Mr. Dirk Harbecke reports

ROCK TECH LITHIUM COMPLETES BANKABLE PROJECT STUDY FOR ITS GUBEN CONVERTER PROJECT

Rock Tech Lithium Inc. has completed a bankable project study (BPS) for the construction and operation of the company's proposed battery-grade merchant lithium hydroxide monohydrate converter and refinery facility in Guben, Germany. The results of the BPS, which was conducted in collaboration with Wave International Pty. and the company's Finnish engineering partner, show a significant improvement in the converter's economics compared with the previous engineering study, released on Nov. 29, 2021, and are expected to form the basis for the project financing discussions with potential lenders.

Highlights:

• Estimated pretax net present value (8-per-cent discount rate) of $1,219-million (U.S.);
• Estimated pretax internal rate of return of 24 per cent;
• Estimated initial capital costs of approximately $683-million (U.S.);
• Estimated nameplate annual lithium hydroxide monohydrate (LHM) production capacity of 24,000 tonnes;
• Estimated C1 plant operating cost of $4,752 (U.S.)/t of LHM produced;
• Estimated revenue of approximately $14,872-million (U.S.) over 25-year life of project;
• Early construction works are anticipated to begin in Q1 2023;
• Start of commissioning planned from Q2 2025.

General remarks

Rock Tech's planned merchant LHM converter in Guben, Germany, is anticipated to be the first European lithium converter, with capacity to produce 24,000 tonnes of battery-grade lithium hydroxide per year, a raw material urgently needed by the battery and automotive industries. The importance of lithium hydroxide is supported by the European Union's recent agreement to effectively ban the sale of new combustion engine vehicles from 2035. Such ban will reshape the European mobility sector and further accelerate electric vehicle production, leading to an increased demand for lithium hydroxide.

Rock Tech's plant will be located in Guben, Brandenburg (DE). As announced in October, 2021, the company purchased a site within the existing Guben South industrial park. The site, which covers a total of 12 hectares, offers excellent accessibility by road and rail. Additionally, key suppliers and customers reside in the region, which is expected to become one of the leading battery and EV clusters in Europe. Transparent federal legislation and comprehensive state subsidy schemes further add to the region's attractiveness. The converter is designed to process spodumene concentrates into battery-grade LHM via the sulphation-causticization (S-C) route. The basic process flowsheet was selected in the previous phase of the project and was subsequently optimized using data supplied by equipment vendors and metallurgical test work completed during the study.

"Our Guben converter is an exceptional project as it will help address the increasing need for battery-grade lithium hydroxide. Additionally, it will strengthen regional supply chains by offering a processing route for spodumene concentrates in Europe," Dirk Harbecke, Rock Tech's chief executive officer, stated.

The company is very pleased that the technical and economic results of the BPS support the company's strategy of building a converter in Germany. Although the BPS uses more conservative costing assumptions than the converter engineering study, it estimates an increase in NPV and of project IRR. The BPS estimates a pretax NPV (8 per cent) of $1,219-million (U.S.), an increase of $789-million (U.S.) (or 183 per cent) compared with the converter engineering study. Recent inflationary pressures and global supply chain tightening have had a substantial impact on both the estimated capital expenditures and operating costs. Cost impacts are partially offset by more favourable lithium pricing assumptions based on current market price forecasts.

"We remain conservative with our price forecasting," Mr. Harbecke explained. "However, if we were to assume the current spot market prices for spodumene and lithium hydroxide remain stable, the pretax NPV of our converter would increase substantially to $4,300-million (U.S.) and an IRR of 37.5 per cent."

The results of the BPS demonstrate the potential of Rock Tech's zero-waste and ESG (environmental, social, governance)strategy, with approximately 96 per cent of the estimated 290,000 tonnes of byproduct identified for potential utilization in other industries. Significant efforts have been undertaken to develop use cases for alumino-silicates, sodium sulphate and gypsum. In line with its conservative costing assumptions, Rock Tech has not yet reflected such opportunities in its revenue estimates.

The city of Guben has commenced preparatory site activities such as grubbing and clearing. Rock Tech is expecting approval of its first partial permit (TG1) in Q4 2022 and the second and last partial permit (TG2) in Q3 2023. As a result of increased lead times for delivery of major equipment from suppliers, early construction works to the extent permitted under TG1 are anticipated to begin in Q1 2023, with start of commissioning planned to commence in Q2 2025.

Summary of BPS results

The BPS was a collaborative study with key contributions from Wave International and the company's Finnish engineering partner. The BPS demonstrates a high-level engineering definition and cost certainty with AACE Class 3 estimates for capital and operating costs.

The BPS incorporates recent metallurgical test work, including vendor test work conducted for key process packages using spodumene feedstocks from a range of prospective suppliers, resulting in a more robust process design.

Additionally, the BPS describes a path forward to realize value-add opportunities for the converter residues, which are envisioned as in-demand feedstocks for the domestic building and construction industries.

Rock Tech also recognizes the risks associated with supply chain disruptions due to the impacts of the continuing war in Ukraine, the COVID-19 pandemic, fluctuating currency exchange rates and energy prices, and an inflationary global marketplace. In an effort to manage such risks and provide a robust financial outlook for the converter, such risks were taken into account when preparing the BPS. This resulted in an increase in capital expenditure and operating cost estimates for the converter compared with the converter engineering study. In addition, the start of commissioning of the project has been moved to Q2 2025 to account for such evolving social, economic and geopolitical risks.

Rock Tech is currently embarking on a front-end loading stage 3 (FEL3) study to finalize basic engineering to support a final investment decision.

Key metrics

Key economic results of the BPS are noted herein.

Capital cost estimates

The BPS estimates total initial capital costs of approximately $683-million (U.S.) for the converter (determined to be within a nominal accuracy of plus/minus 20 per cent), including approximately $485-million (U.S.) in direct capital costs, $130-million (U.S.) in indirect capital costs, including $40-million (U.S.) in owner's costs, and a weighted contingency of 10 per cent. The initial capital cost estimate includes the capital requirements to engineer, procure, construct and commission the converter and covers project implementation costs for the period from final investment decision to the end of commissioning of the converter. It also includes early procurement of long lead items and potential early site works. Initial capital cost estimates were generated from vendor basic design, vendor quotations and market data as of a base date of June 30, 2022.

A breakdown of the estimated initial capital cost is presented in the attached table.

Numerous factors, including the continued development of the converter's engineering design and recent global market volatility, have resulted in an increased initial capital cost estimate compared with the converter engineering study. Key price escalations have been assumed for plant costs relating to raw material prices, labour costs and energy costs.

Basic engineering design, carried out by technology providers, consultants and vendors, resulted in an improved engineering definition of the converter as well as an improved procurement package scoping. The basic engineering design supports an AACE Class 3 capital cost estimate with an accuracy of plus/minus 20 per cent for overall plant and infrastructure, including higher levels of accuracy at plus/minus 10 per cent for key process packages, including the kiln and crystallizers.

The BPS considers increased labour and material costs because of global skilled labour and supply chain disruptions. Rock Tech expects such disruptions to normalize throughout 2023 and has allowed for inflation in the capital cost estimate accordingly. Rock Tech intends to continue to orient its procurement and contracting strategies toward reducing capital cost and execution risk during the FEL3 study.

Operating cost estimates

The average annual operating costs of the converter are estimated at $114-million (U.S.) per year (determined to a nominal accuracy of plus/minus 20 per cent). Prices used to develop operating cost estimates were market-based enquiries and analyst reports. All activities relating to the procurement of materials, transportation and processing to produce an ex works LHM product were included in the operating costs. Spodumene procurement has been excluded in the summary below. Reagent pricing was mostly received in U.S. dollars with other costs and pricing being received in euros. An exchange rate of $1 (U.S.) to 1.042 euros was assumed for the BPS.

A breakdown of the estimated average annual operating cost over the life of the converter excluding the cost of spodumene concentrate is presented in the attached table.

The operating cost estimate of the BPS is greater than the operating cost estimate of the converter engineering study with such increase primarily driven by higher estimated maintenance costs, reagent prices, transportation costs, energy cost and byproduct disposal costs.

Key assumptions and sensitivity analysis

The BPS assumes that the converter will have a 25-year lifespan and a nameplate annual production of 24,000 tonnes of LMH from approximately 173,500 tonnes of spodumene concentrate, which is intended to be sourced from third parties and via RTT (as defined below).

The discount rate utilized for financial analysis is 8 per cent. A weighted average price of spodumene concentrate of $1,532 (U.S.) per tonne is assumed, reducing from a peak price of $4,768 (U.S.) per tonne in 2023. The following exchange rates were considered: U.S. dollar to euro: 1.0417; Canadian dollar to U.S. dollar: 0.7189 (current exchange rates: U.S. dollar to euro: 1.0037; U.S. dollar to Canadian dollar: 0.7382).

As part of the BPS, a sensitivity analysis was conducted on the converter's pretax NPV and pretax IRR to key variables, including spodumene concentrate price and LHM price. Using the base case as a reference, the key variables were changed between plus/minus 30 per cent at 10-per-cent intervals while holding other variables constant. The project is most sensitive to fluctuations in lithium hydroxide and spodumene concentrate prices as well as changes in U.S.-dollar-to-euro exchange rates. Spodumene concentrate price and LHM price sensitivities are presented in the attached tables.

Metallurgical remarks

The converter is expected to comprise a pyrometallurgical and hydrometallurgical chemical plant that uses various reagents to extract the lithium from spodumene concentrate to produce a purified LHM product.

The process flowsheet has been designed to incorporate process unit operations typical to lithium refineries using the sulphation route. Proven technology within the lithium industry was used to minimize technical risk and time to market. Additional process equipment beyond a traditional flowsheet has been included specifically to give the plant a large operating envelope and thus ability to process a wide range of feedstock.

Lithium recoveries based on analysis of a multiphase test work program covering a broad variety of spodumene concentrates and as simulated in the mass and energy balance indicates a potential average leach extraction of 94.5 per cent, a projected lithium loss in other parts of 3.5 per cent and, therefore, an overall lithium recovery to 91 per cent. Critically the metallurgical test work included vendor test work results for key process equipment supplied by FLSmidth & Co. A/S (kiln and roasting circuit) and JordProxa Pty. Ltd. and GEA Group AG (crystallizer circuit). To allow for operational experience factors and the possible effect of spodumene reactivity, the overall recovery has been discounted to 86 per cent in the process design criteria and subsequently the cash flow model. This conservative approach to recovery has the effect of defining the requirement for higher spodumene and reagent feed rates, thereby creating sufficient processing capacity to achieve higher recoveries and process efficiencies once the process has been optimized.

Byproducts

The project is expected to generate approximately 290,000 tonnes of byproducts per year. Studies conducted by Rock Tech show that as a result of their chemical composition the vast majority of these non-lithium products have the potential to be utilized in other industries, subject to certain conditions, including government accreditation following commencement of production. In line with Rock Tech's commitment to highest ESG standards, the BPS describes significant efforts which have been undertaken to develop a use case for the following materials, representing 96 per cent of the byproduct production from the converter:

• Alumino-silicates (69 per cent of byproduct) -- concrete and building industry applications;
• Sodium sulphate (15 per cent of byproduct) -- use markets well established;
• Gypsum (12 per cent of byproduct) -- concrete and building industry applications.

Despite the positive outlook for such byproduct use cases the financial results of the BPS do not attribute additional revenue to these byproducts, in line with the conservative approach taken in the BPS. The study assumes sodium sulphate anhydrous is a saleable product while all other byproducts are assumed to be disposed of in waste management facilities at Rock Tech's expense. Offtake offers and letters of intent for byproduct disposal have been secured for 98 per cent of the non-lithium products. Rock Tech believes there is a significant opportunity to improve project cash flow by finalizing the byproduct use cases and continues to develop and evaluate these cases.

Supply chain management

To operate the converter, feedstock, products, byproducts, residues, consumables and spare parts must be transported. Initially, spodumene, Rock Tech's main feedstock, is expected to be sourced from mines in Australia or Canada. Therefore, Rock Tech has recently announced to have entered into a definitive agreement to form a joint venture entity with Transamine Holdings and Investments Ltd. to form RTT Lithium SA (see the company's press release dated Oct. 24, 2022). Under the terms of the agreement, RTT will manage the procurement of spodumene concentrate from global mining companies and spodumene producers and arrange related logistical and storage services, and Transamine will provide related financing.

Based on the company's supplier discussions, most other consumables, especially reagents, are expected to be sourced in Germany and transported to the converter by train or truck.

Rock Tech has selected preferred logistics partners for the full supply chain from spodumene shipping, port receival and bonded warehousing in the port of Nordenham, rail handling systems and rail transport to Guben. The company has also selected transport systems and preferred suppliers for all other materials handling requirements inbound and outbound from the converter site in Guben.

Schedule and permitting

The BPS provides an updated project schedule compared with the converter engineering study. Site activities have commenced with grubbing and clearing expected to be completed before the end of 2022.

Based on initial submissions to government authorities the permitting process must be completed in accordance with the Federal Immission Control Act of Germany. Rock Tech has agreed that the permitting application will be submitted in two parts:

1. TG1 (partial permit 1, submitted in February, 2022) covers all site preparation and non-process infrastructure-related construction, including submission of an environmental impact assessment and public consultation. The application for TG1 is under review with approval expected by Q4 2022;
2. TG2 (partial permit 2, anticipated to be submitted in November, 2022) covers all process plant related construction, including detailed engineering plans, and a further public consultation period, with permit approval expected by Q3 2023.

As a result of increased lead times from major equipment suppliers, early construction works to the extent permitted under TG1 are anticipated to begin in Q1 2023 with start of commissioning planned from Q2 2025.

As the company moves into the next phase of engineering, the company's Finnish engineering partner has been engaged to prepare the FEL3 study. During this study, a level 3 resource-loaded execution phase schedule will be developed, incorporating detailed supply and installation schedules obtained from vendors during the competitive tendering phase.

About Rock Tech Lithium Inc.

Rock Tech is a cleantech company on a mission to produce lithium hydroxide for EV batteries. The company plans to build lithium converters at the doorstep of its customers, to guarantee supply chain transparency and just-in-time delivery. To close the most pressing gap in the clean mobility story, Rock Tech has gathered one of the strongest teams in the industry. The company has adopted strict ESG standards and is developing a proprietary refining process aimed at further increasing efficiency and sustainability. Rock Tech plans to source raw material from its own mineral project in Canada as well as procuring it from other responsibly producing mines. In the years to come, the company expects to also source raw material from discarded batteries. Rock Tech's goal: to create a closed-loop lithium production system.

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