Speciality Metals International Limited Annual Report 2019

Page | 3 REVIEW OF OPERATIONS The end of the 2018-2019 financial year saw the Board of Speciality Metals International Limited (“Speciality Metals” or “the Company”) successfully complete the 100% acquisition of Mt Carbine Quarries Pty Ltd, an entity that owns and operates the Mt Carbine Quarry and holds Mining Leases ML 4867 and ML 4919 (“Acquisition”). The June 2019 quarter also signalled the commencement of the unincorporated Joint Venture between Speciality Metals and Cronimet Asia Pte Ltd for the development of the Mt Carbine Tungsten Tailings and Stockpile Projects. These events mark the beginning of a new era for Speciality Metals and its world-class Mt Carbine Tungsten Project as it now focuses on bringing the Retreatment Plant back into production. The completion and commissioning on this work is still on-schedule to occur during the 4 th quarter of 2019. The Board of Speciality Metals welcomes the Cronimet team to the Project and looks forward to working closely with them to commericalise the Mt Carbine Tungsten Retreatment Operations. Full details relating to the Acquisition and unincorporated Joint Venture can be found in the Company’s ASX Announcement dated 14 May 2019. DEVELOPMENT & EXPLORATION ACTIVITIES MT CARBINE QUARRY The Mt Carbine Quarry is a fully permitted, established business in operation for over 20 years within the Mt Carbine Mining Leases which offers substantial growth opportunities and an invaluable revenue stream. The synergies between the quarry and the Company’s future mining activities through waste management are invaluable. It should also be noted that it is the largest and most northern hard rock quarry in Queensland. All feed stock is sourced from stockpiled mined rock (~6Mt from a stockpile that has been processed through an optical ore sorter) plus a further ~12Mt of stockpiled mined rock of which approximately 90% will be available for future quarry feed after processing by the Joint Venture. This makes the quarry an extremely cost-competitive operation as no drill and blast is necessary as all mined waste rock becomes quarry feed stock with only secondary crushing, screening and blending required to form a saleable product. Following the 100% acquisition of Mt Carbine Quarries Pty Ltd on 28 June 2019 the quarrying operations have transitioned smoothly from both an operational and customer perspective. The Company’s wholly owned subsidiary, Mt Carbine Quarrying Operations Pty Ltd, has retained all operational staff previously employed by Mt Carbine Quarries Pty Ltd to ensure that the Quarry’s product and service standards are maintained. The current staff collectively have over 60 years’ experience in the quarry industry. The Board of Speciality Metals would also like to thank the former owner who has been extremely helpful in this process and remains available to assist with any operational or customer service requirements that may arise over the next few months. The Company is committed to remaining price competitive whilst maintaining, and wherever possible, exceeding the Quarry’s pre-existing service standards. The Company’s Chief Operating Officer, Chris Godfrey, will oversee the quarry and will also be responsible for the future development of the business. The Company’s office has also been relocated to the Mt Carbine site with the Company’s Administration Manager, Natasha Troughton and support staff now based at this location. The Company will continue to develop the quarry’s client base in order to maximise business opportunities. UNINCORPORATED JOINT VENTURE On 14 May 2019 Speciality Metals announced that it had entered into an unincorporated Joint Venture with Cronimet Asia Pte Ltd (Cronimet) for the development of the Mt Carbine Tungsten Tailings Retreatment and Stockpile Projects (Joint Venture). The joint venture is documented under the terms of: • Offtake Advance Agreement – between Cronimet, CR Australia Pty Ltd (a subsidiary of Cronimet) (Cronimet Australia), Mt Carbine Retreatment Pty Ltd (a subsidiary of Speciality Metals) (Mt Carbine Retreatment) ; Cronimet will provide an offtake advance of US$3.5 million to the Joint Venture Parties (US$1.75 million to Mt Carbine Retreatment and US$1.75 million to Cronimet Australia) under the terms of this agreement. The Joint Venture Parties will each pay US$1.5 million (US$3 million in total) to Speciality Metals in consideration for the transfer of the retreatment assets from Speciality Metals to the Joint Venture Parties and as a pre-payment of rent under the Sub- lease. The balance of US$500,000 will be used to fund the Joint Venture. The Offtake Advance is a component of the funding that was used to part-fund the purchase price under the Sale and Purchase Agreement for Mt Carbine Quarries Pty Ltd. Repayment of the Offtake Advance will be from net profits of sale of production from the Retreatment Operations. • Retreatment Operations Product Offtake Agreement – between Cronimet, Cronimet Australia and Mt Carbine Retreatment ;