Andromeda Metals : Quarterly Activities/Cash Flow Report (App 5B) - March 2022

Andromeda Metals Limited ABN: 75 061 503 375

Corporate details:

ASX Code: ADN

Cash (31st Mar 2022): $35.5m Issued Capital: 3,104,235,099 ordinary shares 70,300,000 unlisted options 27,833,325 performance rights

Directors:

Mick Wilkes

Non-Executive Chair James Marsh

Managing Director Joe Ranford

Operations Director

Andrew Shearer Non-Executive Director Melissa Holzberger Non-Executive Director

Company Secretary:

Andrea Betti

Contact details:

Level 10

431 King William Street, Adelaide, South Australia 5000

PO Box 1210 Unley BC SA 5061

Tel: [phone] Fax: [phone]

28 January 2022

Quarterly Activities Report - March 2022

Highlights

Acquisition of Minotaur completed

•  Andromeda Metals Limited acquisition of Minotaur Exploration Limited complete, creating a leading Australian kaolin/halloysite and technology company by consolidating ownership of the Great White Kaolin Project and Natural Nanotech into Andromeda

Great White Kaolin Project

•  Definitive Feasibility Study (DFS) completed and announced 6th April.

•  High margin cashflows, with pre-tax net present value (NPV)8 of AUD 613m, Internal Rate of Return (IRR) of 36%.

•  Updated Ore Reserve Estimate containing 15.1Mt

Exploration Update

•  Maiden Tiger Kaolin Resource100% Indicated Resource of 12.1Mt of bright white kaolinized granite.

Corporate

•  Appointment of Mr Mick Wilkes as Independent Non-Executive Chair, effective 6 April 2022.

•  Cash at the end of March was $35,506,783.

The Board and management of Andromeda Metals Limited (ASX: ADN, Andromeda, the Company) is pleased to provide a summary of the Company's activities for the quarter ended 31 March 2022.

Managing Director, James Marsh commented, "The March quarter has seen the achievement of another major milestone for the Great White Kaolin Project with finalisation of the DFS. The DFS demonstrates that the Project has the potential to become a globally significant supplier of high value kaolin products to international ceramic, paint and other specialised markets. The focus is now on completing the Program for Environmental Protection and Rehabilitation, advancing our project design and development plans for stage 1, finalising land access and continuing to penetrate markets for our high value products.

The completion of the Minotaur acquisition enables the consolidation of 100% ownership of the Great White Project and the Natural Nanotech Project into a single entity, providing Andromeda with full development optionality."

Operations Update

Great White Kaolin Project Background

The Great White Kaolin Project (GWKP, the Project) comprises four Exploration Licences east of Streaky Bay on the Eyre Peninsula (Figure 1). High quality halloysite-kaolin occurrences exist extensively across the Great White Kaolin Project area making this a region of global significance for the mineral and capable of supporting a considerable long-life mining operation. The Project includes Great White, Hammerhead and Tiger Deposits as well as several additional exploration targets: Manta and Bronze Whaler.

Andromeda also holds a 100% interest in the Mount Hope Kaolin Project which is located approximately 160 km southeast of Great White and is earning into the Eyre Kaolin Project.

Figure 1 - Project Location Plan

Figure 2 - Great White Project

Definitive Feasibility Study (DFS) Released

Subsequent to the end of the quarter, on 6 April 2022, the Company completed the DFS and released it to the market (refer ADN ASX announcement dated 6 April 2022 "Great White Kaolin Project - Definitive Feasibility Study"). The DFS for the Project was prepared by Andromeda Metals Ltd (Andromeda) and a team of experienced specialist consultants. The DFS reflects the latest information on the Project, including marketing agreements and price forecasts. Technical research, including results from metallurgical test work, and confirmatory pilot plant batches have been included to inform the engineering design, project execution and financial modelling.

The DFS scope of work was to prepare a definitive level assessment of the Project, prepared to an accuracy level of +/-15% guided by the requirements of the Australian Institute of Mining and Metallurgy (AusIMM) guidelines (AusIMM 2012. Cost Estimation Handbook. 2nd Edition, Monograph 27. The Australian Institute of Mining and Metallurgy).

Capital and operating cost estimates were developed by Andromeda and supported by supplier provided prices on defined scope of works supporting the staged execution strategy. The DFS varies from the June 2020 Prefeasibility Study (PFS) with the removal of direct shipping ore (DSO) and focussed on higher quality products.

The DFS focussed on several products:

•

Parameter	Life of mine (Total)
Plant feed (nominal)	dry metric tonnes (dmt)	300,000 (years 1-5) 600,000 (years 6-28)
Production (nominal)	Great White HRM™ (dmt)	260,000
Great White KCM™90 (dmt)	246,000
Great White PRMTM (dmt)	336,000
Great White CRMTM (dmt)	6,400,000
Weighted average product sale price (AUD/dmt)	653
Life of mine (years)	28
Strip ratio	2.3
Start-up capital (Stage One)	93.8
Sustaining capital (AUD million)	26.0
Revenue (AUD million)	4,706
EBITDA1 (AUD million)	2,283
Pre-tax cashflow (AUD million)	2,050
NPV8 (before tax) (AUD million)	613
IRR (% before tax)	36
Payback period (years)2	5.9

Great White KCM™90, a semi-refined high-quality kaolin concentrate for sale for direct use, further refinement by other parties or to upgrade their inventory.

•

Great White HRM™, a refined kaolin for sale for use as an additive in the concrete industry and other associated applications.

•

Great White CRM™, a refined, dried, bagged product for use by end-users in the ceramics market.

•

Great White PRM™, a refined, dried, and bagged product for use by end-users in coatings and polymers markets.

The Project is proposed in four production stages. The staged capital costs were developed in conjunction with independent and highly reputable consultant/contractor firms with experience to support the value-add concept of the DFS. The change was driven primarily by volatility in transport costs, the benefit of having in-house quality control and the improved value of refined kaolin products, issues that have significantly moved since the onset of the Covid-19 pandemic. The DFS scenario was driven by value adding, controlling risk through reduced capital exposure in the initial start-up phase, and providing a quality product to maximise the value of the Mineral Resource.

The DFS provides for the development of the Project based on foundation products to establish and build the market and customer base.

GWKP Key Indicators:

• 1 Earnings before interest, taxes, depreciation and amortisation

• 2 Includes payback of initial AUD 93.8 million as well as the further plant upgrades within that time

Updated Great White Ore Reserve

An updated Ore Reserve Estimate containing 15.1Mt with an average Brightness 84 (R457) and 0.5% Fe2O3 was released with the DFS announcement (refer ADN ASX announcement dated 6 April 2022 "Great White Kaolin Project - Definitive Feasibility Study"). The Ore Reserve comprises of 34% Proved Reserve and 66% Probable Reserve.

Maiden Tiger Kaolin Resource

The maiden Tiger Mineral Resource Estimate of 12.1Mt containing 7.2Mt of kaolin (<45 µm) was announced (refer ADN ASX announcement dated 23 March "Maiden Tiger Kaolin Resource and Regional Rare Earth Element Potential"). The Tiger Kaolin Deposit is part of the Great White Kaolin Project, located on the Eyre Peninsula of South Australia, approximately 10km to the south of the Great White Deposit (Figure 2) and further demonstrates the GWKP's potential to become a world class producer of kaolin.

The regional prospectivity for rare earth elements (REEs) is to be assessed following the potential identification of ionic adsorption clay REEs in association with the halloysite kaolin at Bronze Whaler. Assays from the Bronze Whaler prospect returned elevated Total Rare Earth Oxides (TREO) as exampled by TW19AC001 which returned from 10m, 18m @ 1752ppm TREO in the <45µm fraction including 5m @ 2256ppm TREO, refer ADN ASX announcement dated 23 March 2022 "Maiden Tiger Resource and Regional Rare Earth Element Potential").

During the quarter Wudinna Project's joint venture partner Cobra Resources PLC also identified anomalous REE mineralisation in the saprolitic clays that overlie new gold intercepts at the Clarke prospects that included 33m at 1.03g/t gold from 65m and 20m at 1.5g/t gold from 88m (refer ADN ASX announcement dated 8 February 2022 "Clarke - Rare Earth Identified Directly Above Gold Mineralisation").

Mining Tenements

The tenement schedule as at 31st March 2022 is at the end of this Quarterly Activities Report.

Proponent Acceptance Deed signed with Esperance Tjaltjraak Native Title Aboriginal Corporation (ETNTAC) to satisfy condition 19 the grant of Dundas exploration Licence 63/2089 (Circle Valley).

Wudinna Gold Project tenement EL 6262 (Acraman) surrendered in agreement with JV partner.

There were no other acquisitions or disposals of tenements during the quarter.

Corporate

Andromeda and Minotaur Combination Completed

Following the joint announcement of the combination in November 2021 (via an off-market takeover), critical conditions of Andromeda's takeover offer were satisfied, including a minimum acceptance of 90%. Andromeda announced (refer ADN ASX announcement dated 25 February 2022 "Andromeda to proceed to compulsory acquisition of Minotaur Exploration Limited") its intention to proceed to compulsorily acquire any remaining Minotaur shares that were not accepted into its takeover offer.

Consideration associated with the acquisition of Minotaur, in the form of fully paid ordinary shares in Andromeda, were issued in two separate tranches during the quarter as follows: