Pilbara Minerals : Quarterly Activities Report

ASX / MEDIA ANNOUNCEMENT

25 JANUARY 2019

DECEMBER 2018 QUARTERLY ACTIVITIES REPORT

Strong operating performance at the Pilgangoora Lithium-Tantalum Project as the ramp up of the Stage 1 processing plant continues, demonstrating product quality and production growth in Stage 1; as Stage 2 expansion takes shape.

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HIGHLIGHTS

Production and Marketing

• • Strong ramp up of production with a quarterly total of 47,859 dry metric tonnes ("dmt") of +6% spodumene concentrate and 56,634 pounds ("lbs") of tantalite concentrate.

• • Landmark first shipment of +6% spodumene concentrate on board the 'M.V. Pola Devora' departed Port Hedland on 2 October 2018 with 8,800 wet metric tonnes ("wmt").

• • Quarterly sales of 46,682dmt of spodumene concentrate with tonnes weighted average grade of 6.11% Li2O and iron content of 1.27% Fe2O3. Tantalite concentrate sales of 27,821lb.

• • Monthly plant throughput averaged 140,074t for the Quarter, representing approximately 85% of the targeted annualised Stage 1 throughput rate of 2Mtpa.

Project Development

• • Pilgangoora Lithium-Tantalum Project officially opened by Western Australia's Minister for Mines and Petroleum, the Hon. Bill Johnston MLA on 16 November 2018.

• • Continued ramp up of Stage 1 production and further progress made with optimisation of the process plant.

• • Final Investment Decision progressed for the Stage 2, 5Mtpa expansion, subject to securing necessary approvals and balance of funding.

• • Stage 2 engineering works and long-lead items progressed during the Quarter.

• • Potential Stage 3 expansion being evaluated in response to customer requests to unlock further production capacity of up to 6.2Mtpa and potentially up to 7.5Mtpa.

Exploration

• • Infill reverse circulation grade control drilling program underway within the Eastern Resource Domain in advance of mining operations.

• • Successful water exploration program identifies two new borefields west of Pilgangoora Lithium-Tantalum Project, providing additional water to support the current operation and Stage 2/3 expansion initiatives.

Corporate

• • Funding terms agreed with both Ganfeng Lithium and Great Wall Motor Company, which are expected to cornerstone a proposed funding package for the Stage 2 - 5Mtpa expansion.

• • Non-binding Memorandum of Understanding executed with POSCO to consider a larger jointly owned chemical conversion facility of up to 40ktpa LCE (currently 30ktpa LCE).

• • Cash balance as at 31 December 2018 of A$70.2M (30 September 2018: A$90.6M).

Ken Brinsden, Pilbara Minerals' Managing Director and CEO, said:

"The official opening of the Pilgangoora Project capped-off another exceptionally busy and productive Quarter marking a key milestone on our pathway to building a globally significant lithium and tantalum raw materials supply business.

"The opening was a very special occasion in the Company's history which provided us an opportunity to celebrate the contribution of many people and organisations who have helped contribute to delivering this world-class project including employees, government, traditional owners, offtake partners and many business contracting partners.

"Remarkably, this event was held almost exactly four years to the day since our first drill hole into the Pilgangoora deposit - an incredible journey which must stand as one of the fastest and most efficient mine developments in the Australian resources sector's recent history.

"The outstanding credentials of the Pilgangoora Project were also reinforced with the Board of Directors approving the development of the Stage 2 expansion project, which will see the mining and processing rate more than double to 5Mtpa.

"Our customers continued to show strong support for the Project's future by underpinning the funding package for the Stage 2 expansion and encouraging us to continue to expand, which will now see us embark on studies for a possible Stage 3 expansion of up to 7.5Mtpa.

Our partnership with POSCO continues to go from strength to strength, and the new year saw us enter a non-binding MoU for a potential larger conversion facility of up to 40ktpa LCE in South Korea. POSCO's desire to increase chemical conversion capacity is a clear indicator of the exponential rate in which the South Korean lithium market is growing, and I am excited for us and our shareholders that through this partnership we are positioned at the forefront of this emerging market"

Figure 1: The official opening of the Pilgangoora Lithium-Tantalum Project on 16 November 2018

1. OVERVIEW

Australian lithium producer, Pilbara Minerals Limited (ASX: PLS) ("Pilbara Minerals" or "the Company") continued to deliver positive progress at its 100%-owned Pilgangoora Lithium-Tantalum Project in Western Australia ("Project" or "Pilgangoora Project") during the December 2018 Quarter ("Quarter"), with production successfully ramping up towards the Stage 1, 2Mtpa name plate capacity and Pilbara Minerals' Board giving formal approval (subject to securing approvals and financial close) to proceed with the Stage 2, 5Mtpa expansion.

During the Quarter, the Company celebrated a major milestone in its rapid emergence as a new global lithium producer with the official opening of the Pilgangoora Project by Western Australia's Minister for Mines and Petroleum, the Honourable Bill Johnston MLA. The ceremony was also attended by the Federal Minister for Environment and Member for Durack, the Honourable Melissa Price MP; Traditional Owners, the Njamal People; project and offtake partners; and employees.

The official opening comes just over four years to the day since Pilbara Minerals' first drill hole. This rapid project delivery timeline represents one of Australia's fastest and most efficient major lithium developments of recent times.

During the Quarter commissioning and ramp up of the operation progressed strongly, with the first product shipment departing Port Hedland port on 2 October 2018. Ramp up of the processing plant continued achieving plant throughput run-rates of 270tpa, with spodumene concentrate production of approximately 85% of the Stage 1 design capacity being achieved during December 2018.

Following the Board's Final Investment Decision ("FID") for the Stage 2, 5Mtpa expansion, Pilbara Minerals agreed customer financing terms during the Quarter with Jiangxi Ganfeng Lithium Co. Ltd (Ganfeng Lithium) and Great Wall Motor Company (Great Wall Motors), which will support their access to further spodumene concentrate from Stage 2 production, and cornerstone Pilbara Minerals' proposed Stage 2 funding package.

Stage 2 early project works also commenced in the Quarter, with the Company placing long-lead orders for certain items of major equipment and continuing detailed engineering in order to meet its commissioning target of March quarter 2020.

With Stage 2 early projects works underway, Pilbara Minerals will now begin an assessment of a possible Stage 3 expansion to 6.2Mtpa initially and potentially up to 7.2Mtpa.

Finally, Pilbara Minerals continued to strengthen its leadership position in the growing South Korean lithium supply market with the execution of a non-binding MOU with POSCO to consider a larger chemical conversion facility of up to 40ktpa LCE in South Korea (currently 30ktpa LCE).

2. SAFETY PERFORMANCE

Safety performance for the Quarter was positive, with the Quarter ending with a rolling 12-month total recordable injury frequency rate (TRIFR) of 3.21, an improvement from 3.46 from the prior quarter.

Figure 2: Spodumene concentrate stockpiles at the Pilgangoora Project

3. PRODUCTION AND SALES

Units
Ore mined	wmt
Waste mined	wmt

Q2 FY18	Q3 FY18	Q4 FY18	Q1 FY19	Q2 FY19
0	0	344,549	525,559	895,399
151,812	1,832,205	2,851,161	1,884,335	2,021,821
Total material mined wmt	151,812	1,832,205	3,195,710	2,409,894	2,917,220
-	-	-	173,6671	420,221

Ore processed

wmt

Table 1: Total ore mined and processed

1 A proportion of processed ore tonnes resulted in off-specification spodumene concentrate (approximately 5,074dmt) which is typical during the commissioning and process ramp up phase. These tonnes will be either reprocessed or sold.

Direct Shipping Ore (DSO) sold

Spodumene concentrate produced (6% Li20)

Spodumene concentrate sold

Tantalite concentrate produced

Tantalite concentrate sold

UnitsQ2 FY18

Q3 FY18

Q4 FY18

Q1 FY19

wmt dmt

- -

dmtlb

- -

22,151

lb

-

Table 2: Production and sales

• 1 Q1 FY19 spodumene concentrate produced has been adjusted for half-year surveyed stocks reconciliation.

• 2 The DSO program was suspended in Q2 FY19.

• 3 Sales estimates pending final assays results.

Q2 FY19 02

47,859

46,682 56,634

27,8213

Units	Q1 FY19	Q2 FY19
ROM stockpile	dmt	N/A1	665,633
Coarse ore stockpile	dmt	N/A1	82,430
Spodumene product stock at site	dmt	N/A1	17,2662
Tantalite product stock at site	Ib	17,177	45990

Table 3: Stock inventory

• 1 No previous reporting for period due to completion of build and commissioning phase.

• 2 Spodumene stock includes production of low grade stockpiles of 5,074dmt during commissioning.

4. OPERATIONS OVERVIEW

4.1 Mining

Mining activities at the Pilgangoora Project continue to progress well, with increased mining volumes from the prior quarter being consistent with the overall project ramp-up plan and required ore feed.

Mine production during the Quarter comprised 895,399 ore tonnes grading 1.39% Li from both Central and Monster pits.

4.2 Processing

Mill throughput for the Quarter totalled 420,221dmt, with the Pilgangoora Project's concentrator performing within expectations for both product throughput and concentrate quality throughout the Quarter.

The concentrator continued to demonstrate encouraging performance by maintaining sustained design throughput capacity of 270tph during the Quarter, outside of planned and unplanned shutdowns.

Total spodumene concentrate produced continued to improve on a monthly basis with December 2018 production achieving ~85% of the expected Stage 1, 2Mtpa design (Figure 3).

Product quality performance out performed, consistently exceeding customer requirements in respect of lithia and deleterious element grades. For the Quarter, the tonnes-weighted average grades across the first four shipments was 6.11% Li20 and 1.27% Fe2O3.