WA Kaolin : WAK - June 2022 Quarterly Activities Report and Appendix 5B

For personal use only

ASX Announcement

29 July 2022

June 2022 Quarterly Activities Report

Highlights

• Practical completion achieved of the Wickepin Kaolin Plant with construction compliance issued by the Department of Water and Environmental Regulation (DWER)
• The plant has been completed within budget, set out in 2020 IPO Prospectus
• Commissioning of the plant approved by DWER and commenced 27 June 2022
• WA Kaolin anticipates achieving the plant's nameplate production rate of 25 tonnes per hour within a couple of months of commissioning ahead of ramping up Stage 1 production to 200,000 tonnes per annum (tpa) by year end
• Offtake Agreement signed for up to 13,500 tonnes over 3 years with a Vietnamese ceramic and paint client
• WA Kaolin has now secured Offtake and LOI Agreements covering 90% of its Stage 1 200,000tpa production rate
• Expansion of local workforce with further hires of Wheatbelt residents, augmenting WA Kaolin's commitment of growth within the community
• Operations Manager and Maintenance Manager appointed at the Wickepin Project
• Contract with ACFS Port Logistics Pty Ltd for transport of kaolin between Wickepin Processing Plant and Fremantle Port for export

WA Kaolin Ltd ("WA Kaolin" or the "Company") (ASX: WAK) is pleased to provide an update on its activities for the June 2022 quarter.

The Company holds the Wickepin Kaolin Project, 220km south-east of Perth, which has a 644.5 million tonne Mineral Resource, including an Ore Reserve Estimate of 30.5 million tonnes of kaolinised granite. The Wickepin Project produces kaolin products for tier one customers and the Company aims to expand its production to 400,000tpa in a two-stage strategy.

Chief Executive Officer Andrew Sorensen stated,

"The June quarter has been another successful period for WA Kaolin and has taken the Company to within two months of reaching our first nameplate production rate at the Wickepin Kaolin Project. The quarter was not without its challenges, however, as the effects of COVID-19 in Western Australia caused a short delay in our plans to hit this milestone.

"Despite these challenges, our team has continued to work incredibly hard, achieving practical completion of the Wickepin Plant within the budget we set out in our 2020 Prospectus. This, along with several other achievements during the quarter, has increased our confidence for the next stages of development towards ramping up production. We look forward to updating shareholders and the market as we close in on reaching this major milestone in the Company's history."

WA KAOLIN LIMITED	[phone]	ABN: 56 083 187 017
Lot 3 Ward Road, East Rockingham,	[e-mail]
www.wakaolin.com.au
Western Australia 6168

For personal use only

ASX Announcement 29 July 2022

Wickepin Plant Completed on Budget

During the quarter, WA Kaolin advised of the practical completion of the processing plant at the Wickepin Kaolin Project, with government endorsed construction compliance. Most notably, the Company reports that the completion has occurred within the Company's original budget which was detailed in the IPO Prospectus (ASX Announcement "WAK Prospectus" 24th November 2020).

Following the delivery of the processing plant with an excellent safety record during construction, commissioning is the next vital step to provide a safe, efficient and operation-ready facility. Commissioning commenced Monday 27th June 2022 and processing run-of-mine ore is on track to begin in August 2022, with the ramp up to the full production rate of 200,000tpa by year end.

The processing plant has been constructed to utilise WA Kaolin's proprietary dry processing method, the K99 Process, designed specifically for the high-grade Wickepin kaolin resource. The K99 process will produce an ultra-bright,high-quality kaolin product at a low cost, in comparison to other methods which rely on chemical bleaching and multiple wet mechanical and magnetic separation methods.

Prior to the commencement of production from Stage 1, WA Kaolin has in place offtake agreements and LOIs securing contracts covering 90% of the expected Stage 1 output.

Stage 1 Progress / Short Delay in ramp up to Full Production Rate

Despite having substantially overcome the impact of COVID-19 on the project, WA Kaolin advised in mid-May that its pathway to first full production rate had been hampered by shortages of labour and delay in some materials supply, mainly as a result of COVID-19. The Company therefore expected a two-to-three-month delay to its nameplate production rate which was slated for mid-2022.

As foreshadowed in the Company's announcement dated 29 April 2022 ("March 2022 Quarterly Activities Report"), it was noted that a short delay may be experienced due to the effects of the virus. The Company reported on 18 May 2022 that despite the Covid Management Plans and Strategy the company put in place, up to 59% of the workforce at Wickepin have either contracted COVID-19 or have been close contacts therefore necessitating quarantining, with a total loss of 82 person-days.

Three-year Offtake Agreement Signed

WA Kaolin advised it has signed an Offtake Agreement for up to 13,500 tonnes over a period of three years with a distributor in the ceramic and paint market in Vietnam. The Offtake Agreement is for the period 1 July 2022 through to 30 June 2025. Any renewal of the Agreement will be negotiated by 31 March 2025.

Under the terms of the Offtake Agreement, WA Kaolin is to supply a targeted 4,500tpa (minimum 2,500tpa) for three years. Pricing for the Offtake Agreement will be competitive to the world kaolin market delivered on a cost and freight (CFR) basis. Pricing of at least the minimum quantity will be negotiated on a quarterly basis through mutual negotiation and agreement.

As previously stated, WA Kaolin has now secured Offtake and LOI Agreements covering 90% of its Stage 1 200,000tpa production rate.

Wickepin Kaolin Project Appointments

Post quarter, WA Kaolin announced it has strengthened its operational team at the Wickepin Kaolin Project. The Company has appointed Graham Tanner as its Operations Manager, effective 18th July 2022. Mr Tanner is

www.wakaolin.com.au

For personal use only

ASX Announcement 29 July 2022

an experienced general manager and site senior executive with a career spanning more than 25 years in the mining industry in Western Australia, Northern Territory, Eastern Australia and West Africa.

Most recently, Graham was Operations Manager for Metro Mining Ltd (ASX: MMI) at the Bauxite Hills Mine in Queensland. Mr Tanner will be based at the Wickepin Kaolin Project site where he will oversee operations as WA Kaolin ramps up production.

The Company has also appointed David Griffiths as Maintenance Manager at the Wickepin Kaolin Project. Mr Griffiths, who is a local resident and has more than 25 years' experience working with heavy machinery, commences his role on 11th July and will be based on site at Wickepin.

WA Kaolin is strongly committed to employing residents from Western Australia's Wheatbelt region for roles at the Wickepin Kaolin Project. The Company now has nine employees in its workforce who reside locally.

Transport Contract with ACFS Port Logistics Pty Ltd

WA Kaolin advised post the third quarter that the Company had signed a transport contract with ACFS Port Logistics Pty Ltd (ACFS) for transport services between the Wickepin Kaolin Project and ACFS's Fremantle Port facility in Western Australia.

ACFS is the largest privately-owned container logistics operator in Australia with port facilities across the country including at Fremantle Port. The Company has a strong customer base consisting of some of Australia's largest importers and exporters.

Under the agreement, ACFS will transport bagged kaolin by container from the Wickepin Processing Plant to Fremantle Port for export. The contract will initially span one year with a two-year renewal option. A further 12-month extension option is also offered based on service performance.

Figure 1. WA Kaolin has signed a transport contract with ACFS Port Logistics Pty Ltd for services between the Wickepin

Kaolin Project and ACFS's Fremantle Port facility in Western Australia.

Corporate

The Company advises that it undertook no substantive mining exploration activities during the quarter.

In accordance with Listing Rule 5.3.5, $532,672 was paid to related parties or their associates during the quarter. The payments comprise the following:

• Director fees and superannuation: $170,682 (which includes back payments of $70,000 to the executive director and $59,000 to the estate of the former director)
• Salary and superannuation to the daughter of the executive director (per contract of employment as Territory Sales Executive): $18,510

www.wakaolin.com.au

For personal use only

ASX Announcement 29 July 2022

• Fees relating to the construction of the Company's Wickepin Project to entities associated with the executive director's family (at arm's length, 10% mark-up applied): $95,783
• Reimbursement of expenses relating to the construction of the Company's Wickepin Project to an entity associated with the executive director (at arm's length, no mark-up applied): $34,593
• Royalties paid to an entity associated with an executive director (per Royalty Agreement): $6,740
• Fees paid to the executive director: $70,000 (per consultancy deed)
• Outstanding fees paid to the executive director $136,364 (carried forward from time of Company's Listing and disclosed in the Company's IPO prospectus in November 2020).

In accordance with Listing Rule 5.3.3, the Company advises that it held the following tenements at the end of the quarter:

	Tenement		Prospect			Ownership (%)		Change
	M70/1143		South West Kaolin	100%		Nil
	R70/40		Balgulpinn	100%		Nil
	R70/42		Levi	100%		Nil
	R70/43		Walters Hill	100%		Nil
	R70/44		Doraking	100%		Nil
	L70/156		Wickepin	100%		Nil
	G70/251		Wickepin			100%		Nil
M - Mining Lease (granted)		R - Retention Licence (granted)	L - Miscellaneous Licence (granted)
			G - General Purpose Lease (granted)

In accordance with Listing Rule 5.3.4, a comparison of the Company's actual expenditure to 30 June 2022, against planned expenditure disclosed in the use of funds statement contained in the Company's prospectus dated 11 October 2020, is shown in the table on the following page:

www.wakaolin.com.au

For personal use only

ASX Announcement 29 July 2022

				Prospectus				Actual				Variance
				($000's)				($000's)				($000's)
	Existing cash reserves	2,950		2,950		-
	Funds raised from public offer	22,000		22,000		-
	Total Sources	24,950		24,950		-
	Capex Wickepin1	16,000		17,453		(1,453)
	IPO Cost (incl convertible note interest)	1,660		1,785		(125)
	Owner's Loans	700		810		(110)
	Debt Reduction	1,800		1,800		-
	Creditors	200		200		-
	Working Capital2	1,640		1,396		244
	Total Uses		22,000			23,444			(1,444)

The above table shows the intended use of funds in a two-year period following the Company's successful admission to the ASX on 24 November 2020, compared to actual expenditure from admission up to 30 June 2022.

• The total Wickepin Stage 1 Capex of c.$18m applied $16m from the IPO and $2m from pre-IPO funds. The Company also spent some funds in advance on various Stage 2 capital expenditure costs during the Stage 1 construction. A subsequent capital raising was undertaken in February/March 2022 that raised $9m in new equity and secured a $5m loan.

• The previously reported actual working capital figure (in the ASX announcement of 14 June 2022 "Supplementary Information - Mar 22 Qtrly Activities Report") did not include the revenue derived by the Company. This has now been corrected in the figure above.

As of 30th June 2022, the Company had $6,374,350 in cash on hand.

This announcement was authorised for market release by the Board of WA Kaolin Limited.

For further information, please contact:

Andrew Sorensen	Victoria Humphries
CEO	Investor Relations
[e-mail]	[phone]
	[e-mail]

www.wakaolin.com.au