Sep 21 Quarterly Activities & Cashflow Report

ASX Announcement

29 October 2021

QUARTERLY ACTIVITIES REPORT

FOR THE PERIOD ENDING 30 SEPTEMBER 2021

Aeon Metals Limited (ASX:AML) (Aeon or the Company) is pleased to present its activities report for the quarter ending 30 September 2021.

Highlights

• Maturity date of OCP Asia loan facility extended by two years to 17 December 2023
• A$10.2 million new equity raised via placement and SPP
• Pete Moorhouse appointed Exploration Manager and Jeff Botting appointed Project Manager
• In-filldrilling at Vardy zone completed and Marley zone drilling nearing completion
• Assay results pending for the drilling of new exploration target at Vardy Deeps
• Metallurgical optimisation testwork results for bulk sulphide flotation and leaching consistent with Scoping Study outcomes
• Morrison Government announces A$2 billion funding initiative to support critical minerals project development, expected to benefit Aeon's Walford Creek Copper-Cobalt Project
• Commodity prices in the Walford Creek Project metal portfolio continue strong upwards trend

Commenting on the activities for the quarter, Aeon Managing Director, Dr Fred Hess, said:

"Aeon raised over A$10 million during the quarter through a placement to sophisticated and institutional investors and a share purchase plan for existing shareholders. All Aeon directors participated in the capital raising, as did OCP Asia. In addition, OCP Asia continued its strong support with the granting of a two year extension to the maturity of its loan facility, now 17 December 2023.

"The Aeon management team was boosted with the recruitment of Mr Pete Moorhouse and Mr Jeff Botting. We continue to make strong progress towards completing the Pre-Feasibility Study on Walford Creek. The exploration drilling program on site has provided a comprehensive range of samples for metallurgical testwork. The initial flotation and leach optimisation testwork results are broadly consistent with the Scoping Study assumptions. The preliminary design and engineering work to support more detailed capital and operating cost estimates is also progressing well.

"The Morrison Government also recently announced a A$2 billion funding initiative to support the development of critical minerals. This announcement provides further confidence for Aeon to continue on our current development timetable and serves to reinforce the level of potential funding support available for quality critical minerals projects in Australia.

"Commodity prices continue to exhibit strong growth trends driven by the battery/electrification metal thematic in conjunction with renewed global economic growth optimism following the period of COVID-19 induced uncertainty. While individual commodity price performance is variable, Aeon's Walford Creek Project is endowed with a portfolio of metals that affords greater potential revenue risk diversification than others which often rely predominantly on the fortunes of a single metal."

P.O. Box 8155, Gold Coast MC.	Level 7, 88 Pitt Street, Sydney,	P: [phone]
Qld 9726, Australia	NSW 2000, Australia	E: [e-mail]
	ABN : 91 121 964 725	W: aeonmetals.com.au

Walford Creek Exploration Program

A combined total of 4,228 metres was drilled for the quarter. This consisted of 22 finished drill holes for a total of 1,402.6 m using PQ, 2,2007.4 m using HQ and 618.3 m using RC. 13 holes were drilled for metallurgical samples at Vardy, and an additional 6 holes at Vardy were drilled as a combined geotechnical study and metallurgical sampling. One hole was completed at Marley for metallurgical sampling, and two holes were completed as a first step to exploring the Vardy deeps prospect. Assay result turnarounds are typically ranging from 8 to 10 weeks. The assay results for the Vardy exploration holes are expected in November.

As noted from the outset, the primary purpose of this drilling campaign is to provide representative samples of all potential metallurgical feed types. Processing of the initial drill samples has already commenced at ALS Burnie and is on-going.

The results of two extensive high resolution magnetic and gravity surveys were announced on 9 August 2021. Interpretation of these results (see Figures 1 and 2) has provided exciting new insights into the potential for further extensions to the already substantial Walford Creek Mineral Resources Estimates. The much higher resolution achieved in the new data has revealed several structural features which were previously poorly defined in the historic, wide-spaced geophysical datasets. The new datasets further refine the geophysical signatures of the Vardy, Marley and Amy zones where strong correlations exist between the known presence of mineralisation and the modelled geophysical response.

New conceptual target areas have been identified including:

1. Vardy Deeps and Marley Deeps - approximately 300m beneath the Py3;
2. Amy West Splay;
3. Vardy East FRF continuation; and
4. Eastern Dog Leg Trend.

Figure 1: RTP (Reduced to Pole) magnetics survey with location of the drilling and the target zones

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Figure 2: Bouguer gravity survey with location of the drilling and the target zones

The Vardy Deeps target area was drill tested however assay results are pending.

It is envisaged that updated Mineral Resources Estimates for the Vardy and Marley zones will be compiled once final assay results are received for the holes completed as part of the in-fill drilling campaign. These updated Mineral Resources Estimates are expected to inform the PFS with results targeted for release in early CY2022.

Walford Creek Metallurgical Program

The results of the initial optimisation testwork for both bulk sulphide flotation and leaching were announced after the end of the quarter on 13 October 2021, "PFS Metallurgical Testwork Update". The majority of the preliminary testwork has been undertaken using two feed composites representing the previously identified major feed types:

• Copper-cobaltrich; and
• Zinc-leadrich.

The copper-cobalt rich composite was sourced predominantly from samples within the Marley Py3 area of the deposit and assayed 1.9% Cu, 0.3% Co, 0.26% Zn, 30 g/t Ag and 25% S. The zinc-lead rich composite was also predominantly sourced from samples within the Marley Py3 area of the deposit and assayed 0.5% Cu, 0.1% Co, 1.5% Zn, 41 g/t Ag and 25% S. These composites represent the assay extremes for the range of all feed types.

Compared to selective flotation, the pilot plant rougher flotation residence time was increased to approximately 90 minutes to accommodate slightly slower kinetics arising from the coarser flotation feed. To maximise performance, a scavenging stage of approximately 120 minutes residence time was incorporated followed by a cleaner stage to upgrade scavenger concentrate. Regrinding of scavenger concentrate to nominally 20 µm resulted in a 5% reduction in mass produced at equivalent recoveries without regrind. The bulk flotation circuit was optimised using potassium amyl xanthate. Copper sulphate was used to activate pyrite. Flotation recoveries achieved were typically in the range:

• Copper 95 to 97%
• Zinc 93 to 95%
• Lead 94 to 96%
• Cobalt 85 to 88%
• Nickel 86 to 89%

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• Silver 89 to 91%
• Sulphur 92 to 94%

The most significant outcome of the leaching testwork completed to date is the ability to achieve high payable metal recoveries whilst minimising pyrite oxidation to between 25% and 35%. This has significantly reduced the oxygen and limestone (used for acid neutralisation post leach) requirements and therefore operating costs in this area. The payable metal extractions achieved were typically in the range:

• Copper 95 to 97%
• Zinc 97 to 99%
• Cobalt 80 to 85%
• Nickel 80 to 85%

Opportunities for further increasing cobalt and nickel extraction have been identified and the next round of testwork is set to explore these. The testwork has also achieved a clean separation of the lead and silver. Both metals report overwhelmingly to the leach solids residue. The testwork to explore extraction of these metals is expected to commence in November 2021 once sufficient quantities of autoclave residue are accumulated.

Results obtained to date from the current metallurgical testwork program are consistent with the process inputs adopted in the Walford Creek Scoping Study (June 2021). The firming up of process operating conditions has allowed equipment selection decisions to be made in conjunction with preliminary plant layouts. The more detailed estimation of capital and operating costs is currently underway. The PFS remains on track for completion in Q1 CY2022.

Walford Creek Critical Minerals

On 28 September 2021, Prime Minister, Mr Scott Morrison, made a landmark announcement supporting Commonwealth funding of critical minerals project developments. Aeon sees this as a welcome initiative as it continues to advance its Walford Creek Copper-Cobalt Project towards development.

The Commonwealth Government announcement pledges A$2 billion in funding to support new critical minerals project developments. Aeon's Walford Creek Project is ideally placed to be in the vanguard of developments potentially benefiting from this new funding initiative. Cobalt is a critical mineral and the Walford Creek Project has the potential to propel Aeon into the position of being Australia's largest domestic cobalt producer when in production.

Mr Morrison noted that the funding initiative was designed to effectively fill gaps in the financing of critical minerals resources projects, in order to assist with and accelerate their development.

Minister for Trade, Tourism and Investment, Mr Dan Tehan, said, "The global growth in demand for critical minerals to be used in the production of the latest technologies represents an incredible opportunity for Australia to utilise its natural resources and world-leadingmining know how to become a leader in the extraction, processing and supply of critical minerals."

Aeon is currently in the preliminary stages of progressing funding for the Walford Creek Project. It is expected that this process will be much further advanced by the time the PFS is completed.

This move by the Australian Commonwealth Government was consistent with the actions of the United States Geological Survey (USGS) which recently released a report, "Methodology and Technical Input for the 2021 Review and Revision of the U.S. Critical Minerals List" that adds both zinc and nickel to its Critical Minerals List. It identified commodities with the greatest supply risk were those whose:

1. Global production was concentrated in countries that may become unable or unwilling to continue to supply to the U.S.;
2. U.S. consumption was predominately dependent on foreign supplies; and

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3. U.S. consumption represented a large expenditure for U.S. manufacturing industries with low profitability but who contributed greatly to the U.S. economy.

Cobalt was already on the USGS Critical Minerals List, sitting in the upper right quadrant of Economic Vulnerability versus Disruption Potential matrix.

Aeon's Walford Creek Project has the potential to become Australia's largest producer of cobalt metal when in operation and this underpins the strategic importance of its development. This also provides insight into the important role that marketing of the cobalt off-take from Walford Creek will play in its future project financing and development.

Commodity Price Trends

Since the start of 2021 there has been an underlying improvement in the economic outlook of the metals planned to be produced at the Walford Creek Project. Most notable is copper; up 17% year-to-date (YTD), and cobalt, up 37% YTD. Together these metals are expected to account for over 70% of projected revenue at Walford Creek (see ASX release dated 30 June 2021, Walford Creek Revised Scoping Study Results). Zinc, up 12% YTD, and nickel, up 9% YTD, have also shown strong uptrends.

These encouraging commodity price increases in the Walford Creek metal portfolio underline the emerging battery/electrification metal investment thematic that will underpin a low carbon future. The growing consensus to adopt carbon neutral objectives for 2050 further underscore the potential further growth in both demand and prices. The Walford Creek Copper-Cobalt Project timetable to achieve commercial production in 2025 is well positioned to propel Aeon to be a major beneficiary of these broader demand dynamics.

Figures 3(a-d): Commodity price trends in 2021

Copper

	$10,500
(USD/t)	$10,000
$8,500
	$9,500
	$9,000

$8,000 $7,500

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Cobalt

metal)	$55,000
$45,000
LME	$50,000
$40,000
(USD/t	$35,000
21-Jan	21-Feb	21-Mar	21-Apr	21-May	21-Jun	21-Jul	21-Aug	21-Sep
$30,000

Zinc SHG

Metal)	$3,100
$3,000
	$2,900
(USD/t	$2,800
$2,700
	$2,600
	$2,500

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Nickel

metal)	$20,000
$19,000
(USD/t	$18,000
$17,000
	$16,000

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Corporate

On 24 August 2021, the Company announced that it had completed an agreement with OCP Asia Group to extend the maturity date on its existing loan facility by 24 months (to 17 December 2023).

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