Mayur Resources : Letter To Shareholders From Managing Director

Letter to Shareholders from the Managing Director

ASX Announcement

11 July 2022

onlyTo the Shareholders of Mayur Resources Limited

As we enter a new financial year, I want to take the opportunity to provide an update on the Company's activities in advance of the soon to be released June 2022 Quarterly Report. Over the past year and a half Mayur Resources, like many businesses, has faced many challenges as a result of the on-going effects of the COVID-19 pandemic, yet we

usehave continued to materially advance our project portfolio in Papua New Guinea. Whilst this letter is lengthy in nature, I feel it important to explain in detail how we have developed the business and how we have managed your investment.

The announcements made during this time have included key milestones required to transform Mayur's projects into long term cashflow generating businesses. These are outlined in this letter to add context to my statement. The establishment of new businesses to the point of being able to generate long-term cash flow takes time, and we are confident we are on the right pathway on the basis we now have fully permitted and construction ready projects.

personalMayur Resources has taken three projects (Iron and Industrial Sands, Quicklime and Clinker/Cement) from inception ll the way through the project development stages to be fully permitted with construction bids in place - 'Shovel

Ready'. These three projects are now in the financing stage and shall see construction commence as soon as financing has been finalised. For clarity, the development activities of exploration, feasibility studies, permitting/approval, customer offtake support and receival of construction bids have been completed for these projects.

Within this period the Board also decided to pause our thermal energy power station project at Lae and focus instead its efforts on renewables (solar/geothermal) and the establishment of its PNG Nature Based REDD+ Forestry Carbon Credit projects. The response to this amendment in strategy has been positive with our future customers welcoming our ability to use renewables to penetrate the energy requirements of our projects, thus reducing our carbon footprint. We have then additionally proposed to generate high quality PNG Nature Based REDD+ Forestry Carbon credits to further offset remaining carbon emissions that are currently unavoidable. Collectively this approach then yields Net Zero products (with the endeavour to achieve this milestone from the commencement of production).

The Nature Based REDD+ Forestry Carbon Projects we are undertaking with Landowners and the PNG Government relate to forests in PNG that are genuinely under threat from logging and are to be reclassified from logging areas to carbon estates. Revenues from the Carbon Projects will bring vastly larger financial and community benefits vs. logging Forto landowners, communities, and the PNG Government and under our ESG commitments, the majority of carbon revenues are provided to landowners. These landowners reside in very poor communities where these revenues will provide the most basic of services such as health, employment, community empowerment, electrification, sanitisation, aid posts and education but then also enrich these communities over the coming 30+ years with far more

than basic services.

The strategic value of this initiative has been recognised by Santos Limited (ASX:STO), who are now working with Mayur as announced on 21 June 2022. The initiative provides major benefits to landowners but also provides our PNG produced products with a significant competitive advantage in being able to sell products into international markets that are Net Zero from day 1 of production vs. competitors that have made commitments to be net zero in 2030 to 2050.

	Level 7, 300 Adelaide Street
	Brisbane Queensland	4000
	Phone [phone]	4400
Mayur Resources Limited | ARBN 619 770 277 | ASX: MRL	mayurresources.com

Building Shareholder's a long-term sustainable business

onlyThe Company has a deep value, multi generation portfolio of projects that have been set up to provide extra ordinary returns whilst demonstrating environmental, social and governance (ESG) elements in accord with IFC's Equator Principle Investment Standard requirements and aiming to reach net zero commitments far faster than its peers.

The company's founders and key corner-stone and strategic investors, pre and post listing of Mayur on the ASX in 2017, have not sold a single share in the Company and have continued to invest in and support the Company and its development aspirations when raising additional capital.

The attached Appendix A outlines the commitment and significant progress the Company has made since listing and usehow it has deployed circa A$69 million in developing these three projects to now be construction ready and fully p rmitted. Such expenditure has been well managed and are a core part of the front-end investment process in tarting new long-life generational EBIT producing businesses. I encourage you to examine this and the announced

progress and reflect on, how advanced you feel we as a company now are.

In parallel in bringing these three projects to the financing and construction phase, we have launched a carbon and renewable energy platform, but disappointingly we see our market capitalisation at circa A$23.5 million (A$45.5

million less than what has been spent to date). Additionally, there is a p/nav1 discount of 96.5% of released project personalNPV's vs current market capitalisation of the company. This arbitrage situation either communicates (1) a

misunderstanding in the market on the business proposition or (2) that long term strategic corner stone investors who continue to support the company's direction, have a different view to the smaller short-term Shareholders. Management and our large corner stone investors feel that the market capitalisation does not come close to valuing

(a) the money the Company has spent (even on a dollar-for-dollar basis) and (b) a value premium on the money invested to date (which is the purpose and objective of expending such funds in the first place). I further encourage y u to also look at Appendix B for the graphical line plot of market capitalisation changes, share price and announcements made that will bring to the fore what I am saying.

The board and I communicate this with conviction as we currently have announced A$677m NPV for our projects that a e at 'construction ready' stage, backed by several hundred million tonnes of already announced JORC Resources, with a near term plan to announce a growth to this accumulated NPV (due to an expanded case for the Quicklime project and capital structuring of the Clinker/Cement). We therefore remain very confident and resilient in the view that there are clear asymmetrical advantages that the platform the company has established, sets the foundations for a vastly larger, profitable, and more resilient business than that which we listed (being Mayur Resources) via IPO in 2017 (the company came onto the market with a far less developed asset base than what we have today and at a market capitalisation in 2017 of A$53.5 million). Additionally, these projects have now been positioned to be:-

Forexpandable via utilisation of unallocated JORC resources, adaptable (with Mayur Resources own granted Special Economic Zone) and sustainable (via the large ESG benefits the project will have for landowners and communities and being Net Zero), thus setting a bright stage for future generational shareholders and stakeholders.

Therefore, if deploying Shareholders funds does not yield an accretion in value, naturally the strategy and/or application of funding should be examined. The challenge for the Board is, the company continues to act in the best interests of ALL Shareholders, with the loyal long term corner stone and strategic Shareholders who hold >50% of the company remaining supportive (in principle and capital support) of the Company's direction, whilst some smaller short-term Shareholders and day traders continue to sell off our stock when value accretive announcements are made. Refer again to Appendix B to examine this trend.

Our three projects of Iron and Industrial Sands, Quicklime and Clinker/Cement provides a line of sight to annual EBIT (see table below) of circa A$200 million per annum (once in production). Subject to securing financing and commencement of construction, the timeframe to production across the portfolio is estimated as follows:- iron and

1 P/NAV refers to the ratio of a company's market capitlisation divided by the Project Net Asset Value or Net Present Value.

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industrial sands after 12 months, Quicklime after 18-24 months and Clinker/Cement after 26-28 months. I would encourage Shareholders to examine the annual EBIT of other construction materials companies that will have similar onlyproducts and those with remotely comparable renewable aspirations/credentials. I would then ask you to examine their current market capitalisation today based upon their forward EBIT multiple and reflect and assess what our company's near-term future value could be in the range of vs. where it is today (noting our projects are fully permitted a d construction ready only awaiting to secure finance enabling cashflow and EBIT production). As already mentioned, the expansion of the Quicklime project case and capital structuring of the Clinker/Cement will improve EBIT in addition

to what is documented below.

Carbon Status

Project

Estimated Initial Capex

Annual EBIT

Production

Status

use

Orokolo Bay

A$30m^

Construction Ready

- Iron and

Fully Permitted

A$35m^

1.5mtpa

Industrial

Cashflow 12 Months

A$30m equity

Sands

Binding Offtake

CCL Stage 1

A$67.6m*

Construction Ready

Fully Permitted

- Quick Lime

A$40.6m debt

A$21m*

0.2mtpa

Net Zero

Cashflow 18-24 months

personal

(1 Kiln)

A$27.0m equity

In Principle Offtake

Products Day 1

production

CCL Stage 2

A$396.2m*

Construction Ready

Fully Permitted

- Clinker &

A$238m debt

A$128.8m*

1.75mtpa

Cashflow 26-28 months

Cement

A$158.2m equity

In Principle Offtake

Carbon

A$14m+

Refer to

8mtpa

Feasibility Underway

Funding from incoming

ASX

(Stored

Credits

Cashflow 18-24 months

investors

Release+

Carbon)

^ ASX Release 'Orokolo Bay Industrial Sands Project DFS confirms low cost operation with strong economics' (11/09/2020 & 04/04/22) Exchange rate US$1.0:A$1.4. * ASX Release 'DFS confirms technical robustness and strong economics for the central cement & lime project: a new import replacement and export industry for Papua New Guinea' (24/01/2019) Exchange rate US$1.0:A$1.4.

+ ASX Release 'Presentation and Webinar Tuesday 21 June 900 am AEST' (20/06/2022) Exchange Rate US$1.0:A$1.4.

We remain extremely confident that Mayur will soon be redefined as a producing 'Construction Materials' business coupled with a complimentary Renewable Energy and Carbon Offset arm that the market can easily understand. I remain very encouraged by the continuing and steadfast support that I have received from our PNG stakeholders, the Mayur Resources Board, our leadership team, and major strategic pre and post IPO Shareholders who continue to accumulate their shareholding since listing.

ForThe following sections of this letter set out some of the main deliverables, achievements, and future objectives across the various divisions of our business.

Quicklime (CCL Project - Stage 1)

The Quicklime project is Stage 1 of the 2 Stage Central Cement and Lime (CCL) project that aims to be Australasia's first carbon-neutral Quicklime, Clinker and Cement producer. This project will be able to meet 100% of PNG's domestic Quicklime needs for now and into the future whilst also supplying product to the wider international market i.e. Australia, at a very cost competitive price point.

The project consists of a Quicklime high grade quarry, private import/export wharf, power plant and Quicklime kilns.

This project is located near to the coast within our granted Mining Lease on naturally clear land with the limestone resources at surface. Quicklime is a critical processing mineral for battery and future facing metals such as rare earths, copper, nickel, aluminium, uranium, cobalt, and lithium, and for gold processing, pollution abatement, treatment of

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acidification in soils and waterways and for water treatment. Please take the time to inform yourself on the critical role lime plays in the modern world outlined in Appendix E. Without the expansion and development of high-grade Quicklime sources, expansion of high-grade battery processing and critical rare earth minerals will be extremely difficult as Quicklime is a critical processing consumable in the winning/recovery capability of these metals.

If Shareholders were to inquire, they would find Quicklime end user organisations in the Australian market have been focused on the green and future facing metals and other applications that Quicklime aids, however the quality, reliability and supply side of Quicklime has clearly come into focus with a large spike in prices, in instances more than

d

ubling. To be clear our project and its economics are not factoring this growth and price increases, but rather has

only

worked with existing users at historical long-term price points and demand profiles which still generate extremely

attractive project returns. The current and future tightening of Quicklime supplies is upside for our company.

Over the past 18 months since COVID several key value accretive milestones were still achieved including:

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• Receiving quicklime offtake letters of support exceeding the initial proposed upgraded Stage 1 nameplate

capacity of 400,000tpa;

• Securing Special Economic Zone status for the project including a range of fiscal and related financial

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concessions such as tax relief and duty exemptions, which significantly strengthen financial outcomes of the

project and ensures the project is a Tier 1 asset throughout the commodity cycle;

• Incorporating optionality into the project of up to 40% renewable power for the Quicklime Plant to reduce

carbon emissions from power generation via a hybrid generation system adjacent to the Quicklime kiln;

• Collaboration with world leading company First Graphene Ltd (ASX:FGR) to incorporate graphene-derived

additives into Mayur's cement products to reduce emissions by up to a further 25%;

• Amendment of the Mining Lease conditions to enable a staged development of Quicklime as Stage 1;

• Full incorporation and proposed construction of an additional second kiln due to additional Quicklime Kiln

offtake, that we shall further update the market on in the near term;

• IFC Equator principles review demonstrating a high level of compliance via 2 independently engaged

professionally qualified sustainability officers;

• Heads of Agreement signed with PNG Government owned Kumul Consolidated Holdings for gas supply and

enabling the pathway for final negotiations on a Gas Sales Agreement;

• Negotiation with strategic partners for financing support (equity and debt) - these negotiations are well

progressed and ongoing; and

• Receipt of revised construction bids, shortlist and commencement of the Early Contract Involvement stage.

These milestones mark significant forward progress in the development of the Quicklime project and re-iterate the

C

mpany's commitment to sustainable development and ESG principles. Through innovation and the use of new and

emerging renewable and carbon capture technologies along with carbon offsets, the company will hold a significant

For

advantage over competitors from day 1with the aim to be Australasia's first carbon neutral Quicklime (but also

Clinker/Cement) manufacturer.

Project

MRL Subsidiary Market Cap

MRL(s) Forecast

Project NPV

Percent of current

Allocation

EBIT

Quicklime P/NAV

CCL Stage 1 -

A$4.7 m+

4.9%

(Assumed 20% current

A$21m^*

A$96.6m^*

(A$4.7m/A$96.6m)

Quicklime (1 Kiln)

value attribution ASX:MRL)

95.1% discount

+ Management estimate of subsidiary company contribution to Mayur Resources market capitalisation.

• ASX Release 'DFS confirms technical robustness and strong economics for the central cement & lime project: a new import replacement and export industry for Papua New Guinea' (24/01/2019) Exchange rate US$1.0:A$1.4.
  *Derivation of broader CCL NPV via the single kiln CCL Lime only Financial Model - Average LOP EBIT US$15m = A$21m [US$1.0 : A$1.4]

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+ Management estimate of subsidiary company contribution to Mayur Resources market capitalisation.

^ ASX Release 'DFS confirms technical robustness and strong economics for the central cement & lime project: a new import replacement and export industry for Papua New Guinea' (24/01/2019) Exchange rate US$1.0:A$1.4.

*Derivation of broader CCL NPV via Clinker and cement only Financial Model - Average LOP EBIT US$92m = A$128.8m [US$1 : A$1.4]

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97.6% discount

(Assume 40% current value

attribution ASX:MRL)

A$128.8m^*

A$396.9m^*

(A$9.4m/A$396.9m)

CCL Stage 2 -

Clinker & Cement

A$9.4m+

2.4%

Clinker/Cement (CCL Project - Stage 2)

onlyThe Clinker/Cement project is Stage 2 of the CCL project. This project will be able to meet 100% of PNG's cement needs now and into the future whilst also supplying both Clinker and Cement products to the wider international markets as far away as destinations in the Pacific, South America and West Coast USA and as close as only two days sail time away to Townsville, Australia. There is not another known producer that we are aware of that is able to sell its products cost competitively at a Net Zero carbon emissions level in the coming 24-36 months providing the C mpany with key strategic advantages of environmental, quality and supply chain superiority into the market.

The project consists of ideal Clinker raw mix grade quarry material (containing limestone, marl, alumina silicates and iron correctives), private import/export wharf (expansion of additional berth to Quicklime wharf), expanded power

useplant and increase in gas supply.

This project is located on the same Mining Lease as the Quicklime project. Australia imports approximately 50% of its Cementitious requirements today and this trend has and is increasing each year as manufacturing facilities in Australia age and are not replaced. The location of the project renders it the closest supplier to the Australian market and increases delivery time by being three times closer to competing markets (whilst reducing transportation emissions also by a similar factor).

Now that the project is fully permitted and approved it only awaits completion of financing for this multi-generation operation to service PNG (which does not have its own domestic Clinker/Cement plant) and other outlined international destinations. Shareholders should be aware the project hosts a previously announced JORC Resource of 396 million tonnes - adequate resources to service both PNG and Australia's requirements for generations to come.

Over the past 18 months since COVID, several key value accretive milestones were still achieved including:

• Increasing Clinker and cement offtake support to over 1.58 Mtpa which represents circa 92% of our intended

personal

nameplate capacity of 1.72 Mtpa;

• Amendment of the Mining Lease to enable a staged development with Clinker/Cement as Stage 2;

• IFC Equator principles review demonstrating a high level of compliance via 2 independently engaged

professionally qualified sustainability officers;

• Negotiation with strategic partners for financing support (equity and debt) for the project - these negotiations

although stalled during Covid are now going to continue;

• Special Economic Zone Master planning;

• Road design for connecting the mining lease area to public roads;

• Early works scoping complete; and

• Installation of Micro Grid Solar for local landowners at Kido village.

For

Project

MRL Subsidiary Market Cap

MRL(s) Forecast

Project NPV

Percent of current

Allocation

EBIT

Cement/Clinker P/NAV