REG-Pensana Plc: Update on Financing and Project Development

PensanaAnnouncement

03/04/2023 08:15

3 APRIL 2022

     Pensana Plc

("Pensana" or the "Company")

Update on Financing and Project Development

Further to the release of the Interim Results on 31 March 2023, the Company
provides the following update on Financing and Project Development.

As reported the Company is at an advanced stage in its financing of both the
Saltend rare earth separation facility in the UK and the Longonjo mine in
Angola. The total capital requirement is US$550 million. 
Both projects are fully permitted, with FEED studies complete and early works
programmes well underway on each site led by highly experienced project
delivery teams.

The Company has been engaged with three parties to provide the required
funding; namely the previously announced US$175 million bond issue being
arranged by ABG Sundal Collier, for which the Company has received green bond
accreditation from CICERO rating agency, a $220 million strategic equity
investor which is before its investment committee and a $150 million debt
package being arranged by a South African bank.

Project Development Timeline

The funds are required to be put in place between now and the end of the
calendar year in order to meet the proposed construction and commissioning
schedule with first production targeted in 2025.

Offtake Arrangements

The Company has established a direct relationship with the key Japanese magnet
manufacturers and has entered into an MOU for 25% of Saltend’s annual
production. It has ongoing discussions with Japanese trading houses with
direct access to the Japanese automotive sector.

Terms have been agreed terms with a major European wind turbine OEM and the
Company has been shortlisted to supply major US and European automotive OEMs.
Offtake discussions with several automotive component manufacturers in the US
and Europe are underway.

The Company is working closely with its customers to establish an independent
and sustainable supply chain providing them with a cost effective, fully
transparent and an ultra-low embedded carbon range of rare earth products.

At a time when there is growing public concern about the provenance of rare
earth extraction and the resilience of supply chains in general, the
Company’s ability to demonstrate, in particular to consumer facing
automotive OEMs, that it can provide an independently validated sustainable
product from the UK is an increasingly attractive point of differentiation.

Technical Due Diligence - Longonjo and Saltend

The technical due diligence undertaken by independent third parties on behalf
of the financing parties has highlighted that the state-of-the-art Longonjo
mine is one of the largest and highest grade undeveloped rare earth mines in
the world. 

The near surface, deeply weathered orebody, has an average depth of 35 metres,
with a mine grade of 3.72% TREO and NdPr 0.78% and over the first five years
is anticipated to produce around 46,000 tonnes per annum of mixed rare earth
sulphate for export to Saltend.

The Longonjo mine is linked to the Atlantic Port of Lobito via the Benguela
rail line which in a recent joint announcement by the Governments of Angola,
Zambia and DRC has been designated as the Lobito Trade Corridor and
concessioned to Portuguese infrastructure group Mota-Engil for a $450 million
upgrade.

Exploration results from the Sulima West target on the Coola exploration
licence located 40 kilometres north of Longonjo reported rare earth grades of
up to 9.7% TREO averaging 3.4% TREO over 68 metres in surface trenches
highlighting the potential to extend the 20-year mine life at Longonjo.

Saltend will initially produce around 12,500 tonnes of TREO including 4,500
tonnes of NdPr oxide per year making it one of the top three producers in the
world outside China and has capacity for expansion to meet the growing demand
for magnet metal rare earths from electric vehicles and offshore wind.

Independent Rare Earth Processing Hub

Located in the Saltend Chemical Park in the Humber Freeport, Saltend will be
the world’s  first rare earth processing hub, capable of processing third
party feedstock imported from around the world. A number of discussions are
underway with potential third-party feedstock suppliers for access to
uncommitted processing capacity at Saltend.

The Company has partnered with the adjacent Yorkshire Energy Park for a
private wire connection to offshore wind battery storage under which it will
have access to 4 MW rising to 10 MW of low carbon electricity for ten years
and together with Longonjo’s ten-year low-cost supply of hydro-electric
power the Company is able to demonstrate that it can supply ultra-low embedded
carbon products from mine to customer.

A direct example of this is Pensana’s partnership with Polestar to create
the first truly climate-neutral car by 2030. The scope of the Polestar 0
project is to identify and eliminate all greenhouse gas emissions from the
extraction of raw materials to when the car is delivered to the customer and
onwards to the end of vehicle life.

Hydro-electric Power at Longonjo and Low-cost Electricity in the UK

The company has entered into a ten-year contract for electricity at prices
around US$ 2 cents per kwh to power the Longonjo mine supplied from the
hydroelectrical power grid.

For Saltend the UK Government’s Business Industry supercharger program will
exempt firms from certain costs arising from renewable energy obligations such
as the Feed in Tariff, Contracts for Difference and the Renewables Obligation,
as well as GB Capacity Market costs in addition to lower network charges
providing power at a competitive rate to other major economies around the
world.

This future low-cost supply of low-carbon electricity may power the Saltend
separation facility expansion plans including the conversion of NdPr Oxide
into magnet metal, this use of offshore wind to produce ultra-low carbon
magnet metal will be a significant step to further decarbonize the rare earth
supply chain.

The Company and Equinor are studying the use of low carbon hydrogen produced
from Equinor’s flagship 600MW low-carbon hydrogen production plant with
carbon capture, Hydrogen to Humber (H2H) at Saltend, to recycle the seven
tonnes of rare earth permanent magnets in the nacelles of wind turbines
currently being installed in the 3.6GW Dogger Bank windfarm.

The Company is committed to responsible and sustainable production and has
implemented a range of environmental and social initiatives to support the
communities in which it operates.

Financial and Production Summary

The key material assumptions and outcomes of the results of the study are set
out below:

                                                                                        UNIT     
 PRODUCTION ASSUMPTIONS                                                                          
 Life of Mine (based on Proven and Probable Reserves)                            20 years        
 Average grade, TREO (Year 1-5)                                                3.73 %            
 Average grade, TREO (Year 6-20)                                               2.10 %            
 Average grade, NdPr (Year 1-5)                                                0.79 %            
 Average grade, NdPr (Year 6-20)                                               0.46 %            
 Average strip ratio (LOM)                                                     0.21 waste:feed   
 Design ROM throughput                                                          1.5 mtpa (dry)   
 Design concentrator production                                             110,000 tpa (dry)    
 Design MRES Refinery production                                             41,100 tpa (dry)    
 Design Saltend Refinery capacity                                            46,600 tpa (dry)    
 Annual Production of Rare Earth Oxides (TREO)                               12,500 tpa          
 Annual Production NdPr Oxides (1)(included in TREO)                          4,500 tpa          
 Average concentrator recovery (NdPr)                                            41 %            
 Average MRES recovery (NdPr)                                                    72 %            
 Average SX recovery (NdPr)                                                      93 %            
 OPERATING COSTS (2)                                                                             
 Average annual operating cost                                                  198 US$ million  
 Average operating (total rare earth oxide)                                      20 US$/kg       
 CAPITAL COSTS                                                                                   
 Saltend Refinery                                                               197 US$ million  
 Longonjo Mine Infrastructure                                                    49 US$ million  
 Longonjo Concentrator Plant                                                    123 US$ million  
 Longonjo MRES Refinery                                                         133 US$ million  
 Total Capital Pre-production                                                   502 US$ million  
 Average annual sustaining capital (year 1 - 5)                                   7 US$ million  
 Average annual sustaining capital (from year 6)                                 19 US$ million  
 FINANCIAL METRICS (3)                                                                           
 Revenue (average p.a. based on first five years steady state production)       989 US$ million  
 EBITDA (average p.a. based on first five years steady state production)        631 US$ million  
 NPV (8 )(un-leveraged, post-tax) (4)                                           3.5 US$ billion  
 IRR                                                                             60 %            
 Payback from first production                                                  1.5 years        

Source: Company information. Management estimates, inclusive of Longonjo and
Saltend operations, are based on underlying independent studies undertaken by
independent consultants.

Notes:
1. Targeted annual production assumes sourcing third party MREDS / MREC feed
to be processed at Saltend as an alternative to ramping Longonjo up
2. Based on cost and production excluding 3rd party feedstock. Total cost of
US$198 million per annum is split US$127 million for Longonjo and $71 million
for Saltend.
3. Assumes third party feed to be purchased at same cost per tonnes of MRES
when compared to Longonjo.
4. NPV is calculated at an operational level pre-financing which is
anticipated to be a blend of equity and long-term debt financing. Revenue is
based on NdPr oxide prices according to Adamas Intelligence base forecast (Q2
2022). NdPr oxide prices starting at $172/kg in 2023, escalating at CAGR of
3.1% p.a. to 2035, flat real thereafter.
- ENDS –

For further information, please contact:

Shareholder/analyst enquiries:

Pensana Plc      

Paul Atherley,
Chairman                                                         
IR@pensana.co.uk

Tim George, Chief Executive Officer

Rob Kaplan, Chief Financial Officer

George Zacharias, Group Company Secretary

Media enquiries:

FGS Global:

Gordon Simpson / Richard
Crowley                                       
Pensana-LON@fgsglobal.com

About Pensana Plc

The electrification of motive power is the most important part of the energy
transition if we are to tackle climate change and one of the biggest energy
transitions in history. Magnet metal rare earths are central to that
transition, forming a critical part of the technology for efficient electric
vehicle motors and offshore wind turbines.

Pensana plans to establish its Saltend processing hub as an independent and
sustainable supplier of the key rare earth magnet metal oxides to a market
which is currently dominated by China.

The US$195 million Saltend facility is being designed to produce circa 12,500
tonnes per annum of rare earth products, of which 4,500 tonnes will be
neodymium and praseodymium oxide (NdPrO), representing over 5% of the world
market in 2025.

Pensana’s plug-and-play facility is located within the world-class Saltend
Chemicals Park, a cluster of leading chemicals and renewable energy businesses
in the Humber Freeport and will create over 500 jobs during construction and
over 125 direct jobs once in production.

Powered by low-carbon offshore wind, it will be the first major separation
facility to be established in over a decade and will become one of the few
major producers located outside China.

Feedstock will be shipped as a clean, high purity mixed rare earth sulphate
(MRES) from the Company’s Longonjo low-impact operations in Angola. The
mine's state-of-the-art concentrator and proprietary MRES processing plant are
designed by Wood to the highest international standards.

The operations will be powered by renewable energy from hydroelectric power
and connected to the Port of Lobito by the recently upgraded Benguela railway
line.

Pensana believes that provenance of critical rare earth materials supply, life
cycle analysis and GHG Scope 1, 2 and 3 emissions will all become significant
factors in supply chains for major customers.

The Company intends to offer customers an independently and sustainably
sourced supply of the metal oxides and carbonates of increasing importance to
a range of applications central to addressing the energy transition.

Pensana is also aiming to establish Saltend as an attractive alternative to
mining houses that may otherwise be limited to selling their products to
China, having designed the facility to be easily adapted to cater for a range
of rare earth feedstocks.

www.pensana.co.uk

3 APRIL 2022



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