GME Resources : Sept 2018 Quarterly Activities Report

QUARTERLY ACTIVITIES REPORT

SEPTEMBER 2018

GME Resources Limited ("GME" or "the Company") (ASX:GME) released the results of the Pre-Feasibility Study ("PFS") on its 100%-owned NiWest Nickel-Cobalt Project in Western Australia ("NiWest" or "NiWest Project") during the September 2018 quarter. The highlights of the study were:

Head grades average 1.05% nickel and 0.07% cobalt for the first 15 years. Opportunity to extend high-grade profile through potential conversion of Inferred Resources and/or inclusion of other known deposits.

Initial 27-year operating life at a nameplate processing capacity of 2.4Mtpa. Projected steady-state nickel and cobalt recoveries of 79% and 85% respectively.

Total production of 456kt nickel (in nickel sulphate) and 31.4kt cobalt (in cobalt sulphate). Average annual production of 19.2kt nickel and 1.4kt cobalt over the first 15 years. Ungeared post-tax NPV8% of A$791M and internal rate of return (IRR) of 16.2% (equivalent pre-tax values of A$1,390M and 21.2%, respectively). Payback period (pre-tax) of 4.4 years. Average cash unit operating cost (post royalties and cobalt credits) of US$3.24/lb contained nickel (US$3.00/lb for the first 15 years).

Globally attractive pre-production capital intensity of sub-US$20 per pound of average annual nickel production based on forecast pre-production capital expenditure of A$966M. Projected free cashflow (post all capital expenditure and tax) of A$3,342M.

Next Steps

GME intends to undertake a wider and more advanced period of engagement with potential strategic partner/offtake parties prior to commencing a Definitive Feasibility Study (DFS) on the NiWest Project.

This process is targeted at a comprehensive and robust assessment of the broad range of potential ownership, development and funding structures currently available to GME and the NiWest Project.

Concurrent activities planned during this period include delineation of planned DFS scope and workstreams, end-market analysis, assessment of value engineering opportunities delivered via the PFS and the commencement of critical-path environmental study work.

JAMIE SULLIVAN

MANAGING DIRECTOR

30 October 2018

NIWEST (NICKEL-COBALT) PROJECT Pre Feasibility Study

Introduction

The NiWest Nickel-Cobalt Project is one of the largest high grade, undeveloped nickel-cobalt deposits in Australia. The project is located adjacent to Glencore's Murrin Murrin operations in the North Eastern Goldfields of Western Australia. The project is situated in a semi-arid region that is well serviced by existing infrastructure (refer Figure 1).

Figure 1: Niwest Project Location and Infrastructure

The base project parameters determined by the PFS (refer ASX 2 August 2018) are:

Updated Mineral Resource estimate of 85.2Mt at 1.03% nickel and 0.065% cobalt (0.8% nickel cut-off).

Maiden NiWest Ore Reserve estimate of 64.9Mt at 0.91% nickel and 0.06% cobalt (at 0.5% nickel cut-off).

Conventional open pit mining at a low projected strip ratio of 2.0:1.

Head grades average 1.05% nickel and 0.07% cobalt for the first 15 years. Opportunity to extend high-grade profile through potential conversion of Inferred Resources and/or inclusion of other deposits.

Selected processing route of heap leaching followed by highly efficient Direct Solvent Extraction (DSX) to produce low-cost nickel and cobalt sulphate products.

Initial 27-year operating life at a nameplate processing capacity of 2.4Mtpa. Projected steady-state nickel and cobalt recoveries of 79% and 85% respectively.

Total production of 456kt nickel (in nickel sulphate) and 31.4kt cobalt (in cobalt sulphate). Average annual production of 19.2kt nickel and 1.4kt cobalt over the first 15 years.

Project construction period of 24 months from Final Investment Decision (FID). Forecast commissioning and plant ramp-up phase of approximately 20 months.

The key economic assumptions and outcomes of the PFS are:

Life-of-mine price estimates of US$8.00/lb nickel (includes US$0.75/lb sulphate premium) and US$25/lb cobalt (zero sulphate premium). A$/US$ assumption of 0.75.

Ungeared post-tax NPV8% of A$791M and internal rate of return (IRR) of 16.2% (equivalent pre-tax values of A$1,390M and 21.2%, respectively). Payback period (pre-tax) of 4.4 years. Average cash unit operating cost (post royalties and cobalt credits) of US$3.24/lb contained nickel (US$3.00/lb for the first 15 years).

Forecast pre-production capital expenditure of A$966M, representing a globally attractive pre-production capital intensity of sub-US$20 per pound of average annual nickel production. Projected free cashflow (post all capital expenditure and tax) of A$3,342M.

Mineral Resource

The updated Mineral Resource Estimate1 for the NiWest Project is 85.2Mt at 1.03% Ni and 0.065% cobalt at a 0.8% Ni cut-off (refer to Table 1 and Appendix A).

Table 1: Mineral Resource Estimate1 for NiWest Project at 0.8% Ni Cut-off Grade

JORC Classification	Tonnes (million)	Nickel Grade (%)	Cobalt Grade (%)	Nickel Metal (kt)	Cobalt Metal (kt)
Measured Indicated Inferred	15.2 50.4 19.5	1.08 1.04 0.95	0.064 0.068 0.057	165 527 186	9.8 34.5 11.0
TOTAL*	85.2	1.03	0.065	878	55.4

* Columns may not total exactly due to rounding errors. Tonnages are reported as dry tonnage

1 ASX Release 2 August 2018

The update follows a review of the geological models of the three deposits incorporated in the PFS, namely Mt Kilkenny, Eucalyptus and Hepi, with the objective of refining the domaining of the nickel and cobalt mineralisation. The Mertondale, Murrin North, Waite Kauri and Wanbanna models remain unchanged from those released to the ASX on 21 February 2017.

The updated Mineral Resource estimate for solely those deposits that are the subject of the PFS is 67.0Mt at 1.04% Ni and 0.065% cobalt (0.8% Ni cut-off, refer Table 2).

At a 0.8% Ni grade cut-off approximately 74% of the contained nickel in the PFS Mineral Resource estimate is classified in the Measured and Indicated categories.

Table 2: Mineral Resource Estimates for Mt Kilkenny, Eucalyptus and Hepi at 0.8% Ni Cut-off

Deposit	JORC Classification	Tonnes (M)	Ni Grade (%)	Co Grade (%)	Ni Metal (kt)	Co Metal (kt)
Mt Kilkenny	Measured Indicated Inferred	8.8 12.7 4.5	1.11 1.09 0.98	0.063 0.079 0.051	98 138 44	5.6 10.0 2.3
	Sub-total*	26.0	1.08	0.069	279	17.9
Eucalyptus	Indicated Inferred	23.7 12.8	1.04 0.95	0.064 0.056	247 121	15.3 7.1
	Sub-total*	36.5	1.01	0.061	368	22.4
Hepi	Measured Indicated Inferred	1.6 1.5 1.5	1.20 1.01 0.95	0.078 0.073 0.074	19 15 14	1.2 1.1 1.1
	Sub-total*	4.5	1.06	0.075	48	3.4
Total	Measured Indicated Inferred	10.4 37.9 18.7	1.12 1.05 0.96	0.066 0.070 0.056	117 400 178	6.8 26.4 10.4
	Total*	67.0	1.04	0.065	695	43.6

*Columns may not total exactly due to rounding errors. Tonnages are reported as dry tonnage

Ore Reserve & Mine Planning

The Maiden Ore Reserve estimate for the NiWest Project is 64.9Mt at 0.91% Ni and 0.06% Co (for 592kt contained nickel and 38kt contained cobalt). This is based on a 0.5% Ni cut-off grade (refer Table 3).

Table 3: NiWest Project Ore Reserve Estimate (at 0.5% Ni Cut-off Grade)

Orebody	JORC Classification	Tonnes (M)	Ni Grade (%)	Co Grade (%)
Mt Kilkenny Eucalyptus Hepi	Probable Probable Probable	27.9 32.2 4.7	0.96 0.87 0.91	0.06 0.05 0.06
Total*	Probable	64.9	0.91	0.06

*Columns may not total exactly due to rounding errors. Tonnages are reported as dry tonnage

The NiWest Ore Reserve estimate includes a higher grade (>0.8% Ni cut-off) component of 41.2Mt at 1.06% Ni and 0.07% Co. Mining and processing/refining of this higher-grade component predominantly occurs during the first 15 years of NiWest operating life.

Commencement of mining activities at Mt Kilkenny is scheduled approximately six months prior to first heap stacking operations (commencement of processing) also at Mt Kilkenny (Figure 1). Mining is expected to be via conventional truck and shovel operations that are almost entirely free dig with only ferruginous capping requiring drilling and blasting.

Approximately 65Mt of ore and 133Mt of waste material is scheduled to be mined over a mining activity life of approximately 20 years. The life-of-mine average strip ratio is 2.0. Annual material movement is approximately 15Mtpa in Years 1-6, before dropping to around 8Mtpa for much of the remainder of mining operations.

Metallurgy and Processing

The processing route selected for the NiWest Project is heap leaching followed by neutralisation, impurity removal and highly efficient Direct Solvent Extraction (DSX) and crystallisation to produce nickel and cobalt sulphate products.

The heap leach design is a function of column test work on NiWest ore combined with the learnings from all publicly available data in relation to the successful heap leach operations previously conducted at the nearby Murrin Murrin Operations. Projected leach recoveries (81% nickel and 87% cobalt) and residence time (210 days) were optimised by the decision to adopt 2 metre heap heights. Forecast average sulphuric acid consumption is 470kg per tonne of NiWest ore through the full process (with 450kg per tonne attributable to the heap leaching operations). As a function of the accelerated mining profile and stockpiling of lower grade ore in earlier years, stacked nickel head grade is forecast to be maintained above 1.0% Ni (with cobalt averaging almost 0.07%) for the first 18 years of heap leach operations (refer Figure 2).

Figure 2: Heap Leaching Schedule

ROM ore stacked (mt)

3.0

2.5

2.0

Orestacked(mt)

1.5

1.0

0.5

0.0

1.20%

1.00%

0.80%

0.60%

0.40%

Stackedgrade(%Ni)

0.20%

0.00%

Y-1

Y0

Y1

Y2

Y3

Y4

Y5

Y6

Y7

Y8

Y9

Y10

Y11

Y12

Y13

Y14

Y15

Y16

Y17

Y18

Y19

Y20

Y21

Y22

Y23

Y24

Y35

Y26

Y27

Y28

Pregnant Leach Solution (PLS) drawn-off the heap operations is processed through a series of hydrometallurgical steps involving PLS neutralisation, impurity removal, DSX and product crystallisation.

All steps in the proposed hydrometallurgical flowsheet were successfully tested as part of the GME metallurgical test work program conducted over the past 18 months. Further work is planned during the early stages of the DFS to confirm the hydrometallurgical flowsheet (refer Figure 3) and subsequently undertake further continuous pilot testing and detailed engineering.

Figure 3: NiWest Process Flowsheet