Prospect Resources : Quarterly Activities and Cashflow Report March 2022

ASX.PSC FRA.5E8

ASX ANNOUNCEMENT

29 April 2022

QUARTERLY ACTIVITIES REPORT

FOR THE QUARTER ENDED 31 MARCH 2022

Prospect Resources Ltd (ASX: PSC, FRA:5E8) (Prospect or the Company) is pleased to report on activities undertaken during the March 2022 quarter.

Summary

• • During the quarter, conditions precedent relating to the sale of Prospect's 87% interest in the Arcadia Project (Transaction) to Zhejiang Huayou Cobalt Co., Limited (Huayou) were progressed

• • Subsequent to the quarter end, the Transaction completed on 20 April 2022, with Prospect receiving net proceeds of approximately US$342.9 million1 (now converted to A$465.6 million2)

• • Cash distribution expected to be in the range of A$0.94 to A$0.96 per share,3 with A$30-40 million to be retained for future activities

• • Planning and preparation for further exploration activities at Step Aside Project continued, with rock chip sampling expected to be completed in coming weeks, followed by trenching and drilling activities

• • Ongoing assessment of the pipeline of prospective battery mineral targets in Zimbabwe and the broader sub-Saharan African region

• • Prospect was debt free with a cash balance of A$15.7 million4 at quarter end

Prospect Managing Director and CEO, Sam Hosack, commented:

"Having successfully completed the Transaction with Huayou, we have now shifted our focus to the next phase of the Company's growth plans, including further delineation of our Step Aside Project and assessment of further prospective battery metal projects within Zimbabwe and the broader sub-Saharan African region.

"We are at an exciting point in the Company's history, and I look forward to renewed efforts of diligence and dedication from our talented team during the next quarter as we hit the ground running and assess the opportunities ahead of us."

1 Total purchase price of approximately US$377.8m (inclusive of the deposit of US$20m), less US$26.8m in Zimbabwean capital gains tax and US$8.0m payable to Sinomine in relation to termination of the offtake agreement between Prospect and Sinomine (see ASX release dated 18 January 2022).

2 Average conversion rate of AUD:USD 0.7365

3 Calculated based on fully diluted shares on issue of 467,293,677.

4 Quarter-end cash balance excludes US$20m deposit received in December 2021 pursuant to the Transaction.

Prospect Resources Limited ACN 124 354 329 Level 2, 33 Richardson Street. West Perth WA 6005

E:[e-mail] W:prospectresources.com.au

Project Development

Step Aside Project

The Step Aside Project is located 8km north of the Arcadia Project, and comprises claims rationalised to approximately 100 hectares within the Harare Greenstone Belt, west of the Mashonganyika Fault. The potential of the area has been confirmed by positive historical regional stream and soil sample geochemistry results. Four mineralized pegmatites have been mapped from east to west within a meta-dolerite host rock. These mineralized pegmatites are all roughly parallel to each other, lying in a north-south orientation and have dip angles of 40-45˚ to the west.

Figure 1: Locality Map of Step Aside, 8km north of Arcadia

The early stages of an exploration program is underway at Step Aside, with rock chip sampling underway, with a trenching and drilling exercise to follow. Trenching and drilling will aid in determining sub-surface strike extensions and will provide greater detail as to the thickness and strike length of any potential underlying pegmatite. Drilling is planned to be undertaken during Q3 CY2022.

Project Generation

The Prospect exploration team continue to develop a pipeline of prospective battery mineral targets. The success and publicity associated with the Transaction with Huayou has resulted in an increase in opportunities being presented to Prospect. Project generation activities are under way and the Company is well capitalised to identify, assess, invest and then advance those projects that have the potential to meet scale and grade criteria.

Corporate

Sale of Arcadia Project to Huayou

During the quarter, conditions precedent relating to Transaction were progressed and subsequent to the quarter end, on 20 April 2022, Prospect completed the sale of its 87% interest in the Arcadia Project to Huayou International Mining (Hong Kong) Limited, a subsidiary of Huayou.

The Transaction comprised cash consideration of approximately US$377.8 million. Following payment of US$26.8 million in Zimbabwean capital gains tax and US$8 million to Sinomine in relation to the termination of the offtake agreement between Prospect and Sinomine,5 US$342.9 million, (inclusive of the deposit of US$20m), in net proceeds were received by Prospect on completion.

Subsequent to the Transaction completing, Prospect converted the funds into Australian dollars, receiving A$465.6 million at an average AUD:USD conversion rate of 0.7365.

Management Team Changes

Following completion of the Transaction, Mr Trevor Barnard (the General Manager of Prospect Lithium Zimbabwe) and the team of operators, administration staff and field assistants, together with pilot plant assets, have moved across to Huayou's ownership. This results in a reduction in Zimbabwean overheads.

The Board is cognisant of the need to identify and transact on a new project for the Company and has accordingly taken the opportunity to strengthen its management team with the appointment of a Business Development Manager, Mr David Broomfield.

David has over 26 years' experience as a geologist in the Australian mineral resources and exploration industry. He has broad experience managing and coordinating teams in developing projects, including undertaking prefeasibility and feasibility studies, technical and economic modelling, and due diligence in support of merger, JV, acquisition, and development proposals. David has an honors degree in Geology and Masters in Mineral Economics.

Distribution of Funds

As previously announced, Prospect intends to distribute a substantial portion of the net proceeds from the Transaction to its shareholders:

• • the distribution will be a cash distribution, which will likely include a capital reduction component and an unfranked dividend component;

• • Prospect is applying for an ATO ruling which will set out the Australian tax treatment of the distribution for the main classes of Prospect's shareholders;

• • the capital reduction component of the distribution will require shareholder approval and a shareholder meeting is expected to be convened in June 2022 to seek that approval. The record date for the distribution will be announced in the Notice of Meeting;

• • payment of the proposed distribution is expected to occur in July 2022;

• • Prospect expects to distribute between A$0.94 and $0.96 per share6, which will include a capital reduction of up to A$0.20 per share; and

• • Prospect intends to retain a cash balance of between A$30-40 million to progress battery and electrification metals projects with a primary focus in Zimbabwe, and secondary focus on the broader sub-Saharan African region.

5 See ASX release dated 18 January 2022 for further detail relating to the arrangements with Sinomine.

6 Calculated based on fully diluted shares on issue of 467,293,677, subject to final transaction costs.

Cash Balance

Prospect finished the quarter with a cash balance of approximately A$15.7 million.7

As noted above, net proceeds received from the Transaction totalled US$342.9, million, which have been converted to A$465.6 million. The Company is still required to pay final transaction costs to its advisors and consultants, which will be reconciled and paid over the coming weeks.

The Company confirms it currently has 431,293,677 ordinary shares on issue and 36,000,000 options outstanding8.

Appendix 5B - Related Party Payments

During the quarter, the Company made payments of A$492,101 to related parties and their associates. These payments relate to director fees and superannuation including once off salary sacrifice payments to executive directors.

This release was authorised by the Sam Hosack, Managing Director of Prospect Resources Ltd.

For further information, please contact:

Sam Hosack	Nicholas Rathjen
Managing Director	Head of Corporate Development
[e-mail]	[e-mail]

• 7 Quarter-end cash balance excludes US$20m deposit received in December 2021 pursuant to the Transaction.

• 8 See ASX announcement dated 3 March 2022 (Application of quotation of securities)

About Prospect Resources Limited (ASX: PSC, FRA:5E8)

Prospect Resources Limited (ASX: PSC, FRA:5E8) is an ASX listed company focussed on the exploration and development of mining projects, specifically battery and electrification metals, in Zimbabwe and the broader sub-Saharan African region.

Caution Regarding Forward-Looking Information

This announcement may contain some references to forecasts, estimates, assumptions and other forward-looking statements. Although the Company believes that its expectations, estimates and forecast outcomes are based on reasonable assumptions, it can give no assurance that they will be achieved. They may be affected by a variety of variables and changes in underlying assumptions that are subject to risk factors associated with the nature of the business, which could cause actual results to differ materially from those expressed herein. All references to dollars ($) and cents in this announcement are in United States currency, unless otherwise stated.

Investors should make and rely upon their own enquiries before deciding to acquire or deal in the Company's securities.