Sunrise Energy Metals : December 2021 Quarterly Activities and Cash Flow

ASX Announcement

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28 January 2022

Quarterly Activities Report

MELBOURNE, Australia - Sunrise Energy Metals Limited (Sunrise Energy Metals or Company) (ASX:SRL and OTC:SREMF) is pleased to provide an update on its activities for the quarter ended 31 December 2021.

Key Developments:

• The Sunrise Battery Materials Complex ('Sunrise Project') was awarded Commonwealth Government Major Project Status, formally recognising the significance of the project to the Australian economy and regional communities in New South Wales.
• Post quarter end, the Company secured conditional finance support from Export Finance
  Australia ('EFA') for up to A$400 million of debt funding.
• Drilling at Sunrise East intersected a cobalt-bearing laterite zone in ultramafic rocks and porphyry-style alteration associated with more evolved mafic to felsic intrusions including 5.8m @ 1120 ppm cobalt (SDD029) near surface with encouraging grades of nickel, scandium and platinum in the oxide zone1. A 53-hole reverse circulation ('RC') drill program is planned to test the extent of further cobalt and nickel mineralisation at Sunrise East.
• The Phase 2 diamond drill holes completed at Phoenix Platinum Prospect intersected multiple intervals of platinum mineralisation, though platinum grades are lower than previous bonanza grades intersected in the Phase 1 drill program.
• Work streams to advance the fully integrated Sunrise Project continued with activities focussed on:

1. Application for a modification to the Sunrise Development Consent, with NSW Government approval for the modification received in January 2022.

1. Progressing the long-lead electrical transmission line ('ETL') work scope.

• 1. Successful relocation of the Sunrise Project autoclaves, the major component of the Project's processing plant.
• The Company had A$29.3m cash on hand as at 31 December 2021.

1 For full details including JORC disclosures refer to the ASX announcement dated 20 January 2022

Sunrise Energy Metals Limited (ACN 127 457 916)
L6, 350 Collins St, Melbourne VIC 3000
T [phone]
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Managing Director and CEO, Sam Riggall said: "We are grateful to the Australian Government and its agencies for the award of Major Project Status to the Sunrise Project. It confirms the government's on-going commitment to Australia's critical minerals sector, most recently recognised in the establishment of the A$2 billion Critical Minerals Facility. As national and state policies evolve to support Australia's critical minerals sector, large, long-life,low-cost and sustainability designed assets like Sunrise will be key to building reliable and sustainable regional supply chains.

"The non-binding letter of support from Export Finance Australia for up to A$400 million of debt funding clearly demonstrates the Commonwealth Government's commitment to providing material financial assistance to project developers like Sunrise Energy Metals to bring Australia's critical minerals projects to fruition. The Company is targeting approximately 50% of the Project's capital requirements from commercial bank lenders, and this additional financial support from EFA is most welcome. We look forward to working with EFA as we continue to work towards securing a comprehensive financing package for the Sunrise Project from a range of local and offshore participants who have expressed interest in the project. We are grateful for the ongoing support of the Australian Government through its various agencies and we look forward to updating the market on material developments as discussions progress.

"Finally, the Company's growing exploration portfolio continues to offer exciting opportunities. Our exploration activities remain focussed on expanding our understanding of the geological potential of our broader tenement package, ensuring that we can maximise the potential from our core activity which remains progressing the Sunrise Battery Materials Project towards production."

OCCUPATIONAL HEALTH AND SAFETY

The Company had no lost time injuries or reportable environmental incidents recorded during the quarter.

SUNRISE BATTERY MATERIALS COMPLEX

During the quarter, the Company continued to advance the development of the Sunrise Battery Materials Complex. A range of workstreams remain ongoing to progress a number of value-adding deliverables aimed at minimising Project start time once funding is secured. Key work programs include:

• Progressing the long-lead electrical transmission line work scope. The ETL application to connect to the NSW electrical grid is currently in progress and will continue through CY22.
• Test work and process development work assessing opportunities for potential recycling of spent battery materials and further downstream processing of sulphates into precursor cathode active material.
• Ongoing environmental work including monitoring and compliance reporting.

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• A range of scandium alloy development programs continue to be progressed, consistent with Sunrise Energy Metals' long-term strategy to work with, and assist, industry players to investigate and develop new applications for scandium-aluminium alloys.

Conditional finance support from Export Finance Australia

Post the end of the quarter (refer to the ASX release dated 17 January 2022) a letter of conditional finance support was received from Export Finance Australia (EFA) for up to A$400 million of debt funding for the Sunrise Project.

EFA is Australia's export credit agency and provides financial solutions to support Australian exporters through loans, guarantees, bonds and insurance. EFA also manages the Australian Government's A$2 billion Critical Minerals Facility which was established in 2021 to support projects that are aligned with the Australian Government's Critical Minerals Strategy and are otherwise in Australia's national interest.

As outlined in EFA's non-binding letter of support, a successful outcome from the EFA assessment and due diligence process is contingent on several conditions including:

• Satisfactory independent technical review of the Sunrise Project;
• An acceptable contracting strategy for the engineering, construction and commissioning of the Sunrise Project;
• Finalising a comprehensive funding plan for the Sunrise Project including equity investment and securing debt funding from other lenders;
• Meeting eligibility criteria, credit and risk requirements including but not limited to EFA's "know your customer" and anti-bribery requirements and checks; and
• The Sunrise Project complying with EFA's environmental and social risk policies, including receiving the required regulatory and environmental approvals.

EFA has advised that it will commence detailed due diligence on the Sunrise Project.

Major Project Status Award

During the quarter the Australian Minister for Industry, Energy and Emissions Reduction, the Honourable Angus Taylor MP, awarded Commonwealth Government Major Project Status to the Sunrise Project. The award of Major Project Status formally recognises the significance of the Sunrise Project to the Australian economy and regional communities in New South Wales. Key Sunrise Project benefits and economics include:

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• Fully integrated from mine to battery chemicals with an average annual metal-equivalent production of 21.3kt of nickel and 4.4kt of cobalt over the first decade of a 50-year resource life.
• Sustainably designed to operate on 100% renewable power with industry-leading carbon footprint, water re-use and responsible waste management.
• Exceptional project economics with Life of Mine (LOM) revenue of US$16.3 billion, LOM EBITDA of US$10.8 billion, average free cash flow (post-tax) of US$308 million pa and NPV8 of US$1.2 billion2.
• Construction ready with A$250M invested in pre-development capex with all key permits and land secured.
• Creation of over 1,800 direct jobs during construction with an estimated 400 ongoing full-time jobs created.

Permitting and approvals

The Company completed a Project Execution Plan (PEP) in late 2020. Undertaken by an integrated Sunrise Energy Metals and Fluor Australia Pty Ltd (Fluor) team, the PEP updated the 2018 Definitive Feasibility Study, incorporating revised cost estimates, updated design and engineering work as well as a revised master schedule for the engineering, procurement, construction, commissioning and ramp-up of the Project. The PEP resulted in several enhancements to the Project layout and design, requiring a handful of modifications to be made to the Sunrise Project Development Consent - the key NSW state government approval. During the quarter the Company progressed the process for approval of these modifications. Final approval of these (Mod 7) was received in January 2022.

Progress continues on the long-lead electrical transmission line work scope. The application to connect to the NSW electrical grid is currently in progress and will continue through CY22. Connection to the NSW electrical grid is a key enabler of the Company's commitment to procure renewable energy to supply 100% of the Project's external power requirements.

The Company has also continued to progress commercial discussions with landowners, local councils, the NSW State Government and other impacted parties required for land access agreements for key infrastructure including the water pipeline and the electrical transmission line

Autoclaves

The Company owns two autoclaves - the major component of the hydrometallurgical leaching circuit for the Sunrise processing plant - which were being stored at Port Pirie. Due to significant port maintenance works to be undertaken at Port Pirie, the autoclaves were relocated in the quarter

2 For full details including JORC disclosures refer to the ASX announcement dated 28 September 2020

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to an alternate storage location. A brief video of the autoclaves' relocation is available at the weblink below.

https://www.youtube.com/watch?v=6_zUBgLI6g8

The autoclaves and their associated equipment are unused, in excellent condition and are ideally sized for the Sunrise Project. Manufactured with steel shells and an explosively bonded titanium lining, they are designed to withstand the operating conditions required for the effective leaching of nickel, cobalt and scandium from the Sunrise ore.

EXPLORATION ACTIVITIES

The Company continues to advance activities across its range of exploration assets in New South Wales. Post quarter end (refer to the ASX release dated 20 January 2022) the Company provided an update on activity at the Sunrise East (EL4573) and Phoenix Platinum (ML1770) assets.

Sunrise East (EL4573)

EL4573 is located to the east and west of the Sunrise project ML1770 (see Figure 1). During the quarter Sunrise Energy Metals reprocessed and modelled airborne magnetics associated with the eastern part of EL4573 which covers a strong discrete magnetic high of dimensions 2.0x1.5km. Preliminary interpretation suggested that the magnetic feature has a high potential to be an intrusive complex with numerous crosscutting zones of magnetic destruction associated with hydrothermal alteration.

The first hole at Sunrise East (SDD029) was targeting a magnetic anomaly and intersected laterite and saprolite from surface to a depth of 12.8m before intersecting ultramafic pyroxenite and dunite lithologies (Figure 2). Assay results have been received from the oxide zone of SDD029 and have returned cobalt grades comparable to the Sunrise Project resource. Cobalt intercepts included 11m @829ppm from 1.8 to 12.8m, including 5.8m @ 1120ppm from 7 to 12.8m. The drill hole also intersected a thick interval of strong silica-carbonate-fuchsite-pyrite alteration on the contact of the intrusive and sedimentary country rocks. Base metal sulphides and pyrite were observed throughout this interval and the zone has characteristics typically associated with a carbonate-basemetal-gold system. Assays below the oxide zone are pending.

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