WA Kaolin : WAK Quarterly Activities Report and Appendix 5B

ASX Announcement

29 April 2022

March 2022 Quarterly Activities Report

Highlights

•  Installation and pre-commissioning of Stage 1 processing plant at Wickepin Kaolin Project in WA continues strongly

•  First production on track for mid CY22 albeit hampered by delays in some materials delivery and shortages of labour; production to commence at 25 tonne per hour nameplate capacity and steadily increase to ~200,000 tonnes per annum (tpa) rate by the end of CY22

•  Completion of a Capital Raising comprising:

  • o $6.1 m Placement of New Shares

  • o $2.93m Share Purchase Plan to eligible shareholders

  • o $5m secured working capital loan facility

•  Proceeds of capital raising allows WAK to proceed with the acceleration of Stage 2 infrastructure development

•  Two 3-year Offtake Agreements signed to give WAK 90% of Stage 1 production covered by Offtake or LOI agreements

•  Mr. Rod Baxter appointed as non-executive director, effective 15th March 2022

•  Cash on hand of $12.3m at 31 March 2022

WA Kaolin Ltd ("WA Kaolin" or the "Company") (ASX: WAK) is pleased to provide an update on its activities for the March 2022 quarter.

The Company holds the Wickepin Kaolin Project, 220km south-east of Perth, which contains an Ore Reserve Estimate of 30.5 million tonnes (83.7% ISO Brightness )1 of kaolinised granite included in a 644.5 million tonne (75.8% ISO Brightness) Inferred Mineral Resource2. WA Kaolin produces kaolin products for tier one customers and the Company aims to expand its production from the Wickepin Project to 400,000tpa in a two-stage expansion strategy.

Chief Executive Officer Andrew Sorensen stated,

"We are thrilled with the progress we have made during the March quarter as we move closer to successfully becoming a kaolin producer of global significance at our Wickepin Project in Western Australia. We have many achievements to be proud of during the quarter, including the K99 Kaolin Plant Stage 1 construction and commissioning activities, the acceleration of Stage 2 infrastructure following the $12m capital raising, and additional offtake agreements on the international market.

"It is with great anticipation that we look ahead to the remainder of the June quarter with the Company on budget and seeking to stay on time to commence Stage 1 production at Wickepin, starting with a 25 tonne per hour nameplate capacity before we steadily increase over 2022. We look forward to sharing the news of this milestone with the market."

• 1 CSA Global Ore Reserve Estimate R301.2020

• 2 CSA Global Mineral Resource Estimate R280.2017

Stage 1 Kaolin Production in 2022 and Stage 2 Progress

WA Kaolin is on track for first production at its Wickepin Kaolin Project around mid-2022 after making significant progress on its Stage 1 development during the quarter. The Company is currently producing kaolin products using ore from Wickepin via its small-scale processing plant in Kwinana, Western Australia, for tier one customers.

WA Kaolin has a two-stage ramp up strategy. Stage 1 will see the production rate optimised up to 200,000tpa by end of CY22. The second stage will be to expand production to 400,000tpa.

During the quarter, WA Kaolin continued installation and commenced pre-commissioning on Stage 1 of its processing plant, with these activities remaining on budget. While COVID-19 impacted delivery of some equipment items to site, WA Kaolin continued to progress installation and pre-commissioning to still target commencement of production in mid CY22.

All process equipment was fabricated and on site by February, with installation completed by the end of Q1 CY22.

Post quarter, WA Kaolin reported that installation of all equipment and infrastructure required for the commencement of Stage 1 production is now complete. Additionally, the Company advised that all utilities are connected.

The Company is working on the final touches to the plant including material handling chutes, ducting and pipework and connection of services, allowing it to continue commissioning the plant. The Company has not been immune to the effects of COVID-19 in recent times, as evidenced in a lot of workplaces in Western Australia. Unfortunately, several staff have fallen ill to the virus at the Wickepin plant. If COVID-19 affects many more staff, there may be a short delay to start-up, otherwise some kaolin ore should be processed in May ahead of full production.

Throughout the development of Stage 1, the Company's Kwinana proof of concept plant has continued operating with kaolin shipments seeding and developing markets. As such, WA Kaolin is experiencing unprecedented demand for its Stage 1 targeted production (200,000tpa) as new potential clients continue to emerge.

Due to this strong customer demand, elements of Stage 2 Capex (~$4m) have been brought forward into the current construction phase, to take advantage of cost savings and to shorten the lead-time to implement the next increase of production capacity from 200,000 to 400,000 tonnes per annum (Stage 2).

Figure 1. Stage 1 Project Program

Funding Secured for Stage 1 Ramp Up and Acceleration of Stage 2

WA Kaolin confirmed a capital raising comprising a A$6.1m placement of new shares, a $2.93m Share Purchase Plan to eligible shareholders, and A$5m secured working capital loan facility.

The Company secured the $5m to replace the working capital spent in advance on Stage 2 and raised a further $9m of new equity to add to Stage 2 infrastructure and further market developments.

Equity Raising

The Placement comprised a single tranche share placement of 33,888,889 fully paid ordinary shares ("New Shares") at an issue price of A$0.18 per New Share to sophisticated, professional and other institutional investors in Australia to raise A$6.1 million (before costs). The issue price represented a 10% discount to the closing price of $0.20 as at 4 February 2022 and a 12.6% discount to the 5-day trading Volume Weighted Average Price of A$0.206.

The New Shares were issued through the Company's available placement capacity pursuant to ASX Listing Rule 7.1.

Share Purchase Plan

Eligible shareholders with a registered address in Australia or New Zealand at 5.00pm (AEST) on 8 February 2022 were also invited to participate in the SPP at the same issue price as the Placement (A$0.18 per New Share).

Key terms of the SPP included:

• • Up to $30,000 per eligible shareholder, across all of their holdings

• • WA Kaolin intended to raise up to A$0.9 million (the Board having the right to take overs in its absolute discretion)

• • The SPP underwritten up to the target amount of $0.9 million

The SPP closed with applications received for 16,280,695 shares with the Board deciding not to scale back applications and accept all applications raising $2.93m.

Canaccord Genuity (Australia) Limited acted as Lead Manager and Bookrunner to the Placement and Lead Manager and Underwriter to the SPP. JP Equity Partners acted as Co-Manager to the Placement.

Secured Working Capital Debt Facility

To support the Company's ramp up of Stage 2 development, WA Kaolin has also secured a loan facility of $5m provided by its Top 5 shareholder, Mr. Gordon Martin (Boneyard Investments Pty Ltd). The $5m facility has a maturity date of three years from the date of advance at an interest rate of 8% per annum, with interest payable quarterly in arrears. A registered mortgage has been granted over the Company's East Rockingham property as security for this loan.

Anticipated Program

WAK is pleased to provide the following indicative timetable to the Stage 2 work program:

2021

2022

2023

2024

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Stage 1 Construction

Stage 1 Installation

Stage 1 Commissioning

Stage 2 Infrastructure

Stage 2 Construction

Stage 2 Installation

Stage 2 Commissioning

Offtake Agreements Signed

WA Kaolin has signed two additional three-year offtake agreements, with 90% of its Stage 1 200,000tpa production rate now covered by offtake and LOI agreements.

In March, the Company announced it signed an agreement with a distributor servicing the rubber and ceramics markets in China for a period of three years, representing 5% of the total output from the Company's Stage 1 ramp up of the Wickepin Kaolin Project, targeted to commence production in Q2 this year.

The Offtake Agreement is for the period 1 July 2022 through to 30 June 2025. Any renewal of the Agreement will be negotiated prior to 31 March 2025. Under the terms of the Offtake Agreement, WA Kaolin is to supply at targeted 10,000 tonnes per annum (minimum 3,000tpa) for three years. Pricing for the agreement will be competitive to the world kaolin market delivered on a cost and freight (CFR) basis and will be negotiated on a quarterly basis through mutual negotiation and agreement.

Post quarter, WA Kaolin signed an Offtake Agreement for a period of three years with a distributor in the ceramic and paint market in Vietnam. The Offtake Agreement is for the period 1 July 2022 through to 30 June 2025. Any renewal of the Agreement will be negotiated by 31 March 2025.

Under the terms of the Offtake Agreement, WA Kaolin is to supply a targeted 4,500tpa (minimum 2,500tpa) for three years. Pricing for the Agreement will be competitive to the world kaolin market delivered on a cost and freight (CFR) basis. Pricing of at least the minimum quantity will be negotiated on a quarterly basis through mutual negotiation and agreement.

Local Workforce and Sponsorships

WA Kaolin is committed where possible, to build its workforce from the local Wickepin and surrounding community. The Company has made the following appointments from within the local community:

•  Logistics & Procurement Manager

•  HSE & Manager/Deputy Mine Manager

•  Office Administrator

•  Maintenance Supervisor

•  QA/QC Officer, incl Mine Plan Drilling, plus Laboratory Technician

•  Trades Assistants (who will transition into production roles once the construction is completed)

The Company is also committed to providing sponsorships within the community, with recent examples including St John Country Ambulance Service (donation towards new defibrillator devices for the ambulances), Wickepin Football Club, Wickepin Bowling Club, Upper Great Southern Hockey Association and the Wickepin Car Rally.

Corporate

In accordance with Listing Rule 5.3.5, $278,472 was paid to related parties or their associates during the quarter. The payments comprise the following:

•  Director fees and superannuation: $41,682

•  Salary, superannuation, vehicle allowance and expenses reimbursements to the daughter of an executive director (per contract of employment as Territory Sales Executive): $20,041

•  Reimbursement of expenses relating to the construction of the Company's Wickepin Project to entities associated with an executive director (at arm's length, no mark-up applied): $28,683

•  Royalties paid to an entity associated with an executive director (per Royalty Agreement): $4,066

•  Fees paid to the executive director: $184,000 (per consultancy deed; includes back payment of 14 months' increase)

As at 31 March 2022 the Company had $12,334,630 in cash on hand.

Appointment of non-executive director

WA Kaolin appointed Mr. Rod Baxter as non-executive director to the Board, effective mid-March 2022.

Mr Baxter is a highly respected mining executive and seasoned director, who has extensive international and multi-sector experience. Previous leadership roles include Managing Director and Non-executive Director of listed and unlisted companies. Rod is currently a non-executive director on the Boards of Podium Minerals Ltd, Trigg Mining Ltd, Ausenco, and Cullen Wines, and has operated across several different industry sectors in Australia and internationally.

Mr Baxter has an established track record of successfully transforming businesses and delivering substantial company growth through organic expansion, M&A, and IPO's, generating healthy returns for investors.

In his executive career, he has held operational, functional, and company leadership positions in global organisations operating across a number of continents in three different industry sectors: Global diversified mining resources, engineering construction, and manufacturing.

Investor presentation

In March, WA Kaolin Chief Executive Officer, Mr Andrew Sorensen, gave a virtual presentation to shareholders and investors at the NWR Near Term Producers Conference. The presentation can be found on the ASX announcement dated 24 March 2022.

***ENDS***

This announcement was authorised for market release by the Board of WA Kaolin Limited.

For further information, please contact:

Andrew Sorensen [e-mail] Humphries Investor [e-mail]