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1 Quarterly Report For the three months ending March 2015 Vital Metals Limited ASX Code: VML ACN: Churchill Avenue, Subiaco, WA 6008 Tel: Fax: vital@vitalmetals.com.au Capital Structure 304 million shares 80 million unlisted options Board & Management David Macoboy Chairman Mark Strizek CEO and Managing Director Peter Cordin Non-Executive Director Andrew Simpson Non-Executive Director Ian Hobson Company Secretary For further information: Investors: Mark Strizek Managing Director Vital Metals (08) Media: Nicholas Read Read Corporate (08) WATERSHED TUNGSTEN PROJECT: FALLING CURRENCY AND COSTS ENCHANCE PROJECT METRICS Vital continues to advance Watershed towards development as it expands it s international growth pipeline with new German project Highlights Competitiveness of the Company s flagship Watershed Tungsten Project in Queensland further enhanced by the depreciation in the Australian Dollar against the US Dollar, combined with lower Australian costs. The already attractive financial parameters of the Watershed Tungsten Project have further improved over the Definitive Feasibility Study assumptions made in July Negotiations between JOGMEC and Japanese corporations are continuing, with a view to transferring JOGMEC s stake to a long-term joint venture partner which will assist with project financing and development. Initial 5-year Permit application approved over an advanced tungsten project in the German State of Saxony, expanding the Company s future growth pipeline beyond Watershed. Vital Metals Limited (ASX: VML) is pleased to report on an active Quarter during which it continued to make good progress towards development of its flagship 70%-owned Watershed Tungsten Project in North Queensland. Vital s Managing Director, Mr Mark Strizek, said that he was pleased to report that Vital was seeing continual improvements in the metrics of the Watershed Tungsten Project. We are seeing some important improvements in the operating cost estimates for the Watershed Tungsten Project. Cost inputs for the Watershed DFS set in June 2014 were now significantly lower. Tungsten is sold in US Dollars and the decline of the Aussie Dollar against the Greenback increases the returns of our project. This is exactly the same scenario that has seen Australian gold producers increase in profitability, he said

2 Watershed stands ready for development with all significant environmental approvals and Mining Leases in place, and the 2014 DFS having outlined a substantial mine life of 10 years production of tungsten concentrate. ILUA Environmental Approval Mining Lease Mineral Resource Geotechnical Mineral Reserves Metallurgical Flowsheet and Process Plant Capex Definitive Feasibility Study JV Partner Exploration Pipeline Milestones towards Development Agreement with the Western Yalanji people for development of the open pit operation secured and registered with the National Native Title Tribunal. Open pit operation permitted by the Department of Environment and Heritage Protection on 3 rd September Seven Mining Leases for a total of 1,904 hectares were granted on the 1 st December 2013 for a period of 20 years by the Department of Natural Resources and Mines. Mining Leases are held by subsidiary company North Queensland Tungsten Pty Ltd (100% owned by Vital Metals Ltd). Independently estimated by H&SC Consultants. Measured, Indicated and Inferred Mineral Resources (JORC 2004 Guidelines). At a cut-off grade of 0.05% WO 3 the Watershed deposit contains Mineral Resources of 49.32Mt at 0.14% WO 3 for 70,400 tonnes of WO 3. 1 Dempers & Seymour Pty Ltd developed Watershed Mining Rock Mass Model used to develop pit slope design parameters. Seven geotechnical holes drilled to complete geotechnical coverage of the designed pit extents. Proved and Probable Ore Reserve derived from Measured and Indicated Mineral Resources (JORC 2012 Guidelines). Independently compiled by Orelogy Group Pty Ltd. Total in-ground ore inventory within final design pits is 21.3 Mt at an average WO 3 grade of 0.15% using a cut-off grade of 0.05% WO 3 and is inclusive of a 95% mining recovery. 2 Sedgman Limited completed bulk metallurgical test work and development of definitive flowsheet. Process Plant Capex independently developed from Class 3 Engineering Estimate. DFS considered 10-year open pit operation processing 2.5Mtpa with only ~40% of resources extracted. Significant near-mine exploration potential. 3 JOGMEC tender process in train to transfer their 30% interest in the Watershed Project to a Japanese company. This company will have responsibility for arranging its share of project finance in addition to its off-take interest. World-class pipeline of drill ready and greenfields tungsten exploration prospects to drive growth. 4 1 Mineral Resources initially reported ASX release 30 June Mineral Resources classified using JORC 2004 guidelines. 2 Watershed Ore Reserves first reported in ASX release 17 September Mineral Reserves classified using JORC 2012 guidelines. 3 Key finding Watershed DFS first reported in ASX release 17 September Exploration Targets reported in ASX release 13 October

3 Watershed Tungsten Project Queensland (Vital 70%) With the technical and financial viability of the Watershed Project having been confirmed by the DFS, the Company s partner JOGMEC is currently in the process of exiting the Project via the introduction of a Japanese Corporation as a long-term 30% partner which will assist with financing and development. The DFS confirmed that Watershed is a high quality resource development opportunity which ticks all of the boxes from a social, environmental, technical and financial standpoint. Negotiations between JOGMEC and Japanese corporations were ongoing throughout the Quarter. The transfer negotiations are advanced, however the process will not be rushed. JOGMEC is working hard to pair Vital Metals with a Japanese partner which has a need for tungsten and is willing to assist with the project finance. Vital expects to be working towards financial close with a new Japanese partner during the second half of this year. Watershed DFS Review The DFS completed in 2014 demonstrated that the Watershed Tungsten Project is a premier, long-life asset. The key conclusion of the DFS was that a 2.5Mtpa development at Watershed has the ability to produce high quality tungsten concentrate over a 10-year mine life at competitive mine operating costs. During the Quarter, Vital undertook a review of the cost inputs used in the DFS as part of its broader objective of continuing to enhance and improve the project. Changes to the exchange rate and diesel costs, along with increased labour availability, have largely moved outside of the range considered for the DFS, supporting the Company s drive to reduce costs at the Watershed Project. Vendors were involved in the review and in most cases provided updates to previous estimates. In the case of diesel which is a significant component of the mining cost the quoted price is at a significant discount to the pricing assumed for the DFS. In addition, as outlined previously, a number of major cost savings have also been identified involving the purchase of low-hour and unused surplus equipment. This equipment has become available as a result of the downturn in the resource industry in Australia. The combined effect of these changes has made Watershed a compelling proposition that will generate very attractive returns for its shareholders and Joint Venture partners alike. 3

4 Project returns 5 at a range of prices and an exchange rate of US$0.80 (modelled using a 100% equity case and a typical Japanese 70% debt/30% equity funding model) are shown in Table 1. Lower exchange rates and lower operating costs mean that the project will now generate similar returns at a price of US$375/mtu APT compared to the previously reported case 6. Lifeof-mine cash costs are competitive at US$156/mtu. Table 1: Project Returns. Project Returns 100% Equity Case Updated Case APT US$325/mtu FX US$0.80 Pre Tax Post Tax Updated Case APT US$350/mtu FX US$0.80 Pre Tax Post Tax Updated Case APT US$375/mtu FX US$0.80 Pre Tax Post Tax Updated Case APT US$400/mtu FX US$0.80 Pre Tax Post Tax Updated Case APT US$450/mtu FX US$0.80 Pre Tax 8% $63M $31M $111M $65M $160M $100M $207M $132M $300M $200M IRR 16.0% 12.3% 21.5% 16.6% 26.8% 20.6% 31.7% 24.5% 40.8% 31.6% Payback Years Free Cashflow $184M $130M $259M $182M $335M $235M $410M $288M $561M $394M Post Tax Project Returns 70% Debt / 30% Equity Typical Japanese funding model Updated Case APT US$325/mtu FX US$0.80 Pre Tax Post Tax Updated Case APT US$350/mtu FX US$0.80 Pre Tax Post Tax Updated Case APT US$375/mtu FX US$0.80 Pre Tax Post Tax Updated Case APT US$400/mtu FX US$0.80 Pre Tax Post Tax Updated Case APT US$450/mtu FX US$0.80 Pre Tax 8% $63M $38M $111M $72M $160M $106M $207M $139M $304M $207M IRR 16.0% 13.3% 21.5% 17.5% 26.8% 21.6% 31.7% 25.45% 40.8% 32.5% Payback Years Free Cashflow $184M $139M $260M $191M $335M $244M $410M $296M $561M $401M Post Tax Project Cash Costs US$/ mtu Project Total Costs US$/ mtu ASX Announcement 22 January ASX Announcement 17 September

5 Vital has identified further opportunities to enhance the Project metrics. These include: Additional Project life Potential for an underground operation ore body open at depth (MWD WO3 from 302m 7 ); Potential for satellite surface operations at Desailly and Watershed South drill ready exploration targets (Figure 1); Pipeline of exploration prospects within trucking distance of proposed plant (Table 4); Processing Plant Optimisation of process recovery post ramp-up; Test work suggests that average recoveries could increase to ~77% WO3; Financial Further depreciation of the Australian dollar against the US dollar may result in improved returns over forecasts; Continued reduction in Australian mining industry costs will deliver increasing returns; Reduction in Project Capex as a result of very competitive market for plant constructors. 7 ASX Announcement 17 February

6 Figure 1: Watershed pit reserve, mineral resource and exploration targets 6

7 Tungsten Market Tungsten prices have stabilised after falling in response to global economic conditions on top of seasonal market softness. For Australian companies such as Vital, the tungsten price remains relatively buoyant as the AUD:USD exchange rate continues to remain below 80c (Figure 2). Figure 2: APT price The tungsten market outlook for the life of the Project remains favourable. The recent decision by the WTO against Chinese trade practices for metals such as tungsten has resulted in the replacement of export quotas by resource taxes. It was reported that the new taxes are expected by many rare earths and tungsten producers to increase their mining costs significantly. This move by the Chinese authorities will ensure that strategic metals such as tungsten will be preserved for domestic consumption and, if exported, will be in the form of high value-add materials such as tungsten carbides. The bottom line is that China does not want to export concentrates. Our JV partners, JOGMEC are aware of China s approach and this was likely a factor behind their reasoning in approaching Vital in Their farm-in proposal to secure 30% of the Watershed Tungsten Project provides access to a stable supply of tungsten raw material for the Japanese tungsten industry. Japan has no domestic tungsten mining industry and relies 100% on imports to supply its industry. However the Japanese tungsten industry is recognised for the manufacture of highlyprized hard metals or tungsten carbides. These carbide bits are then used for shaping and machining of parts in the automotive industry, industrial engineering, medicine and the aviation industry. Japanese tungsten companies have been performing well and taking advantage of the continued global growth in demand for automobiles (up 2.6% in 2014). It was recently reported 7

8 that Mitsubishi Materials Corp saw its profits increase by 3.2% in December 31, 2014 compared with the same period in Their good performance was driven in part by continued growth in automobile production (a major user of tungsten carbides) that looks set to continue on the back of strong demand from Asia, Europe and the US. There is still plenty of appetite for new cars in China. World Bank data (up to 2011) shows that vehicle penetration rates are tiny with 69 in 1,000 vehicles per Chinese, compared to 786 per 1,000 Americans. 8

9 Exploration - Australia A three-year PhD study into the Watershed deposit commenced during the Quarter. The study is being completed by James Cook University with funding sourced from the Geological Survey of Queensland s Future Resources program. The project is mainly focused on the understanding of W-Sn deposits in the north as well as Cu-Au deposits in the southern part of the study area (Charters Towers). This project involves research on the deposit scale to determine the local controls on mineralisation. Recent work involved re-logging ~2000m of diamond drill core on a NNW trending section. Logging was focused on geology, alteration and mineralisation events. Detailed logging was completed in areas of mineralisation with an emphasis being placed on vein textures and resolving the timing of mineralisation events. To date, 135 representative samples have been taken of lithologies, alteration types and veins. These samples will now be subjected to laboratory testwork to determine the timing and character of mineralising events. It is anticipated that the outcome of this study will enable Vital to identify the source of tungsten mineralisation which, after drilling, could significantly increase the resource base of the Watershed deposit. The northern section of EPM was relinquished during the Quarter. This area reduction was completed in accordance with the permit conditions, which require a 40% area reduction at the end of Permit Year 3. The northern area of the EPM had been subject to numerous studies and sampling campaigns and did not meet our criteria to warrant further exploration. Exploration planning for the upcoming field season has continued throughout the Quarter. Work slated to commence after the wet season is predominantly focussed on grassroots exploration on under-explored regions on EPM15544, EPM18171 and EPPM As the wet season was late this year it is unlikely that field work will be able to commence before late in May. 9

10 Exploration Germany- Aue Tungsten Project During the Quarter, the Company received notice that an application for an Exploration Permit in the German state of Saxony had been approved for an initial period of five years. Vital Metals new Aue Exploration Permit (Figure 3) is prospective for underground tungsten, tin, silver and uranium mineralisation. It is located in the western Erzgebirge region which is in the heart of one of Europe s most famous mining regions and is surrounded by several worldclass mineral fields within a radius of less than 20km. This permit is a very attractive addition to Vital s exploration portfolio: Reduced exploration risk - tungsten mineralisation has been sampled and mapped from underground adits and drill core; Preliminary metallurgical testwork showed WO3 recoveries of around 85% for concentrates containing around 60% WO3; Extensive geological data package; Supportive Government for strategic metals mining projects. Historical mining and intensive exploration work carried out between the 1940s and 1980s demonstrated the high prospectivity of the Aue permit area for tungsten, tin and silver mineralisation. Tungsten was mined in Zschorlau in the western part of the permit area from quartz-wolframite veins between 1917 and The mine reportedly produced 2100t of tungsten concentrates in this time. Work on these prospects included underground exploration which exposed quartz veins up to 1m wide from which slit samples (channel samples) were reported to return grades of over 20% WO3. A sample of quartz wolframite veining obtained from the Bernsbach NW prospect in December 2014 is shown in Figure 4. Drilling in the 1970s by the former Soviet-German SDAG Wismut mining company (Wismut) expanded the size of the wolframite-quartz veined area (now called Bernsbach-NW). Two historical non-jorc compliant Prognostic resource estimates (comparable to an Exploration Target under the JORC code) have been prepared for the Bernsbach NW Prospect ranging from 20,000t to 69,000t contained WO3 with grades ranging from 0.18 to 0.25% WO3. Work on the permit in the upcoming months will include data capture and review. A substantial amount of geological and geophysical information is available in the permit area such as magnetics, radiometrics and historical drilling information. There are numerous drill holes in the area of the Bernsbach Prospect from which the metadata is now being sourced. Once this information is available, it is anticipated that follow-up drilling programs will be planned on high quality targets to rapidly define mineral resources. 10

11 Figure 3: Location of Aue permit. 11

12 Figure 4: Wolframite sample from Bernsbach NW Prospect Exploration Burkina Faso- Doulnia Gold Project The Company s subsidiary, Vital Metals Burkina, received VAT exoneration for the Doulnia Permit during the Quarter. In the past, VAT exemption was not possible for the Doulnia permit due to its ownership by Ampella Mining. The impact of this exoneration is a reduction in the cost of exploration by approximately 18%. An updated Code Minier (Mining Code) has been approved by the interim government and remains to be ratified by the National Transitional Council. The updated Mining Code and changes to anti-corruption laws are required by the World Bank as a condition before the release of US$100 million in budget support. The major changes to the Mining Code legislation are reported to address the distribution of wealth with the communities surrounding mining operations. There was no field work conducted during the Quarter. 12

13 Corporate Vital had a cash balance of $0.53 million as at 31 March JOGMEC continue to contribute to Watershed expenditure on a pro-rata basis (30%). The Company took further measures to reduce corporate overheads during the Quarter, with the Company s board and management team agreeing to a further 20 per cent cut in fees, effective from April Looking ahead, the Watershed Tungsten Project is now substantially de-risked and ready for development and the DFS has shown that it has the potential to generate very attractive returns for its shareholders and Joint Venture partners alike. For further details, refer to the Company s website, Contact: Mark Strizek Managing Director Vital Metals Ltd Phone: vital@vitalmetals.com.au Media Inquiries: Nicholas Read Read Corporate Telephone: info@readcorporate.com.au Competent Person s Statement The information that refers to Mineral Resources in this announcement was prepared and first disclosed under the JORC Code It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since last reported. The information in this report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Mark Strizek, a Competent Person who is a Member or The Australasian Institute of Mining and Metallurgy. Mr Strizek is a full time employee of the Company. Mr Strizek has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaking to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Strizek consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears. The information in this report that relates to Mineral Resources for the Watershed Deposit is based on information evaluated by Mr Simon Tear who is a Member of The Australasian Institute of Mining and Metallurgy (MAusIMM) and who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Tear is a Director of H&S Consultants Pty Ltd and he consents to the inclusion of the estimates in the report of the Mineral Resource in the form and context in which they appear. This Ore Reserves statement has been compiled in accordance with the guidelines defined in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2012 Edition). The Ore Reserves have been compiled by Mr Steve Craig of Orelogy Group Pty Ltd, who is a Fellow of Australasian Institute of Mining and Metallurgy. Mr Craig has had sufficient experience in Ore Reserve estimation relevant to the style of mineralisation and type of deposit under consideration to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Mineral Resources and Ore Reserves. Mr Craig consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears. 13

14 Forward looking statements Certain written statements contained or incorporated by reference in this report, including information as to the future financial or operating performance of the Company and its projects, constitute forward-looking statements. All statements, other than statements of historical fact, are forward-looking statements. The words believe, expect, anticipate, contemplate, target, plan, intend, continue, budget, estimate, may, will, schedule and similar expressions identify forward-looking statements. Forward-looking statements include, among other things, statements regarding targets, estimates and assumptions in respect of tungsten, gold or other metal production and prices, operating costs and results, capital expenditures, mineral reserves and mineral resources and anticipated grades and recovery rates. Forward-looking statements are necessarily based upon a number of estimates and assumptions related to future business, economic, market, political, social and other conditions that, while considered reasonable by the Company, are inherently subject to significant uncertainties and contingencies. Many known and unknown factors could cause actual events or results to differ materially from estimated or anticipated events or results reflected in such forward-looking statements. Such factors include, but are not limited to: competition; mineral prices; ability to meet additional funding requirements; exploration, development and operating risks; uninsurable risks; uncertainties inherent in ore reserve and resource estimates; dependence on third party smelting facilities; factors associated with foreign operations and related regulatory risks; environmental regulation and liability; currency risks; effects of inflation on results of operations; factors relating to title to properties; native title and aboriginal heritage issues; dependence on key personnel; and share price volatility and also include unanticipated and unusual events, many of which are beyond the Company's ability to control or predict. For further information, please see the Company's most recent annual financial statement, a copy of which can be obtained from the Company on request or at the Company's website: The Company disclaims any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. All forward-looking statements made in this presentation are qualified by the foregoing cautionary statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and, accordingly, not to put undue reliance on such statements. Cautionary Statement The Definitive Feasibility Study (DFS) referred to in this report is based on a Proved and Probable Ore Reserve derived from a Measured and Indicated Mineral Resource, plus a small proportion of mining inventory, which comprises material that is currently classified as Inferred Mineral Resource. There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the production target itself will be realised. The Company advises that the Proved and Probable Ore Reserve provides 93% of the total tonnage and 93% of the total WO3 metal underpinning the forecast production target and financial projections, and that the additional life of mine plan material comprises less than 7% of the total tonnage and WO3 metal. Furthermore, in the first five years of production, 95% of the material planned to be processed is based on Proved and Probable Ore Reserves. As such, the dependence of the outcomes of the DFS and the guidance provided in this announcement on the lower confidence Inferred Mineral Resource material contained in the life of mine plan is minimal. The Company has concluded that it has a reasonable basis for providing the forward looking statements included in this report. 14

15 ABOUT VITAL METALS Vital Metals Limited (ASX: VML) is an explorer and developer, focused on progressing three highly prospective mineral Projects: the advanced Watershed Tungsten Project in far north Queensland, Australia, the Aue Tungsten Project in Saxony, Germany and the Doulnia Gold Project in southern Burkina Faso, West Africa. Watershed Tungsten Project Queensland The Watershed scheelite (calcium tungstate) Project, in far north Queensland, 150 kilometres northwest of Cairns, is the Company s flagship venture. Vital entered into a formal Earn-In Agreement with JOGMEC (Japan Oil, Gas and Metals National Corporation) where JOGMEC has earnt 30% of the Project for $5.4M (valuing the Project at the time of the farm-in at $18M). The funds have been used to complete the Definitive Feasibility Study (DFS). Aue Tungsten Project Germany The Aue Tungsten Project (100% Vital) is located in the western Erzgebirge area of the German state of Saxony. The permit, comprising an area of 78 sq. km is located in the heart of one of Europe s most famous mining regions, being surrounded by several world class mineral fields. Historical mining and intensive exploration work carried out between from the 1940 s and 1980 s showed high prospectivity of the Aue permit area for tungsten, tin, uranium and silver mineralisation. Doulnia Gold Project Burkina Faso The Doulnia Gold Project (100% Vital) is located in southern Burkina Faso. The Project is made up of three contiguous permits; the Doulnia, Kampala and Zeko exploration permits. The Project is located in highly prospective Birimian Greenstone terrain with over 400 sq. km of contiguous tenements lying on the trend of the Markoye Fault Corridor and the Bole shear zone and hosting the Kollo Gold Project and Boungou South Gold Prospect. About JOGMEC Japan Oil, Gas and Metals National Corporation (JOGMEC) were established in JOGMEC is Government owned and integrates the functions of the former Japan National Oil Corporation, which was in charge of securing a stable supply of oil and natural gas and the former Metal Mining Agency of Japan, which was in charge of ensuring a stable supply of nonferrous metal and mineral resources and implementing mine pollution control measures. It has an annual budget of around 1,600 billion yen ($18B) and provides financial assistance, technology development and technical support to Japanese companies and their foreign subsidiaries. Figure 5: Vital Metals Project Locations 15

16 Figure 6: Vital Metals North Queensland Permits 16

17 Watershed Mineral Resources Tonnage Mt WO 3% Measured Indicated Sub Total: Measured and Indicated Inferred Total: Measured, Indicated and Inferred Table 2: Watershed Mineral Resources 8 Watershed Ore Reserves Tonnage Mt WO 3% Proved Probable Total: Proved and Probable Table 3: Watershed Ore Reserves 9 Name Tenement Elements of Interest Tonnage Range (kt) Grade Range Comments Watershed Deeps ML20536 W 10,500 14, % Watershed South MDL127 W 830-1, % Desailly North MDL127 W 830-1, % Desailly MDL127 W 1,150 1, % Mt Elephant EPM W, Sn 1,000-3, % Slaty Range EPM W, Sn 35,000 60, % These Exploration Targets are conceptual in nature, and there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the estimation of a Mineral Resource. Exploration Potential exclusive of current Mineral Resource W 49,000 80, % Table 4: Watershed Tungsten Project Exploration Targets 10 8 Watershed Mineral Resources first reported in ASX release 30 July Watershed Ore Reserves first reported in ASX release 17 September Watershed Mineral Resources are inclusive of Ore Reserves. Watershed Mineral Resources and Ore Reserves reported at a cut-off grade of 0.05% WO3. 10 Exploration Targets reported 25 November 2013, AGM Presentation. Please refer to Competent Persons statement accompanying this release. 17

18 Figure 7: Vital Metals Project Portfolio 18

19 Location Tenement Percentage held / earning at beginning of Quarter Burkina Faso Doulnia 100% 100% Burkina Faso Kampala 100% 100% Burkina Faso Zeko 100% 100% Germany Aue 0 100% Watershed EPM % 100% Watershed MDL127 70% 70% Watershed EPM % 70% Watershed EPM % 70% Watershed EPM % 70% Watershed EPM % 70% Watershed EPM % 70% Watershed EPM % 70% Watershed ML % 70% Watershed ML % 70% Watershed ML % 70% Watershed ML % 70% Watershed ML % 70% Watershed ML % 70% Watershed ML % 70% Table 5: Interests in Mining Tenements. Percentage held / earning at end of Quarter 19

20 JORC Code, 2012 Edition Table 1 Aue historical results Exploration results for the Bernsbach NW prospect sourced from historical exploration over the permit area in Saxony Criteria Sampling Technique Section 1: Sampling Techniques and Data JORC Code Explanation Nature and quality of sampling (eg cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as downhole gamma sondes, or handheld XRF instruments, etc.). These examples should not be taken as limiting the broad meaning of sampling Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used. Aspects of the determination of mineralisation that are Material to the Public Report. In cases where industry standard work has been done this would be relatively simple (eg reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay ). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (eg submarine nodules) may warrant disclosure of detailed information. Commentary Drilling was completed over the prospect by a number of parties with the main companies including the East German Geological Survey and the Soviet-German mining company SDAG Wismut who were predominantly exploring for uranium. The Geological Survey drove exploration adits into the tungsten mineralisation at Bernsbach NW, and took bulk metallurgical samples. The quality of the work is currently unknown. Drilling and logging information is currently being sourced. Drilling Drill Sample Recovery Logging Drill type (eg core, reverse circulation, open- hole hammer, rotary air blast, auger, Bangka, sonic, etc.) and details (eg core diameter, triple or standard tube, depth of diamond tails, face- sampling bit or other type, whether core is oriented and if so, by what method, etc.). Method of recording and assessing core and chip sample recoveries and results assessed. Measures taken to maximise sample recovery and ensure representative nature of the samples. Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material. Whether core and chip samples have been geologically and geotechnical logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies. Whether logging is qualitative or quantitative in nature. Core (or costean/trench, channel, etc.) photography. The total length and percentage of the relevant intersections logged. Drilling was reportedly completed as diamond holes. The dimension of the holes and whether core was orientated is currently unknown. Historical drilling sample recovery assessment techniques are currently unknown. Geological logging was completed on drill holes and mapping completed of the adits. The information is currently being sourced; the quality of this information is currently unknown. 20

21 Sub-Sampling Technique and Sample Preparation If core, whether cut or sawn and whether quarter, half or all core taken. If non-core, whether riffled, tube sampled, rotary split, etc. and whether sampled wet or dry. For all sample types, the nature, quality and appropriateness of the sample preparation technique. Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples. Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/ second-half sampling. Whether sample sizes are appropriate to the grain size of the material being sampled. Sub sampling techniques for drill holes are unknown. Sampling of adits was reportedly by channel sampling (slit sampling) although the actual method of sampling and practices in unknown. Quality of Assay Data and Laboratory Tests Verification of Sampling and Assaying The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total. For geophysical tools, spectrometers, handheld XRF instruments, etc., the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc. Nature of quality control procedures adopted (eg standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (ie lack of bias) and precision have been established. The verification of significant intersections by either independent or alternative company personnel. The use of twinned holes The verification of significant intersections by either independent or alternative company personnel. Discuss any adjustment to assay data The analytical techniques for historical data are currently unknown. No independent verification has been completed to date. Intercepts have been sourced from a summary report compiled by the East German Geological Survey whilst exploration was ongoing. Location of Data points Data Spacing and Distribution Accuracy and quality of surveys used to locate drill holes (collar and down- hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation. Specification of the grid system used Quality and adequacy of topographic control Data spacing for reporting of Exploration Results Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied. Whether sample compositing has been applied The accuracy of sampling locations and drill collars is unknown. Field work will be required to determine is the collars may be located. The drill collar and trace data supplied by the Geological Survey is in the Gauss Kruger Projection RD83. The spacing of historical sampling is currently poorly understood. Historical sampling information is currently being sourced. 21

22 Orientation of Data in Relation to Geological Structure Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type. If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material. Drilling and adits are NE-SW orientated, the local stratigraphy strikes to the NW, and as such the orientation of previous work appears appropriate. Sample Security Audits or reviews Criteria Mineral Tenement and Land Tenure Status The measures taken to ensure sample security The results of any audits or reviews of sampling techniques and data JORC Code Explanation Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings. The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area. Historical measures taken for sample security are unknown No external reviews or audits have been completed to date. Section 2 Reporting of Exploration Results Commentary The Aue permit was granted by the German Department of Mines on the 18th of February 2015 for an initial period of 5 years. The permit is located in the state of Saxony with the majority of the mineralised zones located in areas of commercial forest (logging). At this point in time Vital Metals are not aware of any issues with the security of tenure. Exploration Done by Other Parties Geology Drill Hole Information Acknowledgment and appraisal of exploration by other parties. Deposit type, geological setting and style of mineralisation. A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes: easting and northing of the drill hole collar elevation or RL (Reduced Level elevation above sea level in metres) of the drill hole collar dip and azimuth of the hole down hole length and interception depth hole length If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case. Previous exploration by other parties is detailed in historical reports held by the Geological Survey and the Wismut. The two main explorers in the region were the East German Geological survey who were exploring for tungsten and the Soviet-German mining company SDAG Wismut who were predominantly exploring for uranium. Information sighted to date appears to be of a high standard. Tungsten mineralisation at Bernsbach is reported to be as wolframite and scheelite within quartz vein swarms and stockworks. Individual vein thicknesses are reportedly up to 1m in width. The local geology comprises Palaeozoic metamorphosed sediments which are intruded by Carboniferous S-type granites and intersected by the major Gera-Jachymov fault zone. Both the granites and the Gera-Jachymov fault zone are closely linked to the known world-class mineral deposits in the region. No actual drill hole information being reported. Metadata for the drill holes completed over the prospect is currently being sourced from the German Geological Survey. This information will have to be digitised. 22

23 Data Aggregation Methods Relationship Between Mineralisation Widths and Intercept Lengths In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (eg cutting of high grades) and cut-off grades are usually Material and should be stated. Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail. The assumptions used for any reporting of metal equivalent values should be clearly stated. These relationships are particularly important in the reporting of Exploration Results If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported. If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (eg down hole length, true width not known ). No data aggregation completed. No drill hole intercepts being reported. Diagrams Balanced Reporting Other Substantive Exploration Data Further Work Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views. Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results. Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances. The nature and scale of planned further work (eg tests for lateral extensions or large scale step out drilling. Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive. A location plan has been included in the text of this document. Data is currently insufficient to determine if historical information is representative. Rock samples taken from the area in 2014 indicate the mineralisation is present sometimes in spectacular quantities. The reference to metallurgical testwork was sourced from a report completed by a geologist working for the East German Geological Survey. It is reported that the samples were taken from the drive 83a. At 4 locations with previous channel samples, they pushed the roof by 30cm to obtain material for testing. The methods for the metallurgical testwork are unknown. Further exploration work is planned this will initially involve sourcing historical drill information and converting the information to digital format for interpretation. 23