Grange Resources : Savage River Underground Prefeasibility Study Results

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ASX RELEASE

23 December 2021

ASX: GRR

Savage River Prefeasibility Study confirms technical and

financial viability of an underground operation

Savage River Operations, Tasmania

• The Prefeasibility Study presents a standalone underground case that informs the decision to transition from open pit to an underground mine in the future.
• Demonstrated ore continuity at depth with a 30% (approximately 120 million tonne) increase in Mineral Resources.
• Potential 6 million tonne per annum production rate with an underground mine life of more than 10 years, utilising underground caving methods.
• Potential for increase in mine life.
• In line with company Environment, Social Governance (ESG) initiatives to investigate Green Pellet Production.
• Definitive Feasibility Study to proceed to next level of evaluation subject to board approval in H1,2022.

Disclaimer

The material in this ASX release is not and does not constitute an offer, invitation or recommendation to subscribe for, or

purchase, any security in Grange Resources Limited ("GRR") nor does it form the basis of any contract or commitment. GRR

makes no representation or warranty, express or implied, as to the accuracy, reliability or completeness of this material. GRR, its directors, employees, agents and consultants, shall have no liability, including liability to any person by reason of negligence or negligent misstatement, for any statements, opinions, information or matters, express or implied, arising out of, contained in or derived from, or for any omissions from this material except liability under statute that cannot be excluded.

Statements contained in this material, particularly those regarding possible or assumed future performance, costs, dividends, production levels or rates, prices, resources, reserves or potential growth of GRR or, industry growth or other trend projections are, or may be, forward looking statements. Such statements relate to future events and expectations and, as such, involve known and unknown risks and uncertainties. Actual results and developments may differ materially from those expressed or implied by these forward-looking statements depending on a variety of factors.

The Prefeasibility Study referred to in this ASX release has been undertaken for the purpose of initial evaluation of a potential development of an underground mine at Savage River in Tasmania. It is a preliminary technical and economic study of the potential viability of the North Pit Underground Project.

The Prefeasibility Study has been completed to a level of accuracy of +/- 25% in line with a prefeasibility level study accuracy. No Ore Reserve has been declared from the underground project. Further exploration and evaluation work and appropriate studies are required before Grange will be in a position to estimate any Ore Reserves related to underground mining or to provide any assurance of an economic development case. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Prefeasibility Study. The Mineral Resources scheduled for extraction in the Prefeasibility Study production plan are classified as Measured and/or Indicated.

Grange Resources Limited	ABN 80 009 132 405
34a Alexander Street, Burnie, Tasmania 7320	| PO Box 659, Burnie, Tasmania 7320

T: + 61 (3) 6430 0222 E: [e-mail] W: www.grangeresources.com.au

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ASX RELEASE

Grange Resources Limited (ASX:GRR) (Grange) is pleased to provide an update regarding the Prefeasibility Study (PFS) into the potential for underground mining in North Pit. The financial outcomes demonstrate that an underground mine is technically and economically feasible for the North Pit ore body. A number of improvements will be incorporated into the Definitive Feasibility Study (DFS) which should provide further operational and cost efficiencies to the current PFS study.

Project Highlights

• Demonstrated ore continuity at depth with a 30% (approximately 120 million tonne) increase in Mineral Resource, ore body remains open at depth.
• In line with company ESG initiatives to investigate Green Pellet Production.
• A potential 6 million tonne per annum underground mine life of 10+ years utilising underground caving methods.
• Estimated underground production life of 25 million tonnes of magnetite concentrate.
• Preproduction capital requires a further investment of A$160 million in addition to use of existing infrastructure, processing plant and equipment at Savage River Operation.
• Life of mine capital requirement of approximately A$710M.
• Underground mining costs in the range of A$15 to A$22 per tonne of ore during operation utilising a combination of sublevel caving and block caving mining methods to optimise resource recovery and provide early production.
• Technically and financially feasible with approximately 20% reduction in C1 costs compared to current open pit mining costs.
• A range of underground transport options are viable including conveying, twin decline trucking and shaft material handling systems.
• 2.5 kilometres of underground development, including bulk sample drives, completed to assess viability of underground mining and provide access to developing the ore body.
• Potential to increase mine life by exploiting the high-grade resource at depth.
• Full mine automation and reduced carbon emissions footprint review in scope for DFS.
• Grange to move forward to the next level of study in 2022, subject to board approval.
• Confirmation for the optimal transition from open pit to underground mining will be assessed during the DFS.

Commenting on the delivery of the North Pit Underground PFS, Grange CEO Mr Honglin Zhao said:

"The magnetite deposit at Savage River continues to deliver high quality ore. This successful prefeasibility study provides us with continued confidence in the long-term future of the Tasmanian operations.

"The Study provides justification for our view that the Underground is technically and commercially viable. The planned DFS will be completed in parallel with current open pit mining of the deposit and with ongoing resource extension drilling. It would also be a consideration of the DFS to complete further value adding studies on automation with the final goal of significantly reducing the C1 operating cost of the mine"

Registered Office: 34a Alexander Street, Burnie, Tasmania 7320	Page 2 of 18

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Introduction

An underground concept study and a mining options study was commissioned in 2018 to evaluate the potential for underground mining at Savage River's North Pit. This suggested that underground mining Block Cave (BC) or Sub Level Cave (SLC) could be a viable and economically attractive alternative to increasing the depth of the North Pit. A Prefeasibility Study (PFS) was commissioned by Grange to investigate the viability of an underground mine and commenced in 2019.

Current mining operations comprise two active open pits, North and Centre Pits. North Pit is approximately 360 metres in depth and future cutbacks and extensions have the potential to extend to approximately 450 metres below the natural land surface. North Pit is the primary ore source, producing approximately 5 million tonnes per annum of ore.

A concept study and a mining options study was commissioned in 2018 to evaluate the potential for underground mining. This recommended that underground mining using Block Cave (BC) or Sub Level Cave (SLC) could be viable and competitive with the life of mine North Pit. A Prefeasibility Study (PFS) was commenced in 2019 to investigate the viability of underground mining below the current North Pit.

An Exploration Decline was developed from March 2019 to September 2020 and included 2,423 metres of development, 11,340 metres of resource drilling and collection of a 20,000 tonne bulk sample of ore. The decline portal was located in the south-east corner of North Pit with the decline developed in the eastern wall of the pit and traversing from the southern end of the resource to the north.

The ground conditions encountered are similar to what was expected from the drilling and geotechnical interpretations. The decline ground conditions have generally been considered good and hydro- geological observations indicated that the eastern wall is generally tight and dry.

A Bulk Sample Drive (BSD) was developed through the ore at the -60mRL. Several breakaway headings were developed successfully from the BSD to test intersections and breakaways in the ore. The ground conditions in the ore ranged from fair to very poor.

Location

The Savage River Mine and concentrator plant is located in north-west Tasmania, approximately 100km south-west by sealed road from Burnie. The Mine has been in operation for more than 53 years, extracting magnetite from a series of open pits.

Grange owns the mine and the downstream processing facilities which include a concentrator on site and a pelletising plant at Port Latta which is located on the Bass Strait coast. The pelletising plant and dedicated port facilities at Port Latta are located 70 kilometres northwest by sealed road from Burnie. Magnetite concentrate slurry is pumped from the mine to the pelletising plant through an 85km pipeline. The pipeline currently has capacity for delivering up to 2.75 million tonnes per annum.

Figure 1 Location of Savage River Mine

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Strategic Fit

The strategic rationale for the underground project is to profitably extend the life of the operation. The underground mining option is, from a strategic perspective, directly comparable to the deepening of the existing North Pit. Current open pit designs and the underground options in the PFS address the extraction of magnetite ore defined as Mineral Resources in North Pit.

Key requirements were to:

• Extend the mine life.
• Reduce the operating cost.
• Minimise preproduction capital for the project.
• Improve the internal rate of return.
• Transition to the underground with no disruption to ore supply.

The mining options analysed were based on findings of the concept study which recommended that low- cost caving methods be assessed.

The options assessed in the PFS included:

• Block Cave with Scavenge mining - Trucking to the ROM via twin declines. o (Block Cave Trucking Option)
• Block Cave with Scavenge mining - Trucking to Vertical Haulage Shaft.

• 1. (Block Cave Shaft Option)
• Block Cave with Scavenge mining - Trucking to inclined conveyor.
• 1. (Block Cave Conveyor Option)

The Scavenge Mine utilises a sub-level caving mining method to extract ore remaining around the margins of the open pit. This provides access to ore production in the early part of the development while access is established to the Block Cave.

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Key Assumptions & Outcomes

The project financial analysis includes all downstream and overhead cost allocation to the project. These costs are allocated to the underground project based on the percentage of underground concentrate relative to the total concentrate produced. Exchange rate ranges and product price for pellet and chips, are based on forecasts provided by CRU (2021).

The Physicals and financial evaluations are summarised in Table 1.

Table 1 Summary of the physicals & financials for the mining options evaluated in the PFS.

	Physicals & Financials			Block Cave
	Physicals
	Ore Produced	Mt		55.2
	Ore Grade	%DTR*			47.8
	Concentrate Produced	Mt		25.0
	Pellet Produced	Mt			24.4
	Chips Produced	Mt		1.0
	Price and Revenue
	Average Pellet Price	US$/t		107
	Average FX	A$/US$			0.75
	Total Revenue	A$M		3,435
	Capital Cost	A$M			628 - 710
	Operating Cost	A$M		1,969 - 2,040
	Free Cash Flow	A$M			982 - 994

Note that the average specific gravity of the ore is 3.6 t/m3 * ore grade is expressed as Davis Tube Recovery (DTR%)

The Block Cave Trucking option is most favourable financially when compared with the other material handling options studied, however it is less amenable to scaling up and more carbon emission intensive. The Shaft and Conveyor options provide more scalability with an improved carbon footprint. The production and cash flow profiles for the Conveyor option are shown in Figure 2 and Figure 3, below:

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