Hexagon Energy Materials : June 2022 Quarterly Activities Report & Appendix 5B

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ASX Announcement | 26 July 2022

Hexagon Energy Materials Limited (ASX: HXG)

April - June 2022 (FYQ4) Quarterly Activities Report

Hexagon has McIntosh drill program ready for commencement and continues

to progress Hydrogen initiatives.

Hexagon Energy Materials Limited (ASX: HXG) ('Hexagon' or 'the Company') is pleased to provide this quarterly activities report for the quarter ended 30 June 2022 (Q4 FY22).

EXECUTIVE SUMMARY

The June 2022 quarter saw the Company successfully fully funded for all planned drill program, Hydrogen project progress and corporate costs through to next year as a result of the recently completed capital raise (A$1.91 million) which closed on 27 April 2022.

Hexagon has pledged to maximise value from its existing asset base with focus on the minerals and hydrogen initiatives. At the same time, Hexagon is gaining value for its non- core assets without expenditure. To this end, progress is being made on the Graphite project that Hexagon is joint venturing on with announcements made in period.

Hexagon's stated initiatives over the coming year include:

• Drilling and analysing three identified Ni-Cu-PGE targets within the greater "Melon Patch" prospect at Hexagon's McIntosh Project, Kimberley Region, WA. (ASX Announcement 13 March 2022).
• Drilling of Au-Base Metal- PGE targets at the Hall's Creek Project, Kimberley Region, WA. (ASX announcement 7 December 2021).
• Progression of the WAH2 (Northwest WA) project through negotiations around gas supply, CCS contracts, securing of an industrial site and customer / strategic partner identification. This will contribute to a Scoping Study assessing the commercial attractiveness of the project. (ASX announcement 4 July 2022).

The quarter has seen meaningful progress on all of these initiatives.

INTRODUCTION

The June 2022 quarter saw Hexagon continue to execute its stated strategy of progressing its Future Energy Materials and Future Energy long-term growth strategy, as approved by the Board in late 2021 and illustrated in Figure 1 below. The strategy is to progress the WAH2 hydrogen (Ammonia) project which was identified during the PFS process as being the best route to optimise margin and returns while minimising time to market and CapEx for Asia and domestic focused clean energy. In parallel, the strategy includes undertaking a drill program at McIntosh (Ni/PGE) and Halls Creek (Au/PGE) to cement the potential that has been identified through the desktop and groundwork undertaken over the past two years.

HEXAGON ENERGY MATERIALS LIMITED

Australian Business Number (ABN) 27 099 098 192

Registered Office: Level 2, 35 Outram Street, West Perth, Western Australia 6005

t: [phone] e: [e-mail] w: hxgenergymaterials.com.au

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Figure 1: Hexagon's Strategy 2022

1. McIntosh Ni-Cu-PGE

Hexagon's McIntosh Project in the West Australian (WA) Kimberley area lies in the centre of an area known for active Ni-Cu-PGE extraction. McIntosh is surrounded by well-established Nickel and/or PGE producers, exporters, and substantial Ni-Cu-PGE JORC resources. Over the past two years, Hexagon has undertaken substantial appraisal work to try to establish the continuity of the surrounding geology with Hexagon's McIntosh Project. The upcoming drill program seeks to confirm the Company's appraisal of the viability of the Ni-Cu-PGE.

Figure 2: Companies in Ni-Cu-PGE production and/or with Ni-Cu-PGE JORC resources near McIntosh

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Figure 2 (above) shows the location of McIntosh relative to active Ni/PGE projects surrounding Hexagon's tenements. Table 1 (below) highlights the resources held by those operators and their valuations. The ambition of the drill program is to advance the understanding of the Hexagon ground and move towards establishing a resource in order to get value recognition in line with our peers.

		Deposit Name	ASX		Company	Market Cap.	Source of	JORC Resources etc	Resources information
			Code		Name	[$ M]	Market		sources and Comments
							(7/4/2022)	Cap.
								information
1		Savannah	PAN		Panoramic		749	ASX website	13,500,000t @ 1.56% Ni, 0.7% Cu,	https://panoramicresources.com/savannah-
			project/mineral-resource-savannah-project-may-2020/
					Resources Ltd				0.1% Co
2		Copernicus	PAN		Panoramic		749	ASX website	852,000 t @ 1.24% Ni, 0.81% Cu,	Penna, P; 9 November 2016 WAMEX Report A110234
			"BCI Iron Limited Final Surrender Report For the Period 7
					Resources Ltd				0.05 % Co with Reserves of 784,000
								t @ 1.1% Ni, 0.67% Cu, 0.05 % Co (	October 2008 to 5 October 2016 E80/3878", page 12 of
									18.
									Mined Resource:
									132,000 t @ 0.97% Ni, 0.52% Cu,	Unclear whether Au and PGE's is routinely assayed for.
									0.3% Co
3		Panton Deposit	FME		Future Metals		71	ASX website	14,320,000t @ 4.89 g/t PGM	https://future-metals.com.au/panton-pgm-project/
					NL					22 square kilometer holding
4		Nicolsons Gold	PNR		Pantoro		457	ASX website	394,000 oz contained Au	PNR ASX Announcement, 10/1/22 ASX Announcement
				Past Production:	15/11/22
		Mine							https://app.sharelinktechnologies.com/announcement/as
									180,000 oz Au	x/0fb756c82ef34c79a753e17a92211d87
									PGE results:
									30m @ 1.03 g/t Pt+Pd+Au (3PGE):
									0.54% Ni & 0.033% Co from 3 m
5		McIntosh	HXG		Hexagon		19	ASX website	PGE Results:	HXG ASX Announcement, 21/3/22
			https://hxgenergymaterials.com.au/wp-
					Energy				3.63g/t 3PGE, 0.35% Cu, 0.18% Ni
								in soils	content/uploads/2022/03/Three-Ni-Cu-PGE-Drill-ready-
					Material Ltd				Targets-Confirmed-at-McIntosh.pdf
								Historic drill results:	HXG ASX Announcement 2/2/2022
									20 m @ 0.75 g/t 3PGE plus other	542 square kilometer holding
									intersections
										2022 Drilling program planned

Table 1: Details of Companies in Ni-Cu-PGE production and/or with Ni-Cu-PGE JORC resources near McIntosh

Preparatory groundwork for the drill program was undertaken in the June quarter as well as undertaking regulatory sign offs. A heritage clearance survey will be undertaken post quarter end.

In addition to the successful funding round (A$1.91 million) closed on 27 April 2022, Exploration drilling co-funding has been secured by Hexagon as part of Round 24 of the Western Australian Government Exploration Incentive Scheme (EIS) to support this drill program.

Comprehensive analytical work has been undertaken on the site to get to a point where the Company believes we have the highest probability to successfully identifying Ni/PGE mineralisation in the upcoming drill program.

This work has included soil sampling, desktop analysis of historical work, integrated modelling of the area to try to establish an integrated understanding of the geology and assaying of existing core from previous graphite programs.

Drill core from past Graphite focussed drilling not previously analysed for Ni-Cu-PGE was retrieved from Hexagon's warehouse. This core is sourced from where potential sulphide mineralisation had been identified during core logging and were submitted for assaying and interpretation. During the March quarter the results from historic PGE drilling at McIntosh were announced. (ASX Announcement 2 February 2022). These historic results of 20 metres at 0.75 g/t PGE were built upon, in terms of highlighting McIntosh's PGE prospectivity by the 2021 field season soil sample analytical results of up to 3.63g/t 3 PGEs subsequently announced (ASX Announcement 2 February 2022).

Upcoming drill program - the McIntosh drill program is slated for Q1 FY 2022-23. Drill contractors have already been procured and all requisite approvals are in place. In addition, a heritage clearance survey with the Malagowen traditional owners is booked for July. The drill program, which will include multi-hole Reverse Circulation (RC) drilling program of totalling around 1,000 metres to not more than 130 metre depth from surface, cased so downhole geophysics can be completed, is planned for McIntosh over the coming months.

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In addition to the drilling, further geophysical survey (Inverse Polarisation (IP)) work will take place at Melon Patch and new lines/surveys will be undertaken at Melon Patch North and Mable Hill. Infill soil sampling across the 50 Km2 already covered will take place and new areas will be sampled, with additional target identification expected.

2. Clean Hydrogen

Following the completion of the Company's Hydrogen PFS, WAH2 was identified as the focus for Hexagon moving forward.

WAH2 - Hexagon's Blue Hydrogen Initiative

The WAH2 project focusses on developing a hybrid green/blue hydrogen production facility in NorthWestern WA. The strategy is to develop a Hydrogen/Ammonia production facility using Northwest Shelf gas as a feedstock, a high component of renewable electricity for energy. Hexagon already has a MoU in place with international solar company FRV who we anticipate will be our partners for the renewable component. Four other 'pillars' of the project are also being advanced, these are: Securing Gas supply, Securing Land, Agreement around Carbon Sequestration (CCS) and establishing customer base/offtake/strategic partnerships. Newly appointed Director Andrew Kirk has made quick progress since joining on these four cornerstones of the WAH2 strategy as outlined below. (ASX Announcement

4 July 2022).

• Securing Gas supply for blue hydrogen feedstock
  Hexagon has entered a mandate with Equity Lifting Solutions (ELS) for various services, including a potential gas supply for the project. For stage one, the project will consume up to 21TJs/day of gas for conversion to Hydrogen increasing to 71TJs/day for full scale production. In addition, Hexagon plans to source power from renewable sources to minimise the sequestration capacity required and, as part of its hybrid approach, to ultimately maximise the renewable nature of the process as technology and economics permit. Hexagon aims to move these supply negotiations to a Heads of Agreement in the near term to accompany the MoU already in place with solar provider FRV.
• Securing land for site location in the Company's preferred NW Coast of Western Australia
  Hexagon has submitted a comprehensive application with the Western Australian Government to secure an allocation at a Strategic Industrial Area (SIA) at a coastal development on the Northwest Shelf. Hexagon is working with Development WA and JTSI (Department of Jobs Tourism, Science, and Innovation) as part of this process. The application process will likely take another 2-3 months to be processed.
• Progressing agreements around access to CO2 sequestration capacity
  Hexagon has been in discussions with two large corporations who are progressing CO2 sequestration and storage projects as part of their existing businesses in the Northwest Shelf. Hexagon is seeking to finalise a Heads of Agreement with one of these groups in the coming months and to be able to progress this to a binding status as other parts of the project are refined and made definitive.
• Strategic conversations with offshore customers/funding partners

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Hexagon's WAH2 strategy is to be an economic and scale player to service the potential demand in North Asia. Management is having ongoing conversations with large business and government groups focused on near term ammonia demand for energy generation. These conversations cover offtake, possible feedstock (gas) supply as well as potential strategic partnerships.

3. Halls Creek - Au - Base Metals - PGEs

The Halls Creek project lies approximately 100 kilometres to the South West of McIntosh. As with McIntosh, the Company has undertaken systematic, structured geological assessments and drill target identification over the past two years.

Included in the funded 2022 field season is a program for Halls Creek. Exploration drilling co-funding has been secured by Hexagon as part of Round 24 of the Western Australian Government EIS. The anticipated schedule includes around 400 metres of drilling to depths of 130 metres from surface. Further geophysical and geochemical work at Halls Creek will be undertaken budget permitting.

The drill rig and field staff team has been contracted and will be sharing with McIntosh where possible. The requisite regulatory approvals are progressed including already having signoff of the program of works. At the time of writing the Company is awaiting confirmation of the date of the heritage survey with the Koongie-Elvire traditional ownership group.

4. Graphite

McIntosh, WA - Following the Graphite Mineral Rights Only Earn-In deal with Green Critical Minerals Pty Ltd (GCM) (ASX Announcement 14 February 2022), GCM has continued to make progress in its path to the public markets. Hexagon's management team has formed a good working relationship with GCM's team to help progress both their corporate and operational activities. GCM has announced its intention to enter into a transaction with Chase Mining Corporation Limited (CML) (ASX CML Announcement 15 June 2022) under which CML would acquire GCM which in turn would provide access to the financial resources for GCM to meet its financial obligations under the agreement with Hexagon and have sufficient funding to undertake a drill program, and Pre-Feasibility Study work on McIntosh graphite.

Ceylon, Alabama - In the quarter South Star Metals Corp (South Star) has continued to make statements around its focus on Hexagon's Ceylon Graphite project in Alabama as a core project. Hexagon is awaiting findings from South Star from their obliged work program as per the Earn-In deal struck in late December 2021 (ASX Announcement 8 December 2022).

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