Strike Resources : Quarterly Activities and Cash Flow Report - 31 December 2021

Quarterly Report for period ended 31 December 2021

QUARTERLY REPORT

For personal use only

COMPANY DETAILS

ABN: 94 088 488 724

PRINCIPAL AND

REGISTERED OFFICE

Level 2

31 Ventnor Avenue

West Perth WA 6005 T | [phone] F | [phone]

E | [e-mail] W| www.strikeresources.com.au

ASX CODE

SRK

SECURITIES ON ISSUE

270,000,000 shares

1,000,000 Broker's Options ($0.15, 30 Nov 2023)

12,000,000 Directors' Options ($0.185, 3 Dec 2023)

1,000,000 Broker's Options

($0.33, 3 Jun 2024)

BOARD OF DIRECTORS

Farooq Khan

(Executive Chairman)

William Johnson

(Managing Director)

Malcolm Richmond

(Non-Executive Director)

Matthew Hammond

(Non-Executive Director)

Victor Ho

(Executive Director)

COMPANY SECRETARY

Victor Ho [e-mail]

AUTHORISED FOR RELEASE BY - FOR FURTHER INFORMATION:

William Johnson

Managing Director

E| [e-mail] T| [phone]

HIGHLIGHTS

Paulsens East Iron Ore Project, Pilbara (Western Australia)

• A staged approach is proposed to optimise the development of Paulsens East:
• 1. Stage 1 Production will focus on detrital and low strip ratio materials of up to 400,000 tonnes to be shipped through the Utah Point Multi-User Bulk Handling Facility at Port Hedland; and
  2. Stage 2 Production at an annualised rate of 1.5 - 2Mtpa proposed to transition from Utah Point to Port of Ashburton at Onslow (reducing trucking distance by ~365kms).
• Pilbara Ports Authority (PPA) has confirmed export allocation though Utah Point to match Strike's proposed Stage 1 production of up to 400,000 tonnes of DSO during CY 2022, subject to Strike making a FID on the Project and the finalisation of normal logistics and related operational plans.
• In consultation with PPA, Strike has lodged a Works Approval Application with the Department of Water and Environmental Regulation (DWER) seeking approvals (pursuant to environmental legislation and regulations) for proposed operations at the Port of Ashburton.
• A final investment decision (FID) on Paulsens East is pending. The principal consideration for a positive FID is a review of forward iron ore prices with ancillary matters being the finalisation of contracts with key contractors and service providers and the finalisation of the structure and terms for iron ore offtake and project financing.

Apurimac Iron Ore Project (Peru)

• Second shipment of 15,000 tonnes of Apurimac Premium Lump (as an industrial trial) to South American steel mill completed, with full market price received on an FOB basis. Discussions are ongoing for long term offtake agreement.

About Strike Resources Limited (ASX:SRK)

Strike Resources Limited (ASX:SRK) is an ASX listed resource company which is developing the Paulsens East Iron Ore Project in Western Australia. Strike also owns the high grade Apurimac Iron Ore Project in Peru where it has commenced exporting "Apurimac Premium Lump" DSO product of ~65% Fe. Strike has a 43% shareholding in Lithium Energy Limited (ASX:LEL), which was spun-out of Strike under a $9m IPO in May 2021. Lithium Energy is developing battery minerals related assets - the Solaroz Lithium Brine Project in Argentina and the Burke Graphite Project in Queensland.

31 January 2022

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Quarterly Report for period ended 31 December 2021

PROJECTS

Paulsens East Iron Ore Project (Pilbara, Western Australia)

(Strike - 100%)

The Project is located ~10km from Northern Star Resources Limited's (ASX:NST) Paulsens Gold Mine, ~235km by road east of Onslow (and Port of Ashburton) and ~600km by road south of Port Hedland (refer Figure 1). The Project is ~20km from the private Wyloo Station airstrip previously used by the Paulsens Gold Mine, which is suitable to support the transport of the Project's FIFO workforce.

Figure 1: Paulsens East Project Location, West Pilbara

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Quarterly Report for period ended 31 December 2021

Optimisation of Proposed Mining Operations and Port Logistics

Strike has determined a staged approach to optimise the development of Paulsens East, with up to the first 400,000 tonnes of planned production to be exported through Port Hedland and subsequent production (up to 2Mtpa) through the Port of Ashburton near Onslow (subject to receipt of necessary port and environmental permits and approvals).1

Stage 1 Production and Export Through Utah Point, Port Hedland

Given the outcropping nature of the high grade Paulsens East iron ore ridge, which in parts lends itself to a very low strip ratio together with the presence of high-grade surface detrital iron ore, it is proposed that initial mining operations will focus on these two areas of mineralisation.

Up to 400,000 tonnes of ore will be crushed and screened from these areas to produce DSO Lump and Fines products, which will be trucked from the mine to the Utah Point in Port Hedland.

The advantages of Utah Point are that it is an existing facility that allows for early access, but with an attendant ~600 kilometres haulage cost from mine to Port.

Production under Stage 1 is expected to deliver up to 400,000 tonnes of export, before Strike transitions to Stage 2 exporting through the Port of Ashburton at Onslow, which affords a significantly shorter haulage distance of ~235 kilometres compared with ~600 kilometres to Utah Point.

Strike has been provided 200,000 tonnes of annualised export allocation from the Pilbara Ports Authority (PPA) (calculated per financial year - July to June), affording Strike the ability to deliver up to 400,000 tonnes of export through Utah Point during the 2022 calendar year. This coincides with Strike's planned Stage 2 time framework to transition to exporting through the Port of Ashburton at Onslow, at an annualised rate of up to 2Mtpa. This allocation from Utah Point is subject to Strike making a FID on the Project, Strike and PPA finalising a Logistics Plan with respect to haulage into the Utah Point facility and PPA undertaking a site visit to the Paulsens East mine site (once operational), to complete PPA's product approval process.2

Stage 2 Production and Export Through Port of Ashburton, Onslow

Stage 2 production will focus on a ramp up in annual throughput through conventional open pit mining of the ridge of iron ore to an annualised production rate of 2Mtpa with a scale up in the contracted mining fleet, expansion of mine site personnel and additional working capital requirements to facilitate the larger annualised production rate.

Stage 2 involves the export of ore through the Port of Ashburton at Onslow (via transhipment operations) which reduces the trucking distance from mine to Port by ~365km.

Port of Ashburton

The Port of Ashburton (refer Figure 2) is a common user facility initially constructed for the Wheatstone Project and was recently transferred by Chevron to the control of the PPA.

The Port of Ashburton is located ~12km southwest from the town of Onslow and is ~235km from Paulsens East.

PPA has confirmed the use of the Port of Ashburton for export of iron ore by Strike subject to environmental permitting requirements and Port operation approvals being obtained by Strike.

After consultation with the PPA, a Works Approval Application was lodged with the Department of Water and Environmental Regulation (DWER) on 14 October 2021 seeking approvals (pursuant to environmental legislation and regulations) for proposed operations at the Port of Ashburton.

Strike plans to finalise port operational requirements and logistics with the PPA during the DWER Works Approval review period (which is currently proceeding in the normal course), with the utilisation of the Port of Ashburton to be subject to normal commercial terms offered by the PPA for the use of Port facilities.

1. Refer Strike's ASX Announcement dated 13 September 2021: Paulsens East Iron Ore Mining Operation Optimised
2. Refer Strike's ASX Announcement dated 28 October 2021: Export Allocation Received for Paulsens East

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Figure 2: Port of Ashburton - Onslow

Loading of ore will be through transhipment operations with Strike having selected a preferred operator. Strike is currently finalising the terms of a transhipping contract with its preferred transhipment operator.

Strike has also lodged Miscellaneous Licence and General Purpose Lease applications for an area close to the Port of Ashburton to be used as a staging area for iron ore stockpiles prior to ship loading at the Port of Ashburton.

Regulatory Approvals and Access Agreements

Strike has secured key tenements, regulatory approvals and access agreements for the development of Paulsens East:

• Grant of a Mining Lease (M47/1583) for an initial term of 21 years3;
• Native Title Mining Agreement with the PKKP Aboriginal Corporation RNTBC (PKKPAC) - the PKKPAC holds native title on trust for the benefit of the Puutu Kunti Kurrama and Pinikura People (PKKP) Traditional Owners4; the agreement provides an agreed framework for Strike to undertake its mining activities at Paulsens East in a way that minimises any impacts on Aboriginal Cultural Heritage; there is a strong focus on protection of Aboriginal heritage, including effective safeguards for the care and protection of the lands and rights of the PKKP peoples;
• Access Agreements with Pastoral Lease and Mining Tenement stakeholders5;
• Grant of various Miscellaneous Mining Licences to facilitate and support mining operations;
• Mining Proposal (pertaining to approval to undertake mining operations on M47/1583 pursuant to mining legislation and regulations) from the WA Department of Mines, Industry Regulation and Safety (DMIRS)6;
• Project Management Plan (pertaining to approval of mine site occupational health and safety management systems, pursuant to mines safety legislation) from DMIRS7.

1. Refer Strike's ASX Announcement dated 7 September 2020: Grant of Mining Lease for Paulsens East Iron Ore Project
2. Refer Strike's ASX Announcement dated 17 August 2020: Native Title Agreement Paves Way for Iron Ore Development
3. Refer Strike's ASX Announcement dated 28 June 2021: Contractors Selected and Access Agreements Secured for Paulsens East
4. Refer Strike's ASX Announcement dated 2 August 2021: Mining Proposal Approved for Paulsens East Iron Ore Mine
5. Refer Strike's ASX Announcement dated 15 April 2021: DMIRS Approval of Project Management Plan for Paulsens East Iron Ore Mine

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Quarterly Report for period ended 31 December 2021

• Works Approval (pertaining to compliance with environmental legislation and regulations) from the WA Department of Water and Environmental Regulation (DWER);
• Native Vegetation Clearance Permits (pertaining to approvals pursuant to (including Commonwealth) environmental legislation and regulations) from DMIRS (under delegation by DWER); and
• Water licence and approval of water bores from DWER, to support the extraction and usage of water for mining operations.

All key mining approvals and permits required to commence Stage 1 mining have been received; permitting (with DMIRS and DWER) is currently in progress for Stage 2 Port of Ashburton environmental and associated road and other approvals which are expected to be completed prior to the completion of Stage 1 mining operations.

Offtake and Project Financing

Strike has engaged with a range of potential customers and off-take partners, including Chinese steel mills, global established iron ore traders and a number of other marketing groups.8

In addition to negotiating optimal pricing formulae and payment terms for its products, Strike has held discussions with a number of the above parties regarding the potential to contribute project financing facilities and/or prepayments for iron ore shipments.

Strike has determined to execute binding off-take and accompanying pre-payment and/or working capital finance facility at the time it makes a FID with respect to the Project.

Final Investment Decision

A final investment decision (FID) on Paulsens East is pending the Board of Strike forming a position on forward iron ore prices that are sufficient to meet the Company's investment hurdles and risk adjusted returns with ancillary matters being the finalisation of contracts with key contractors and service providers and the finalisation of the structure and terms for iron ore offtake and project financing.

Apurimac Iron Ore Project (Peru)

(Strike - 100%)

Strike's Apurimac Iron Ore Project in Peru is recognised as one of the highest grade, large scale magnetite projects in the world with the potential to support the establishment of a significant iron ore operation.

A JORC (2012) Indicated and Inferred Mineral Resource has been defined at the main Opaban 1 and Opaban 3 concessions of 269Mt of iron ore at 57.3% Fe (142 Mt Indicated Resource at 57.8% Fe and 127 Mt Inferred Resource at 56.7% Fe)9. In addition to the current JORC resource, there is significant exploration potential given the deposits are open at depth and along strike (with very promising drill results including 154m @ 62% Fe) with extensive undrilled gravity and magnetic anomalies.

Mining Operations at Apurimac

Strike has been mining high-grade surface deposits of DSO material from Apurimac via the process of engagement of local miners who are permitted, under Peruvian mining legislation, to mine up to 350 tonnes per day (or ~125,000 tonnes per annum) of iron ore from specific portions of a mining concession. Strike has engaged local trucking operators to transport DSO from the mine site to third-party crushing plants, where crushed DSO have also been stockpiled prior to transport into port for ship loading.

Offtake Agreement

Strike has executed an Offtake Agreement (for up to 300,000 tonnes per annum over a 2 year term) with Good Importing International Pty Limited (GII), an international iron ore trading company currently involved in iron ore offtake into China from various countries including Australia, Russia and South Africa; GII have also previously been involved as an offtake partner for a number of Australian iron ore producers including Mt Gibson Iron, Karara Mining, Pluton Resources and Shree Minerals.10

1. Refer Strike's ASX Announcement dated 16 November 2020: Paulsens East Iron Ore - Marketing Update
2. Refer Strike's ASX Announcement dated 20 January 2015: Apurimac Mineral Resources Updated to JORC 2012 Standard
3. Refer Strike's ASX Announcement dated 14 April 2021: Peru Iron Offtake Agreement Signed with US$2 Million Prepayment

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