Lunnon Metals - Emerging Nickel Discovery in Australia's Most Prolific Nickel Belt

• Lunnon Metals is focused on nickel, particularly nickel sulfides. Their unique offerings include high-grade nickel sulfides and a rapid transition capability from exploration to production. The company believes that Kambalda, a prolific region for nickel, still holds potential for significant discoveries.
• In the past two years, Lunnon Metals has aggressively explored and de-risked their assets. Their Baker project has shown potential with a pre-tax free cash flow of $196 million and an NPV of $164 million, reflecting a promising future.
• Nickel remains a critical metal, with significant global importance. Lunnon Metals, being in the Kambalda belt, offers a unique value proposition in the nickel sulfides market, backed by historic data and recent discoveries.

Lunnon Metals is a mineral exploration company focused on discovering the next generation of high-grade nickel sulfide deposits within the Kambalda nickel district in Western Australia. The company controls a large and highly prospective land package totalling close to 50km2 in this premier nickel address

Lunnon Metals was listed on the ASX in June 2021 and has rapidly advanced exploration activities across its portfolio, resulting in the discovery of the shallow, high-grade Baker shoot at its Foster mine project. The company has established an initial mineral resource estimate containing close to 90,000 tonnes of nickel metal and continues to demonstrate significant resource growth potential. With nickel positioned as a critical mineral for the global clean energy transition, Lunnon Metals offers investors exposure to new nickel discoveries in a Tier-1 location with well-established infrastructure and low technical risk. The company also has a clear pathway to potential near-term nickel production from the high-grade Baker shoot.

Why Invest in Lunnon Metals?

• Exposure to new high-grade nickel sulfide discoveries in a premier nickel address - the Kambalda District
• Controls highly prospective ground with walk-up drill targets adjacent to historic mines
• Unique opportunity - the only listed company exploring for nickel solely focused on the Kambalda District
• Shallow, high-grade Baker nickel discovery demonstrates the potential for further growth
• Clear pathway to potentially fast-track Baker to production due to shallow nature and proximity to existing infrastructure
• Strong balance sheet to support accelerated exploration and development activities

Kambalda Nickel District - Australia's Most Prolific Nickel Belt

The Kambalda nickel district, located around 60km south of the mining town Kalgoorlie in Western Australia, is recognised globally as a premier nickel address. This world-class nickel sulfide mining district has produced over 1.6 million tonnes of nickel metal since its discovery in 1966 by Western Mining Corporation (WMC). The Kambalda district includes two separate nickel sulfide mining centres - the Kambalda Dome and the Widgiemooltha Dome, collectively referred to as the Kambalda Nickel District. Lunnon Metals’ key projects are focused exclusively on the Kambalda Dome. The Kambalda Dome is the smaller of the two domes but accounts for 90% of the nickel metal produced, underlining its outstanding high-grade nickel endowment. Historically, ore mined at Kambalda has averaged a spectacular nickel grade above 3%.

Four mega mines - Otter Juan, Dordie, Silver Lake and Long Shaft - produced over 300,000 tonnes of nickel each from Kambalda. Globally, only the Thomson Nickel Belt in Canada compares for such significant production from individual mines.

This premier nickel address continues to deliver new discoveries, as demonstrated by the acquisition of fellow Kambalda explorer Mincor Resources by Gold Fields in 2022 for A$1.1 billion. Mincor defined new nickel resources immediately north of Lunnon Metals’ ground, reiterating the outstanding potential and increasing industry interest in the Kambalda Dome. A key attraction of Lunnon Metals is the company’s dominant and strategic landholding within the southern portion of the Kambalda Dome. Two projects comprise Lunnon’s holdings - the Foster complex and the Northern Nickel Project. The combined projects cover approximately 50km2 over positions interpreted to be highly prospective for new high-grade nickel discoveries adjacent to past producing mines.

Lunnon Metals has already enjoyed early exploration success at Foster, highlighted by the shallow and exceptional grade Baker nickel shoot. The company’s Northern Nickel Project also hosts multiple priority drill targets defined along the prospective nickel contact with the dome-shaped ultramafic. Significantly, the Lunnon ground being targeted has seen negligible exploration over many decades, providing a unique opportunity to make new grassroots nickel discoveries in Australia’s premier nickel address.

Discovery Opportunity - The Kambalda Dome’s “Missing Giants”

A unique aspect of the Kambalda Dome is the stark contrast in past nickel exploration and production between the northern and southern portions, effectively segmented by the nickel producing Silver Lake and Beros mines. The northern segment hosts the four mega high-grade nickel mines noted above, which have been almost continuously explored and mined over the past 50 years.

In contrast, the southern area remained largely unexplored after being shut down by WMC more than 30 years ago, providing a highly prospective search space for Lunnon Metals. Technical assessments by Lunnon Metals support the interpretation that mineralisation associated with the northern mega mines has strong potential to extend southwards into the company’s ground. There is particular encouragement provided by interpreted structural extensions to the 4-5km strike extent of the high-grade Silver Lake ore channel.

Lunnon is targeting the discovery of “missing giants” from the Kambalda Dome’s outstanding nickel endowment. The company estimates a substantial production gap approaching 600,000 nickel tonnes between the northern and southern portions of the dome. Initial geophysical surveys by Lunnon have already defined a compelling drill target interpreted to represent a possible discovery of the southerly extension of the Silver Lake mineralised channel.

Baker Nickel Discovery - Potential Company Maker

The high-grade Baker nickel discovery, located at the Foster project, was made by Lunnon Metals shortly after listing in mid-2021. This shallow nickel shoot highlights the potential for further significant nickel discoveries across the company’s Kambalda ground package. Baker was discovered using modern geophysical techniques not previously applied in the area, and was identified below 80 metres depth adjacent to the former Bakers open pit gold mine owned by Westgold Resources.

With an initial JORC-compliant mineral resource of 936,000 tonnes at 3.6% Ni for 33,600 Ni tonnes, Baker’s grade is exceptional for such a recent nickel discovery. Mineralisation remains open down-plunge and has clear potential for growth with further drilling. A pre-feasibility study has outlined strong preliminary economics for a low capital cost, low risk development of Baker. Using a conservative nickel price of US$20,000/t, the PFS returned a pre-tax NPV of A$164M and an internal rate of return of 117%. Payback would be rapid at just 10 months, with total pre-tax free cash flow estimated at A$196M.

These robust economics are a function of Baker’s high-grade, shallow nature and location immediately adjacent to existing open pit infrastructure. A low upfront capital cost of just A$18.4M is required, allowing rapid payback from early cash flows. The high-grade Baker discovery confirms the outstanding potential across Lunnon’s Kambalda ground package. Additional drilling success could be a genuine company-maker for Lunnon as the company looks to add to the Baker resource inventory.

Clear Pathway to Production

An important aspect of Lunnon Metals is the advanced status and strategic location of the Baker discovery. A relatively straightforward pathway is available to fast-track Baker into nickel production should ongoing exploration and project development continue successfully.

The shallow high-grade mineralisation coupled with adjacent access to road, power and processing infrastructure means Baker could potentially be in production within 18-24 months from a final investment decision. The required capital expenditure is modest by industry standards. A key advantage is Baker’s location within the established Kambalda nickel mining district, where Lunnon can leverage extensive existing infrastructure. This includes the nickel concentrator at Kambalda operated by BHP, adjacent mines and available local mining contractors and personnel. Compared to many nickel projects globally, Baker has a clear development edge.

Along with Baker, the company’s additional nickel resources at the Foster complex provide supplemental production feed with minimal incremental capital cost. Investment in a potential new nickel producer like Lunnon Metals stands to benefit from the positive demand outlook as part of the global clean energy transformation. Positioning for the emerging battery metals boom could prove a prudent move by resource investors.

Strong Cash Position

Lunnon Metals is in a solid financial position, ending June 2022 with A$21 million cash on hand plus shares in nickel explorer St George Mining worth A$1 million. This funding capacity enables the company to aggressively advance exploration activities and project development studies over the medium term. The Baker PFS numbers noted above highlight the modest capital requirements of a potential start-up mining operation, mitigating financing risk. Lunnon’s healthy treasury is a key asset.

Lunnon Metals has an experienced board and management team to lead the company’s growth. Managing Director Ed Ainscough is a geologist with 35 years’ industry experience. He previously held senior roles with WMC and Gold Fields during their management of Kambalda nickel assets, so has expert and intimate knowledge of the district’s geology and mines. Non-Executive Chairman Peter Cook brings over 40 years of resource sector experience, including managing the nickel assets of WMC and overseeing the IPO of Independence Group. The company’s technical team includes highly experienced geologists Dr Jon Hronsky and Brad Sampson, bolstering the in-house nickel exploration expertise.

The Investment Thesis for Lunnon Metals

• Favourable nickel market fundamentals - Nickel demand is forecast to increase significantly driven by the electric vehicle and battery storage revolution. This should support higher nickel prices in the medium to long term. Lunnon Metals provides leverage to this potential price upside.
• Exploration upside in a premier nickel district - The company's tenements are located in the heart of the world-class Kambalda nickel district, with minimal modern exploration applied. Outstanding potential remains for further high-grade nickel discoveries building on the exceptional Baker shoot.
• Clear pathway to production - The shallow, high-grade Baker discovery has low capital cost and rapid payback potential given its close proximity to existing infrastructure. This provides a plausible path to nickel production within a short timeframe.
• Strong financial position - Lunnon's healthy cash balance of ~A$21 million ensures exploration and development activities are fully funded. The company is not diluting shareholders to raise capital for its key programs.
• Experienced board and management - Lunnon Metals' management has extensive technical experience specifically in the Kambalda region. This provides expertise and confidence in their nickel exploration and development strategy.
• Takeover potential - Lunnon's strategic ground position in a Tier-1 nickel district, where majors are actively acquiring nickel resources, leaves the company as a prime takeover target at an attractive premium.
• Nickel leverage - Lunnon offers exposure and leverage to any prospective rises in the nickel price due to global decarbonisation and the batteries/EV thematic.

Lunnon Metals offers an attractive risk/reward investment proposition for exposure to potential further nickel discoveries and resource upside in Australia's premier nickel address.