[Ferro-Alloys.com] THIRD LETTER OF INTENT FOR IRON TITANIUM COPRODUCT OFFTAKE SALES

Rizhao Steel Holding Group Co. Limited confirms interest in AVL FeTi coproduct for blast furnace application

KEY POINTS

• AVL has signed a Letter of Intent (LOI) with Rizhao Steel Holding Group Co. Limited (Rizhao Steel) for offtake of the iron titanium (FeTi) coproduct to be produced from the Australian Vanadium Project.

• Rizhao Steel is ranked at the world's 26th and China's 15th largest integrated steel producer and has an annual steel production of 15mtpa from its mill.

• Rizhao Steel is China's largest importer of titanium bearing concentrate.

• AVL plans to produce approximately 900,000 tonnes per annum (tpa) of FeTi coproduct from the Australian Vanadium Project, in addition to approximately 11,200 tpa of vanadium pentoxide from its proposed mine and processing facility in the Mid West region of Western Australia1.

• Third LOI with direct end user closely follows the first two LOIs2, further validating AVL's strategic vanadium processing plant location, close to Geraldton Port3.

Australian Vanadium Limited (ASX: AVL, "the Company" or "AVL") is pleased to announce that it has signed a Letter of Intent (LOI) for the supply of its iron titanium (FeTi) coproduct with Rizhao Steel Holding Group Co. Limited (Rizhao Steel). Rizhao Steel is ranked at the world's 26th and China's 15th largest integrated steel producer and produces 15 mtpa of steel from its steel mill in the Shandong Province in China. It is also the largest importer of titanium bearing concentrate.

1 See ASX announcement dated 6th April 2022 'Bankable Feasibility Study for the Australian Vanadium Project'

2 See ASX Announcement dated 9th November 2021, 'First Letter of Intent for Iron Titanium Coproduct Offtake Sales'

and ASX announcement dated 17th March 2022 'Letter of Intent for Iron Titanium Coproduct Offtake Sales'

3 See ASX Announcement dated 25th February 2022, 'Joint Co-operation Agreement Signed with Mid West Ports Authority for Geraldton Port'

Managing Director, Vincent Algar, comments, "Our consultant in China continues to help AVL to build relationships with some of the country's top steel producers. We look forward to working with Rizhao Steel to supply this unique product which can cost effectively improve operational efficiency. Work continues on additional LOIs and binding agreements. These agreements further validate AVL's strategic decision to locate its vanadium processing plant close to Geraldton's port, strengthening the AVL pathway to funding and project development."

AVL has had several rounds of communication with Rizhao Steel through emails and online video meetings to reach this LOI, which will lay a very good foundation for future cooperation.

As part of the Australian Vanadium Project ("the Project"), AVL plans to produce approximately 900,000 tpa of FeTi coproduct, along with 11,200 tpa of V2O5 from its operations in Western Australia. AVL's strategic location for its vanadium processing facility near Geraldton will enable the sale of the FeTi coproduct, enhancing the Project's economic resilience through the addition of a secondary revenue stream.

The price of AVL's FeTi coproduct will be tied to the Platts62 Fines Index Price (See Figure 2). The FeTi coproduct is ideally suited for use in iron sintering feeds, providing a low-cost titanium source and additional low-cost iron units to steel producers. Blast furnace operators often add titanium to sintering blends to improve furnace refractory protection and to minimise maintenance costs associated with furnace relines. AVL's FeTi coproduct will enter the market as a stable alternative to existing reliable and unreliable sources of similar material.

Sale of the FeTi coproduct is part of the AVL strategy to reduce overall project risk. The iron ore and vanadium price have not moved together historically, offering unique opportunities for AVL to mitigate vanadium price risk and provide a secondary revenue source for the Project. Figure 2 below shows the historical pricing for 62% iron ore and V2O5 pricing.

The LOI is non-binding and its intention is to record the interest of the buyer to support the development of the Project and for the parties to negotiate and agree a binding ore sale contract.

Negotiations will commence at a mutually agreed timeframe, subject to the progress of the Project.

The parties intend to finalise the ore sale contract in 2022, at a yearly tonnage to be determined.

The price of the FeTi coproduct will be referenced to the 62% Fe Platts Iron Ore Index or other agreed price index, with a mutually acceptable price adjustment reflecting the market situation at the time and based on amicable consultation.

AVL will provide the buyer with a quarterly update on the Project's progress and will supply samples for testing at regular intervals for the buyer's feedback. Site visits and meetings will be undertaken when travel permits.

• [Editor:tianyawei]