Australian Rare Earths Limited announced that they have entered into a non-binding Memorandum of Understanding with Neo Performance Materials Inc. providing for the good faith negotiation of a joint development agreement to accelerate Koppamurra towards first production. Koppamurra MREC production is an important first step towards realising AR3's ambitions to build a strategically significant, global rare earths business. Neo is a producer of Neodymium iron boron ("NdFeB") rare earth permanent magnets ("REPM") and other rare earth products.

Neo has been a shareholder in AR3 since its listing in 2021 and has identified Koppamurra as a potential key future source of Neodymium ("Nd"), Praseodymium ("Pr"), Terbium ("Tb") and Dysprosium ("Dy"), which are all vital to REPMs. Neo operates several rare earth production facilities around the world, including separation plants in Estonia and China that source MREC from third-party producers. Neo's experience in providing input to MREC supply will be invaluable to AR3, as demonstrated by Neo's ongoing success in securing light and heavy rare earth raw materials from the United States and elsewhere. The agreement with Neo follows a series of positive developments at Koppamurra over recent months, including: A 104% increase in the Mineral Resource Estimate to 81.4Mt at 785 ppm TREO 1, including an Indicated Resource of 45Mt at 835 ppm TREO1, and an Exploration Target of up to 220Mt1 for the extensional area; Positive metallurgical test results, including average recovery rates of 60% for Nd & Pr and >40% for Tb & Dy at a reduced acid consumption2; and Successful completion of a trial mining pit, demonstrating the potential for low-cost mining and environmentally friendly progressive rehabilitation.

Joint Development Agreement; Neo will assist AR3 pursuant to a joint development agreement ("JDA") to be entered into that would include provision by Neo of technical consulting services to AR3, such as testing of samples from Koppamurra and collaborating to optimise the Koppamurra flowsheet to reduce impurities in the MREC to a level acceptable for feed into separation plants. The JDA would also outline the general terms under which Neo and AR3 will collaborate to identify and develop future clay-hosted rare earth projects in Australia and New Zealand, with AR3 to receive a first right of refusal to participate in such projects, and Neo to receive a first right of refusal on any offtake from developed projects. Offtake agreement; The MOU outlines the general terms on which Neo will, subject to final negotiations and customary conditions, enter into a binding offtake agreement to purchase 50% of the MREC produced by AR3's first module of operation at Koppamurra.

The MOU also contemplates a right of first refusal for Neo to purchase 50% of the output of AR3's second module on similar terms. The precise pricing mechanisms underpinning the offtake agreement, which will be based on standard terms and conditions for such supply, remain subject to negotiation to be finalised closer to first production.