Elmore : Retraction and Amendment - ASX Announcement dated 18 July 22

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July 21st, 2022

Retraction and Amendment - ASX Announcment

dated 18th July 2022

REASON FOR RETRACTION AND AMENDEMENT

In accordance with ASX listing rules 5.8.1, 5.8.2 and 5.22, ASX has informed the Company that the disclosure of PekoBull and Normandy previously reported mineral resources requires the consent of a competent person. As the competent person who previously consented to the mineral resources is not an employee of Elmore and the Company has not completed all of the work to verify the Mineral Resource Statement, references to the mineral resources previously reported have been removed from this ASX announcement.

Investors should not rely on the information that has been retracted from the Company's 18th July 2022 ASX announcement.

An amended announcement follows.

Market Update

KEY POINTS

• Elmore has executed an agreement to purchase the Peko Magnetite, Copper, Cobalt, Gold and Bismuth project along with all related project Companies
• Purchase has been funded by a Vendor Finance Agreement
• The purchase allows Elmore to widen its focus from the minerals processing contract that only covered the stockpiled tailings, to also extend to the known and potential open pit and underground mineralisation and the significant exploration potential of the tenements.
• The project has historic and recent JORC compliant defined resources for gold, copper, cobalt and bismuth within the stockpile, along with oxide gold resources and potentially significant remnant mineralisation in the old underground mine below the stockpile.
• Elmore has extended the previously announced Avior funding facility by a further $1.5m to assist in the ownership transition.

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Elmore Ltd (ELE: ASX or Elmore) is pleased to provide an update on the development of the Peko magnetite, copper, cobalt, gold and bismuth project in the Northern Territory.

Project Purchase

Elmore has executed agreements to purchase the Peko Project in the Northern Territory, plus all of the Companies related to the project held by the existing owners. The binding purchase agreements has now been finalised, subject to Shareholder and any relevant Government Approvals and standard share transfer administration that is normal in such transactions.

Vendor Finance has been provided, ensuring that the purchase is not subject to finance and that the deal metrics can be set now, rather than change with a variable balance sheet of the operations as they ramp up.

The Vendor Finance Facility allows the Company ample time to both refinance the facility utilising a longer-term debt instrument, plus reduce the facility utilising project cash-flows.

Background

In mid-2021, when ICAs retiring shareholders (Peko Gold Lending) took control of the Peko project, Elmore was asked to manage the construction and day to day operations of the project under a duly executed Management Agreement.

Elmore has since completed the construction and commissioning of the Stage 1 Magnetite Recovery Plant and is now producing magnetite product with regularly deliveries, via train, to the Port of Darwin.

Peko Gold Lending's shareholders focus primarily on funding conventional property construction projects and do not have a history of funding mining, minerals processing or exploration projects. The funding provided to ICA was considered a Special Situations facility, not business as usual.

Now that the project has been constructed and production has commenced, Peko Gold Lending's shareholders have decided to take the opportunity to exit the project and return their focus to their normal business. The sale timing allows for a reasonable rate of return to Peko Gold Lending, plus significant potential returns to Elmore, thus satisfying both parties.

Peko Gold Lending's Mr David McIntosh said "While the investors in ICA are giving up significant amounts in terms of future opportunities, this isn't our area of expertise and the combined knowledge and skills of the Elmore Board, led by David Mendelawitz, are much better positioned to gain the most benefit from the mine, to make it work commercially and to give the best returns for all investors. I look forward to the success of the Peko Mine, and to

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what David Mendelawitz and the Board of Elmore can do with it and with Elmore's other activities across the market."

Purchase Price and Arrangements

The key points of the new contract are:

• $30 million purchase price
• Elmore to guarantee the performance a pre-existing royalty agreement between the ICA group and ICAs retiring shareholders so that they will receive a total of 20,000 ounces of gold at the higher of 900 ounces per quarter, or 25% of production from commencement of production, which must occur within 3 years.

Vendor financing package:

• 12-monthterm
• Initial interest rate of 2.5% pa for 3 months (Initial Rate)
• Rate increased to 17.5%pa for the next 3 months (Standard Rate) and 27.5% for final 6 months (Extended Rate).

The Vendor Financing Agreement has been negotiated to allow Elmore to obtain financing without the risk of the deal metrics changing during the finance period. It is not intended to be used as a means of paying off the purchase. The acceptance of a high interest rate is reflective of Elmore confidence in the re-financing and to encourage Elmore to re-finance the purchase. Elmore is targeting refinance of the Vendor Finance Facility in Q4, 2022 (prior to the Extended Rate) and expects, based on initial discussions with potential funders and debt advisory groups, that this should be achievable with a 3-year debt facility with interest rates below the Standard Rate provided in the Vendor Finance Facility.

About Peko

The Peko Project is located approximately 10km SE of Tennant Creek in the Northern Territory, 900km south of Darwin. The Project site is situated near the Stuart Highway, and the Adelaide-Darwin railway, both of which are utilised for transport and logistics.

Previous mining of Peko and surrounding tenements has had a significant impact on the development and prosperity of the Tennant Creek township. Peko Iron Project has continued this trend by supporting local businesses and by sourcing a large proportion of the workforce locally. This serves to not only bolster support for the Project and Elmore's standing within the community, but also helps to reduce operational costs associated with a fly-in,fly-out workforce. The current workforce is 80% Northern Territory based and 30% Indigenous.

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Peko/ ICA Tenements

Peko Tailings Dams

The Project resource is a complex of five adjoining tailings dams containing a total of approximately 3.75M tonnes of dry-stacked tailings. The figure below shows a still frame of the tailings dams taken from drone footage. Ore mined from the historical Peko mine and nearby mines including El Dorado, Warrego, Nobles Nob, Juno, Gecko, White Devil, Orlando, and Ivanhoe - operating from as early as 1932 to the late 1990s - was processed and stockpiled at the Project site. Historical production focussed on the recovery of gold, copper, and bismuth. At the height of production, Tennant Creek was one of the largest gold producers in Australia. Production of copper was also lucrative, especially during World War Two, as it was needed for munitions and ordnance.

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Peko Tailings Dams looking northeast - drone footage

Copper, Cobalt and Gold

Copper, cobalt and gold resources were modelled by Normandy Gold (1997) and PekoBull (2016) over the stockpile generating Historic Resources. The Company will present these to the market as soon as it can finalise the appropriate information required, such as the "Table 1" associated with the Resource Statements.

The PekoBull drilling results are closely correlated with the 1997 Normandy grade estimates, and in a number of cases, Au and Co exceed them.

Recent modelling to convert these Historic Resources into JORC 2012 Resource statements have been undertaken, though lacked some of the survey data, so were incomplete in their estimation of the resources. Elmore has undertaken a drone survey of the stockpile, which supports the Normandy estimate, though now needs to provide this data to an Independent Geologist to combine with the resource model.

Magnetite

As well as containing gold, copper, and bismuth, the mined ore was also rich in magnetics - particularly magnetite; however, previous ventures have not capitalised on this resource. Historically, magnetite production has not been economically justifiable due to low prices and government restrictions on exportation to foreign markets. Owing to this, all magnetic products at the Peko site were processed as a tail. On average, the tailings stockpiled at the Peko site contains approximately 75% magnetite. Elmore's processing circuit produces a high-grade magnetite concentrate, for which a premium can be charge. The final product contains between 65% and 68% iron, exceeding the industry benchmark of 62%.

At a planned feed rate of 100 tonne per hour feed rate (yielding circa 50 tonnes per hour of product produced now, along with circa 25 tonnes per hour of oversized material produced

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