Pacific Nickel Mines : Release of Scoping Study for Kolosori Nickel Project

Pacific Nickel Mines Limited ABN 86 075 613 268 Level 4, 283 George Street, Sydney NSW 2000, Australia PO Box R1295, Royal Exchange NSW 1225, Australia

For personal use only

No Ore Reserve has been declared. This announcement has been prepared in compliance with the current JORC Code (2012) and the ASX Listing Rules. All material assumptions, including sufficient progression of all JORC modifying factors, on which the production target and forecast financial information are based have been included in this ASX release.

Assumptions also include assumptions about the availability of funding and approvals. While Pacific Nickel considers that all the material assumptions are based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by this Study will be achieved.

To achieve the range of outcomes indicated in the Scoping Study, pre-production funding in the order of US$20 million will likely be required. There is no certainty that Pacific Nickel will be able to source that amount of funding when required. It is also possible that such funding may only be available on terms that may be dilutive to or otherwise affect the value of Pacific Nickel's shares.

It is anticipated that finance will be sourced through a combination of equity from existing shareholders, new equity investment and a debt facility from offtake providers.

This announcement contains a series of forward-looking statements. Generally, the words "expect," "potential", "intend," "estimate," "will" and similar expressions identify forward-looking statements. By their very nature forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results, performance or achievements, to differ materially from those expressed or implied in any forward-looking statements, which are not guarantees of future performance. Statements in this release regarding Pacific Nickel's business or proposed business, which are not historical facts, are forward-looking statements that involve risks and uncertainties, such as Mineral Resource estimates, market prices of metals, capital and operating costs, changes in project parameters as plans continue to be evaluated, continued availability of capital and financing and general economic, market or business conditions, and statements that describe Pacific Nickel's future plans, objectives or goals, including words to the effect that Pacific Nickel or management expects a stated condition or result to occur.

Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by Pacific Nickel, are inherently subject to significant technical, business, economic, competitive, political and social uncertainties and contingencies. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made.

Pacific Nickel has concluded it has a reasonable basis for providing these forward-looking statements and believes it has reasonable basis to expect it will be able to fund development of the project. However, a number of factors could cause actual results or expectations to differ materially from the results expressed or implied in the forward-looking statements. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of this study.

The Project development schedule assumes the completion of a DFS by the end of 2021/early Q1 2022, subject to the receipt of assay results from drilling programs completed at the Kolosori Nickel Project from May to November this year.

The key document for the environmental approval process in respect of the Project is the Environmental and Social Impact Assessment (ESIA), which was lodged in October 2021. Delays in the environmental approval process or any other development approval (including the issue of a mining licence and landowner agreements) could result in a delay to the commencement of construction (planned for Q2 2022). This could lead to a delay to first production. The Company's stakeholder management and community engagement programs will reduce the risk of project delays. These dates are indicative only.

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The Board considers the Company has sufficient cash on hand to undertake the next stage of planned work programs, including the DFS activities, continued exploration and an early works program in the Project area.

For personal use only

• Pacific Nickel otherwise confirms the references made to work being undertaken in preparation for a DFS for the Kolosori Nickel Project in the Prior Disclosures and otherwise notes that:
• • the DFS will be a Feasibility Study for the purposes of the JORC Code 2012;
  • the mineral resource estimate released by the Company on 19 November 2020 will form the basis of the DFS, along with the results of the drilling at the Kolosori Nickel Project that commenced in May 2021 and the comprehensive engineering work undertaken by engineering consultants Resindo;
  • the works undertaken for the Scoping Study will also be utilised in the DFS (such as the engineering work), which is why the Company has commenced and progressed both scoping and DFS level studies concurrently, as opposed to sequentially; and
  • the works that presently remain for completion of the DFS include:
  • • receipt and analysis of assays from drilling commencing in May 2021 leading to an update of the mineral resource estimate;
    • assessment of quotes from contractors to carry out the major works for the Project which include mining contract, port construction, pad construction and barging contract;
    • geotechnical assessment for the port construction;
    • review of barging to ensure design throughput based on barges available in country; and
    • availability of equipment to carry out the mining.

SUMMARY OF SCOPING STUDY

Pacific Nickel is pleased to announce the results of an independent Scoping Study for the development of its 80% owned Kolsori Nickel Project in the Solomon Islands.

Located on Isabel Island the Project is expected to generate strong financial returns while also delivering significant social and economic benefits to the landowners (who hold a 20% carried interest in the Project), local communities and the provincial and federal governments.

The Scoping Study was conducted by a group of leading independent consultants from Australia and Indonesia including Resindo and Mining One, overseen by in-house Pacific Nickel personnel who are experienced in mining projects in the region.

Key Study Parameters

The key parameters of the Study were as follows:

• Shallow open pit mining operation
• No processing or tailings dams required (as it is a direct ship ore)
• Initial haul road from first pit to the port area less than 1 km
• Stockpile management a key to moisture control and loading DSO onto barges
• Barge ore less than 1km to 50,000 to 60,000 tonne geared ships for export
• Production of 1.3 wet mtpa based on port throughput

Key Study Assumptions and Results

The key assumptions and result inputs of the Study were:

• Production Target of 6.23m tonnes at 1.5% Ni for 93,450t of contained nickel
• Production Target contains 43% Measured and Indicated Resources with more than 75% of the Production Target over the first 2.5 years from Measured and Indicated Resources
• The shallowness of mining allows flexibility to mine the Measured and Indicated Mineral Resource as early as possible where required
• Ability to mine higher grades in excess of 1.6%Ni early in mine schedule
• First production targeted in late 2022
• Capital cost estimate between US$18m and US$20m
• Site operating cost estimate in the range US$15 to US$17/wmt
• Barging costs in the range US$4.50 to US$5.50/wmt
• Shipping cost of around US$38/wmt
• Saprolite shipped to China for the RKEF plants for end use in the stainless steel industry

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For personal use only

• Pricing of 1.5% Ni saprolite US$85/wmt (CIF China
• Pricing of 1.6% Ni saprolite US$91/wmt (CIF China)
• Capital payback approximately one year

KOLOSORI NICKEL PROJECT UPDATE

Key Licences and Approvals

• Mining Lease application lodged in August 2021
• Environmental and Social Impact Assessment lodged in October 2021
• Mining Agreement to confirm project fiscal terms - currently in progress
• Surface Access Right Agreement with landowners - currently in progress
• Development consent approval process in progress - workshop meeting with key stakeholders held in Honiara on 28-29 October 2021
• Community Development Agreement - currently in progress

Social Responsibility and Sustainability

• Landowners have a 20% carried interest in the project.
• Exploration team is over 50 people all of whom are Solomon Islanders
• Environmental and bathymetric studies have been carried out by local contractors
• Company will endeavour to use and train as many of the local workforce as possible
• Provincial and Federal Governments are very supportive of the Company's approach

Next Steps

• Pacific Nickel has been proceeding with a DFS on the Project in parallel with the Scoping Study
• Design of many of the key infrastructure components is already well advanced
• The DFS expected to be completed in Q4 2021/Q1 2022 subject driven largely by the completion of assay results from approximately 220 holes, noting that there is significant congestion at Australian assay laboratories
• Around 200 holes have been completed to date with the drilling program expected to be completed in late November 2021
• An early works program is expected to commence in late November 2021 to carry out initial pad construction, temporary site set up, a grade control pattern and a number of test pits
• Continuing discussions are being held with trading groups and off-takers to assist with financing the Project, and initial discussions with a number of these groups have been positive
• Pacific Nickel is expecting to commence construction of the Project in May 2022 subject to approvals and financing
• The Company has recently raised equity capital to enable it to meet its next steps

Further information on Pacific Nickel is available at www.pacificnickel.com.

Authorised by the Board.

For further information please contact:

Mr. Geoff Hiller

Executive Director & CEO

Mr. Andrew J. Cooke

Company Secretary

Email: mailto:info@malachite.com.auacooke@pacificnickel.com

Please visit the company's website at www.pacificnickel.com

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