Tawana Resources NL : September 2018 Quarterly Activities Report

Quarterly Activities Report

For the quarter ended 30 September 2018

Tawana Resources NL (ASX: TAW, Tawana or the Company) is pleased to report to shareholders its activities for the quarter ended 30 September 2018.

Increased production of high quality lithium and tantalum concentrates at

Bald Hill as the mine continues to ramp up.

ASX: TAW

Highlights

CORPORATE DIRECTORY

Bald Hill Mine, Western Australia, Operations

Non-Executive Chairman Robert Benussi

Production

• • Commercial lithium production declared in July

  Managing Director Mark Calderwood

• • Significant plant performance improvements during the quarter

  Non-Executive Directors Robert Vassie

• • Production of 28,419 wmt of spodumene concentrate, up 63% from the June quarter

• • Recovery of 36,100lbs of saleable Ta2O5, up 36% from June quarter

  Mark Turner Wei (Vicki) Xie

• • Shipments of 18,670 dmt lithium concentrate and a further 10,336 dmt on 7 October

  Chief Financial Officer Craig Hasson

• • Sales of parcels containing approximately 41,000 Lbs Ta2O5 negotiated during the quarter

  Joint Company Secretaries Alexei Fedotov

• • Bald Hill produces high quality lithium (+6% Li2O, <0.5% Fe, <0.5% mica) and tantalum (+30% Ta2O5) concentrates

  Joanna Kiernan

• • Production Cash Costs2 for the Quarter were approximately A$900 (US$660) per tonne of spodumene concentrate produced

• • Revised production target of 55,000 to 60,000 tonnes of lithium concentrate for the 6 months between July and December 2018 (previously 60,000 - 75,000 tonnes)

Optimisation Study Update

• • Fines optimisation study completed; detailed design commenced

• • Targeting increased combined throughput to 300tph and recovery of 72-80%

• • Offtake discussions commenced on increased lithium concentrate production

Corporate

Proposed merger with Alliance Mineral Assets Limited ("Alliance")

• • Scheme Booklet registered with ASIC and despatched to shareholders

• • Independent Expert BDO concluded that the Scheme is fair and in the best interests of Tawana Shareholders (in the absence of a superior proposal)

• • Supplementary Scheme Booklet progressed, subject to ASIC and Court approval

Demerger of non-core assets to form Cowan Lithium Limited

• • Shareholders approved disposal of projects, capital reduction and amendment to constitution at a General Meeting on 6 July 2018

• • Cowan Lithium shares were distributed to eligible shareholders on 18 July 2018

Funding

• • Institutional share placement completed in July 2018 to raise approximately $4.9m

• • $40m funding package secured to strengthen balance sheet and expedite the ASX listing of Alliance

CONTACT DETAILS

Level 3,

20 Parkland Road, Osborne Park WA 6017

Email:admin@tawana.com.auWebsite:www.tawana.com.auPhone: +61 8 9489 2600

Tawana Managing Director Mark Calderwood said "The Bald Hill Mine continued to make excellent progress throughout the quarter, notably significant increases in lithium and tantalum concentrate production. The completion of the fines study and commencement of commissioning of an additional tantalum circuit were also achieved. Improvements to plant performance continued throughout the quarter with an average throughput rate of 202tph; 25% above nameplate capacity. In addition, we agreed terms for our first tantalum sales and have continued to build our reputation as a supplier of premium lithium and tantalum concentrates."

1

1 wmt = wet metric tonnes. dmt = dry metric tonnes

Bald Hill Mine (Tawana 50%, Alliance 50%)

The Bald Hill Lithium and Tantalum Mine (Bald Hill Mine) is located 50km south east of Kambalda in the Eastern Goldfields region of Western Australia. It is located approximately 75km south east of the Mt Marion Lithium project. The Project comprises mining tenure totalling 774km2.

Safety Performance

The 12-month moving average Total Recordable Injury Frequency Rate (TRIFR) for the mine is 0.63 (up 0.27 due to a recordable Medically Treated Injury that occurred in September).

Mining

Mining during the September quarter occurred in Stages 1 and 2 of the pit with ore supply coming from Stage 1. Mining continued at a rate of approximately 773kbcm per month for a total of 2.3mbcm of material including 292,428t of lithium ore at 0.90 % Li2O and 265 ppm Ta2O5. An additional 98,510 wmt of low-grade tantalum ore grading 284 ppm Ta2O5 was also mined.

The strip ratio for the September quarter was 14.7, and will continue to remain high as the Stage 3 pre-strip begins in the schedule, allowing for continuity of ore supply in the medium to long term.

Mining vertical advance rates were less than targeted and has resulted in lower than expected ore and waste volumes. Improvements to the mining and dewatering procedures have been adopted and a fourth excavator has arrived on site to reduce effects of equipment downtime.

Processing

Processing during the September quarter resulted in a total of 337,287 tonnes of lithium and tantalum ore at 0.82 % Li2O and 284ppm Ta2O5 being fed to the plant. From the plant feed, 93,164 tonnes of -1mm fines were stockpiled after removal of 374wmt of tantalum concentrate containing about 36,100lbs of saleable Ta2O5. The remaining 244,123 tonnes grading 0.94 % Li2O were processed through the DMS circuit for recovery of 28,419 wmt of spodumene concentrate. Lithium recovery was approximately 74% (net 62%, taking into account unprocessed fines and middlings).

The Bald Hill JV previously announced a lithium concentrate production target of 60,000 to 75,000 tonnes for the six-month period July to December 2018. This target has been revised to 55,000 to 60,000 tonnes due to mining delays and throughput limitations during construction of the tailings dam during the December quarter.

Plant performance was consistently good with throughputs of up to 249tph. The average throughput rate for the quarter was 202tph, up 17% from June quarter and 25% above nameplate.

Operational performance of the plant continues to improve with plant availability increasing to 78% as it approaches the steady state target 85%. Crushed plant feed size increased from 10mm to 18mm. This change has reduced the quantity of -1mm fines bypassing the DMS circuit from 27% to 20% and improved overall mass yield, while maintaining overall concentrate grades of 6% or better.

The Bald Hill Mine currently produces a high quality spodumene concentrate containing +6% Li2O, <0.5%

Fe, <0.5% mica, <3% H2O, <1% K2O and +90% of concentrate greater than 1mm.

A total of 374 wmt of tantalum pre-concentrate containing 36,100 lbs of Ta2O5 was recovered from the fines circuit. Commissioning of two tables to upgrade spiral concentrates resulted in the production of concentrates containing 15-40% Ta2O5 on site. Work continued to be undertaken at Nagrom Mineral Laboratory in Perth to upgrade pre-concentrates. Based on the treatment of spiral samples, results indicate that a +30% concentrate is available with extremely low deleterious elements.

A pilot jig plant was also installed to recover liberated tantalite contained in the final lithium product. This plant is currently being commissioned and is expected to provide recovery of additional liberated tantalum minerals.

Fines Circuit Upgrade

A metallurgical and engineering options study to increase throughput and recovery has been completed. The preferred option is to modify the existing DMS circuit from a 2-stream circuit currently processing a 1-18mm feed range to a 3-stream circuit processing a 0.5mm to 18mm feed range through the addition of cyclones, screens and pumps. A 3-stream DMS circuit provides maximum operational flexibility for the Bald Hill Mine's feed. It is proposed that +2mm feed would be processed through the existing DMS plant streams and the 'fines' stream would treat an additional 20% of feed in the 2mm and 0.5mm size range. The plant throughput rate with the addition of the fines stream is expected to increase from the current 220tph to 300tph and increase total lithium recovery rates to a range of 72-80% depending on feed grade. The combined increase in throughput and recovery will significantly increase the total concentrate production and reduce the processing cost per tonne produced. In addition, tantalum recovery rates would increase.

The preliminary capital cost estimate for the fines circuit addition, completed by Primero Group is estimated at A$10M (+/- 20%) excluding contingency and contractor margin. Primero has extensive knowledge for DMS circuits including the existing DMS circuit at the Bald Hill Mine.

Work is continuing on the Front End Engineering Design (FEED) works and it is expected that mechanical equipment orders will commence being placed during the December 2018 quarter.

Sales and Marketing

During the quarter, Tawana and Alliance sold a total of 18,670 dmt of spodumene concentrate to offtake partner Burwill Lithium Company Limited (Burwill) and a further 10,336 dmt was shipped on 7 October.

Tawana and Alliance agreed to sell approximately 400 wmt (50% each) of low-grade tantalum concentrate (3-4% contained Ta2O5) produced by the Bald Hill Mine between April and July 2018 under a one-off sales contract to Global Advanced Metals Greenbushes Pty Ltd, with the sale completed subsequent to the end of the quarter.

Subsequent to quarter end, Tawana and Alliance also agreed to sell approximately 23 dmt (50% each) of high-grade tantalum concentrate (approximately 30% contained Ta2O5) to H.C. Starck Tantalum and Niobium GmbH (H.C. Starck). Tawana and Alliance remain engaged with H.C. Starck for the long-term offtake of the high-grade tantalum concentrate production from the Bald Hill Mine.

Costs

Production Cash Costs2 for the Quarter, net of tantalum by-product credits were approximately A$900 (US$660) per tonne of spodumene concentrate produced.

Exploration

Limited exploration work was undertaken during the quarter. The grade control rigs were used periodically to complete selected in-pit resource definition drilling in areas that were not previously available to exploration during the 2017 program due to access restrictions. A total of 21 holes were completed for 2042m.

In addition to the limited drilling, field reconnaissance, mapping and rock chip sampling has been undertaken on regional targets across the broader Bald Hill Mine area.

Notes:

2 Cash Costs per wmt of spodumene concentrate produced is a non-IFRS measure of the direct costs incurred

net of tantalum by-product credit value produced, net of waste deferral costs and excluding royalties.

Corporate

Proposed Merger of Tawana and Alliance

On 5 April 2018, Tawana announced a merger with Alliance by way of a members' scheme of arrangement (Scheme) pursuant to which, Alliance will acquire all Tawana shares and Tawana shareholders will receive 1.1 new Alliance shares for every 1 Tawana share held at the Scheme record date (Merger). Tawana and Alliance entered into a Scheme Implementation Agreement (SIA) (as amended on 9 July 2018) which documented the terms of the Merger.

On 20 August 2018, Tawana announced that ASIC had registered the Scheme Booklet in relation to the Merger following Federal Court of Australia approval. The Scheme Booklet included an Independent Expert's Report prepared by BDO Corporate Finance (WA) Pty Ltd which concluded that the Scheme is fair and reasonable and therefore in the best intrests of Tawana shareholders, in the absence of a superior proposal.

As outlined in the Scheme Booklet, the Merger is subject to a number of conditions precedent. On 19 September 2018, Tawana announced that Tawana and Alliance agreed to waive the condition relating to the admission of Alliance to the Offical List of ASX Limited (ASX) and Official Quotation of Alliance Shares on ASX (ASX Listing Condition) as Alliance was unable to satisfy certain ASX listing conditions at the time relating to its accounts not containing an empahsis of matter (as further explained in the announcement on 19 September 2018).

On 27 September 2018, Tawana announced that it had secured a debt funding package (see details below) which was expected to facilitate the satisfaction of the ASX listing requirements. Accordingly, Tawana and Alliance confirmed that Alliance will seek ASX listing following the Merger.

The Scheme Meeting scheduled to be held on 26 September 2018 was adjourned until a later date so that additional disclosure can be provided to shareholders in respect of the impact of the new debt facilities and waiver of ASX listing condition. The new date for the Scheme Meeting and an updated indicative timeline will be advised in due course, subject to the required orders being obtained from the Federal Court of Australia. Shareholders will also be provided with a Supplementary Scheme Booklet.

General Meeting of Alliance Shareholders

The General Meeting of Alliance shareholders was held on 21 September 2018, where all the resolutions in respect of the Merger were approved. This satisfied a key condition to the Merger, and also facilitates the listing of Alliance on ASX through the adoption of ASX-compliant changes to Alliance's constitution.

Demerger of Assets

In the March quarter, Tawana announced a proposed demerger of its non-core assets to allow it to focus on the development of the Bald Hill Mine (Demerger). The Demerger involved transferring the Cowan, Yallari and Mofe Creek assets and shares in Rakana Consolidated Mines (Proprietary) Ltd to a new wholly-owed public company, Cowan Lithium Limited (Cowan Lithium) before undertaking a capital reduction and an in-specie distribuion of 85% of all of the Cowan Lithium shares to the Company's shareholders.

The Demerger was approved at a General Meeting held on 6 July 2018, and shares in Cowan Lithium were distributed on 18 July 2018. Tawana no longer has a direct interest in these projects, however retains exposure through its 15% shareholding in Cowan Lithium.