Trek Metals : accelerates Battery metals strategy

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Trek accelerates battery metals strategy with

acquisition of advanced WA manganese project via scheme of arrangement with Edge Minerals Limited

Transformational acquisition will see Trek leverage the strong battery materials

credentials of its board

Highlights

• Trek enters into a Scheme Implementation Agreement with unlisted public company Edge Minerals Limited (Edge) to acquire the advanced South Woodie Woodie Manganese Project, located in the Pilbara region of Western Australia.
• The South Woodie Woodie Project hosts a JORC (2012) Inferred Resource for the Contact and Contact North Deposits of 11.3Mt grading 15.0% Mn (refer to Table 1, Appendix 1, 2 & 4).
• Historical beneficiation test work has confirmed the ability to upgrade the manganese concentrate to up to 44.6% Mn, with Trek to undertake further test work to determine the potential to produce battery-grade manganese products.
• Outstanding exploration potential both in the existing Resource areas at South Woodie Woodie and within the broader exploration tenement package.
• Heritage and land access agreements are already in place, allowing for immediate access to commence on-ground activities.
• Trek's Board has a strong track-record of successfully developing and commercialising battery materials projects, with Directors Tony Leibowitz, Neil Biddle and John Young all playing a leading role in the formation and early growth of ASX-100 lithium producer Pilbara Minerals (ASX: PLS).
• Total consideration for the project acquisition is ~$4.0m with Edge shareholders to receive 2.12 new Trek shares for each Edge share held.
• Transaction is subject to regulatory and shareholder approvals.
• Directors Tony Leibowitz, Neil Biddle and John Young are directors of both Trek and Edge and recommend (with Edge Independent director Cameron Boys) that Edge shareholders vote in favour of the Scheme, subject to the independent expert concluding, and continuing to conclude, that the Scheme is in the best interests of Edge shareholders.
• Trek will rename the project the "Hendeka Project".

Commenting on the landmark acquisition, Trek Chief Executive Officer Derek Marshall said:

"South Woodie Woodie represents an advanced, high-quality asset that offers an exciting opportunity for Trek to target the rapidly expanding battery materials sector.

"Importantly, South Woodie Woodie already has an existing Mineral Resource, positive preliminary metallurgy and all required access agreements in place. This will enable Trek to move ahead

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quickly with our initial work programs focused on expanding the existing Resource and assessing the potential to produce battery-grade manganese products.

"High-purity manganese is expected to see strong demand growth over the coming years as an increasingly desirable component of battery cathode composition. The raw material is significantly less expensive than alternative cathode materials - such as cobalt and nickel - while also offering batteries with reduced charging time and enhanced safety performance.

"Excitingly, Trek is ideally positioned to pivot towards the battery sector, with a Board that has a very strong track-record in the space. Trek Directors Tony Leibowitz, Neil Biddle and John Young all played a formative role at Pilbara Minerals during the discovery and development of the world- class Pilgangoora Lithium-Tantalum Project and have extensive experience and contacts in commercialising battery materials projects."

Trek Metals Limited (ASX: TKM) ("Trek" or the "Company") is pleased to advise that it has secured an exceptional near-term development opportunity in the battery materials sector through the proposed acquisition of the advanced South Woodie Woodie Manganese Project, located in the Pilbara region of Western Australia (see Figure 1).

Trek has entered into a binding scheme implementation agreement ("Scheme Implementation Agreement") under which it will, subject to the satisfaction of various conditions, acquire all of the shares in the capital of unlisted public company Edge Minerals Limited ("Edge") by way of a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) ("Scheme"). Edge holds a majority interest in the South Woodie Woodie Project.

Implementation of the Scheme is targeted for October 2022.

The transformational acquisition will give the Company an opportunity to pursue the development of an advanced and well-located manganese project in a Tier-1 mining district. The project comprises seven granted Exploration Licences, one pending Exploration Licence and one Retention Licence - refer Appendix 2 & 3 for additional information.

The South Woodie Woodie Project, which will be renamed the Hendeka Project following implementation of the Scheme, provides Trek with exposure to a metal with strong supply-demand fundamentals and a robust outlook given its use in steel manufacturing (which currently accounts for 85-90% of global consumption) and growing consumption by the lithium-ion battery sector.

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Figure 1: Hendeka Project location map, including Trek Metals other Pilbara Projects

South Woodie Woodie has a JORC (2012) Inferred Mineral Resource Estimate (MRE) of 11.3Mt grading 15.0% Mn for the Contact and Contact North deposits (refer Table 1, Appendix 1, 2 & 4 for additional information), with immediate drill targets for both Resource extensions and new discoveries.

Table 1: Global Inferred Mineral Resource Estimate for Contact and Contact North deposits at South Woodie

Woodie

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Metallurgical beneficiation test work was previously undertaken by Spitfire Resources Ltd, on PQ diamond core in collaboration with Mineral Engineering Technical Services (METS) to maximise recovery and grade. Composite intervals were put through a scrubbing test to remove slimes (<1mm) before being separated into fines and lump and then passed through Dense Media Separation (DMS) to remove additional waste. After the DMS tests, the final grade and yield of both products was determined. Based on the results of the test work, a product grading up to 44.6% can be produced (refer Appendix 1 and ASX: SPI 17 February 2012 for additional information).

Transaction summary

Under the terms of the Scheme, Trek will acquire all of the issued shares in the capital of Edge at a fixed exchange ratio of 2.12 new Trek shares for each Edge share held by Edge shareholders as at the Scheme record date.

Based on the 10-Day VWAP of $0.0828 two days prior to the execution of the Scheme Implementation Agreement, the transaction values Edge at approximately $4.0 million and each Edge share at approximately $0.1755.

Upon implementation of the Scheme, it is estimated that Trek shareholders will own 86.53% of the combined entity and Edge shareholders will own the remaining 13.47%.

Conditions and deal protection mechanisms

The implementation of the Scheme is subject to customary conditions, including:

• An independent expert concluding that the Scheme is in the best interests of Edge shareholders and not changing, withdrawing or qualifying that conclusion;
• Edge shareholders approving the Scheme by the requisite majorities under the Corporations Act;
• The Court approving the Scheme in accordance with section 411(4)(b) of the Corporations Act;
• Trek shareholders approving the Scheme for the purposes of ASX Listing Rule 10.1; and
• Other conditions customary for a transaction of this nature.

The Scheme Implementation Agreement also contains customary deal protection mechanisms, including no shop and no talk provisions, matching and notification rights in the event of a competing proposal for Edge and a break fee payable by Edge and Trek in specified circumstances.

The exclusivity arrangements are subject to customary exceptions that enable the Edge directors to comply with their respective fiduciary and/or statutory duties.

Full details of the terms and conditions of the Scheme are set out in the Scheme Implementation Agreement, a copy of which appears as Annexure 1 to this announcement.

ASX Listing Rule 10.1

The Company has applied for "in-principle" advice from the ASX by virtue of the fact that Directors Tony Leibowitz, John Young and Neil Biddle are also directors and shareholders of Edge ("Related Party Directors"). The ASX has requested that Trek seek shareholder approval pursuant to ASX Listing Rule 10.1 for the acquisition of Edge which will include the requirement for an Independent Expert's report as to whether the transaction is fair and reasonable to Trek shareholders (excluding the Related Party Directors).

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Edge Board support

As noted above, the Related Party Directors are directors of both Trek and Edge. In addition, the Related Party Directors hold the following relevant interests in each of Trek and Edge:

1. John Young: 2.11% interest in Trek and 2.36% interest in Edge;
2. Neil Biddle: 3.32% interest in Trek and 2.27% interest in Edge; and
3. Tony Leibowitz: 4.82% interest in Trek and 2.04% interest in Edge.

In order to address potential conflicts of interest, Edge has appointed Cameron Boys to its board. Mr Boys is considered to be an independent director (Independent Director).

The Independent Director and Related Party Directors unanimously recommend to Edge shareholders that the Scheme be approved.

Each Edge director who holds or controls Edge shares intends to vote (or cause to be voted) such Edge shares in favour of the Scheme (representing approximately 6.67% of the Edge shares on issue).

These recommendations and intentions are subject to:

• An independent expert concluding, and continuing to conclude, that the Scheme is in the best interests of Edge shareholders; and
• There being no superior proposal for Edge shares.

Next steps for the South Woodie Woodie Project (to be renamed the "Hendeka project")

Following completion of the acquisition, Trek plans to undertake Resource extension and exploration drilling to expand and upgrade the existing Resource. Drilling is expected to commence in the December 2022 Quarter, subject to drill rig availability.

In addition, metallurgical test work will be undertaken to determine the characteristics of the ore and the potential to produce battery-grade manganese products, including high-purity manganese sulphate monohydrate (MnSO4.H2O) which is seeing growing demand for battery cathode manufacturing.

Existing Heritage and Land Access Agreements are in place, allowing for immediate access to commence on-ground activities.

Indicative timetable and next steps

Trek and Edge shareholders will be asked to approve the Scheme at separate meetings expected to be held in September 2022.

A scheme booklet containing information in relation to the Scheme, including the transaction terms, the basis for the Independent Director and Related Party Directors recommendation and details of the Scheme (Scheme Booklet) is expected to be circulated to all Edge Shareholders in August 2022. The Scheme Booklet will include an independent expert's report.

A notice of meeting and explanatory memorandum will also be sent to Trek shareholders including an independent expert's report for the purpose of ASX Listing Rule 10.1.

Advisers

Trek has appointed Blackwall Legal as its legal adviser.

Edge has appointed Steinepreis Paganin as its legal adviser.

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