Vulcan Energy Resources : 31 Dec 23 Group Management Report

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TABLE OF CONTENTS

1. MANAGEMENT REPORT ............................................................................................... 3

1.1 BUSINESS MODEL AND CORPORATE PROFILE .................................................................. 3

1.2 GROUP STRUCTURE .......................................................................................................... 5

1.3 MANAGEMENT STRATEGY AND OBJECTIVES .................................................................. 6

1.4 MANAGEMENT SYSTEMS AND STEERING ......................................................................... 7

1.5 INNOVATION, RESEARCH, AND DEVELOPMENT ............................................................... 8

2. ECONOMIC REPORT ..................................................................................................... 11

2.1 MACROECONOMIC ENVIRONMENT: OVERALL INDUSTRY SITUATION .............................. 11

2.1.1 LITHIUM AND ECONOMIC SITUATION OF THE CHEMICAL INDUSTRY ........................................ 11

2.1.2 ENERGY MARKETS - PRICE DEVELOPMENT AND PROCUREMENT STRATEGY ........................ 15

2.2 REVIEW OF OPERATIONS ................................................................................................ 18

2.2.1 EXPLORATION AND DEVELOPMENT ......................................................................................... 22

2.2.2 VULCAN'S ZERO CARBON LITHIUM™ PROJECT LICENCE TABLE ........................................... 23

2.2.3 GEOTHERMAL AND RENEWABLE ENERGY ............................................................................. 25

2.2.4 FOCUS PHASE ONE EXECUTION ............................................................................................... 27

2.2.5 FUTURE PHASE DEVELOPMENT .............................................................................................. 30

2.2.6 CORPORATE .............................................................................................................................. 33

2.2.7 SEGMENT INFORMATION .......................................................................................................... 33

2.3 FINANCIAL OVERVIEW ................................................................................................... 34

2.3.1 EARNINGS PERFORMANCE ....................................................................................................... 34

2.3.2 CASH FLOWS AND FINANCIAL POSITION ................................................................................ 38

2.3.3 KEY PERFORMANCE MEASURES USED BY THE VULCAN GROUP ........................................... 41

3. MATTERS SUBSEQUENT TO THE REPORTING PERIOD .............................................. 43

4. OUTLOOK, OPPORTUNITIES, AND RISKS ................................................................... 44

4.1 CORPORATE OUTLOOK ................................................................................................... 45

4.2 RISKS REPORT ............................................................................................................... 46

4.2.1 RISK MANAGEMENT SYSTEM ................................................................................................... 46

4.2.2 FINANCIAL REPORTING MAIN OPPORTUNITIES AND RISKS IDENTIFIED ............................... 50

• 5. TAKEOVER RELEVANT INFORMATION ………………………………………………………… ..57

• 6. FURTHER INFORMATION …………………………………………………………………………… ..61

  • 6.1 CORPORATE GOVERNANCE STATEMENT …………………………………………………………… .61

  • 6.2 DIVERSITY ………………………………………………………………………………………………… 61

  • 6.3 RESPONSIBILITY STATEMENT BY THE COMPANY'S LEGAL REPRESENTATIVE………. 62

1. MANAGEMENT REPORT

1.1 BUSINESS MODEL AND CORPORATE PROFILE

ABOUT VULCAN: EMPOWERING A CARBON NEUTRAL FUTURE

WE ARE ONE VULCAN

FOUNDED IN 2018, VULCAN'S PURPOSE IS TO EMPOWER A CARBON NEUTRAL FUTURE, THROUGH THE EFFICIENT CO-PRODUCTION OF RENEWABLE ENERGY, HEAT, AND LITHIUM FROM GEOTHERMAL BRINE. VULCAN IS FOCUSED ON DELIVERING THE WORLD'S FIRST INTEGRATED RENEWABLE ENERGY AND ZERO CARBON LITHIUMTM PROJECT.

By adapting existing technologies to efficiently extract lithium from geothermal brine, Vulcan (the Company) aims to deliver a local source of sustainable lithium for Europe, built around a carbon neutral strategy with exclusion of fossil fuels from the lithium production process. Already an operational renewable energy producer, Vulcan will also provide renewable electricity and heat to local communities. Vulcan's combined geothermal energy and lithium resource is the largest in Europe1, with licence areas focused on the Upper Rhine Valley, Germany. Strategically placed in the heart of the European electric vehicle market to decarbonise the supply chain, Vulcan is rapidly advancing the ZERO CARBON LITHIUM™ Project to target timely market entry, with the ability to expand and meet the unprecedented demand that is building in the European markets. Guided by our Values of Climate Champion, Determined and Inspiring, and united by a passion for the environment and leveraging scientific solutions, Vulcan has a unique, world-leading scientific and commercial team in the fields of lithium chemicals and geothermal renewable energy.

Vulcan is committed to partnering with organisations that share its decarbonisation ambitions and has binding lithium offtake agreements with some of the largest cathode, battery, and automakers in the world. As a motivated disruptor, Vulcan aims to leverage its multidisciplinary expert team, leading geothermal and lithium technology, and position in the European electric vehicle supply chain to be a global leader in producing carbon neutral lithium. Vulcan aims to be the largest, most preferred, strategic supplier of lithium chemicals and renewable power and heating from Europe, for Europe; to empower a carbon neutral future.

1 According to public, JORC-compliant data. See Upgrade of ZERO CARBON LITHIUM™ Project Resources, 29 September

DEFINING ZERO CARBON LITHIUM

VULCAN USES 'ZERO CARBON' IN ITS TRADEMARK TO REFER TO THE CLIMATE CHANGE IMPACT OF THE LITHIUM HYDROXIDE MONOHYDRATE (LHM) PRODUCT EXTRACTION AND PROCESSING. VULCAN IS CURRENTLY EXPECTING ZERO BURNING OF FOSSIL FUELS IN ITS PROCESS TO PRODUCE LHM ONCE FULLY OPERATIONAL.

Since 2020, Vulcan has commissioned Minviro to undertake a series of International Organisation for Standardisation (ISO) compliant Life Cycle Assessments (LCAs). These are cradle-to-gate studies which include the extraction of the raw lithium product, the geothermal plant, the brine handling, the purification, electrolysis and crystallisation, and the transport of the product from well sites through to the final processing plant. The LCA does not include emissions associated with construction of the ZERO CARBON LITHIUM™ production plant, or the Vulcan Group's corporate office emissions.

The latest update of the LCA, undertaken in 2024, found that Vulcan's planned integrated renewable energy and ZERO CARBON LITHIUM™ Project has an overall net climate change impact contribution of - 2.0 kg CO2 eq. per kg LiOH.H2O. This included the estimated emissions from lithium production and transport including the import of energy from the grid, and estimated emissions avoided due to export of geothermal electricity and heat into the grid and district heating respectively. For full information on the LCA calculation, please see the 2023 Sustainability Report.

1.2 GROUP STRUCTURE

PARENT ENTITY

The Company is the parent company of the Vulcan Group(Table 1).

Vulcan Energy Resources Limited Registered Office - Level 2, 267 St Georges Terrace, Perth Western Australia 6000, Australia.

SUBSIDIARIES

Vulcan

1.3 MANAGEMENT STRATEGY AND OBJECTIVES

Vulcan was founded in 2018 with a clear purpose: To empower a carbon neutral future, by becoming Europe's leading ZERO CARBON LITHIUM™ business and enabling energy security through geothermal energy. The Company aims to produce both geothermal renewable energy and lithium hydroxide for electric vehicles (EVs), from the same deep brine source in the Upper Rhine Valley (URV), Germany.

With the completion of its Definitive Feasibility Study (DFS)2, followed by a more advanced Bridging Engineering Study (BES)3 published in November 2023, Vulcan is now execution ready to commence delivering its Phase One integrated renewable energy and ZERO CARBON LITHIUM™ Project.

VULCAN'S 2024 OBJECTIVES

Figure 1 Vulcan's 2024 objectives.

Vulcan has a clear goal and strategy built around implementing the world's first integrated renewable energy and ZERO CARBON LITHIUM™ Project, targeting a phased approach over the long term.

The Company has applied an integrated business model, aiming for dual revenue sources through its lithium chemicals and geothermal renewable energy business. Vulcan has access to a strategically located and scalable lithium raw materials resource, estimated by the Company to be the largest lithium resource in Europe4. In addition, Vulcan has strategic support with secured, long term lithium supply contracts. The Company has five key offtake agreements secured, with binding take-or-pay, and a mixture of pricing mechanisms for stable cash flow that also enables upside in pricing if the market is favourable.

• 2https://www.investi.com.au/api/announcements/vul/e617fca6-6d4.pdf

• 3https://www.investi.com.au/api/announcements/vul/7e316105-420.pdf

• 4 According to public, JORC-compliant data. See Upgrade of ZERO CARBON LITHIUM™ Project Resources, 29 September 2023

1.4 MANAGEMENT SYSTEMS AND STEERING

Vulcan's internal management system is based on five core performance indicators. These are influenced by the Company's strategic goals and monitored on a regular basis. The following indicators are essential for steering the Company:

• • Strong cash position.

• • Capital expenditure.

• • Operating expenses.

• • Building a world-class team.

• • Carbon neutral position.

Compared to 2022, management excluded revenue and EBITDA from the core performance indicators for 2023, as these indicators are less informative given the development stage of Vulcan.

The Company had a cash position of €78.7m on 31 December 2023, down from €134.1m on 31 December 2022. The reduction in cash during the financial year was principally due to construction costs towards completion of the Lithium Extraction Optimisation Plant (LEOP) and the Central Lithium Electrolysis Optimisation Plant (CLEOP), partial refurbishment of two electric drill rigs, exploration costs including well planning costs for the upcoming Schleidberg well, acquisition of land relating to upcoming production locations, and Bridging Engineering Study costs.

Capital Expenditure (CAPEX) for the twelve-month financial year ended 31 December 2023 was €90.4m, up from €30.7m in the six-month shorter financial year ended 31 December 2022, and Operating Expenditure (OPEX) increased to €62.5m in the financial year ended 31 December 2023, up from €21.1m in the six-month shorter financial year ended 31 December 2022. The increase in CAPEX and OPEX relates to the longer financial year compared to the previous financial year (six months) as well as the construction of the LEOP and CLEOP during the financial year. Furthermore, the Company made relevant investments in rig refurbishments, well sites, and permit engineering, helping to ensure that Vulcan is ready to execute its integrated renewable energy and ZERO CARBON LITHIUM™ Project.

Building a project execution team has been a core focus throughout 2023 which will be instrumental in the Company's ability to successfully execute on the project development strategy. The Company's workforce increased to 371 FTE by December 2023.

Vulcan's management distinguishes between the segments concerning the performance indicators. A conservative cash position is required at the Vulcan Group level to develop the operations in Germany and to cover supporting corporate costs at the German and Australian level. CAPEX is a reasonable KPI for Australia and Germany as the Company is in the development phase. OPEX is also used to steer the segments of Australia and Germany.

Vulcan is aiming to deliver a local source of sustainable lithium hydroxide monohydrate for Europe, built around a carbon neutral strategy, with the team expecting to exclude fossil fuels from the lithium production process. The acquisition of the Natürlich Insheim renewable energyoperation is in line with this steering indicator and adds renewable energy producer alongside Vulcan's carbon neutral lithium product.

A carbon neutral position is important at the Company level as it is central to Vulcan's strategy to empower a carbon neutral future through the production of sustainable lithium and geothermal heat and power.

The Australian Vulcan business has been certified as carbon neutral by Climate Active since 2020, with the German operations certified as carbon neutral from 2021. The 2022 carbon neutral certification has been completed through Climate Impact Partners' carbon neutral label. During the reporting Period, Vulcan together with ERM, a leading global provider of environmental, health, safety, risk, social, and sustainability related consulting services, completed its Environmental and Social Impact Assessment (ESIA), a comprehensive report that details the potential environmental and social risks and impacts for Phase One of its ZERO CARBON LITHIUM™ Project through all stages of the Project including construction, operation and decommissioning. The ESIA highlighted multiple positive impacts of the Project, including renewable heating provision for local communities, and carbon neutral lithium production to decarbonise the lithium supply chain. The ESIA shows the Project's potential alignment with Equator Principles 4 and the International Finance Corporation Performance Standards, is a prerequisite for the raising of sustainable or "green" debt finance and is an important third-party validation of the Project.

1.5 INNOVATION, RESEARCH, AND DEVELOPMENT

Vulcan aims to provide lithium and baseload renewable heat and power with a very low environmental impact compared to legacy methods. To achieve this, the Company views innovation as a cornerstone to successfully delivering its project. Currently there are several publicly funded research, development, and innovation (R&D+I) projects conducted at the Vulcan Labs and at the geothermal power plant to optimise output efficiency. The projects aim to:

• • Gain comprehensive understanding of reservoir properties to optimise reservoir development and to assess and control reservoir productivity towards a deep understanding of the reservoir - operations-interactions to mitigate risks.

• • Increase efficiency for base-load heat and electricity production.

• • Optimise efficiency of lithium production from the brine with a carbon neutral footprint.

Vulcan collaborates with internationally acknowledged research partners (such as Potsdam Geoforschungszentrum, Karlsruhe Institute of Technology, University of Stuttgart, TU Darmstadt, and other renowned institutions), as well as strong industrial partners.

Most of these research, development and innovation projects are publicly supported by the European Commission and Germany.

KEY R&D+I PUBLICLY FUNDED PROJECTS DURING THE FINACIAL YEAR 1 JANUARY TO 31

DECEMBER 2023