June 2021 Quarterly Report

June 2021 Quarterly Report

Salt Lake Potash Limited (SO4 or the Company) is pleased to present its Quarterly Report for the period ending 30 June 2021. The Company is focussed on delivering the Lake Way Sulphate of Potash Project in Wiluna, Western Australia.

Construction of the Lake Way process plant was finalised with GR Engineering Services handing over the plant to SO4 operations. Each of the 34 Process Units in the plant were individually commissioned with the SO4 operations team working towards achieving 'Stage 4' commissioning - bringing the plant into continuous operation and producing SOP. Recent activities have primarily focused on calibration of the flotation circuit to achieve expected recoveries. The company continues to work with the flotation circuit vendor and Design Engineer to bring performance up to modelled targets and expects the issue to be resolved this quarter.

Part IV Environmental Approval was received for the Lake Way project covering full-scale operations, including the expanded pond footprint and required brine abstraction infrastructure to enable production of 245kt per annum of SOP.

Salt harvesting activities continued with additional harvesting taking place in Train 1 and removal of the in-cell stockpiles, which were transported to the plant. Approximately 74kt of plant feed salts have now been harvested and are ready as feedstock for the plant.

A$28m in new equity was raised at A$0.35/share to enable the final US$33m tranche of the Senior Debt Facility to be drawn. The capital raise also enabled the implementation of an A$18m guarantee facility provided by Sequoia Economic Infrastructure Income Fund (SEQI), in support of the gas pipeline constructed by APA Operations Pty Ltd (APA).

Following the period-end the Company announced it will be implementing a revised ramp-up strategy that involves suspending the initial plant feed programme, following the processing of the first 90-110kt of harvest salts. As a result forecasted SOP production in FY'22 has been reduced and the Company has determined that it will require further funding before the end of 2021 to continue operations at Lake Way. Discussions to resolve the funding shortfall have commenced and once complete and agreed will be announced to the market.

Tony Swiericzuk Chief Executive Officer

"The Lake Way Project took major strides forward during the June quarter with the hand-over of the Process Plant and the granting of EPA Part IV approval. The entire SO4 team has been working tirelessly through the harvest salt pond management system and plant commissioning challenges over the last few weeks. We are disappointed these challenges have pushed out our expected ramp up profile however the project fundamentals remain attractive. I am grateful for the support and patience of our shareholders and our lenders as we work towards delivering first SOP and positive cash flow."

For further information please visit www.so4.com.au or contact:

This announcement has been authorised for release by the Board of Directors.

Process Plant handover and commissioning

Construction and practical completion of the Lake Way process plant has been finalised with GR Engineering Services handing over the plant to SO4 in late June. Each of the 34 process units in the plant have been individually commissioned and the SO4 operations team is now working through the 'Stage 4' load commissioning process.

The SO4 operations team have been systematically working through the plant to ensure each unit is functioning within design parameters and the plant chemistry is established.

COVID-19 related border restrictions have impacted the travel arrangements of key commissioning personnel as well as affecting the timely transport of some commissioning supply items, impacting the commissioning schedule.

The commissioning process has involved calibrating and fine tuning several mechanical components in the plant including crushers, screens, cyclones, thickeners, centrifuges, control valves, agitators and pumps as well as the electronic control systems. More recently work has focussed on the calibration of the flotation circuit to achieve the designed waste mass pull. 'Batch trials' each using 500-800t of low-grade feed salt have been run, with mass-pull performance achieving variable results. The company continues to work with the flotation circuit vendor and design engineer to bring performance up to modelled targets and expects the issue to be resolved this quarter.

Non-process infrastructure

Installation of bagging plant and equipment were progressed with the Flexicon bulk bagging plant completed and installed.

The form fill seal bagging plant installation has progressed significantly and is expected to be completed during the September quarter. The plant will bag the product into 25kg bags for export via Fremantle.

On-Lake infrastructure

The paleochannel drilling campaign continued throughout the quarter, with new production bores drilled on pads 4, 16 and 22.

Total trench length excavated remained at 65.5km, with design for the upcoming Stage 3 extension programme finalised during the period.

Salt harvesting recommenced in Train 1 with the in-cell stockpiles that were harvested during the March quarter also transported to the plant. Around 90-110kt of harvest salt harvested ready as feedstock for the plant.

Equity raise to enable final debt drawdown

In May, the Company completed a A$28 million equity capital raising by way of a placement of 79,947,858 Ordinary Shares at A$0.35 per new share (Placement).

The proceeds from the Placement will be used for general operating expenses during the ramp up of the Lake Way Project. The Placement was a key condition to enable the Company to undertake the final US$33 million drawdown under the Syndicated Facility Agreement, as well as providing for the implementation of an A$18 million guarantee facility to be provided by SEQI in support of the gas pipeline constructed by APA. The guarantee facility provided by SEQI will release A$18m in equity that will be used for general operating expenses during the ramp up of the project.

Within the Placement SO4 Directors subscribed for 2.8 million Placement Shares, including 2.5 million shares by Chairman Ian Middlemas and 250,000 by Managing Director and CEO Tony Swiericzuk, approved in a July shareholder meeting.

The issue price of A$0.35 per share represented a 12.5% discount to the last traded share price on ASX of A$0.40 and 14% to the 5-day volume weighted average share price on ASX prior to the Company entering into the Trading Halt on 21 May 2021.

Grant of Part IV EPA permit

The Company's Part IV Environmental submission was approved by the Government in April, having been recommended by the EPA with no appeals in January.

The permit enables SO4 to finalise construction of the remaining evaporation ponds as well as the trench and bore construction that will support full scale operations at Lake Way of 245kt per annum of SOP.

Revised ramp-up strategy

Following the period-end the Company announced it will be implementing a revised ramp-up strategy that involves suspending the initial plant feed programme, following the processing of the first 90-110kt of harvest salts.

Under the revised ramp-up strategy the Company plans to process 90-110kt of plant feed salts to produce SOP for initial customer sales. Plant feed will then be suspended for a period of 10-14 weeks before harvesting activities and SOP production recommence. As a result, FY'22 forecast SOP production has reduced from 165-185kt to 85-105kt.

The revised mine plan is a result of three factors.

· A change in operating methodology for the ramp up period of the pond system has been implemented to manage salt grade variability in the harvest cells, reducing SOP production by c.63kt in FY'22: Ramp up of the ponds has followed the original modelling and expert advice, applying a continuous flow model that has resulted in brine with concentrations of less than 3.4%Mg (the concentration at which potassium salts begin to precipitate), being pumped into the harvest cells. As a result, salt formation in several harvest cells has exhibited higher grade variability than modelled, resulting in a lower average potassium and higher halite content. To rectify this issue the Company has adopted a revised operating methodology for the continued ramp up of the pond system that suspends brine transfer into all harvest cells until the chemistry reaches the required level, to minimise salt grade variability.

· Reduction in the estimation of available plant feed salt inventory, reducing SOP production by c.12kt of SOP in FY'22: The reduction in estimated plant feed salt inventory is based on the change between the Mine Plan Inventory Model used for the previous mine plan, and newly acquired data from bulk sampling taken during and after harvesting activities in June. Prior to the opportunity to undertake bulk sampling arising from cell harvesting, only multiple single point data collection had been taken from across the cells.

· The deferment and sterilisation of lower grade inventories determined as unsuitable for plant feed during ramp up, reducing SOP production by c.7kt of SOP in FY'22. As part of the plant modelling that was undertaken from bulk sampling results in June, the lower potassium grade threshold has been increased for the plant ramp-up period. As a result some material was sterilised (not to be used) and other deferred with the intention of being fed through the plant at a later date, once in steady state.

DISCLOSURES IN ACCORDANCE WITH ASX LISTING RULE 5.3

Summary of Mining Tenements

Appendix 5B

Mining exploration entity or oil and gas exploration entityquarterly cash flow report

Compliance statement

1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2 This statement gives a true and fair view of the matters disclosed.

Date: xx July 2021

Authorised by: By the Board

(Name of body or officer authorising release - see note 4)

Notes

1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2. If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

Related Party Payments

During the quarter ended 30 June 2021, the Company made payments of $223,000 to related parties and their associates. These payments relate to existing remuneration arrangements (executive salaries, director fees and superannuation).

Additional Disclosures

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Forward Looking Statements

This announcement includes forward-looking statements. These forward-looking statements are based on the Company's expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, which could cause actual results to differ materially from such statements. Although the Company believes that its forward-looking statements have reasonable grounds, can give no assurance that they will be achieved. They may be affected by a variety of variables and changes in underlying assumptions that are subject to risk factors associated with the nature of the Company's business (including those described in pages 25 to 29 (inclusive) of the Presentation released to ASX on 11 December 2020), which cause actual results to differ materially from those expressed herein. The Company makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement, save where required by law or regulation, to reflect the circumstances or events after the date of this announcement.