Aeon Metals : Dec 21 Half Yearly Report

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Aeon Metals Limited

31 December 2021 Interim Financial Report

Contents

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Aeon Metals Limited

31 December 2021 Interim Financial Report

Directors' Report

The Directors of Aeon Metals Limited (the "Company" or "Aeon") and the entities it controlled (together, "the Group") present their report together with the consolidated financial statements for the six months ended 31 December 2021 and the auditors' review report thereon.

Directors

The Directors of the Company at any time during or since the end of the reporting period are:

Name

Dr Fred Hess

Managing Director

Mr. Paul Harris

Chairperson

Non-Executive Director

Mr. Ivan Wong

Non-Executive Director

Mr Andrew Greville

Non-Executive Director

Review of operations

Overview

The first half of FY2022 was focussed on conducting a geophysical exploration program at Walford Creek, undertaking a limited exploration drilling program at Walford Creek, completing an extensive program of in-fill drilling at Walford Creek and advancing the Pre-Feasibility Study for the Walford Creek Copper-Cobalt Project.

The high resolution geophysical surveys revealed a number of new exciting targets at Walford Creek that have the potential to grow the existing Mineral Resources. The limited exploration conducted based on these results revealed the previously unrecognised potential of the Walford dolomite to host significant copper mineralisation. Step out drilling into the Le Mans zone demonstrated a continuation of PY1 mineralisation.

The in-filling drilling program has provided the necessary sample quantity and representation to allow an extensive metallurgical testwork program to be conducted in order to both confirm and optimise the process flowsheet. By year end, substantial progress was made in both bulk sulphide flotation and pressure leaching performance optimisation.

Aeon raised $9.5 million (before costs) in a placement to new and existing sophisticated and professional investors in July 2021. The Company also raised a further $705,000 from existing eligible shareholders on the same terms via a Share Purchase Plan.

On 24 August 2021, the Company announced that it had completed an agreement with OCP Asia Group to extend the maturity date on its existing loan facility by 24 months (to 17 December 2023).

Long standing Exploration Manager, Mr Dan Johnson, resigned in August 2021 and was replaced by Mr Pete Moorhouse. In addition, Mr Jeff Botting has taken up the new role of Project Manager to advance the project execution and related engineering elements of the Walford Creek Project.

In September 2021, Prime Minister, Mr Scott Morrison, made a landmark announcement supporting Commonwealth funding of critical minerals project developments. Aeon sees this as a welcome initiative as it continues to advance its Walford Creek Copper-Cobalt Project towards development.

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Aeon Metals Limited

31 December 2021 Interim Financial Report

In December 2021, Aeon announced the appointment of Bacchus Capital Advisers to provide strategic financial advice on the progression of project debt funding, potential project partners and related major commercial opportunities.

Over the course of the six months, the rising trend in commodity prices continued with particularly strong performances by cobalt, zinc and nickel. This strong commodity price environment augers well for the advancement of the Walford Creek Project.

Exploration

The 2021 field program at the Walford Creek Project had the following objectives:

• Obtaining suitable representative feed samples from the Vardy and Marley resources to allow comprehensive metallurgical test work to be completed.
• Providing further geotechnical data to support mine design.
• Completing infill drilling within the existing resource where appropriate to enhance confidence in mineralisation and continuity.
• Conducting exploration of the Vardy Deeps concept as detailed in ASX release dated 9 August 2021 (New Drill Targets at Walford Creek) and commencing exploration for further mineralisation along strike between the Marley and Amy deposits.

The metallurgical sample collection program was split between the Vardy and Marley zones, while the Amy zone was excluded (see Figure 1). The program commenced with a single, multi-purpose drill rig operating on double shift from 3 June 2021. A second rig was added on 18 September 2021. Drilling ceased in mid-November ahead of the wet season.

A total of 46 new drill holes were completed, plus an additional diamond tail to a historic drill hole, during the 2021 drilling program. This represents a total of 8,951 metres of drilling.

The results of the exploration activities were reported in the following ASX releases:

• 9 Aug 2021 - New drill targets at Walford Creek
• 3 Nov 2021 - 2021 Vardy drilling update
• 11 Nov 2021 - Vardy Deeps exploration update
• 11 Nov 2021 - Vardy and Marley drilling update
• 28 Jan 2022 - 2021 Vardy and Marley drilling update
• 11 Feb 2022 - Step-out drilling identifies potential Vardy repeat

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Aeon Metals Limited

31 December 2021 Interim Financial Report

Figure 1: Distribution of the 2021 drilling in relation to the Marley and Vardy deposits

The existing drill spacing at Vardy and Marley is variable. Where possible, the metallurgical drill holes were designed to tighten drill hole spacing with the objective to achieve a spacing approaching 20 metres. Assay results received were broadly consistent with historic results and continued to demonstrate the exceptional continuity and quality of the Mineral Resources at Vardy and Marley.

The results of two extensive high resolution magnetic and gravity surveys were announced on 9 August 2021. Interpretation of these results (see Figures 2 and 3) has provided exciting new insights into the potential for further extensions to the already substantial Walford Creek resources. The much higher resolution achieved in the new data revealed several structural features which were previously poorly defined in the historic, wide-spaced geophysical datasets. The new datasets further refine the geophysical signatures of the Vardy, Marley and Amy zones where strong correlations exist between the known presence of mineralisation and the modelled geophysical response.

New conceptual target areas have been identified including:

1. Vardy Deeps and Marley Deeps - approximately 300m beneath the Py3;
2. Amy West Splay;
3. Vardy East FRF continuation; and
4. Eastern Dog Leg Trend.