Sunrise Energy Metals : June 2022 Quarterly Activities and Cash Flow

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22 July 2022

Quarterly Activities Report

MELBOURNE, Australia - Sunrise Energy Metals Limited (Sunrise Energy Metals or Company) (ASX:SRL and OTC:SREMF) is pleased to provide an update on its activities for the quarter ended 30 June 2022.

Key Developments:

• The increasing demand for EV's, coupled with the geopolitical uncertainty and desire for battery and auto makers to secure supply chains, has led to an increased level of direct interest and engagement in the Sunrise Battery Materials Complex ('Sunrise Project')
• The Sunrise Project's sustainability benefits, including renewable power supply and low carbon intensity of production, are becoming an increasingly important part of conversations with potential funding providers
• Work streams to advance construction-readiness are focussed on:

1. Progressing the long-lead electrical transmission line work scope

1. Assessment of construction transport corridors

• 1. Test work to assess opportunities for potential recycling of spent battery materials
• Exploration activities continued during the quarter with a focus on expanding the understanding of the geological potential of our large tenement package in the Macquarie Arc:
• 1. A number of assays from the recently completed drill program at Sunrise East returned excellent cobalt and scandium results and confirmed the discovery of a new composite intrusion located to the east of the Sunrise Project

• 1. The drilling program at Hylea was completed in the quarter with initial assays indicating promising cobalt and scandium intervals
• Progression of scandium alloy development programs continue with a focus on scandium- containing aluminium alloys, as well as emerging demand for scandium in hydrogen electrolysers.
• The Company had A$24.9m cash on hand as at 30 June 2022.

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Managing Director and CEO, Sam Riggall said:

"The current geopolitical situation is highlighting supply chain risks for critical minerals across the globe. Projects located in low-risk countries, like Australia, are increasingly recognised by the auto industry as crucial to building reliable and sustainable supply chains.

"The sustainability benefits of the Sunrise Project, including our commitment to procure 100% renewable electricity, as well as its low carbon intensity of production compared to alternative sources of new and existing nickel and cobalt supply, are also well recognised by potential funding providers.

"We have seen an increased level of engagement from a range of interested parties in recent months as global supply shortages and geopolitical risks have heightened concerns from OEM's about supply and pricing risk. Discussions remain ongoing with a view to securing an equity and offtake partner for the Project.

"Exploration activities continue to expand our understanding of the geological potential of our broader tenement package, ensuring that we can maximise value from the Sunrise Battery Materials Project."

OHS AND ENVIRONMENTAL PERFORMANCE

The Company had no lost time injuries or reportable environmental incidents recorded during the quarter.

SUNRISE BATTERY MATERIALS COMPLEX

During the quarter, the Company continued to advance the development of the Sunrise Project. A range of workstreams remain ongoing to progress several value-adding deliverables aimed at minimising Project start time once funding is secured. Key work programs include:

• Progressing the long-lead electrical transmission line work scope. The ETL application to connect to the NSW electrical grid is currently in progress and will continue through CY22.
• Test work to assess opportunities for potential recycling of spent battery materials and further downstream processing of sulphates into precursor cathode active material.
• A range of scandium alloy development programs continue to be progressed, consistent with Sunrise Energy Metals' long-term strategy to work with, and assist, industry players to investigate and develop new applications for scandium-aluminium alloys. We have also seen increasing interest in scandium involving applications for hydrogen production.

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Permitting and approvals

Progress continues on the long-lead electrical transmission line (ETL) work scope. The application to connect to the NSW electrical grid is currently in progress and will continue through CY22. Connection to the NSW electrical grid is a key enabler of the Company's commitment to procure renewable energy to supply 100% of the Project's external power requirements.

The Company also continued to progress commercial discussions with landowners, local councils, the NSW State Government and other impacted parties required for land access agreements for key infrastructure including the water pipeline and the ETL.

Progress was made during the quarter with the National Heavy Vehicle Regulator (NHVR) on the planning and approvals required for the oversized transport route from Port Pirie to Sunrise. Works underway include the design and scoping of civil and overhead services modifications required along the oversized transport route with engagement with key road and power authorities ongoing. The NHVR is assisting with this process through facilitating meetings with the relevant stakeholders across both South Australia and New South Wales.

Project Financing

The Company continues to engage proactively with a range of participants in the electric vehicle (EV) industry with a view to securing an offtake and equity investment partner for the Project. Recent global developments, including surging nickel, cobalt and lithium prices, have highlighted the risks associated with critical minerals in EV supply chains. Engagement with a range of potential partners, primarily within EV supply chains, continues to be positive. The Company remains optimistic on the outlook for demand growth in the EV and lithium-ion battery sectors, and in particular the strategic importance of the Sunrise Project as one of the largest suppliers of battery- grade nickel and cobalt into the global EV supply chain. The partnering process will continue, however the targeted timing for completion of any transaction is not possible to forecast.

EXPLORATION ACTIVITIES

The Company continues to advance activities across its range of exploration assets in New South Wales.

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A number of drillholes returned excellent cobalt and scandium results reflecting laterite development over ultramafic intrusive bedrock lithologies including:

• SERC024 returned 11m @ 653ppm cobalt from 19 to 30m, and 32m @ 411ppm scandium from surface to a depth of 32m.
• SERC024A returned 36m @ 403ppm scandium from surface to 36m, and 7m @ 633ppm cobalt from 24 to 31m.

The wide-spaced scout drilling program was effective at detecting cobalt and scandium-bearing laterite developed over an extensive area, providing opportunities for infill and step-out drilling

(Table 1 and Figure 2).

Soil sample and rock chip results were also received during the quarter. Rock chip sampling targeted areas of outcropping altered rocks, while soil sampling tested the eastern half of Tout East. Rock chip and soil sampling assay results delineated a coincident arsenic, antimony, cobalt and lead soil anomaly at the Mortimers Hill Prospect located just to the north of the reverse circulation (RC) drilling area. Several rock chips returned anomalous gold results. Additional work also included prospect-scale mapping over Tout East, which delineated several areas of strong silica-carbonate and pyrite alteration located within metasediments and intrusive lithologies. Work remains ongoing.

Table 1: Reverse Circulation Drilling Assay Results Highlights - Sunrise East