The PEG 9 lepidolite prospect contains a number of outcropping pegmatites rich in lepidolite and Li-muscovite. The prospect is located within the Pioneer Dome project owned by Pioneer Resources Limited (ASX:PIO) (“Pioneer”) near Norseman in Western Australia.

As announced by the Company on 23 February 2017, Lepidico is farming into PEG 9 via a drilling program to evaluate its lithium-mica resource potential, with the objective of delineating 500,000 tonnes grading 1.2% Li2O or more to earn a 75% interest (see terms below). Assuming success, this would represent approximately five years of feed for Lepidico’s planned Phase 1 L-Max® Plant, currently the subject of a Feasibility Study.

A grab sample from PEG 9 was collected by Lepidico in January that underwent bench scale test work by the L-Max® process, producing excellent results, and confirming the amneability of the PEG 9 material for potential future feedstock for an L-Max® processing plant.

PEG 9 occurs within a cluster of 13 pegmatites defined by Pioneer along a 20 km trend flanking the eastern edge of the Pioneer Dome, an Archaean granite intrusive within the Norseman-Wiluna greenstone belt. The PEG 9 prospect is located approximately 35 km north of the town of Norseman adjacent to the Coolgardie-Esperance Highway and rail line. The PEG 9 farm-in area covers approximately 2.5 km of strike along this trend within exploration licence E63/1669 (Figure 1).

The PEG 9 prospect was described by Pioneer (PIO ASX release dated 19 May 2015) as an example of a complex lithium-caesium-tantalum (LCT) type pegmatite, outcropping in two parallel structures over a 200 m strike length. Rock chip samples returned up to 3.94% Li2O from lepidolite-rich pegmatite and up to 3.84% Li2O from a lepidolite-poor, yet micaceous pegmatite.

A pronounced soil geochemical anomaly confirms the LCT-type characteristics of PEG 9 and its prospectivity for lepidolite mineralisation (Figures 2 and 3).

Drilling by Pioneer to the north at the PEG008 prospect has intersected high grade lithium mineralisation, including lepidolite, as well as high grade caesium, in the form of pollucite, at the Sinclair Zone. The PEG 9 prospect is undrilled.

Lepidico plans to commence exploration at PEG 9 during May 2017.

Summary of the Farm-in

The farm-in is based on the timely exploration at PEG 9 to drill out a JORC Code (2012)-compliant Inferred-Indicated Resource of the order of 1 million tonnes of lepidolite-rich material grading in the vicinity of 1.5% Li2O, as per the Terms and Conditions outlined below.

Terms

PEG 9 Area: The farm-in area over PEG 9 will include all of Kalgoorlie Primary Block 3404, sub-blocks J and O (“PEG009 Area”) as shown in Figure 1.

Stage 1 Farm-in: Within 12 months of Commencement Date, Lepidico would commit to undertaking such work as to enable the delineation of a lepidolite-rich JORC Code-compliant Inferred Resource of at least 500,000 t grading at least 1.2% Li2O based on lepidolite content.

Stage 2 farm-in: Within 24 months of Commencement Date, Lepidico is to delineate a lepidolite-rich JORC Code-compliant Indicated Resource of at least 500,000 t grading at least 1.2% Li2O based on lepidolite content to earn a 75% equity interest in the PEG 9 Area.

If Lepidico fails to meet either the Stage 1 or Stage 2 requirements the agreement will terminate and Lepidico will not retain any rights in the PEG 9 Area.

Pioneer Free-carried: On Lepidico earning a 75% interest by satisfying the Stage 2 requirements, Pioneer’s 25% interest will be free-carried by Lepidico through to completion of a feasibility study resulting in a Decision to Mine.

Contributing Joint Venture: Consequent upon a Decision to Mine a JV Management Committee will be formed, with pro-rata voting rights, and subsequent expenditure would be on a contributing joint venture basis, with Lepidico contributing 75%, and Pioneer 25%, with each of Lepidico and Pioneer having the option to dilute. If Pioneer dilutes to an interest of less than 10% then its interest would convert to a 2% net L-Max® refinery royalty. If Lepidico dilutes to an interest of less than 10% then it will be deemed to have withdrawn from the joint venture, its interest would be deemed to be zero, and all rights in the PEG 9 Area will revert to Pioneer.

Buy-out: At any stage after it has earned a 75% interest, Lepidico may offer to buy out Pioneer’s interest on terms agreed by the parties.

Other minerals: Lepidico will retain rights to minerals conducive to treatment by the L-Max® process, including lepidolite and other Li-bearing mica minerals as well as lithium phosphate minerals such as amblygonite and montebrasite. Any other lithium silicate minerals such as spodumene and petalite would be handed to Pioneer. All other products would be shared on a pro-rata basis, other than pollucite mineralisation, which is explicitly reserved by Pioneer for its sole benefit.

Pre-emptive rights: Lepidico and Pioneer are to have a first right of refusal on the other party’s interest in case of an offer from a third party.

Withdrawal: If Lepidico withdraws prior to earning its 75% interest it will not hold any beneficial interest in the PEG 9 Area.

Conditions

Pioneer will provide assistance to Lepidico in relation to permitting matters and will afford Lepidico unrestricted access to the PEG 9 Area.

Lepidico and Pioneer will share all information relevant to the PEG 9 Area and will act in good faith going forward.

Should there be a change in control of Lepidico then Pioneer has the option to terminate the agreement.