Quarterly Activities Report for period ending 30 September 2018

• Board and Management changes including the appointment of lithium industry expert illustrate Infinity’s focus on the strategically important San Jose Project.
• Listing of the Company successfully completed on the Frankfurt Stock Exchange and Stuttgart Stock Exchange under the symbol ‘3PM’ to broaden Infinity’s investor appeal and increasing exposure to European investors.
• San Jose lithium hydroxide scoping study progressing following the completed lithium hydroxide technical option study.
• San Jose lithium hydroxide scoping study scope expanded and expected to be completed in Q4 2018. Advances have highlighted potential variations in input reagents to optimise process flow sheet.
• Infinity believes this new study has demonstrated it can adapt to evolving market conditions and growing demand for lithium hydroxide in response to strategic partner requirements such as lithium sulphate.
• Lithium hydroxide increasing in importance for LIBs with advancements in nickel-rich battery cathode technologies.
• Growth in battery grade lithium chemicals demand now widely projected to be for lithium hydroxide instead of lithium carbonate on the back of electric vehicle projections
• European investments in the battery chain continues to gain momentum with San Jose positioned to capitalise on developments.

Summary

Infinity Lithium Corporation Limited (“Infinity” or “the Company”) is pleased to announce a summary of activities for the three months to end September 2018.

The quarter has been a period of change involving Board and management.  Furthermore, the continued evolving lithium-ion battery (“LIB”) market has provided a clearer direction for lithium chemicals demand and energy storage requirements. There have also been significant positive changes in the markets and commodity prices for Infinity’s non-core assets (tungsten and potash) which have been on care and maintenance. This has allowed commencement of a concerted process of divestment of Infinity’s non-core assets (tungsten and potash).

Battery-grade lithium hydroxide (“LiOH”) is expected to be a key component of the lithium chemical industry going forward. Due to its high energy density properties LIBs utilising lithium hydroxide-based cathodes are projected to grow significantly, and the resulting increased lithium hydroxide demand is projected to outstrip lithium carbonate for energy storage and use in electric vehicles (“EVs”). Infinity continues to address this changing market dynamic and the Company is excited by the opportunities it presents for San Jose when considering the distinct advantages hard rock lithium resources maintain (over some other lithium sources) in the production of lithium hydroxide.

Work continues at San Jose with activities primarily focused on corporate advancements and the prioritised advancement of lithium hydroxide studies over the purely lithium carbonate Feasibility Study progression. A historical Feasibility Study (pre JORC) for the production of lithium carbonate was used by Infinity as the basis of a scoping study (“Lithium Carbonate Scoping Study”, or “LCSS”) to produce battery-grade lithium carbonate on site in an integrated production facility (ASX release 18 October 2017). This LCSS formed the basis of the Mining Licence Application (“MLA”) which was lodged in partnership with Joint Venture (“JV”) partner, Spanish company Valoriza Mineria S.A.

Work then commenced on the Feasibility Study for San Jose. This included additional drilling, geotechnical, and related work. It has become apparent to Infinity that the Project should also examine the production of battery-grade lithium hydroxide as a final product. Infinity understands that any changes to the MLA would require resubmission by the Joint Venture Infinity has with Valoriza Mineria S.A. Infinity is applying increased attention and interaction with potential strategic partners and end-users as it refines advances in technical work at San Jose. After a successful ‘technical option’ or ‘trade off’ lithium hydroxide study, which compared lithium carbonate production to lithium hydroxide production, a Lithium Hydroxide Scoping Study (“LHSS”) was commissioned.

Lithium Hydroxide Option & Scoping Study Compliments Lithium Carbonate Study

Work on lithium hydroxide has progressed in direct response to potential strategic investment and offtake requirements, which was reaffirmed through a series of meetings with industry participants at the 10th Lithium Supply & Markets Conference in June 2018. Furthermore, pricing and sentiment in the lithium market for lithium carbonate has been diminished in recent months.

It is important to note that the LCSS released by Infinity (ASX release 18 October 2017) assumed a price of US$10,000/t of battery grade lithium carbonate. The Chinese spot price at the time was approximately US$20,000/t. With its retraction to ~US$11,000/t and stabilisation at the US$11-12,000/t price range over the past month, San Jose remains a highly valuable and attractive project for development. The price for lithium hydroxide has stabilised at a much higher (approximately US$18,000/t) price for battery grade product ex-China.

Infinity recently announced (ASX release 8 June 2018) the commencement of the LHSS to complement the existing LCSS at San Jose. This study is expected to demonstrate that San Jose can produce lithium hydroxide if desired, a strategically important consideration in response to evolving LIB technologies and the trend towards LIB compositions used in EVs deriving greater energy densities (and ranges) based on lithium hydroxide derived cathodes.  Infinity has progressed the lithium hydroxide technical option study towards a LHSS to confirm the economic benefits and outcomes of diverting product stream post lithium extraction stages in the process flow sheet. San Jose presents multiple lithium chemical production opportunities. This Scoping Study is expected to be released Q4 2018.

Lithium Hydroxide Scoping Study

The Company has previously completed a lithium hydroxide technical option study (ASX release 11 July 2018) which successfully demonstrated the ability of San Jose to produce lithium hydroxide.  The study complimented the existing lithium carbonate scoping study.  Infinity then commenced a lithium hydroxide Scoping Study (LHSS)

The LHSS will be coordinated simultaneously and broadly in parallel with the lithium carbonate Feasibility Study.  The JV can assess the outcomes of the LHSS considering potential strategic partners and offtake requirements.  There may be some delay in the delivery of the Feasibility Study as a result of the outcome of the LHSS. As the process flow sheet for production of either lithium carbonate or hydroxide at San Jose and the point of deviation illustrates, the deviation from the LCSS flowsheet occurs after the sulphate recovery stage. Most of the work completed to date including resource drilling, environmental, hydrological, geotechnical, leaching is interchangeable. 

Lithium carbonate is proposed to be produced at San Jose using contemporary sulphate roast-water leach technology.  This commonly utilised process can be tailored in the downstream (post leach) processing stages to produce lithium hydroxide.  It is envisaged that the current lithium carbonate Feasibility Study can continue broadly parallel with the LHSS due to the large amount of process, design and mining overlap.

Wave International Pty Ltd (‘Wave’), who completed the technical option study to produce lithium hydroxide and lithium carbonate from the San Jose resource, were retained to complete the LHSS and have extensive experience in lithium test work design, process design, detailed engineering and commissioning including detailed design for downstream lithium hydroxide chemical plants.  The expanded LHSS is expected to be complete in Q4 2018.

The summarised process flowsheet as shown in Figure 2 is shown in more detail in Figure 3. This highlights the advantages associated with hard rock lithium resources and the ability to deviate from the LCSS flowsheets in the production of battery grade lithium hydroxide. A relatively minor variation is required in downstream processing and Infinity will benefit from the heavily overlapped work conducted to date.  The LHSS can assist in determining the progression of the San Jose feasibility study to a lithium carbonate or hydroxide battery chemical product. 

It is the ability to deviate from the LCSS flowsheets in the production of battery grade lithium hydroxide without having to first produce a lithium carbonate (as per brine sources), and the relative regularity of lithium-bearing solutions sourced from regular San Jose project feedstock (hard rock), improves the ability to produce high-quality, lower cost lithium hydroxide.  As highlighted in Figure 3, most stages in production of battery-grade lithium chemicals shown in the production of either a lithium carbonate or hydroxide are the same.

A detailed outline of the evolving LIB market was presented subsequent o the Quarter (ASX release 16 October 2018). The ability of the Company to recognise changes in the market and present the optimal project is important.

The identification of the potential market for lithium sulphate recently has justified additional work to be conducted by the consultants undertaking the LHSS for The Company.  It is important to note that the work underway has identified that Infinity has the ability to:

1. vary the type and ratio of specific sulphate reagents in the mixing stage pre-roast, and
2. that the leached material goes through a lithium sulphate stage regardless of whether lithium carbonate or lithium hydroxide is selected as the final product.

Satisfying Demand – Complementary Sources of Lithium to Meet Lithium Hydroxide Demand

Due to these expected increases in demand for higher performance battery cathodes, battery-grade lithium hydroxide is expected to surpass battery-grade lithium carbonate and become the main product consumed in the rechargeable battery market by 2024. Hard rock lithium resources and the low impurities featured in mineral-based lithium hydroxide is particularly advantageous when selling to cathode manufacturers, when compared to suppliers using brines to source lithium raw materials.

Lithium hydroxide demand continues to grow faster than lithium carbonate and most of the recent investments in lithium chemical plants have been in lithium hydroxide production. Roskill as forecast that:

1. Battery-grade lithium hydroxide is forecast to take over battery-grade lithium carbonate by 2024; and
2. Battery-grade lithium hydroxide is forecast to grow at 43.2% per year from 2017 to 711,000t LCE by 2027.

Traditional sources of technical grade lithium (sub-battery grade) have been supplied primarily from South American based brine projects. More recently the emergence and prevalence of Australian hard rock resources for battery grade lithium products has supported market growth. Hard rock resources have an advantageous process flow sheet in the production of lithium hydroxide as it is not necessary to produce one product (lithium carbonate) and then convert to another (lithium hydroxide). Rather a deviation in the process allows for the beneficial production of lithium hydroxide directly. Infinity’s summarised process flow sheet illustrates the advantage of the San Jose mica/lepidolite hard rock resource.

Mica/lepidolite has been used for decades to produce lithium carbonate. There are several operations currently utilising mica to produce lithium carbonate and plants are being established to produce lithium hydroxide. Infinity is proposing to use existing process technology to bring battery grade lithium chemicals to market. This use of existing lithium carbonate production technology (as per the process flowsheet detailed in the LCSS) has de-risked San Jose and will support the potential variation into lithium hydroxide products. Independent testing by world renowned Dorfner Anzaplan confirmed and successfully demonstrated the ability to deliver battery grade, +99.5% lithium carbonate (ASX release 18 October 2017). The lithium hydroxide study is designed to provide optionality to the JV and potential partners to consider alternate products.

It has been noted that many Chinese conversion capacities fell short of both claimed nameplate and actual capacity (Benchmark Mineral Intelligence industry presentation July 2018). Infinity’s planned fully integrated lithium project benefits from the adjacent infrastructure and control of raw material quality through the use of a one source feedstock. This will assist greatly in de-risking the project nameplate capacity availability. Furthermore, Infinity can benefit through the engagement of industry leading engineering and processing design groups and draw on Wave’s experience in the sector in the implementation of the next generation of efficient and technologically advanced lithium processing facilities. San Jose is expected to be a fully integrated lithium project, and therefore Infinity can control the processing feedstock throughput with no cross-contamination issues.

Infinity believes this could provide a strong advantage for the JV to consider at San Jose.

Regional Investment

Infinity recognises significant opportunities in the Extremadura region. The region’s status as a "priority objective" region in the European Union (under the current 2014-2020 Financial Framework) allows preferential access to structural funds in terms of employment and business competitiveness. The world class lithium resource, its proximity to key infrastructure (allowing the viable implementation of downstream processing), and regional government’s desire to attract investment to the region provide an attractive backdrop for cathode production, battery manufacturing or other industry that can benefit in a synergistic way from a strategic partnership with Infinity and the utilisation of high quality outputs from the San Jose project.

Investments in the Battery Chain – Europe Gaining Momentum

The European Union and various European countries continue to establish targets to phase out ICE vehicles, with European automakers such as Volvo, Volkswagen, BMW and Daimler publicising ambitious plans to produce primarily electric vehicles.  Europe recognises the importance of maintaining and reinforcing their position in the automobile industry, and the EU continues to address the requirements to be one of the dominant players in EV production. The adoption of EVs needs to accelerate in order to align with government EV proposals and targets.

Reuters Business News (July 2018) noted that “Europe’s lack of its own production capabilities for the cells that power electric cars has prompted warnings that it could leave its car industry exposed and too reliant on others.”

It is vitally important to de-risk the European supply chain by having more domestic sources of raw materials, including lithium, available at a competitive cost. Infinity has shown the ability to produce battery grade lithium carbonate at the lower end of the cost curve, with the results of the LHSS due shortly. The production of sufficiently high grades of lithium chemicals is also vital in the production of technologically advanced cathodes.  With a cache of hard rock resources, European participants are able to produce battery grade lithium hydroxide at a competitive price. The San Jose project benefits from the availability of key infrastructure including a gas pipeline adjacent to the project area, further supporting the economic outcomes delivered under the LCSS and soon to be released LHSS.

The use of battery grade lithium chemicals in cathode production has primarily been dominated in Asia where 95% of the world cathodes are currently produced. European companies such as BASF, Umicore and Johnson Matthey have announced European cathode production investments.  Furthermore, a project to create a sustainable life cycle for LIBs has seen BMW recently announce a European partnership with Swedish battery company Northvolt and the Belgian based materials and recycling group Umicore. There has been a flood of investment announcements in LIB factories across Europe.

European leaders are recognising the importance of the LIB industry and in September 2018 German Chancellor Angela Merkel called for European countries to develop its own electric car battery cell production for electric vehicles. “I think we should, within the framework of our own strategic abilities, work with other European countries on our own battery cell production,” she told a news conference in Berlin. Chinese battery maker Contemporary Amperex Technology Limited (“CATL”) recently announced the investment of €240 million in in battery cell fabrication facilities in the east-central German region of Thuringen in what Wolfgang Tiefensee, Minister of Economic Affairs, described as “the most important industrial investment in Thuringen in the last 10 years.”  BMW plans to source up to €4 billion of battery cells from CATL with approximately to €1.5 billion coming from the Germany facility, and have been sourcing raw materials for the battery cells to ensure surety of supply for the battery manufacturers.

CATL, as one of the world’s largest manufacturer of battery cells, has stated the new German investment in just its first step into Europe with Chairman Robin Zeng noting “we want to supply all the OEMs in Europe.”

San Jose Lithium Project of Strategic Importance

Infinity continues to progress the LHSS in direct response to the evolving battery chemicals market, with lithium hydroxide demand continuing to grow faster than lithium carbonate. San Jose has an advantageous process route to produce lithium hydroxide via a lithium sulphate pathway and benefits from the availability of world class infrastructure (including gas required for the roasting process) adjacent to the project area. 

The majority of recent global investments in lithium chemical plants have been in lithium hydroxide production as LIB makers move towards higher energy density and nickel-rich cathodes in battery manufacturing. With Europe recognising the requirement to move forward in EV production capabilities, it is vitally important to de-risk the European supply chain by having more domestic sources of raw materials, including lithium, available at a competitive cost. The San Jose Project maintains significant strategic importance and is ideally located to participate in the European value chain with a vertically integrated project located in Spain.

Europe’s desire to become a cornerstone in the new and green way of storing energy will require continued strategic investment and reliable partners to build the value chain. 

Summary of Activities

Drilling activities at San Jose were concluded earlier in the year to form the basis of the Feasibility Study as defined under the JV agreement between Infinity and Sacyr’s wholly owned subsidiary Valoriza Mineria. The completion of the Feasibility Study will be to the satisfaction of earn-in provisions, the project has a Mining Licence Application (“MLA”) lodged and being reviewed by the relevant regional authorities.

The Feasibility Study is to detail the ability to produce battery grade lithium carbonate on site. Test work has also demonstrated there is flexibility to adapt to produce lithium hydroxide and respond to changing market conditions. Technical work indicates that there is the potential to create a significantly smaller surface footprint impact and deliver materially comparable economic benefits and Infinity will update the market as to the next round of progress in Q4 2018.

Corporate Update: Non-Core Asset Divestment

There have been significant changes in the markets and commodity prices for Infinity’s non-core assets which have been on care and maintenance. The strategically significant potash assets in Gabon, and in particular the Banio potash project, have strong advantages in the supply of end product to the seaborn Brazil market. As detailed in Figure 7 below, the recovery in commodity prices have led to further technical work and allowed commencement of a concerted process of divestment.

The Company expects to provide further updates on non-core assets in Q4 2018.

Board and Management Changes

During the quarter Dr Eric Lilford and Mr Humphrey Hale resigned as Non-Executive Directors reducing the total number of Directors on the board to three. Mr. Adrian Byass resigned as Managing Director however remained as Executive Director to assist and support the Company as it progresses the San Jose Lithium-Tin Project.

Mr. Ryan Parkin was appointed as a Managing Director of the Company.

Prior to his appointment Mr. Parkin held the role of General Manager of Corporate Development with Infinity. Mr. Parkin has a proven business acumen which will be focused on the key objectives of Infinity; entering into offtake agreements to supply lithium and attracting strategic investment into the Company and/or the San Jose Lithium-Tin Project.

Mr. Parkin, an experienced Chartered Accountant, brings to Infinity experience in mergers and acquisitions, capital raisings and start-ups, in both the public and private corporate sectors. 

Having become a Member of Chartered Accountants Australia and New Zealand whilst at Ernst & Young in 2004, a move to corporate development and finance roles included 4 years with an ASX 200 company.  Mr. Parkin has extensive experience in working closely with public and private company boards and providing financial modelling and business valuations services with participation in transactions across a range of industry sectors including infrastructure, technology, resources, agribusiness and property, with considerable time spent post becoming a CA in Europe and Australia.

Subsequent to the end of the September quarter, Infinity appointed Vincent Ledoux-Pedailles as the Company’s Vice President of European Corporate Strategy and Business Development (ASX release 24 October 2018). This is part of the broader shift as development continues to be more European and industry focused. With his unique lithium focused background and European base, Vincent will drive Infinity and the strategically significant San Jose Lithium Project forward. Vincent will continue to work closely with London based Infinity Chairman Kevin Tomlinson as Infinity’s expanding focus on European exposure progresses.

Vincent previously led the lithium and battery materials research team at London based global data and information service group IHS Markit (“IHS”).  The IHS group employs more than 14,000 people and caters to a number of industries including automotive, energy, financial services, defence and maritime. 

Further Events Subsequent to September 2018 Quarter End Results in the Successful Listing on the Frankfurt and Stuttgart Stock Exchanges

Infinity (ISIN Number: AU0000007627) is active on both the Frankfurt Stock Exchange (FRA:3PM) and Stuttgart Stock Exchanges (STU:3PM) after successfully completing the German dual listings over the European summer period (ASX release 24 October 2018). European demand for battery grade lithium chemicals is predicted to accelerate based on the rapid expansion of cathode manufacturing and battery assembly investments in Europe, driven by the rapid adoption of EVs required to align with government EV proposals and emissions targets. 

The European investor market remains well informed and aware of the innovative developments in the lithium industry and in particular the evolution of the EV market.  The successful listing on the Frankfurt Stock Exchange (‘FWB’) and Stuttgart Stock Exchange (‘SWB’) will provide relevant platforms for European investors with a particular focus on German and Swiss interest.

Joint Venture Agreement

Tecnologia Extremena Del Litio (“TEL”) remains the special purpose vehicle that retains 100% ownership of San Jose.  Infinity currently hold 50% ownership interest in TEL with 50% held by Valoriza Mineria, the wholly owned subsidiary of major Spanish construction and engineering group Sacyr SA.

TEL has an MLA lodged with the Extremadura Regional Government for the creation of a vertically integrated lithium mining and processing operation at San Jose. As per the announcement on 11 July 2018, the JV remains committed to the current environmental process and the ongoing Feasibility Study.

Share Options

On 30 September 2018, 11,732,961 share options exercisable at $0.29 each issued 19 March 2018 lapsed.

Cash Balance

The cash balance as at 30 September 2018 was $3.3m.

Competent Persons Statement

The information in this report that relates to Exploration Targets is based on the information compiled by Mr Jeremy Peters, FAusIMM CP (Mining, Geology). Mr Peters has sufficient relevant professional experience with open pit and underground mining, exploration and development of mineral deposits similar to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of JORC Code. He has visited the project area and observed drilling, logging and sampling techniques used by Infinity in collection of data used in the preparation of this report. Mr Peters is an employee of Snowden Mining industry Consultants and consents to be named in this release and the report as it is presented.

The information in this report that relates to the December 2017 and updates in May 2018, updated Mineral Resources is based on the information compiled by Mr Patrick Adams, FAusIMM CP (Geology). Mr Adams has sufficient relevant professional experience with open pit and underground mining, exploration and development of mineral deposits similar to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of JORC Code.  Mr Adams has not visited the project area and has relied on the documented (Peters, May 2017) drilling, logging and sampling techniques used by Infinity in collection of data used in the preparation of this report. Mr Adams is a Principal Geologist and a Director of Cube Consulting Pty Ltd and consents to be named in this release and the report as it is presented.

The information in this report that relates to Exploration Results is based on the information compiled or reviewed by Mr Adrian Byass, B.Sc Hons (Geol), B.Econ, FSEG, MAIG and an employee of Infinity Lithium Corporation Limited.  Mr Byass has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the JORC Code.  Mr Byass consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

Disclaimer

Forward-looking statements are statements that are not historical facts. Words such as “expect(s)”, “feel(s)”, “believe(s)”, “will”, “may”, “anticipate(s)” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to statements regarding future production, resources or reserves and exploration results. All of such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of the Company, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include, but are not limited to: (i) those relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits and conclusions of economic evaluations, (ii) risks relating to possible variations in reserves, grade, planned mining dilution and ore loss, or recovery rates and changes in project parameters as plans continue to be refined, (iii) the potential for delays in exploration or development activities or the completion of feasibility studies, (iv) risks related to commodity price and foreign exchange rate fluctuations, (v) risks related to failure to obtain adequate financing on a timely basis and on acceptable terms or delays in obtaining governmental approvals or in the completion of development or construction activities, and (vi) other risks and uncertainties related to the Company’s prospects, properties and business strategy.  Our audience is cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof, and we do not undertake any obligation to revise and disseminate forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of or non-occurrence of any events.

About Infinity’s’ Lithium Project

Infinity has partnered with the large Spanish listed engineering and construction group’s wholly owned subsidiary  Valoriza Mineria in an earn-in JV over a large, lithium-tin project (San Jose) in central Spain. Infinity can earn up to 75% of San Jose by completing a Feasibility Study within 4 years (approximately A$6 million in spend in staged increments of 50% and 75%).

San Jose is a highly advanced lithium project which is hosted in lithium-mica that hosts a JORC resource of lithium carbonate equivalent (LCE). A feasibility study completed in 1991 defined an open pit mining operation and a process flow sheet which produced lithium carbonate through acid-leach or sulphate calcine processing. This drilling, mining and processing study work highlights the advanced status and inherent advantages enjoyed by San Jose in relation to many other hardrock deposits. The Resource estimate for San Jose is shown below in Table 1;