Announcement PDF 24 September 2024 ANNUAL REPORT 2024 Highlights: • • • • • • • Mineral Resource Estimate increased by 84% to 186 million tonnes at 712 ppm TREO. Contained TREO tonnage increased by 60% to 132,000 tonnes over the year. Significant tenure expansion at Koppamurra, bringing the total project area to 7,399 km2. Successful drilling program targeting strike extensions and resource definition upgrades. Improved development pathway with a progressive heap leach and rapid rehabilitation approach. Strategic diversification of exploration portfolio to include uranium. Engage with this announcement at the AR3 investor hub. Australian Rare Earths (ASX: AR3) is pleased to release its Annual Report for the financial year ended 30 June 2024. Managing Director, Travis Beinke comments in the Annual Report: “This has been a year of significant progress and strategic achievements for AR3. I am extremely proud of our team’s dedication and the milestones we have reached. Our advancement of the Koppamurra Project, strategic diversification of our exploration portfolio, and commitment to sustainability position us well in developing a portfolio of energy transition metals projects. Looking ahead, we remain focused on our strategic growth objectives through the expansion and diversification of our exploration portfolio and advancing our projects to ensure sustained growth and long-term value creation.” The announcement has been authorised for release by the Board of Australian Rare Earths Limited. For further information please contact: Australian Rare Earths Limited Travis Beinke Managing Director and CEO T: 1 300 646 100 Media Enquiries Jessica Fertig Tau Media E: info@taumedia.com.au About Australian Rare Earths Limited Australian Rare Earths is committed to the timely exploration and development of its 100% owned, flagship Koppamurra Project, located in the new Koppamurra rare earths Province in southeastern South Australia and western Victoria. Koppamurra is a prospective ionic clay hosted rare earth deposit, uniquely rich in all the elements required in the manufacture of rare earth permanent magnets which are essential components in electric vehicles, wind turbines and domestic appliances. In addition, AR3 is actively reviewing other potential prospective areas which may also host uranium and ionic clay hosted rare earth deposits throughout Australia. The Company is focused on executing a growth strategy that will ensure AR3 is positioned to become an independent and sustainable source of energy transition metals, playing a pivotal role in the global transition to a green economy. Annual Report 2024 2 Chairman’s Letter 4 Managing Director’s Letter 8 Operations Review Koppamurra Project 11 Uranium Portfolio 14 Queensland Projects 16 Mineral Resources Highlights 19 Koppamurra Project Mineral Resource Estimate 20 Koppamurra Exploration Target Estimate 21 Tenement Interests 25 Our Footprint 26 Directors’ Report 32 Remuneration Report (audited) 42 Auditor’s Independence Declaration 57 Statement of Profit or Loss and Other Comprehensive Income 60 Statement of Financial Position 61 Statement of Changes in Equity 62 Statement of Cash Flows 63 Notes to the Financial Statements 64 Consolidated Entity Discolsure Statement 89 Directors’ Declaration 90 Independent Auditor’s Report 92 Additional Information 96 Corporate Directory 99 3 | AR3 2024 ANNUAL AND SUSTAINABILITY REPORT 4 Dear Shareholders, I am pleased to present the 2024 Annual Report for Australian Rare Earths Limited (ASX: AR3). Despite a challenging year for the small-cap resource sector, we have made significant progress on developing options for the Koppamurra Rare Earth Project, initiated strategic diversification to our growing exploration portfolio in energy transition minerals, and maintained our focus on creating long-term value for our shareholders. So, how did we approach this challenging environment? Market conditions have been particularly challenging for junior explorers and developers in critical minerals. Rare Earth Element (REE) products prices weakened over the year, and in turn flowed through to poor investor sentiment and weak share price performances across most of the listed rare earth sector. Rare Earths AR3’s share price has not been immune to this, and I acknowledge and share your disappointment in this outcome. We focused on the factors within our control; and We made steady progress on our projects, so that when the cycle and sentiment turns – as they invariably do, though the timing is unknown the Company is well positioned to capitalise. The rare earth sector sits at the intersection of two megatrends of our day: Geopolitics, and Decarbonisation. Rare Earth Permanent Magnets (REPM) are crucial components in wind turbines and electric vehicle motors. They’re also a key input into a range of robotic, medical and defence applications. Currently, China dominates both REPMs production and upstream REE ore mining. Reducing this dependence has become a key objective for policymakers worldwide. That’s why the governments of our friends and allies in the US, European Union (EU), Japan and Korea are implementing programs to support the development of diversified, reliable REE supply chains, encompassing both upstream mining and downstream processing into REPMs. And we mean to be a part of it. The Koppamurra deposit contains all four of the key rare earth minerals – the ‘light’ Neodymium and Praseodymium, and the ‘heavy’ Dysprosium and Terbium. Heavy rare earths are particularly strategic, as China currently supplies almost all global demand. This year, AR3 has focused on identifying capitalefficient, cost-effective and environmentally responsible pathways to bring Koppamurra into production, subject to permitting and favourable market conditions. I’m pleased to report we have made good progress, as outlined by our Managing Director, Travis Beinke, in his letter that follows. 5 | AR3 2024 ANNUAL REPORT As mentioned, government policy initiatives in Australia and abroad are supporting the development of new REE supplies. These include: The expansion of the Critical Minerals Facility on the National Interest Account of Export Finance Australia to $4bn, announced by the Australian Government in October 2023; The opening of grant applications for a $40 million international partnerships program to build end- to-end critical minerals supply chains, announced by the Australian Government in February 2024; The launch of the Mineral Security Partnership Forum - a collaboration of the US, EU, Australia and 11 other countries to work together to develop individual projects and promote a dialogue on policies that contribute to diversification and resilience of supply chains – in April 2024; The announcement of the Critical Minerals Production Tax Incentive in the May 2024 Federal Budget; and The signing of a Memorandum of Understanding between the EU and Australia to establish a partnership to build critical and strategic minerals supply chains, in May 2024. In an age of heightened geopolitical rivalry, ‘industry policy is back’ in a way we haven’t seen since the 1960s and 70s, particularly for minerals like rare earths that are vital to our future energy, transport and defence systems. Positioning the Company to capitalise on this trend has been a strategic focus this year. As an ionic-clay hosted deposit, with the potential for production via a progressive heap-leach approach and rapid rehabilitation, Koppamurra could benefit from a relatively short construction period and lower technical risk during ramp-up. This positions it well to be in the vanguard of the next wave of rare earth producers entering steady-state production, subject to successful permitting and supportive market conditions. We are working hard to ensure government policy and decision makers are aware of Koppamurra’s potential speed-to-market edge in a volatile world. Strategic addition of uranium As we advance the development pathway at Koppamurra and pursue early-stage rare earth exploration in Queensland, we have leveraged our management team’s expertise to diversify our portfolio by including uranium exploration projects. The acquisition of South Australian tenements prospective for sedimentary-hosted uranium deposits via in-situ recovery (ISR) mining methods provides the Company with new opportunities for growth and value creation. South Australia currently hosts two operating ISR uranium mines, and other explorers are active in the regions where AR3 has secured ground. The target sequence rocks in our tenements are expected to be amenable to cost-effective drill-testing. Our team looks forward to getting on the ground and commencing exploration this year. Conclusion Despite a challenging year for the small-cap mining sector, the AR3 team has remained focused on controlling what we can, managing costs, advancing our flagship project, and adding other value-creation opportunities to the portfolio. I extend my sincere thanks to the AR3 management team for their hard work, creativity and value-added insights throughout the year. And I am particularly grateful to you, our shareholders, for your continued support, and look forward to the coming year as one of strategic progress on multiple fronts. Yours sincerely, Angus Barker Chairman 24 September 2024 6 7 | AR3 2024 ANNUAL REPORT Dear Shareholders, I am pleased to provide you with a summary of our strategic achievements and project progress over the past year, complementing the Chairman’s market overview. Strategic Progress at Koppamurra Our flagship Koppamurra Rare Earths Project continues to demonstrate its potential. Over the past year, we significantly expanded the JORC Mineral Resource Estimate (MRE) for Koppamurra by 84% to 186Mt of total MRE with an average Total Rare Earth Oxide (TREO) grade of 712ppm. We also continued to demonstrate significant resource upside potential with an Exploration Target range of 340 million to 3.1 billion tonnes. With an additional 8,750 metres drilled during the year, contributing to more than 65,000 meters drilled since 2021, we have gained further confidence in the regional extent of the resource potential. The 2024 drilling program focused on extending the known mineralisation area that had not previously been drill tested and resource definition upgrades. Pleasingly the drilling defined new shallow high-grade and high magnet rare earth mineralisation outside the existing resource. As magnet rare earth content is one of the key economic drivers of rare earth projects, prioritising higher value mineralisation zones will be an important focus of our future development plans to maximise the Project’s value. In addition to our exploration successes, we have made significant progress in metallurgical testwork. The identification of a high-grade progressive heap leach and rapid rehabilitation pathway strongly aligns with our commitment to sustainable development. This innovative approach provides advantages such as efficient extraction of rare earths while potentially lowering initial capital and operating costs and delivering improvements to the project’s environmental credentials, including reduced water and lower power consumption. 8 Exploration Portfolio Diversification Conclusion In a strategic move to diversify our portfolio and strengthen our position in the clean energy transition metals market, we secured an option to the rights for the Overland Uranium Project, which has now been exercised. This has been a year of significant progress and strategic achievements for AR3. I am extremely proud of our team’s dedication and the milestones we have reached. This project not only broadens our exploration portfolio but also provides additional opportunities for growth and value creation. We are focusing our uranium efforts on projects with potential for ISR amendable uranium deposits, positioning us well to leverage our team’s extensive expertise in uranium exploration. Subsequent to the year-end, we further expanded our uranium exploration footprint by applying for two new exploration licenses: Triggs Bore and Hamilton Creek in South Australia. These prospects exhibit promising geological indicators for uranium mineralisation. In North Queensland we applied for additional exploration licences in the Kennedy Province, a highly prospective new rare earth province. The additional tenure complements our existing Massie Creek and Dalrymple projects. Our advancement of the Koppamurra Project, strategic diversification of our exploration portfolio, and commitment to sustainability position us well in developing a portfolio of energy transition metals projects. Thank you for your continued support and confidence in our vision. Yours sincerely, Travis Beinke Managing Director 24 September 2024 Maintaining Capital Discipline Our strong financial position has enabled us to pursue new opportunities aggressively. We have maintained a robust cash reserve, which supports our capacity to explore and develop new projects while continuing to advance our Koppamurra Project. Investor Engagement and Future Outlook Engaging effectively with our shareholders is crucial, and the launch of our Interactive Investor Hub platform this year represents a significant step forward in this regard. This platform provides our shareholders with timely updates and insights into our ongoing activities and strategic initiatives. Looking ahead, we remain focused on our strategic growth objectives through the expansion and diversification of our exploration portfolio and advancing our projects to ensure sustained growth and long-term value creation. 9 | AR3 2024 ANNUAL REPORT 10 Koppamurra Project Project Overview The Koppamurra Project, located in South-Eastern South Australia and Western Victoria, is a significant ionic clay-hosted rare earth deposit. The project boasts a substantial Mineral Resource Estimate (MRE) of 186 million tonnes at 712 ppm TREO, representing a substantial 84% increase from the previous year. This translates to a contained TREO tonnage of 132,000 tonnes, a 60% increase yearon-year. Exploration and Resource Growth During the year, exploration efforts focused on expanding and upgrading the Koppamurra resource. A comprehensive drilling program, encompassing 8,750 meters across 694 holes, targeted strike extensions and resource definition upgrades. These efforts yielded encouraging results, defining new shallow high-grade TREO intercepts and high Magnet Rare Earth Oxide (MREO). Infill drilling assay results, received in the March 2024 quarter, confirmed shallow, high-grade mineralisation within the existing MRE. Additionally, extensional drilling in a previously unexplored area, located 25km north of the existing Koppamurra Resource, successfully intersected shallow, high-grade mineralisation. Land Tenure Expansion During the year, Australian Rare Earths secured significant tenure extensions at Koppamurra, expanding its landholding to 7,399 km2. This strategic move strengthens the Company’s position and paves the way for sustained exploration and potential future development. An initial, low-impact roadside hand auger program across two new southern tenements identified shallow, clay-hosted REE mineralisation extending 60 kilometres south of the Koppamurra MRE area. The program will help guide the next exploration stage in the southern region and supports the potential for widespread REE mineralisation. FY 24 Highlights Mineral Resource Estimate increased by 84% to 186 million tonnes at 712 ppm TREO. Contained TREO tonnage increased by 60% to 132,000 tonnes over the year. Significant tenure expansion at Koppamurra, bringing the total project area to 7,399 km2. Successful drilling program targeting strike extensions and resource definition upgrades. Improved development pathway with a progressive heap leach and rapid rehabilitation approach. Looking Ahead The Koppamurra Project represents a significant opportunity for Australian Rare Earths, with substantial resource growth potential and an improved development pathway. The Company remains focused on advancing the project towards development and production, positioning itself as a key supplier of critical rare earth elements to the growing electric vehicle, renewable energy, and robotics markets. 11 | AR3 2024 ANNUAL REPORT SA 0 12 25 50km VIC Operations Review Koppamurra Project Improved Development Pathway In April 2024, Australian Rare Earths announced an enhanced development pathway, featuring a highgrade progressive heap leach and rapid rehabilitation approach. The high-grade ore zones, and the application of temporary heap leaching production pathways, will allow for scalable, efficient production of rare earths with staged satellite developments enhancing the favourable environmental outcomes from a development of this type. A conceptual project process flowsheet has been developed (figure below). Design features for developing the Koppamurra Project via a progressive heap leach pathway (as compared to a slurry leach), include: Design Features: High-grade satellite mine sites with temporary heap pads located at the edge of the satellite mine void; Water treatment equipment will be located near the temporary heap pads to facilitate recycling and reuse of both water and reagents; and The extracted top soil and overburden material will be temporarily set aside ready to be placed back in the mine void after rare earths have been harvested from the clay and the clay has been washed allowing for rapid and progressive rehabilitation of the land. Design advantages include: Potential for a significantly lower capital cost and reduced operating cost; Enables improved environmentally sustainable characteristics with; • Very low water consumption • Reduced power consumption • Improved materials handling characteristics enabling environmentally sustainable, rapid, progressive rehabilitation techniques Testwork also indicates lower gangue/impurity profile with higher rare earth in solution characteristics through column leach resulting in lower capital and operating cost; and Opportunity to easily expand and scale up production over time across the multi- generational province. Koppamurra Conceptual Project Flow Sheet A simple process with low technical risks which is environmentally sustainable. 13 | AR3 2024 ANNUAL REPORT Operations Review Uranium Portfolio Strategic Extension of Clean Energy Transition Metals Portfolio – Uranium In line with the Company’s strategic focus on expanding its clean energy transition metals portfolio, Australian Rare Earths added three highly prospective uranium projects, broadening its strategic portfolio. Overland Uranium Project AR3 broadened its portfolio by entering into an Option Agreement to acquire 100% ownership of Valrico Resources Pty Ltd, the holder of the Overland Uranium Project (ASX, 3 April 2024) with the option exercised in September 2024. This project includes Exploration Licence Applications (ELA) 2024/14 and 2024/15 (subsequently granted as El7001 and El7003), covering a combined area of 1,981 km2 within the Murray Basin, South Australia, a potential new uranium province. AR3 subsequently lodged an additional ELA (2024/22), (subsequently granted as El7001 and El7003) which will expand the total project area to approximately 3,000 km2 once granted. 14 Multiple high-potential exploration targets have been identified within the Overland Project, with a focus on paleochannel sediments within the Renmark Group, which are considered geologically analogous to those in the Eyre Formation, which hosts Boss Energy's uranium operations (ASX, 7 May 2024). Triggs Bore Prospect This 250 km2 prospect features historical drilling that intersected uranium mineralisation within the Eyre Formation sediments, the same host as the Four Mile and Honeymoon uranium deposits (ASX, 16 July 2024). Hamilton Creek Prospect Spanning 200 km2 in the Callabonna Sub-basin, this prospect will focus on an anomalous downhole gamma response detected in previous drilling, suggesting the presence of uranium mineralisation (ASX, 23 July 2024). AR3’s strategic expansion into uranium exploration underpins its commitment to supporting the clean energy transition, positioning the Company in the sustainable development of critical energy resources. Overland Uranium Project Area 15 | AR3 2024 ANNUAL REPORT Operations Review Queensland Projects Queensland Project Overview Key Activities and Achievements During the year, AR3 actively expanded its presence in two areas, prospective for ionic clay-hosted rare earths province in North Queensland. The Company significantly increased its landholding through the application of exploration tenure, in the Kennedy Province, adding 800km2 to the total project area. Tenure Expansion AR3 is utilising the substantial experience and knowledge it has developed through exploration and evaluation of the Koppamurra rare earths project in South Australia to create value in prospective Queensland acreage. energy transition, positioning the Company in the sustainable development of critical energy resources. Exploration Progress 16 AR3 has expanded exploration permits in the Kennedy Province, encompassing the Forty Mile Scrub, Sandy Tate, and Oaky Valley prospects. This strategic move complements the Company’s existing tenements at Massie Creek and Dalrymple. A maiden field program at the Dalrymple Project was completed, with surface and shallow auger samples collected and assayed. Dalrymple Uranium Project Area Kennedy Province Cairns Oaky Valley EPM28902 N Mareeba Dimbulah Gordonvale Chillagoe Atherton Torwood Massie Creek EPM27952 Millaa Millaa Sandy Tate EPM28901 Innisfail Ravenshoe Mount Garnet AR3 granted tenement AR3 tenement Cairns AR3 application tenement Highway and major roads Bowen Highway and major roads Tully Towns QLD Towns Kennedy Province Kennedy Province Carboniferous-Permian Intrusive Rock Mount Surprise 40 km Forty Mile Scrub EPM28872 Carboniferous Intrusive Rock Permian Volcanic Rock Carboniferous Volcanic Rock Bulgonunna Volcanic Group 40 km 17 | AR3 2024 ANNUAL REPORT 18 84% increase in Resource confirms Koppamurra as a world-scale ionic clay-hosted rare earths province. Highlights Mineral Resource estimate increases 84% to 186 million tonnes at 712 ppm TREO; Contained TREO 1 tonnage up 60% to 132,000 tonnes; Koppamurra is now one of the largest ionic clay-hosted rare earth provinces in Australia with extensive scope for more growth, positioning it as a multi-generational supplier to the electric vehicle and renewable energy markets; Outstanding scope for ongoing Resource growth with current Mineral Resource covering only ~2% of total Koppamurra tenure; Mineralisation remains open to the north and south; A ~30,000 m drilling program began in October 2023 to further expand the Mineral Resource; and Continuing to advance metallurgical testwork and other development studies in parallel. Interpretation of the geological samples and assays using relevant industry standard methods has resulted in an increase of 84% to 186 Mt of total Mineral Resource estimate with an average TREO grade of 712 ppm. This includes 99 Mt in the Measured and Indicated categories. The interpretation also resulted in a significant increase to the Exploration Target which now ranges from 340 Mt to 3.1 Bt, at average grades of 510 ppm to 780 ppm TREO and is more than double the upper range tonnage of the previous Exploration Target. The potential quantity and grade of the Exploration Target is conceptual in nature, as there has been insufficient exploration undertaken to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource. 1 Total Rare Earth Oxide (TREO) 19 | AR3 2024 ANNUAL REPORT Mineral Resources Mineral Resource Estimate Table 1 Koppamurra Mineral Resource Estimate – September 2023 JORC Magnet Rare Earths Tonnes TREO Praseodymium Neodymium Terbium Dysprosium Category Mt ppm ppm % TREO ppm % TREO ppm % TREO ppm % TREO Measured 0.8 747 33 4.4 122 16.4 3.3 0.4 19 2.5 Indicated 98 716 32 4.4 122 17.0 3.3 0.5 18 2.6 Inferred 88 709 32 4.5 121 17.0 3.2 0.4 18 2.5 Total 186 712 32 4.5 121 17.0 3.2 0.5 18 2.5 Table 1 – Koppamurra MRE September 2023 - Rounding may cause differences in the last significant figure. The updated Mineral Resource incorporates results from the drilling program conducted between February and June 2023. The overall program added 16,394m (1,317 holes) to the existing 39,585m (3,966 holes) drilled for the previous Mineral Resource estimate announced in April 2023. Interpretation of geological samples and chemical assay data using relevant industry standard methods resulted in a significant increase in overall resource tonnes, contained metal, and continuity of mineralisation. The updated resource continues to expand with an increase of 56% to Indicated and 132% increase to Inferred resource inventories. Drill spacings to satisfy the Indicated and Measured JORC Resource Categories are at 120 m and 60 m respectively. The drilling which informs the Exploration Target is at line spacings of at least 1 km, and sometimes 2 km apart. Drill hole spacings along the lines are typically 100m to 400 m apart. The updated September 2023 Mineral Resource estimate is set out in Table 1 above. This Resource has been reported using a cut-off grade of 325 ppm TREO-CeO2. 20 200 150 Million Tonnes Interpretation of the geological samples and assays using relevant industry standard methods has resulted in an increase of 84% to 186 Mt of total Mineral Resource estimate with an average TREO grade of 712 ppm. This includes 99 Mt in the Measured and Indicated categories. 100 50 0 Apr’ 21 Jun’ 22 Mar’ 23 Figure 2 Koppamurra Mineral Resource estimate A summary of Mineral Resource estimates over time, demonstrating the progressive increase in resource Sep’ 23 Exploration Target Estimate The Exploration Target for the Koppamurra project increased significantly, informed by an extensive roadverge drilling program focused on testing the eastern extent of mineralisation within AR3’s Victorian tenure EL’s 7254 and 7719. The regional road verge drilling combined with additional drilling proximal to the Koppamurra resource has resulted in a revised global Exploration Target of 340 Mt @ 780 ppm TREO to 3.1 Bt @ 510 ppm TREO. Road verge drilling has continued to be highly effective in quickly evaluating and defining large Exploration Targets. A similar road verge program was completed in Q4 2023 within AR3’s South Australian EL’s 6509 and 6613 to test the area north of the main resource and south of the currently defined Exploration Target where very limited drilling has been completed. The updated September 2023 Exploration Target estimate is set out in Table 2 obelow. This Exploration Target has been reported using a cut-off grade range of 225 ppm and 425 ppm TREO-CeO2. Table 2 Koppamurra Exploration Target – September 2023 Exploration Target Total Magnet Rare Earths Tonnes TREO Praseodymium Neodymium Terbium Dysprosium Mt ppm ppm % TREO ppm % TREO ppm % TREO ppm % TREO 340-3,100 510 - 780 20 - 30 3.9-3.8 90 - 140 2.4 - 3.6 0.5-0.5 13 - 20 2.6-2.6 18-18 21 | AR3 2024 ANNUAL REPORT Mineral Resources Figure 3 Wider Koppamurra Project Area. 22 Geology and Geological Interpretation The ionic clay hosted REE mineralisation at Koppamurra is hosted by clayey sediments interpreted to have been deposited onto a limestone base (Gambier Limestone) and accumulated in an interdunal, lagoonal or estuarine environment which has been extensively mapped east of the Kanawinka fault in south-east SA. A dedicated post-doctoral research program investigating the source of the REE at Koppamurra is ongoing, with no definitive source of the REE confirmed to date although preliminary results of this study have ruled out the alkali volcanics in south-eastern Australia which was originally considered as a potential source. Mineralogical test work conducted on clay samples from the project area established that the dominant clay minerals are smectite and kaolin, and that the few REErich minerals detected during the scanning electron microscope (SEM) investigation were not considered inconsistent with the suggestion that a significant proportion of REE are distributed in the material as adsorbed elements on clay and iron oxide surfaces. Sampling and Sub-Sampling Techniques One metre aircore sample intervals were homogenised within the cyclone and the rotary splitter was set to an approximate 20% split producing around 1.5kg sample for each metre interval. The 1.5kg sample was collected in a pre-numbered calico bag and the 80% portion was collected in plastic UV stabilised bags labelled with hole identity and interval. The 1.5kg sample collected in the calico bag was logged by the geologist onsite. The logged samples were placed in polyweave bags and sent to Naracoorte base at the end of each day. The polyweave bags were then placed on pallets and dispatched to the assay laboratory in Bulka Bags. Drilling Techniques Reverse Circulation (RC) aircore drilling methods were used obtain samples from the drilling programmes. The RC aircore method uses hollow rods containing an inner tube which sits inside the hollow outer rod barrel. The drill cuttings are removed by injection of compressed air into the hole via the annular area between the inner tube and the drill rod. The cuttings are then blown back to surface up the inner tube where they pass through the sample separating system (cyclone, with a rotary splitter) and are collected. Aircore drill rods used were 3m lon