DIRECT NICKEL LIMITED ACN 003 087 689

LEVEL TEN 15-17 YOUNG STREET SYDNEY NSW 2000

AUSTRALIA

T +61 (0)2 8014 7780 F +61 (0)2 8324 6366

DIRECTNICKEL.COM

Nickel Production Demonstration Program

Summary Report for Direct Nickel Shareholders

DNi Test Plant, Australian Minerals Research Centre, Waterford, WA

March 2014

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….. The step change the nickel industry needs …..

o “Elegant” process chemistry where reagents are regenerated and recycled within the Process

o Ability to treat limonite and saprolite ores and blends without loss in nickel recovery

o Low process intensity not requiring high temperatures or pressures

o “Off-the-shelf” equipment with a well-known design and scale up methodology

o No exotic materials of construction

o Low volume, benign tailings that can be disposed as landfill Valuable by-products of MgO and hematite

DNi Process

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EXECUTIVE SUMMARY

Successful Nickel Production Demonstration Program

Direct Nickel Limited’s (DNi) completion of its successful Nickel Production Demonstration

Program is a major step in the Company’s strategy to become a leading global nickel producer.

During 2012-2013, DNi built and operated a one tonne per day Test Plant at the CSIRO’s

Australian Minerals Research Centre in Waterford, Western Australia. The successful outcomes

of the 2013 Program are contained in this summary report.

Significantly, the completion of the program positions DNi for its first Commercial Plant and

supports its aims to become a leading global nickel producer, using the proprietary DNi Process

to access and process nickel laterite resources.

The Company’s primary focus is South East Asia, where there are abundant, known, high-grade

resources, and where Direct Nickel has partnered with a diversified mining company and

Indonesia’s largest nickel miner, PT ANTAM (Persero) Tbk (IDX: ANTM; ASX: ATM; “ANTAM”) to

develop a DNi Process Plant.

Coinciding with the successful results from the Nickel Production Demonstration Program at the

DNi Test Plant, a Feasibility Study has commenced on a DNi Process Plant at ANTAM’s Buli

operation in Halmahera, Indonesia, adjacent to Antam’s new ferronickel smelter which is under

construction.

The plant will be the first commercial processing plant to utilise the revolutionary processing

technology developed by DNi and is likely to produce 10-20,000 tonnes per annum of nickel in

concentrate.

Highlights of the 2013 Nickel Production Demonstration Program

o The DNi Process has proved to be simple and safe to operate on a continuous basis o High standards of occupational health, safety and environment demonstrated o Recoveries for pay metals Ni, Co, Fe and Mg match laboratory results with +90% for Ni o +95% recycling of nitric acid achieved o A working, accurate process model has been developed and verified o Commercially available 304 stainless steel remains the construction material of choice o Water and energy balances have been confirmed o A simplified flowsheet has resulted in reduced process plant capital costs o Process operating costs of US$2.00 to $3.00/lb (before credits) have been confirmed o MHP grades of 32%Ni were achieved, with scope to further improve identified

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De-risking the scale-up to the first Commercial Plant

Through the successful Nickel Production Demonstration Program and by testing the DNi

Process with a highly experienced team at pilot scale for a full year, Direct Nickel has established

the fundamentals to manage the risks involved with the commercialisation of its new

technology as it scales-up for a Commercial Plant.

The commitment of one of the region’s leading nickel producers to support the new technology,

through its partnership with Direct Nickel and plans to review the feasibility of the first

Commercial Plant, further underlines the success of the demonstration program and the

derisking of the potential to scale-up the DNi Process for commercial application.

TEST PLANT VALIDATION

The DNi Process

The DNi Process is an atmospheric hydrometallurgical processing route able to treat all types of

nickel laterite ores to produce a number of final saleable products.

The key to the Process is the use of nitric acid as the leaching agent and the subsequent use of a

patented recovery and recycling process returning +95% of the nitric acid for re-use.

Figure 1: Simplified Process Flowsheet

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Test Plant Operations

The Test Plant included all the key process unit operations in the flow sheet and combined them

such that continuous operation was achieved for long periods of time allowing the collection of

important operating data.

The Test Plant operated throughout 2013 and completed nineteen campaigns. The feed material

was supplied by PT ANTAM from its Tanjung Buli operations (Buli), Halmahera Island.

Table 1: Variability of Plant Feed Compositions

Element % Design

Basis

Buli

Limonite

Buli

Saprolite

Buli 75%S

and 25%L

Buli 50:50

Ni 1.65 1.24 1.78 1.54 1.55

Co 0.04 0.10 0.05 0.06 0.08

Al 2.51 3.14 1.95 2.19 2.67

Fe 13.3 44.4 15.8 22.3 30.7

Mg 12.6 1.3 12.8 10.0 6.9

Cr 0.74 2.00 0.76 0.95 1.44

Si 12.4 3.28 15.9 12.5 9.4

Mn 0.19 0.65 0.37 0.45 0.53

Process Performance

During the operation of the DNi Test Plant, process data was collected to compare with earlier

bench scale results and to assist in the preparation of a process model.

The objective of process modelling was to establish a baseline model, grounded on chemical and

thermodynamic fundamentals, to provide verification of the Test Plant Process and its mass and

energy balances. Specific objectives of the modelling process included the following:

o Simulate full closed loop process o Verify mass balances of key components o Generate water balance o Understand energy requirements o Identify information gaps o Provide a baseline for commercial scale-up o Provide a baseline for optimisation and sensitivity testing

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Stainless steel 304L and 316 are the main materials of construction used in the DNi Test Plant.

Other materials used in the plant for piping and connections are Teflon and HDPE.

The leach tanks and iron hydrolysis vapour space were the only two areas of the plant that

raised any questions about the suitability of 304 stainless steel as the chosen material of

construction. The coupon testing for corrosion conducted during the program provided simple

and cost effective answers to these two areas and appropriate materials will be further

evaluated in 2014.

Occupational Health and Safety (OHS)

Key OHS risks identified for the Test Plant operations were:

o Use of Nitric acid at strengths from 5% to 68% o Use of heat in several sections of the Process o The presence of molten salts and steam at temperatures from 160°C to 220°C o Oxides of nitrogen in gaseous forms, with temperatures up to 350-400°C o Potential for dust from ore and products o Vehicles (in the case of the Test Plant specifically fork lifts).

From an OHS perspective the Test Plant program demonstrated beyond doubt that the Process

can be operated in a safe and healthy manner. Similar risks are satisfactorily managed

elsewhere in the processing of nickel laterites and other base metal ores and concentrates.

Environment

The unique feature of the Process is that the leach reagent, nitric acid, is recovered and recycled

from the waste streams. The efficient capture of nitrates from solutions and gases is an

economic requirement of the Process, and this fact assists in reducing environmental impacts.

Furthermore, in addition to the main MHP product the DNi Process can make saleable by-

products. These include an iron rich product (60% Fe) and magnesia (+95% MgO). This feature

results in the solids waste being limited to an acid insoluble residue and an aluminium product.

Together these two solid waste streams will represent less than 50% of the original mass of feed

material to the Process. This is a small amount compared to other hydrometallurgical processes

for nickel laterites where the quantity of solid waste is well in excess of the initial mass of feed.

The waste solids will be inert in the environment.

Soluble nitrates are not welcome in the environment. The safe level of nitrates in drinking water

is 10ppm and it is anticipated this will be the effluent standard required for any solution

discharges. Whilst the process water balance indicates a zero discharge operation, the issue of

nitrate disposal has been addressed in the following manner:

Prior to discharge, effluent will be treated with alkaline Al rich solution, which will produce inert

hydrotalcite that will fix nitrate anions. The effluent will be further polished by biological de-

nitrification. Both processes are used commercially.

Nitrogen oxide (NOX) gaseous discharges are very low in volume due to the +99% capture of

NOx into useable nitric acid. The gas assays <100ppm NOx and meets regulatory requirements.

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DNi Products

The DNi Process will produce an intermediate nickel product, either a mixed hydroxide product

(MHP) or a mixed oxide product (MOP).

Table 2 below shows product quality achieved during the last Campaign compared to the

requirements of conventional refineries.

DNi products will target a market in the conventional refinery sector or amongst stainless steel

producers. Since MHP or MOP produced from a DNi plant will be the first of its kind considerable

marketing effort will be required to achieve acceptability amongst conventional refiners and the

material may need to be placed with more than one customer so that it can be blended with

their other raw materials.

Acceptance within the stainless steel sector may be easier as the Al and Mg that concerns

refiners is not an issue to them. It is relatively straightforward to convert MHP to metal and test

work to do so is in progress.

Table 2: DNi Nickel Products

MHP Test Plant

MOP Bench Test Refiners Target

%Ni 32.2 52.5 +40

%Co 1.2 1.9 1 - 2

%Fe 0.5 0.7 0.2

%Mg 3.7 6.0 <1.5

%Al 4.3 6.8 0.2

%Mn 0.7 1.2 <1.0

%Zn 0.5 0.8 0.2

%NO3 15.2 none <0.01

% LOI 19.5 0.2 n/a

The unique features of DNi’s co-products, in terms of purity and lack of deleterious elements,

have yet to be fully developed for marketing.

In addition to a nickel/cobalt product one of the unique features of the DNi Process is that it also

produces saleable Fe and MgO products. The specifications of these products are shown in Table

3 below.

Fine, chemically reactive MgO is sought after in the chemical and water treatment industries

and lower qualities are used in agriculture.

In general Fe products around 60% are readily marketable.

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Table 3: DNi MgO and Fe Products

Element Units MgO

Product

Fe

Product

Mg % 55.8 0.02

MgO % 93.0 nr

Ca % 1.05 <0.01

Fe % 0.09 59.8

Fe2O3 % nr 85.4

Ni % 0.13 0.17

Mn % 0.29 0.68

Cr % 0.02 0.71

Al % 0.02 1.3

Si ppm 100 400

Cu+Co+Zn ppm <10 <200

N % 0.65 0.60

NO3 % 2.9 2.5

LOI % nr 6.3

Full Scale Considerations

The DNi Process can be constructed and operated with commercially available off-the-shelf

equipment using well-proven technology, thus significantly reducing scale up risks.

The Test Plant operation has demonstrated the operability of the DNi Process as an integrated

circuit. It has also confirmed the performance of a range of process control schemes across the

plant, which can be further refined and built upon in a full-scale operation.

Overall, the DNi Process is considered to be significantly less arduous from an operability and

maintenance viewpoint compared to a fully integrated High Pressure Acid Leaching (HPAL) Ni

plant, Nickel Pig Iron or Ferro-Nickel smelter.

The Nickel Production Demonstration Program in 2013 has generated a large amount of

valuable information and has confirmed the expectations of the DNi Process, including

highlighting areas that can and need to be improved. Key amongst these relate to comminution,

MHP quality, focus on marketing Ni, Fe and MgO products, energy management and vendor

cooperation.

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These activities have been built into the 2014 program, when it is expected to run the Test Plant

for a further three months on more representative samples of Buli material from Indonesia to

provide data for a feasibility study.

The 2014 Test Plant program will be supported by a continuing laboratory and research program

aimed at further enhancements to the Process economics.

Low-cost Implications

Whilst the key purpose of the Test Plant was to demonstrate the efficacy of the DNi Process, the

results can be used to consider if there has been any new information, which may significantly

impact on capital and operating costs.

The base case for cost comparison is the 2009 PFS2 study by Aker Solutions for an Australian

process plant treating 3Mt per annum of laterite ore at 1.22%Ni, 14.3%Fe and 8.6%Mg,

producing 34,182 tonnes of nickel as a mixed oxide product.

The impact of changes made to the flow sheet since PFS2 represent around a 10% reduction in

process plant capital cost on a like for like basis still using 2009 costs.

The key components of the PFS2 operating costs were natural gas (53%), consumables (reagents

and maintenance – 24%), labour (9%), electric power (8%) and miscellaneous (6%).

For 100% saprolite Buli material the Commercial process model estimates Process Energy at 640

GJ/t Ni produced, compared to 572 GJ/tNi in PFS2 The Total Gross Energy required for 100%

saprolite is 864 GJ/t Ni with the additional 224 GJ/t Ni related to the operation of a coal fired

power and steam generation plant, which was not included as part of PFS2.

The Commercial Process model also demonstrates Gross Energy demands of 1065 GJ/t Ni

produced for the 50:50 Blend. At a coal cost of US$70/t this represents a cost reduction from

US$1.70 to 1.40/ lb Ni produced, when changing feed type from 50% saprolite and 50% limonite

blend to 100% saprolite. This compares with an energy cost figure quoted in PFS2 of $0.98/lb Ni

produced.

In summary, with the changes predicted in labour and energy costs a comparative figure to the

PFS2 total process plant operating cost of US$1.84/lb Ni produced before bi-product credits, will

increase to a range of $2.41 to $2.71/lb Ni for the anticipated range of Buli ores.

An Indonesian setting for labour and further optimisation of energy demand can be expected to

trim this cost to some degree.

CONSIDERATIONS FOR THE FIRST COMMERCIAL PLANT

Commercialisation

The DNi Process provides the step change the nickel industry needs to overcome high capital

and operating costs in a low commodity price environment. It delivers:

o “Elegant” process chemistry where reagents are regenerated and recycled within the Process

o Ability to treat limonite and saprolite ores and blends without loss in nickel recovery

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o Low process intensity not requiring high temperatures or pressures o “Off-the-shelf” equipment with a well-known design and scale up methodology o No exotic materials of construction o Low volume, benign tailings that can be disposed as landfill o Valuable by-products of MgO and hematite

These features above all combine to offer attractive operating and capital costs and simple

operability benefits.

DNi, by operating its new Process at pilot scale for a full year with a highly experienced team,

has put in place the fundamentals to manage the inherent risks involved with commercialisation

of a novel process technology. DNi has enhanced the Process through the Test Plant program

and is on track to successful commercialisation by focussing on the following.

o People – maintaining continuity of knowledge o Novelty – De-Risking Process Chemistry o Managing scale up risk through data collection and integrating full-scale design into the

Test Plant program

Commercialising a new approach

Over the past seven years DNi has developed and implemented a plan that addresses the risks

associated with commercialising a new approach to treating nickel laterites.

By testing the DNi Process at pilot scale during the Nickel Production Demonstration Program

for a full year, Direct Nickel has developed and tested the fundamental steps and considerations

required to manage the inherent risks involved with commercialisation of a new technology.

In summary, there are two major aspects of risk; first the process chemistry risk and second the

equipment scale-up risk.

The process chemistry risk has been addressed in the laboratory and in the Test Plant. Take-outs

from the Nickel Production Demonstration Program have shown that this risk can be managed

whilst operating at a relatively small scale, as long as the pilot plant is treating the target ore, in

a fully integrated circuit that contains all steps of the process, and is running in steady state for a

sufficiently long time to obtain all process design data.

For the second area of risk, DNi has approached the equipment scale up risk with specific focus

on (i) people, (ii) process novelty and (iii) equipment scale-up.

(i) People – maintaining continuity of knowledge

The core technical team, which includes strong representation from DNi and CSIRO, has been consistent from process inception to date. This team has many years of experience in designing, constructing and operating mineral and hydrometallurgical plants.

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(ii) To Address Process Novelty DNi has

A corporate culture that supports thorough scientific confirmation of all process claims and design parameters;

Completed a series of disciplined and well-designed development phases, with appropriate stage gate and risk review at the completion of each phase;

Run a one-year, well-funded, Test Plant programme to thoroughly test the Process on a continuous basis on a variety of ore samples and blends;

Processed representative material from the Buli resource, where the first commercial plant may well be based and

Developed and verified a Process simulation model during the Test Plant program.

(iii) Equipment Scale-Up

No first-of-a-kind equipment will be used in a commercial plant.

Implementation of high quality data collection and interpretation by experienced process engineers.

The process is simple and elegant with the bulk of the equipment simple stirred tanks, thickeners and filters. Equipment vendors, who are skilled at scaling up equipment from small-scale test work results, have been engaged.

All aspects of the design criteria have been thoroughly researched and are supported by hard data from laboratory or Test Plant.

The thermal decomposition unit supplier, Therma-Flite, has been involved in the decomposition process with DNi since 2010, including the 2010 Acid Recycling Pilot work in Charlotte NC, USA, and the recent Test Plant program in Perth.

Using 304 stainless steel as the major material of construction has been confirmed.

The viability of the nitric acid recovery system has been reconfirmed.

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Next steps toward commercial production

Direct Nickel’s strategy to become a leading global nickel producer has progressed materially as

a result of the successful Nickel Production Demonstration Program completed during 2013 at

the DNi Test Plant at the CSIRO’s Australian Minerals Research Centre in Waterford, Western

Australia.

Importantly, and as clear confirmation of interest as confidence in the results and the take-outs

from this program, a Feasibility Study has commenced on a DNi Process Plant with Direct

Nickel’s partner and Indonesia’s largest nickel miner, PT ANTAM (Persero) Tbk (IDX: ANTM; ASX:

ATM; “ANTAM”).

The proposed plant is being considered for ANTAM’s Buli operation in Halmahera, Indonesia, to

be situated next to Antam’s ferronickel smelter. The DNi plant is likely to produce 10-20,000

tonnes per annum of nickel in concentrate and will be the first commercial processing plant to

utilise the revolutionary processing technology developed by DNi as tested in the Nickel

Production Demonstration Program.

The completion of this program not only positions DNi for its first commercial plant, and the

Company’s objective to become a leading global nickel producer using the proprietary DNi

Process, it will also serve to increase awareness within industry of the availability of a

commercially viable solution to access and process nickel laterite resources to meet a range of

industrial demands.