Thursday, 12 November 2015 HEADS OF AGREEMENT FOR 250,000T PHOSPHATE ROCK OFFTAKE AND PROJECT EQUITY TRANSACTION KEY POINTS HEADS OF AGREEMENT (HOA) SIGNED FOR AN OFFTAKE OF 250,000 TONNES OF PHOSPHATE ROCK (PHOSPHATE) ON ATTRACTIVE TERMS (50KT/YEAR FOR 5 YEARS) OFFTAKE CAN BE EXTEND FOR FURTHER PERIODS BY WAY OF THIS HOA THE BUYER CONFIRMS INTEREST IN: ACQUIRING EQUITY STAKE IN GEOLSEC FOR $4MLN IN CASH ASSISTING WITH EXPANSION AND FURTHER DEVELOPMENT AND OPERATION OF THE QUARRY GEOLSEC PHOSPHATE QUARRY HAS LOW OPERATING COST AND LOW COST OF PRODUCTION QUARRY IS PERMITTED TO CARRY OUT MINING OF PHOSPHATE ROCK AND IS LOCATED ON GRANTED MINERAL LEASE MINERAL LEASE HAS BEEN GRANTED TO 21 APRIL 2035 AND CAN BE RENEWED DISCUSSIONS WITH FURTHER POTENTIAL PHOSPHATE BUYERS AND ENTITIES INTERESTED IN ACQUIRING EQUITY IN GEOLSEC ARE AT ADVANCED STAGE Korab Resources Ltd ( Korab, or Company ) () is pleased to advise that its wholly owned subsidiary Geolsec Phosphate Operations Pty Ltd ( Geolsec ) has entered into Heads of Agreement ( HoA ) for an offtake of 250,000 tonnes of phosphate rock (phosphate) with DPA Oceania Pty Ltd which is an unrelated entity. The offtake covers sales of 250,000 tonnes of phosphate rock (50KT/year for 5 years) on commercially attractive terms and it can be extended for further periods. The price per tonne and price terms have been agreed for the first year of the offtake. The prices for the remaining years will be set through negotiations prior to commencement of each successive year. Phosphate rock supplied by Geolsec will be used in production of advanced cementitious and Geo-Polymer materials using disruptive technologies proprietary to DPA/TGS. The HoA also includes acquisition of no more than 50% equity interest in Geolsec for $4 million in cash and provision of assistance with the expansion and further development of the quarry, and the management of its operations. Following the signing of the HoA the parties will negotiate the detailed terms of the equity acquisition and provision of assistance. Under the HoA, Geolsec has committed to the offtake agreement, but Korab is under no obligation to sell equity stake in Geolsec, or to accept the assistance in any of the above areas. This gives Korab and Geolsec flexibility to consider at their full discretion potential transactions with other parties to ensure the best outcome for the Company. This HoA is conditional upon conditions precedent which include completion of construction of DPA s facilities and which are subject to temporal requirements. Korab is in advanced discussions with ACN 082 140 252 PAGE 1
further parties interested in acquiring stake in Geolsec and other potential phosphate buyers. Korab previously advised that despite very difficult market conditions for phosphate rock over the last 12 months, discussions with various parties regarding Geolsec offtakes, sales, and equity transactions were at an advanced stage. Prior to that, on 22 September 2015 Korab advised that it has reached an in-principle agreement with an Eastern States based organic fertiliser distributor to supply commercial quantity of phosphate rock. In a separate development, Korab also advised that the site visit to Geolsec by phosphate/fertiliser operator from New Zealand has been completed last week. Korab reported that the party confirmed that they were very impressed with the geology, and the general tenor and grades of phosphorus recorded on the XRF analyser. On various other occasions (3 September 2015, 24 August 2015 and 16 June 2015) Korab advised that it was in discussions with overseas and domestic buyers, distributors, end users, and fertiliser manufacturers regarding supply of phosphate rock and sale of equity stake in Geolsec. Korab is currently engaged in further advanced negotiations with other parties regarding offtakes, distribution agreements, and potential equity transactions. Market will be advised of the outcome of these discussions when required. PHOSPHATE MARKET Phosphate rock prices have been depressed for a long period of time due to reduced demand out of India and China and a considerable oversupply of rock coming from North Africa. This has caused product coming from new operations to be less attractive to large-volume buyers than product coming from established producers. Despite these obstacles, Geolsec has been actively pursuing available opportunities and during this difficult period has engaged with various parties with the aim of securing offtake agreements, distributorships and other arrangements. The phosphate market oversupply appears to be abating and the recent lift in phosphate rock price suggest that the market may have turned around (Figure 1 and Figure 2). It is expected that the overall phosphate market demand will continue to grow into 2020, and that shortages of phosphate rock may develop after 2025. The primary target markets for the domestic sales of the phosphate rock are organic farmers in Queensland, Victoria, New South Wales, South Australia and WA, plantations and pastoralists around Darwin (NT), and fruit growers in Ord River (WA). The primary target markets for the overseas sales of the phosphate rock are Asian and New Zealand distributors, fertiliser manufacturers and end users. Geolsec phosphate rock when used for direct application has a potential to provide substantial ongoing benefits to the environment by improving soil fertility and improving nutritional quality of produce grown on fields fertilised with phosphate rock and phosphate rock products. More information about Geolsec s benefits and the benefits of direct application of phosphate rock to soils is available from Korab website at www.korabresources.com.au/geolsec. Additional markets which offer potential for rapid growth are in the production of advanced cementitious and Geo-Polymer materials. QUARRY DEVELOPMENT AND OPERATIONS Geolsec phosphate quarry is a simple operation with rock available from surface and with an easy access using existing road infrastructure (Figure 4 and Figure 5). Mined rock may be transported using an existing road network, or may be shipped out of Darwin port East Arm Wharf which approximately 90 km from the Geolsec quarry (Figure 3 and Figure 7). Geolsec quarry is fully permitted to extract phosphate rock on continuous basis, and can be expanded subject to demand for the output. Rock may be quarried at a low operating cost primarily due to the location and the outcropping nature of the deposit. The quarry is designed to operate on a campaign basis using mobile equipment and with no material additional site infrastructure. Location of the Geolsec project just south of the port of Darwin and within a short distance to majority of Asian ports gives Geolsec significant shipping advantage when supplying Asian and Australian ACN 082 140 252 PAGE 2
buyers and distributors. Furthermore, being located next to trans-continental rail-way link and highway connecting Darwin to Queensland, NSW, Victoria and the Ord River agricultural region in WA, Geolsec has excellent access to the main agricultural regions in all Australian states. Location and Tenure Geolsec phosphate quarry is located within the Batchelor project near town of Batchelor, some 85km south of Darwin in the Northern Territory of Australia. The deposit is located on a granted Mineral Lease ML27362 covering 234ha, which expires 21 April, 2035 and which may be extended for further periods of 25 years. The mineral lease is 100% owned and operated by Geolsec Phosphate Operations Pty Ltd, a wholly owned subsidiary of Korab Resources Ltd. CONTACT Andrej K Karpinski, Executive Chairman - Australia: (08) 9474 6166, International: +61 8 9474 6166 ABOUT KORAB RESOURCES Korab Resources Ltd is an international mining and exploration company with operations in Australia and Europe. Korab s projects include gold and silver deposit at Bobrikovo in eastern Ukraine, Geolsec phosphate rock deposit and Winchester phosphate quarry at Batchelor in the Northern Territory of Australia. More information about Korab s projects can be sourced from Korab s website at. Korab s shares are traded on Australian Securities Exchange (ASX) and on the Berlin Stock Exchange (Berliner Börse) through Equiduct electronic trading platform. LIST OF FIGURES Figure 1 Phosphate rock price in US$ (32%P2O5 Moroccan rock, F.A.S. Casablanca)... 3 Figure 2 Global phosphate rock demand 2010-2020... 4 Figure 3 Geolsec phosphate deposit location near town of Batchelor... 4 Figure 4 Geolsec deposit location relative to town of Batchelor, basic infrastructure and topography... 5 Figure 5 Road access from Batchelor to Geolsec... 5 Figure 6 Strategic location of Geolsec phosphate quarry... 6 Figure 7 Darwin port - East Arm Wharf... 7 124 122 120 118 116 114 112 Sep 2014 Nov 2014 Jan 2015 Mar 2015 May 2015 Jul 2015 Sep 2015 For personal use only Figure 1 Phosphate rock price in US$ (32%P2O5 Moroccan rock, F.A.S. Casablanca) ACN 082 140 252 PAGE 3
Figure 2 Global phosphate rock demand 2010-2020 Figure 3 Geolsec phosphate deposit location near town of Batchelor ACN 082 140 252 PAGE 4
Figure 4 Geolsec deposit location relative to town of Batchelor, basic infrastructure and topography Figure 5 Road access from Batchelor to Geolsec ACN 082 140 252 PAGE 5
GEOLSEC Figure 6 Strategic location of Geolsec phosphate quarry ACN 082 140 252 PAGE 6
Figure 7 Darwin port - East Arm Wharf ACN 082 140 252 PAGE 7