Aclara Resources Inc.

A copy of this amended and restated preliminary prospectus has been filed with the securities regulatory authorities in each of the provinces and territories of Canada (other than Québec) but has not yet become final for the purpose of the sale of securities. Information contained in this amended and restated preliminary prospectus may not be complete and may have to be amended. The securities may not be sold until a receipt for the prospectus is obtained from the securities regulatory authorities.

No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. These securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “ U.S. Securities Act ”), or the securities laws of any state of the United States (as such term is defined in Regulation S under the U.S. Securities Act) and may not be offered, sold or delivered, directly or indirectly, in the United States, except pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. This prospectus does not constitute an offer to sell or solicitation of an offer to buy any of these securities in the United States.

AMENDED AND RESTATED PRELIMINARY PROSPECTUS (amending and restating the preliminary prospectus dated October 21, 2021)

New Issue Prospectus

November 19, 2021

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Distribution in specie by Hochschild Mining PLC of

 Common Shares of Aclara Resources Inc.

Aclara Resources Inc. (the “ Company ”, “ Aclara ”, “ us ” or “ we ”) is an indirect wholly-owned subsidiary of Hochschild Mining PLC (“ Hochschild Mining ”) as of the date of this prospectus. Aclara is a development-stage rare earth mineral resources company with 451,585 hectares of mining concessions located in the Maule, Ñuble, Biobío and Araucanía regions of Chile. Aclara is initiating the development of its resources through a project called the Penco Module (the “ Penco Module ”), which covers a surface area of approximately 600 hectares and which has ionic clays that are rich in rare earth elements (“ REE ”). Aclara is currently focused on the development and on the future construction and operation of the Penco Module, which will aim to produce a rare earth concentrate through a processing plant that will be fed by clays from nearby deposits. In addition to the Penco Module, Aclara will conduct exploration activities in order to determine if there are deposits within its other mining concessions that can be developed economically and with an adequate environmental footprint. Aclara is and will remain a holding company and its assets currently consist solely of interests in its wholly-owned subsidiary, REE UNO SpA (“ REE Uno ”), and the only business of Aclara is the business of its subsidiaries. Upon completion of the Demerger (as defined herein), Aclara, including its subsidiary, REE Uno, will be separated from Hochschild Mining and the two companies being (i) Aclara, which has applied to list its Common Shares on the Toronto Stock Exchange (the “ TSX ”), and (ii) Hochschild Mining, which will continue to be traded on the main market for listed securities of the London Stock Exchange, will operate as separately listed companies, each with its own distinct investment prospects. Aclara will focus on rare earth mineral resources, whereas the primary focus of Hochschild Mining’s business is the exploration, mining, processing and sale of precious metals.

This prospectus qualifies the distribution of  common shares of the Company (the “ Common Shares ”, and the Common Shares distributed under this prospectus being the “ Demerged Aclara Shares ”) representing 80% of the issued and outstanding shares of the Company (the “ Demerger ”) to the holders of ordinary shares of Hochschild Mining (the “ Hochschild Mining Shareholders ”) by way of a dividend in specie (the “ Demerger Dividend ”) in each of the provinces and territories of Canada (other than Québec). Hochschild Mining will continue to retain Common Shares of Aclara representing 20% of the issued and outstanding Common Shares. The Demerged Aclara Shares to be distributed under this Canadian prospectus may not be offered or sold in the United States by holders thereof unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available. This Canadian prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities within the United States.

The Demerger Dividend will be paid at a ratio of  Common Shares for each ordinary share of Hochschild Mining (the “ Hochschild Mining Ordinary Shares ”) which is outstanding as at the record time (being the date and time at which Hochschild Mining Shareholders are required to be on the register of members of Hochschild Mining in order to be entitled to the Demerger Dividend) (the “ Record Time ”). The Record Time will be announced by Hochschild Mining to Hochschild Mining Shareholders in advance of such date through a Regulatory Information Service. As part of such announcement, instructions on how to obtain a hard copy or an electronic copy of this prospectus will be provided.

The Demerger is conditional upon: (a) the approval of directors of Hochschild Mining; (b) the passing of the resolution to be proposed as an ordinary resolution at the extraordinary general meeting of Hochschild Mining on November 5, 2021 (or any adjournment thereof); (c) the completion of the Initial Public Offering on terms that are satisfactory to Hochschild Mining and Aclara; (d) the Common Shares being conditionally approved for listing on the TSX (the “ Listing ”); and (e) no other events or developments occurring or existing that, in the judgement of the board of directors of Hochschild Mining, in its sole and absolute discretion, would make it inadvisable to effect the Demerger. The Demerger was approved by the board of directors of Hochschild Mining on October 16, 2021. A circular dated October 19, 2021 was published by Hochschild Mining and mailed to its shareholders (except to those who consented to accessing materials electronically). A copy of the circular is available on Hochschild Mining website at the investor’s page of http://www.hochschildmining.com. The extraordinary general meeting of Hochschild Mining was held on November 5, 2021, and the ordinary resolution (50% approval) was duly passed, with 99.27% of the votes cast being voted in favour. See “The Demerger”.

The Common Shares are not available for purchase pursuant to this prospectus, and no funds are to be received by the Company or Hochschild Mining from the distribution of the Common Shares.

Should any fractional entitlements arise in connection with the Demerger Dividend, no fractions of a Demerged Aclara Share will be distributed and all fractional entitlements will be rounded down to the nearest whole number. Any Hochschild Mining Shareholder who shall be entitled to one or more Demerged Aclara Shares and who would otherwise also be entitled to fractional entitlements will not be entitled to any payment or other compensation (whether cash or otherwise) in relation to their fractional entitlements.

Concurrently with this distribution, the Company is making a public offering of  Common Shares at an offering price of $  (the “ Initial Public Offering Price ”), which is being made by means of a separate prospectus and not by means of this prospectus (the “ Initial Public Offering ”). It is anticipated that the Initial Public Offering Price will be between $1.70 and $2.00 per Common Share for gross proceeds of $59,512,500. In the Initial Public Offering, we have granted the underwriters of that offering an option to purchase up to an additional  Common Shares at the Initial Public Offering Price less the underwriting discount, within 30 days from the date of the separate prospectus (the “ Over-Allotment Option ”). This distribution is conditioned upon the closing of the Initial Public Offering, and the closing of the Initial Public Offering assumes completion of the Demerger. Additionally, concurrently with the Initial Public Offering, in order to maintain their respective pro rata equity ownership in the Company on completion of the Demerger and Initial Public Offering, Hochschild Mining and Pelham Investment Corporation (a company controlled by Eduardo Hochschild) (together with Hochschild Mining, the “ Principal Shareholders ”) have severally agreed (approximately in proportion to their respective existing ownership in the Company following the Demerger) pursuant to subscription agreements with the Company dated as of  , 2021, and certain individuals including directors, officers, employees and other purchasers identified by us who have expressed interest in purchasing Common Shares, to purchase from the Company, on a prospectus-exempt basis in Canada, an aggregate of 35,495,294 Common Shares (the “ Placement Common Shares ”) based on the midpoint of the estimated price range set forth above for aggregate gross proceeds to the Company of $65,666,294 (the “ Concurrent Private Placement ”). The Company has also granted each of the Principal Shareholders the right, but not the obligation, to subscribe for an additional 4,953,119 Common Shares, in the aggregate, based on the midpoint of the estimated price range set forth above, for a period of 30 days from and including the closing date of the Initial Public Offering, if and only to the extent the underwriters exercise the Over-Allotment Option, in whole or in part (the “ Private Placement Option ”). The Private Placement Option will be exercisable up to the same proportionate size, and at the same pricing, as the exercise of the Over-Allotment Option by the underwriters in the Initial Public Offering. Closing of the Concurrent Private Placement is scheduled to occur concurrently with the closing of the Initial Public Offering, and closing of the Concurrent Private Placement to the Principal Shareholders and the closing of the Initial Public Offering are conditional on each other. The Placement Common Shares, and any Common Shares that may be issued in connection with the Private Placement Option, will be subject to a statutory hold period. This prospectus does not qualify the distribution of the Common Shares pursuant to the Concurrent Private Placement or the Private Placement Option. See “Agreements with Principal Shareholders - Concurrent Private Placement”.

Readers should rely only on the information in this prospectus. The Company has not authorized anyone to provide readers with different information. See “About This Prospectus”.

There is currently no market through which the Demerged Aclara Shares may be sold and holders may not be able to resell the Demerged Aclara Shares distributed under this prospectus. This may affect the pricing of the Demerged Aclara Shares in the secondary market, the transparency and availability of trading prices, the liquidity of the Demerged Aclara Shares, and the extent of issuer regulation. See “Risk Factors”. We have applied to list the Demerged Aclara Shares on the TSX. Listing is subject to the approval of the TSX in accordance with its original listing requirements. The TSX has not conditionally approved the listing application and there is no assurance that it will do so. The closing of the Demerger is conditional on the Common Shares being conditionally approved for listing on the TSX. The listing is intended to occur shortly after the effective time of the distribution of the Demerged Aclara Shares. Neither the listing nor the intended timing of the listing can be guaranteed.

Hochschild Mining Shareholders are advised to consult their own tax advisors regarding the application of Canadian federal income tax laws to their particular circumstances, as well as any other provincial, foreign and other tax consequences of acquiring, holding or disposing of the Demerged Aclara Shares.

No underwriters or selling agents have been involved in the proposed distribution of the Demerged Aclara Shares, or the preparation of this prospectus, or performed a review or independent due diligence of the contents of this prospectus and no underwriters or selling agents have been, or will be compensated for the distribution of the Demerged Aclara Shares.

All of our operations and assets are located outside of Canada, certain of our directors and officers, including Eduardo Hochschild, Ignacio Bustamante, Sanjay Sarma, Ramon Barua, Rodrigo Ceballos, Francois Motte Sauter and Mauricio Alvarez, reside outside of Canada, and our promoter, Hochschild Mining, is organized outside of Canada and does not have an office in Canada. Our aforementioned directors and officers who reside outside of Canada and Hochschild Mining have each appointed 152928 Canada Inc., c/o Stikeman Elliott LLP, 5300 Commerce Court West, 199 Bay Street, Toronto, Ontario, Canada, as their agent for service of process in Canada. In addition, EY Servicios Profesionales de Auditoría y Asesorías SpA, and certain of the qualified persons named in this prospectus also reside outside of Canada. Readers are advised that it may not be possible for them to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the person has appointed an agent for service of process.

The Company is incorporated under the Business Corporations Act (British Columbia). Our head office is located at Cerro el Plomo 5630, Office 901 9th floor, Las Condes, Región Metropolitana de Santiago, Chile. Our telephone number at our head office is +56 2 25651000. Our registered office is located at Suite 1700, 666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8.

ABOUT THIS PROSPECTUS ................................................................................................................................... 1 CURRENCY AND EXCHANGE RATE DATA ...................................................................................................... 1 FORWARD-LOOKING INFORMATION ................................................................................................................ 2 SCIENTIFIC AND TECHNICAL DISCLOSURE .................................................................................................... 6 MARKET AND INDUSTRY DATA ........................................................................................................................ 6 ELIGIBILITY FOR INVESTMENT ......................................................................................................................... 7 PROSPECTUS SUMMARY ...................................................................................................................................... 8 THE DEMERGER SUMMARY ........................................................................................................................... 8 BUSINESS OF ACLARA ................................................................................................................................... 11 PRINCIPAL FEATURES OF ACLARA’S BUSINESS ..................................................................................... 11 SUMMARY OF CONCURRENT INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT ............... 18 RISK FACTORS.................................................................................................................................................. 19 SELECTED FINANCIAL INFORMATION ........................................................................................................... 20 CORPORATE STRUCTURE .................................................................................................................................. 22 BUSINESS OF THE COMPANY ........................................................................................................................... 22 INDUSTRY OVERVIEW ........................................................................................................................................ 36 THE PENCO MODULE .......................................................................................................................................... 43 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................................................................................................................................................... 67 CONCURRENT INITIAL PUBLIC OFFERING .................................................................................................... 82 USE OF PROCEEDS ............................................................................................................................................... 82 DESCRIPTION OF SHARE CAPITAL .................................................................................................................. 83 THE DEMERGER ................................................................................................................................................... 86 DIVIDEND POLICY ............................................................................................................................................... 91 PRINCIPAL SHAREHOLDERS ............................................................................................................................. 92 AGREEMENTS WITH PRINCIPAL SHAREHOLDERS ...................................................................................... 93 CONSOLIDATED CAPITALIZATION ................................................................................................................. 97 PRIOR SALES ......................................................................................................................................................... 97 DIRECTORS AND EXECUTIVE OFFICERS ....................................................................................................... 98 EXECUTIVE COMPENSATION ......................................................................................................................... 108 DIRECTOR COMPENSATION ............................................................................................................................ 116 INDEBTEDNESS OF DIRECTORS AND OFFICERS ........................................................................................ 116 PLAN OF DISTRIBUTION ................................................................................................................................... 117 CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS ........................................................ 117 RISK FACTORS .................................................................................................................................................... 120 LEGAL PROCEEDINGS AND REGULATORY ACTIONS............................................................................... 145 PROMOTER .......................................................................................................................................................... 146 INTERESTS OF QUALIFIED PERSONS ............................................................................................................ 146 INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ................................... 146 AUDITOR, TRANSFER AGENT AND REGISTRAR ........................................................................................ 146 ENFORCEMENT OF JUDGMENTS AGAINST FOREIGN PERSONS ............................................................ 146 MATERIAL CONTRACTS ................................................................................................................................... 147 PURCHASERS’ STATUTORY RIGHTS ............................................................................................................. 147 GLOSSARY OF CERTAIN TERMS .................................................................................................................... 148 INDEX TO FINANCIAL STATEMENTS ............................................................................................................ F-1 APPENDIX A – MANDATE OF THE BOARD OF DIRECTORS .................................................................... A-1 APPENDIX B – AUDIT COMMITTEE CHARTER ............................................................................................ B-1 CERTIFICATE OF THE COMPANY ................................................................................................................... C-1 CERTIFICATE OF THE PROMOTER ................................................................................................................. C-2

(i)

ABOUT THIS PROSPECTUS

A reader should rely only on the information contained in this prospectus and is not entitled to rely on parts of the information contained in this prospectus to the exclusion of others. We have not authorized anyone to provide readers with additional or different information. The information contained on our website at www.aclara-re.com is not intended to be included in or incorporated by reference into this prospectus and readers should not rely on such information. Any graphs, tables or other information demonstrating our historical performance or that of any other entity contained in this prospectus are intended only to illustrate past performance and are not necessarily indicative of our or such entities’ future performance and may include approximations due to rounding. The information contained in this prospectus is accurate only as of the date of this prospectus or the date indicated, regardless of the time of delivery of this prospectus or of any distribution of the Demerged Aclara Shares.

Unless otherwise noted or the context otherwise requires: (i) information contained in this prospectus (a) gives effect to the Demerger, (b) assumes that the Initial Public Offering has been completed and that the Over-Allotment Option has not been exercised, (c) the Concurrent Private Placement has been completed and that the Private Placement Option has not been exercised, and (d) assumes an Initial Public Offering Price of $1.85 per Common Share, the midpoint of the estimated price range for the Initial Public Offering, and (ii) all references in this prospectus to the “Company”, “Aclara”, “we”, “us” or “our” refer to Aclara together with its subsidiaries, on a consolidated basis, as constituted on completion of the Demerger and the Initial Public Offering.

Certain other terms used in this prospectus are defined under “Glossary of Certain Terms”.

CURRENCY AND EXCHANGE RATE DATA

In this prospectus, all references to “$”, “C$” or “dollars” are to Canadian dollars and all references to “US$” are to United States dollars. Amounts are stated in Canadian dollars unless otherwise indicated. We present our financial statements in United States dollars and disclose certain financial information in this prospectus in United States dollars. Certain totals, subtotals and percentages throughout this prospectus may not reconcile due to rounding.

The following table sets forth, for the period indicated, the high, low, average and period end spot rates of exchange for one U.S. dollar, expressed in Canadian dollars, published by the Bank of Canada.

Highest rate during the period .............................................................................. Lowest rate during the period ............................................................................... Average rate for the period................................................................................... Rate at the end of the period(1)..............................................................................	Nine-Months Ended September 30,	Nine-Months Ended September 30,	Fiscal Year Ended December 31,	Fiscal Year Ended December 31,	Fiscal Year Ended December 31,
	2021	2020	2020	2019	2018
	(C$) 1.2856 1.2040 1.2513 1.2741	(C$) 1.4496 1.2970 1.3541 1.3339	(C$) 1.4496 1.2718 1.3415 1.2732	(C$) 1.3600 1.2988 1.3269 1.2988	(C$) 1.3642 1.2288 1.2957 1.3642

Notes:

(1) Calculated based on the exchange rates on the last business day of the applicable period.

On November 18, 2021, the rate of exchange posted by the Bank of Canada for conversion of U.S. dollars into Canadian dollars was US$1.00 = C$1.2615. The foregoing rates may differ from the actual rates used in the preparation of the financial statements and other financial data appearing in this prospectus. We make no representation that Canadian dollars could be converted into U.S. dollars at that rate or any other rate.

FORWARD-LOOKING INFORMATION

This prospectus contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information may relate to our future financial outlook and anticipated events or results and may include information regarding our business, financial position, business strategy, growth plans and strategies, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not anticipate”, “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forwardlooking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances.

Discussions containing forward-looking information may be found, among other places, under “Prospectus Summary”, “Business of the Company”, “Industry Overview”, “Selected Financial Information”, “The Penco Module”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Concurrent Initial Public Offering”, “Description of Share Capital”, “Dividend Policy”, “Principal Shareholders”, “Consolidated Capitalization”, “Directors and Executive Officers”, “Executive Compensation”, “Director Compensation” and “Risk Factors”.

Forward-looking information in this prospectus includes, among other things, statements relating to:

the Demerger and the Demerger Dividend;
the Initial Public Offering, including the Initial Public Offering Price, the Over-Allotment Option, the underwriters’ fee, and the completion, size, expenses of the Initial Public Offering and timing of closing of the Initial Public Offering;
the Concurrent Private Placement and Private Placement Option;
the underwriting agreement and other documents to be entered into by the Company and the underwriters in connection with the Initial Public Offering (the “ Underwriting Agreement ”);
the listing of the Common Shares on the TSX and any future market or liquidity in the Common Shares;
our future financial or operating performance;
our growth strategy;
future trends that may affect our business and results of operations;
the impact of competition and applicable laws and regulations on our operations and results;
the proposed use of proceeds from the Initial Public Offering and the Concurrent Private Placement;
estimation of mineral reserves and resources;
mine life;
our financial liquidity;
lock-up arrangements;
our dividend policy;
the Investor Rights Agreement;
the Transitional Services Agreement;
the market price for the Common Shares;
our executive compensation, governance policies and Board composition; and
the anticipated impact of COVID-19 and other epidemics and pandemics.

This forward-looking information and other forward-looking information are based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Material factors underlying forward-looking information and management’s expectations include certain assumptions in respect of: our ability to build our market share; our ability to retain key personnel; future prices of REE; favourability of operating conditions, including the ability to operate in a safe, efficient and effective manner; the receipt of governmental and other third party approvals, licences and permits on favourable terms; obtaining required renewals for existing approvals, licences and permits and obtaining all other required approvals, licences and permits on favourable terms; sustained labour stability; stability in financial and capital goods markets; availability of equipment and the condition of existing equipment being as described in the Technical Report (as defined herein); our ability to continue investing in infrastructure to support our growth; our ability to obtain and maintain existing financing on acceptable terms; currency exchange and interest rates; the impact of competition; the changes and trends in our industry and the global economy; and changes in laws, rules, regulations, and global standards.

The forward-looking information in this prospectus is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as of the date such statements were made. It is also subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the following risk factors described in greater detail under the heading entitled “Risk Factors”:

prices of REE are volatile and may be lower than expected;
risks related to mining operations;
risks related to failure to comply with the law or obtain or renew necessary permits and licences;
geologic, metallurgic, engineering, title, environmental, economic and financial assessments may be materially incorrect;
dependence on a single mineral project;
risks related to competition in the rare earth mining industry;
risks related to China currently dominating the REE market;
dependence, in part, on the growth of existing and emerging uses for rare earth products;
risks related to earthquakes;
risks related to unanticipated adverse geological, hydrological and climatic events;
actual production, capital and operating costs may be different than those anticipated;
risks related to the speculative nature of mineral exploration efforts;
the Company may be not able to successfully complete new development projects;
currency fluctuations may result in unanticipated losses;
operational risks that may result in increased costs or delays that prevent the successful implementation of our projects;
risks related to inability to industrialize the processing and recovery methods on our operations;
dependence on the skills of the Company’s management and workforce for the successful development and operation of the Penco Module;
operations during mining cycle peaks are more expensive;
risks related to ownership of properties;
risks related to geological changes or environmental regulations which may affect the Penco Module’s water supply;
compliance with environmental regulations can be costly;

risks related to social and environmental activism which may negatively impact exploration, development and mining activities;
risks related to industry consolidation which may result in increased competition and a reduction in revenue;
inadequate infrastructure may constrain mining operations;
risks related to fluctuations in the market prices and availability of commodities and equipment;
risks related to failure to maintain satisfactory labour relations;
risks related to our operations and potential liability that could result therefrom;
jurisdictions in which the Company operates or might operate in the future may offer less certainty as to the judicial outcome or less effective forms of redress or a more protracted judicial process than in Canada;
risks related to enforcement of judgments and effecting service of process on directors and officers;
risks related to conflicts of interest;
risks related to future acquisitions;
risks related to failure of information systems or information security threats;
risks related to legal proceedings;
risks related to increased expenses as a result of being a public company;
risks related to product alternatives that may reduce demand for the Company’s products;
risks related to changes in climate conditions;
risks related to indebtedness;
dependence on outside parties;
risks related to the capital intensive nature of the Company’s business;
increase in operating expenses resulting from increases in the price of electrical power, fuel or other energy sources;
risks related to changes in tax laws;
risks related to the mining industry;
risks related to employee or third-party contractor misconduct;
risks related to the suspension or cancellation of deliveries under sales agreements by our customers;
risks related to operating in a foreign jurisdiction, including political and economic problems in Chile;
risks related to changes to mining laws and regulations and the termination or non-renewal of mining rights by governmental authorities;
risks related to the implementation of proposed amendments to the Metropolitan Land-Use Plan of Concepción;
dependence on relations and agreements with local communities;
environmental regulations in Chile will require more time and money to be dedicated to compliance and remediation activities;
risks related to the perception of higher risk in other emerging economies resulting in adverse effects on the Chilean economy;
risks related to corruption and anti-bribery law violations by the Company’s employees or other agents;
risks related to the ongoing COVID-19 pandemic, including the resulting global economic uncertainty and measures taken in response to the pandemic, which could materially impact our business and future results of operations and financial conditions;
an active, liquid and orderly trading market for our Common Shares failing to develop;
risks related to dilution through the issuance of additional Common Shares;

risks related to the listing of our Common Shares on the TSX;
volatility in the market price of the Company’s equity securities;
future sales of our securities by holders of Common Shares (the “ Shareholder s”), including Principal Shareholders, causing the market price for our Common Shares to decline;
significant influence of the Principal Shareholders;
future offerings of debt securities or equity securities that may be senior to our Common Shares;
any issuance of preferred shares may hinder another company’s ability to acquire us;
claims for indemnification by our directors and officers;
our Articles could limit the Shareholders’ ability to obtain a favourable judicial forum for disputes;
no cash dividends for the foreseeable future;
the trading price and volume of our Common Shares could decline if analysts do not publish research or publish inaccurate or unfavourable research about us or our business;
risks related to forward-looking information contained in this prospectus;
risks of class action litigation against the Company following a decline in the market price of the Company’s securities;
risks related to global financial conditions;
Shareholders will have limited control over our operations; and
the Company is a holding company.

If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forwardlooking information prove incorrect, actual results or future events might vary materially from those anticipated in the forwardlooking information. The risks, uncertainties, opinions, estimates and assumptions referred to above and described in greater detail in “Risk Factors” should be considered carefully by readers.

Although we have attempted to identify important risk factors that could cause actual results or future events to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this prospectus represents our expectations as of the date of this prospectus (or as of the date they are otherwise stated to be made), and is subject to change after such date. We disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable Canadian securities legislation.

All of the forward-looking information contained in this prospectus is expressly qualified by the foregoing cautionary statements. Readers should read this entire prospectus and consult their own professional advisors to ascertain and assess the income tax, legal, risk factors and other aspects of acquiring, holding or disposing of the Demerged Aclara Shares.

SCIENTIFIC AND TECHNICAL DISCLOSURE

Scientific and technical information (including financial forecasts and valuation calculations) relating to the Penco Module contained in this prospectus has been derived from, and in some instances extracted from a technical report prepared in accordance with National Instrument 43-101 — Standards of Disclosure for Mineral Projects (“ NI 43-101 ”) entitled “NI 43-101 Technical Report – Preliminary Economic Assessment for Penco Module Project” with an effective date of September 15, 2021 (the “ Technical Report ”) prepared by Ausenco Engineering Chile Limitada (“ Ausenco ”) and authored by Francisco Castillo, Alejandro Solar, Manuel Hernandez, Luis Oviedo, Scott Weston, Scott Elfen, and Gavin Beer, each of whom approved the scientific and technical information contained in this prospectus that was derived from or extracted from the portion of the Technical Report that such person authored, and is a “qualified person” and “independent” within the meanings of NI 43-101.

Portions of the scientific and technical information relating to the Penco Module contained in this prospectus are based on assumptions, qualifications and procedures which are not fully described herein but are set out in the Technical Report. Reference should be made to the full text of the Technical Report which has been filed with the Canadian securities regulatory authorities in each of the provinces and territories of Canada other than Québec pursuant to NI 43-101 and is available for review on the Company’s SEDAR profile at www.sedar.com.

The mineral resource estimates referred to in this prospectus have been calculated using the Canadian Institute of Mining, Metallurgy and Petroleum (“ CIM ”) “Standards on Mineral Resources and Reserves, Definitions and Guidelines” dated May 10, 2014 prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM (the “ 2014 CIM Definition Standards ”).

MARKET AND INDUSTRY DATA

Market and industry data presented throughout this prospectus was obtained from third party sources, industry reports and publications, websites and other publicly available information, including International Energy Agency (IEA), International Renewable Energy Agency, CRU Group (“ CRU ”), peer public disclosure and press releases, US Geological Survey (“ USGS ”), Adamas Intelligence (“ Adamas ”), Asian Metals, and Argus Media (“ Argus ”), as well as industry and other data prepared by us or on our behalf on the basis of our knowledge of the markets in which we operate, including information provided by customers and other industry participants. We believe that the market and industry data presented throughout this prospectus is accurate and, with respect to data prepared by us or on our behalf, that our opinions, estimates and assumptions are currently appropriate and reasonable, but there can be no assurance as to the accuracy or completeness thereof. The accuracy and completeness of the market and industry data presented throughout this prospectus are not guaranteed and we do not make any representation as to the accuracy of such data. Actual outcomes may vary materially from those forecast in such reports or publications, and the prospect for material variation can be expected to increase as the length of the forecast period increases. Although we believe it to be reliable, we have not independently verified any of the data from third party sources referred to in this prospectus, analyzed or verified the underlying studies or surveys relied upon or referred to by such sources, or ascertained the underlying market, economic and other assumptions relied upon by such sources. Market and industry data is subject to variations and cannot be verified due to limits on the availability and reliability of data inputs, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry and markets in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the headings “Forward-Looking Information” and “Risk Factors”. For the avoidance of doubt, nothing stated in this paragraph operates to relieve us from liability for any misrepresentation under applicable Canadian securities laws to the extent a misrepresentation were to be contained in this prospectus.

ELIGIBILITY FOR INVESTMENT

The Demerged Aclara Shares are not currently listed on a “designated stock exchange” (which currently includes the TSX) and the Company is not currently a “public corporation”, as those terms are defined in the Tax Act. If the Common Shares are listed on a “designated stock exchange” in Canada on or before the filing due date for the Company’s income tax return for its first taxation year, the Company may file an election in such tax return to be deemed to have been a “public corporation” from the beginning of that taxation year. If the Demerged Aclara Shares are not listed on a “designated stock exchange” at the time the Demerged Aclara Shares are issued pursuant to the Demerger and the Company is not, and is not deemed to be, a “public corporation” at that time, the Demerged Aclara Shares will not be “qualified investments” under the Tax Act at that time for a trust governed by a registered retirement savings plan, a registered retirement income fund, a registered education savings plan, a registered disability savings plan, a tax-free savings account, and a deferred profit sharing plan (each a “ Registered Plan ”). Where a Registered Plan acquires or holds a Demerged Aclara Share in circumstances where the Demerged Aclara Share is not a “qualified investment” for the Registered Plan, adverse tax consequences not discussed herein may arise for the Registered Plan and the holder, annuitant or subscriber under the Registered Plan, as the case may be.

PROSPECTUS SUMMARY

This summary highlights certain information contained elsewhere in this prospectus. Readers should read this entire prospectus carefully, especially the “Risk Factors” section of this prospectus and the financial statements and related notes appearing elsewhere in this prospectus. Capitalized terms used but not defined in this prospectus summary are defined elsewhere in this prospectus.

THE DEMERGER SUMMARY

In October 2019, Hochschild Mining (via a subsidiary) acquired 100% of the Aclara ionic clay rare earth deposit (formerly known as Biolantánidos) in Chile (the “ Aclara Project ”). At the time of the acquisition, Hochschild Mining considered that the acquisition of the Aclara Project represented an opportunity for Hochschild Mining to acquire a unique rare earth deposit whilst maintaining its primary focus on the exploration, mining, processing and sale of precious metals. Since its acquisition, Aclara has continued to be run as an independent business unit within Hochschild Mining. Aclara’s primary growth opportunities going forward are expected to be in expanding its rare earth business.

Assuming the Conditions (as defined below) are satisfied, the Demerger will be effected by Hochschild Mining distributing the Demerged Aclara Shares to Hochschild Mining Shareholders by way of the Demerger Dividend. The Demerger will result in two separately listed companies, each with its own distinct investment prospects.

Shareholders of Hochschild Mining are able to access a copy of the prospectus filed in each of the provinces and territories of Canada (other than Québec) qualifying the Demerged Aclara Shares on Aclara’s SEDAR profile at www.sedar.com.

See “The Demerger”.

Reasons for the Demerger

Pursuant to the shareholder circular of Hochschild Mining dated October 19, 2021, the directors of Hochschild Mining believe that the Demerger will provide each of Hochschild Mining and Aclara with a number of opportunities and benefits, including the following:

Strategic focus on precious metals : although Hochschild Mining has applied its expertise to identifying and developing a rare earth mineral deposit, directors of Hochschild Mining believe that its strategic focus should remain on precious metals. In contrast, Aclara has a different strategic approach in order to succeed in the specialty rare earth industry and will be required to develop specific commercial capabilities and consider further integration down the permanent magnet value chain. Both are areas of expertise that Hochschild Mining does not currently possess and, even if it were to develop such expertise, this would not necessarily enhance Hochschild Mining’s precious metals business in the future.
Management focus : with Hochschild Mining’s management team focusing the majority of its time on precious metals deposits, an independent Aclara will benefit from a dedicated, standalone management team and board.
Access to capital : Hochschild Mining has a pipeline of precious metals opportunities with which Aclara currently competes for capital. At the same time, Aclara has an ambitious growth plan based on the development of several production modules and may eventually invest in building its own separation capabilities. Given Hochschild Mining’s likely future prioritisation of precious metal projects, a separately-listed Aclara will be in a significantly improved position to raise capital from investors who are keen to support a high-growth rare earth opportunity and may have a different approach than precious metals investors.
Independent valuation : separating Hochschild Mining’s precious metals and rare earth portfolio will allow the market to value each business independently, potentially leading to a re-rating of either or both businesses.

Further, the directors of Hochschild Mining believe that current and future Hochschild Mining Shareholders will benefit from Hochschild Mining retaining a meaningful indirect stake in Aclara. Accordingly, immediately following the Demerger, HM Holdings (a wholly-owned subsidiary of Hochschild Mining) will retain Common Shares of Aclara representing 20% of the issued and outstanding Common Shares. The directors of Hochschild Mining currently expect that, prior to the Initial Public Offering, Hochschild Mining would undertake not to sell or otherwise dispose of its indirect holding of such retained shares for at least one year following the completion of the Initial Public Offering. The directors of Hochschild Mining believe that this conveys a strong message of the Hochschild Mining’s support for Aclara and, through Hochschild Mining’s rights as a

significant shareholder, will help ensure the establishment of a robust governance framework as Aclara transitions to being an independently listed company.

Finally, the directors of Hochschild Mining currently expect that, prior to the Initial Public Offering, Pelham Investment Corporation (a company controlled by Eduardo Hochschild) would undertake not to sell or otherwise dispose of its holding of Demerged Aclara Shares for at least one year following the completion of the Initial Public Offering.

Conditions to the Demerger Dividend

The Demerger is conditional upon: (a) the approval of directors of Hochschild Mining; (b) the passing of an ordinary resolution (50% approval) at the extraordinary general meeting of Hochschild Mining on November 5, 2021 (or any adjournment thereof); (c) the completion of the Initial Public Offering on terms that are satisfactory to Hochschild Mining and Aclara; (d) the Listing; and (e) no other events or developments occurring or existing that, in the judgement of the board of directors of Hochschild Mining, in its sole and absolute discretion, would make it inadvisable to effect the Demerger (each a “ Condition ”, and together the “ Conditions ”).

The Demerger was approved by the board of directors of Hochschild Mining on October 16, 2021.

A circular dated October 19, 2021 was published by Hochschild Mining and mailed to its shareholders (except to those who consented to accessing materials electronically). A copy of the circular is available on Hochschild Mining website at the investor’s page of http://www.hochschildmining.com.

The extraordinary general meeting of Hochschild Mining was held on November 5, 2021, and the ordinary resolution (50% approval) was duly passed, with 99.27% of the votes cast being voted in favour.

Subject to the other conditions being satisfied, it is expected that the Demerger Dividend will be made shortly prior to Listing. The directors of Hochschild Mining believe that the Demerger is likely to become effective before the end of 2021. However, as the Demerger is subject to a number of conditions as detailed above, such date is only indicative and may change.

Value and Ratio of the Demerger Dividend

The Demerger Dividend will be paid at a ratio of  Common Shares for each Hochschild Mining Ordinary Share which is outstanding as at the Record Time. Hochschild Mining will continue to retain Common Shares of Aclara representing 20% of the issued and outstanding Common Shares.

Any fractional entitlements arise in connection with the Demerger Dividend, no fractions of a Common Share will be distributed and all fractional entitlements will be rounded down to the nearest whole number. Any Hochschild Mining Shareholder who shall be entitled to one or more Demerged Aclara Shares and who would otherwise also be entitled to fractional entitlements will not be entitled to any payment or other compensation (whether cash or otherwise) in relation to their fractional entitlements.

The Demerger Dividend will constitute an in specie distribution of the Demerged Aclara Shares, and there will be no cash equivalent to the Demerger Dividend. Any Shareholders who do not wish to hold their Demerged Aclara Shares should inform themselves of (and such Shareholders are responsible for complying with) any applicable securities laws and regulations or restrictions on transferring such shares and should contact their own broker. There can be no assurance as to whether there will be an active trading market in the Common Shares following Listing.

Record Time of the Demerger Dividend

The Record Time is  , 2021. Any Hochschild Mining Shareholders that have sold or transferred their Hochschild Mining Ordinary Shares prior to the Record Time will not be entitled to the Demerger Dividend and will not receive any Demerged Aclara Shares. The Record Time will be announced by Hochschild Mining to Hochschild Mining Shareholders in advance of such date through a Regulatory Information Service. As part of such announcement, instructions on how to obtain a hard copy or an electronic copy of this prospectus will be provided.

Qualification of the Demerged Aclara Shares

This prospectus qualifies the distribution of the Demerged Aclara Shares forming the Demerger Dividend. The Demerged Aclara Shares to be distributed under this Canadian prospectus may not be offered or sold in the United States by holders thereof unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such

registration is available. This Canadian prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities within the United States.

Depositary Interests

The Common Shares are Canadian securities and are, therefore, not capable of being settled directly in the United Kingdom through CREST like ordinary shares of companies incorporated in the United Kingdom. Accordingly, Aclara has agreed to make arrangements to provide Hochschild Mining Shareholders whose shares in Hochschild Mining are held in uncertificated form through CREST with Aclara Depositary Interests (“ Aclara DIs ”), which are instruments that represent the underlying Common Shares and allow settlement of trading in Common Shares through CREST. Hochschild Mining Shareholders whose shares in Hochschild Mining are held in uncertificated form through CREST will, therefore, receive Aclara DIs.

Certificated UK Shareholders

Aclara has agreed to make arrangements for Hochschild Mining Shareholders who hold their shares in Hochschild Mining in certificated form to receive direct registration advices which will reflect their ownership of Demerged Aclara Shares in book-entry form. Direct registration advices will be issued, by post, to such registered address of any entitled shareholder as appears on the Hochschild Mining’s register of members at the Record Time.

BUSINESS OF ACLARA

Aclara is a development-stage rare earth mineral resources company with 451,585 hectares of mining concessions located in the Maule, Ñuble, Biobío and Araucanía regions of Chile. Aclara is initiating the development of its resources through the Penco Module, which covers a surface area of approximately 600 hectares and which has ionic clays that are rich in REE. Aclara is currently focused on the development and on the future construction and operation of the Penco Module, which will aim to produce a rare earth concentrate through a processing plant that will be fed by clays from nearby deposits. In addition to the Penco Module, Aclara will conduct exploration activities in order to determine if there are deposits within its other mining concessions that can be developed economically and with an adequate environmental footprint.

Aclara is and will remain a holding company and its assets currently consist solely of interests in its wholly-owned subsidiary, REE Uno, and the only business of Aclara is the business of its subsidiaries.

PRINCIPAL FEATURES OF ACLARA’S BUSINESS

We believe that the following are the principal features of the Company’s business:

Our Product: Heavy Rare Earth Elements (“HREE”) are critical to the global clean energy transition

The global transition to clean energy has helped to drive an expanding market for REE due to their valuable properties, and we believe that this trend will continue. Dysprosium (“ Dy ”) and terbium (“ Tb ”), which are HREE, and neodymium (“ Nd ”) and praseodymium (“ Pr ”), which are light rare earth elements (“ LREE ”), have magnetic attributes and are critical components in the production of high-performance permanent magnets. HREE have received the second highest supply risk score among raw materials according to the European Commission’s “Study on the review of the list of Critical Raw Materials”. Neodymium-based permanent magnets (“ Nd magnets ”) offer superior performance as they are lighter and stronger compared to other type of magnets, and have the ability to be engineered into any shape or size. The performance of Nd magnets can be complemented with Dy and Tb, to improve their magnetic performance and increase their ability to maintain their magnetism at high temperatures according to Argus.

The predominant uses of Nd magnets are in the electric vehicle (“ EV ”) industry and in wind turbines. Incorporation of Dy and Tb into Nd magnets delivers enhanced operating performance by enabling them to operate at higher temperatures (magnets with HREE can operate up to 240 °C as compared to 60 °C for those magnets without HREE), without losing their magnetic properties (high coercivity). The improved performance provided by incorporation of HREE is an important quality for permanent magnets used in EVs, military applications, and various electronic devices. In EVs, permanent magnets result in increased range autonomy, better use of space, lower weight and lower battery costs, the latter as a result of reduced lithium, cobalt and nickel content. According to Roskill, Nd permanent magnets are the permanent magnets that offer the best performance and optimisation potential in electric motors, with 90% of EV models using them as part of their drivetrain, including Tesla’s Model S, Model X and Model 3. In wind turbines, Nd magnets are a preferred alternative to traditional geared systems to generate wind power, as magnets require less maintenance, leading to longer wind turbine operating lives with lower operating costs. This advantage is particularly important for offshore wind turbines.

Aclara’s objective is to become a strategic non-China based supplier of the critical HREE, Dy and Tb, as well as supplying the in-demand LREE, Nd and Pr, all of which are required to manufacture the permanent magnets that we believe are required to enable the widespread use of renewable energy technologies and the increased adoption of EVs globally. Our operations are expected to produce a basket of REE with a value that is weighted towards the highest value HREE, Dy and Tb, with approximately 54% of the basket value attributed to these two elements. We aim to produce HREE carbonates with approximately 93% purity and a very low environmental and social footprint, underpinned by: minimal water consumption due to a high level of water recirculation, no tailings dams, and no use of blasting, crushing or milling.

Penco Module’s Estimated Basket Economics (% Value by REE)

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Other; 20%
Dy; 32%
Pr; 4%
54% HREE (Dy + Tb)
(over the life of the mine)
Nd; 22%
Tb; 22%
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Source: Management estimate of revenue share (%) per element from the Penco Module, calculated by multiplying estimated concentrate production in the Technical Report by long-term REE price estimates prepared for the Company by Argus and Adamas

Compared to existing REE global exploration and development projects and operations, we believe that our ionic clayhosted deposit will produce one of the highest value per kilogram rare earth oxides (“ REO ”) concentrate in the world. We expect that 80% of the value of the REO basket that we will produce from the Penco Module will be derived primarily from Dy, Tb, Nd and Pr. As of November 2021, we estimate the basket has a value of US$75/kg, the third most valuable basket amongst the companies that we have identified as our peers, and more than two times the basket value of the highest-value non-Chinese producer amongst the companies that we have identified as our peers.

Comparable Peers Rare Earth Element Basket Values

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Source: Aclara peer analysis based on the Technical Report and peer information sourced from public reports and press releases. Prices per Asian Metals

Penco basket price assumes LOM average basket composition
** Mt. Weld, owned by Lynas, and Mountain Pass, owned by MP are the only REE assets amongst the peer group that are currently in production

Our Deposit: Aclara offers a superior source of HREE outside of China

Ionic clay deposits, such as Aclara’s Penco Module, are rarely found outside of China. Ionic clay deposits are rich in HREE and are a primary source of China’s HREE production according to Hallgarten & Company. HREE within ionic clay deposits include Dy and Tb, which are among most valuable REE and are critical in the production of permanent magnets used in EVs, wind turbines, military applications, and various electronic devices.

In addition, ionic clay deposits, which are rich in HREE, offer several advantages relative to the more commonly occurring hard rock REE deposits. Ionic clay deposits are typically located near-surface, are simple to excavate, have a straightforward processing method, and contain negligible levels of radioactive deleterious elements that are typically present in hard rock REE deposits according to Hallgarten & Company, thus resulting in the following operational benefits:

Minimal development expenditures: low strip ratio, no blasting required, simple machinery, and conventional open pit mining methods
Low processing costs: amenable to standard leaching techniques, with no grinding and milling required, that separates low-value elements lanthanum, cerium, and samarium as waste
Negligible radioactivity: unlike the majority of hard rock REE projects, negligible radioactivity in the deposits and in the end product
High-value end product: containing the high-priced HREE

We believe that production from ionic clays offers Aclara a compelling and competitive advantage relative to other sources of REE. In addition, production from Aclara is expected to be highly attractive and sought after by customers seeking HREE (Dy and Tb) production that is traceable, environmentally responsible and that originates outside of China. The product basket will also be complemented by high value LREE (Nd and Pr), further increasing the value of the basket.

Our Sustainable Operations: We believe that our environmental, social and governance (“ESG”) advantage ideally positions Aclara to become the sustainable REE supplier of choice for the world’s leading clean-tech companies

Aclara’s vision is to become the foundation of a sustainable value chain for technologies that are integral to the world’s green energy transition. Our ESG-focused approach to our planned operations is based on the following:

Sustainable extraction process: no blasting, no tailings dam and minimal water consumption due to a high level of water recirculation
Negligible radioactivity in the deposits and in the end product
Traceable production
We have benefited from Hochschild Mining’s demonstrated track record of operational success, sustainability-focused culture, and high standards of corporate governance

Our End-Market: Compelling market backdrop for REE underpinned by exponential demand growth and constrained supply

Based on a 2021 report by the Rare Earth Magnets and Motors Cluster of the European Raw Materials Alliance titled “Rare Earths Magnets and Motors: A European Call for Action”, the combination of a lack of diversified REE supply chains and the exponential growth in the demand for high performance permanent magnets, particularly as it relates to automotive and renewables, creates optimal conditions for supply chain disruptions.

As the world strives to meet its climate change goals and implement a transition away from fossil fuels and towards green energy, significant growth is expected in green energy infrastructure, including EVs and wind power generation. According to the IEA, global annual EV sales are expected to increase at a compound annual growth rate (“ CAGR ”) of 31% in the Sustainable Development Scenario (SDS), and a CAGR of 24% in Stated Policies Scenario (STEPS), in each case from 2020-2030. According to the International Renewable Energy Agency’s (“ IRENA ”) report titled “Future of wind: Deployment, investment, technology, grid integration and socio-economic aspects (A Global Energy Transformation paper)” (the “ IRENA Report ”), annual installation of offshore wind power capacity is required to increase at a 12% CAGR from 2020-2030 in order to meet future demand.

Forecast Global Sales of Electric Vehicles (Millions of Vehicles)

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EV´s Demand 2020-2030 (SDS Scenario) EV´s Demand 2020-2030 (STEPS Scenario)
60 60
50 50
40 40
30 30
20 20
10 10
0 0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Passenger BEV Passenger PHEV Comercial EV Passenger BEV Passenger PHEV Comercial EV
EV units mm EV units mm
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Source: IEA, Global EV Outlook 2021-2030

Forecast Global Offshore Wind Demand (GW)

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Source: IRENA Report, Future of Wind (2019)

The forecast growth in EV sales and wind power generation are expected to drive a significant increase in demand for permanent magnets containing REE, with a forecast 9% CAGR increase in permanent magnet demand from 2020-2030 according to CRU.

Permanent Magnets Demand 2020-2030

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300
250 CAGR 9%
200
150
100
50
0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Others ICE BEV PHEV Commercial EV Wind Power Electronics
Tonnes (000)
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Source: CRU 2021

Supply of both HREE and LREE, as well as further downstream processing, are currently dominated by China, which in 2020, was estimated by the USGS to contribute 58% of global REO production (in 2012, USGS estimated that China contributed 91% of global REE production). Furthermore, it is estimated that China imported 100% of REO produced from Myanmar’s ionic clay production facilities, increasing their supply control of Dy and Tb to approximately 90%, as well as Nd and Pr to approximately 70%. In addition, according to CRU, China refines 100% of the HREE supply. Stricter environmental policies and measures to curb illegal production of REE are expected to constrain unlicensed, low-cost Chinese supply from 60,000 tonnes (57%) in 2017 to 8,000 tonnes (5%) in 2021, limiting REO production in China, according to Argus, and potentially making HREE more scarce. While there are several potential new REE projects outside of China, only two projects, owned by Lynas Corporation, Ltd. (“ Lynas ”) and MP Materials Corp. (“ MP ”), have initiated production in the last 10 years, and both companies are focused primarily on production of LREE. Neither production facilities owned by Lynas and MP, nor the vast majority of other potential development assets, are enriched in HREE[1] , positioning Aclara to take advantage of a compelling market opportunity and backdrop for HREE production outside of China. For these reasons, the Penco Module provides a compelling basket composition compared to those produced by MP and Lynas, positioning itself in a privileged market position.

Our Growth Objectives:

Robust Starter Project

Aclara’s mission is to create a geopolitically independent, sustainable HREE supply chain for critical sectors in the growing green energy economy. The first step towards achieving our mission is to execute our Penco Module development project, which is expected to benefit from low estimated initial capital expenditures of approximately US$125[2] million in 2023 (driven by access to existing nearby key infrastructure including, among other things, power, motorways, port and airport access and a local professional workforce). We expect to achieve commercial REE production from the Penco Module in 2024 with a mine life of 12 years. The Penco Module is estimated to contribute approximately 2% of global Dy production, or approximately 28% excluding China and Myanmar[3] .

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(1) Includes US$10M site costs; capital expenditures to be incurred between 2023-2026

(2) Shown on an after-tax basis

Ausenco, an independent consulting firm, estimates total measured and indicated resources of approximately 20.7 million tonnes of mineralized material containing approximately 50 thousand tonnes of REO at an average grade of approximately 0.24% REO, and inferred resources of approximately 2.1 million tonnes of mineralized material containing approximately 4.8 thousand tonnes of REO at an average grade of approximately 0.23% REO.

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1 Source: Hallgarten & Company; peer information based on public reports and press releases

2 Excludes capital expenditures incurred in 2021; estimated capital expenditures to be incurred in 2023 to 2026 are approximately US$129 million

3 Estimates based on Technical Report average annual production divided between estimated production by country (USGS)

Given similar ionic clay deposits that have been mined in China over the last several decades, we believe that our deposit will be well-suited to proven extraction and concentration technologies, and that it will produce a highly saleable and soughtafter concentrate. We further believe that our HREE rich product will be attractive to many potential buyers, including Chinese refiners, permanent magnet producers seeking an alternative source to Chinese REE production, original equipment manufacturers interested in securing a strategic source of critical raw materials, and concentrate traders. Aclara presently has no offtake contracts in place, and accordingly, the Company’s operations have full exposure to REE prices.

Penco Module EBITDA Forecast (US$M)

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Source: Technical Report

Multi-Pronged Organic Growth Strategy

Aclara continues to perform optimization activities at the Penco Module as part of its development that may result in future improvements in metallurgical recoveries, costs, and capital expenditures. Such improvements include, in the short term, pilot testing methods expected to improve recoveries, and in the medium-term, experimenting with other reagents and conditions. These potential operational improvements, together with current brownfield exploration activities, may result in additional mine life, in higher production output or in an increase in production throughput (assuming the modification of the current environmental permit that restricts the level of production to that presented in the Technical Report). In addition, the Company may obtain additional upside by using clays as addition to cement, and as a result of superficial land close to urban areas increasing in value.

In parallel with the development of the Penco Module, we intend to define additional opportunities to increase HREE and LREE production via development of multiple additional production “modules” within our land package. We own 451,585 hectares of mining concessions, with the Penco Module only covering approximately 600 hectares (approximately 0.1% of our land package). As we undertake an intensive greenfield exploration programme, we believe there to be strong potential for the remaining land package to host additional ionic clay REE deposits. Based on the geological mapping associated with geochemical analysis test work, we have identified several high-priority target areas that could underpin an opportunity to develop additional production modules. The high-priority target areas we have currently identified cover approximately 12,100 hectares at our Verónica exploration project, and approximately 3,800 hectares at our Catalina exploration project; each project being located within our existing land package. Furthermore, we believe that there is a compelling opportunity to identify additional target areas within our land package that could support additional growth modules.

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Catalina Project V é ronica Project
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As our Company matures, we intend to explore additional value-creation opportunities. Our Penco Module plan contemplates producing and selling a concentrate, which will be further refined by third parties separating the concentrate into individual oxides. There are several concentrate separation alternatives we believe will be available to Aclara, including utilizing: (i) existing excess separation capacity in China, (ii) existing plants outside of China, located in Silmet, Estonia (owned by Neo Performance Minerals) or India (owned by Toyota), and (iii) new separation plants that are either under construction (owned by MP Materials or Lynas) or may potentially be built in the future (planned by Pensana). Furthermore, we intend to investigate vertical integration options, including the opportunity to build our own separation plant, providing a compelling opportunity for Aclara to capture additional value from our geopolitically independent, high quality and sustainable product.

Our Team: Highly qualified management team with extensive expertise in developing and operating projects within the extractive industry in Latin America, who benefit from an established relationship with our Principal Shareholders

Aclara is led by a management team with deep expertise in the mining and extractive industries, including the REE sector. The management team has the skills and capabilities necessary to develop and operate mineral resource projects in Chile, establish commercial relationships in the emerging western rare earth industry and emulate Hochschild Mining’s strong ESG and corporate governance culture.

Our Chief Executive Officer has extensive experience in mining, cement, phosphate and industrial minerals in the Americas and has a proven track record of financing the development of mining projects in local and international capital markets. He is supported by Aclara’s President and General Manager who brings 20 years of experience in critical minerals such as rare earth, molybdenum and rhenium and by the Company’s Chief Operating Officer who brings extensive knowledge in the fields of mining, metallurgy and project management in the Americas. The Company’s Chief Financial Officer has 10 years in the mining sector and holds a MSc in innovation management and business development with a focus on rare earths. The Company’s General Counsel has broad international experience in the cement and mining sectors and a solid background in permitting and stakeholder engagement processes, supporting the sustainable development of mining projects and operations across Latin America. Collectively, Aclara’s management team will seek to deliver shareholder value by leveraging its expertise across the mining value chain, from development through to construction, ramp-up and commercial production.

In addition to our senior management team, Aclara has benefited from its relationship with our Principal Shareholders, Hochschild Mining and Eduardo Hochschild, the Chairman of Hochschild Mining and Cementos Pacasmayo (NYSE-listed cement company in Peru). The Principal Shareholders have extensive track records of profitable and ESG-focused metallic and non-metallic mining operations in South America, bringing to bear a vast network of industry connections with expertise in mineral extraction and engineering.

SUMMARY OF CONCURRENT INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT

Concurrently with this distribution, we are offering, by means of a separate prospectus, 32,168,919 Common Shares (based on the midpoint of the estimated price range of the Initial Public Offering Price) at the Initial Public Offering Price. In the Initial Public Offering, we have granted the underwriters an Over-Allotment Option, pursuant to which they have the option to purchase from us up to an additional 4,825,338 Common Shares (based on the midpoint of the estimated price range of the Initial Public Offering Price) at the Initial Public Offering Price. This distribution is conditioned upon the closing of the Initial Public Offering, and the closing of the Initial Public Offering assumes completion of the Demerger.

Additionally, concurrently with the Initial Public Offering, in order to maintain their respective pro rata equity ownership in the Company on completion of the Demerger and Initial Public Offering, the Principal Shareholders have severally agreed (approximately in proportion to their respective existing ownership in the Company following the Demerger), and certain individuals, including directors, officers, employees and other purchasers identified by us who have expressed interest in purchasing Common Shares, to purchase from the Company, on a prospectus-exempt basis in Canada, an aggregate of 35,495,294 Placement Common Shares (based on the midpoint of the estimated price range of the Initial Public Offering Price) at the Initial Public Offering Price, at the Initial Public Offering Price pursuant to subscription agreements with the Company dated as of  , 2021. The Company has also granted the Private Placement Option. The Private Placement Option will be exercisable up to the same proportionate size, and at the same pricing, as the exercise of the Over-Allotment Option by the underwriters in the Initial Public Offering. Closing of the Concurrent Private Placement is scheduled to occur concurrently with the closing of the Initial Public Offering, and closing of the Concurrent Private Placement to the Principal Shareholders and the closing of the Initial Public Offering are conditional on each other. The Placement Common Shares, and any Common Shares that may be issued in connection with the Private Placement Option, will be subject to a statutory hold period. See “Agreements with Principal Shareholders - Concurrent Private Placement”.

The aggregate net proceeds of the Initial Public Offering and the Concurrent Private Placement are estimated to be approximately $115,564,938 ($123,956,201 if the Over-Allotment Option is exercised in full and $132,798,757 if the OverAllotment Option and the Private Placement Option are exercised in full), after deducting the underwriters’ fee of $5,925,545 and the expenses of the Initial Public Offering and the Concurrent Private Placement which are estimated to be approximately $3,700,000. We will use the net proceeds from the Initial Public Offering and the Concurrent Private Placement to advance the exploration and development of the Penco Module, the exploration of potential new modules, and for working capital and general corporate purposes.

RISK FACTORS

There are risks inherent in the Company’s business that may affect the value of Common Shares, as more fully described under “Risk Factors” in this prospectus. These risks could materially adversely impact our business, financial condition, results of operations and future prospects, which could cause the trading price of our Common Shares to decline and could result in a loss of your investment. These risks include, but are not limited to:

prices of REE are volatile and may be lower than expected;
risks related to mining operations;
risks related to failure to comply with the law or obtain or renew necessary permits and licences;
geologic, metallurgic, engineering, title, environmental, economic and financial assessments may be materially incorrect;
dependence on a single mineral project;
risks related to competition in the rare earth mining industry;
risks related to China currently dominating the REE market;
dependence, in part, on the growth of existing and emerging uses for rare earth products;
risks related to earthquakes;
risks related to unanticipated adverse geological, hydrological and climatic events;
actual production, capital and operating costs may be different than those anticipated; and
risks related to the speculative nature of mineral exploration efforts.

See “Risk Factors” and the other information included in this prospectus for a discussion of the risks that readers should carefully consider.

SELECTED FINANCIAL INFORMATION

The following table sets forth selected historical financial information for REE Uno for the periods and as at the dates indicated. The Company is and will remain a holding company and its assets currently consist solely of interests in its whollyowned subsidiary, REE Uno, and the only business of the Company is the business of its subsidiaries.

The financial results and earnings for year ended December 31, 2020, December 31, 2019 and December 31, 2018 and selected financial position information as of December 31, 2020 and December 31, 2019 has been derived from REE Uno’s audited financial statements included elsewhere in this prospectus which have been audited by EY Servicios Profesionales de Auditoría y Asesorías SpA. The summary financial information set out below for the nine months ended September 30, 2021 and September 30, 2020 has been derived from REE Uno’s unaudited financial statements included elsewhere in this prospectus.

Readers should review this information in conjunction with the financial statements including the notes thereto, as well as “Prospectus Summary”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Consolidated Capitalization” and “Description of Share Capital” included elsewhere in this prospectus.

Balance sheet data:

(in thousands of US$) ASSETS Non-current assets Property, plant and equipment Evaluation and exploration assets Trade and other receivables Total Current assets Trade and other receivables Cash and cash equivalents Total Total assets EQUITY AND LIABILITIES Capital and reserves attributable to shareholders of the Parent Equity share capital Other reserves Retained earnings Total equity Current liabilities Trade and other payables Accounts payable from related entities Total Total liabilities Total equity and liabilities	As at September 30, 2021 As at December 31, 2020	As at December 31, 2019 200 17,935 27 18,162 1,435 1,220 2,655 20,817 19,768 597 (1,358) 19,007 295 1,515 1,810 1,810 20,817
	513 536 32,517 27,831 2,536 2,193 35,566 30,560 182 247 1,510 1,265 1,692 1,512 37,258 32,072 40,518 26,768 (3,187) 1,421 (2,224) (2,149) 35,107 26,040 663 2,222 1,488 3,810 2,151 6,032 2,151 6,032 37,258 32,072

Income statement data:

come statement data:
(in thousands of US$) Continuing operations Administrative expenses Exploration expenses (Loss)/gain from continuing operations before net finance income/(cost) and income tax Finance income Finance costs (Loss)/gain from continuing operations before income tax Income tax (expense)/Income (Loss)/gain for the year from continuing operations Basic loss per share Diluted loss per share	Nine months ended September 30, 2021 Nine months ended September 30, 2020 Year ended December 31, 2020	Year ended December 31, 2019 (75) (223) (298) 43 (54) (309) (3) (312) (0.00003) (0.00003)	Year ended December 31, 2018 (90) (85) (175) 22 (108) (261) 13 (248) (0.00002) (0.00002)
	(88) (398) (237) 17 (89) (554) (71) (487) (791) – 2 2 (4) (1) (2) (75) (486) (791) – – – (75) (486) (791) 0.000004 (0.000004) (0.00006) 0.000004 (0.000004) (0.00006)

Cash flow statement data:

	Nine months	Nine months
	ended	ended	Year ended	Year ended	Year ended
	September 30,	September 30,	December 31,	December 31,	December
(in thousands of US$)	2021	2020	2020	2019	31, 2018
Cash flows from operating activities
Cash generated from/(used in) operations	(675)	(715)	2,509	208	(613)
Interests received	–	2	2	43	22
Interests paid	–	–	–	(44)	(98)
Income tax paid	–	–	–	(3)	13
Net cash generated from/(used in) operating activities	(675)	(713)	2,511	204	(676)
Cash flows from investing activities
Purchase of property, plant and equipment	(109)	(121)	(294)	–	(39)
Purchase of evaluation and exploration assets	(9,070)	(4,438)	(8,297)	(717)	(305)
Net cash used in investing activities	(9,179)	(4,559)	(8,591)	(717)	(344)
Cash flows from financing activities
Capital contributions	10,250	6,000	7,000	492	4,032
Cash flows generated from financing activities	10,250	6,000	7,000	492	4,032
Net increase/(decrease) in cash and cash equivalents during the year	396	728	920	(21)	3,012
Exchange difference	(151)	(954)	(875)	(1,317)	(3,360)
Cash and cash equivalents at beginning of year	1,265	1,220	1,220	2,558	2,906
Cash and cash equivalents at end of year	1,510	994	1,265	1,220	2,558

CORPORATE STRUCTURE

Name and Incorporation

The Company was incorporated on May 5, 2021 under the Business Corporations Act (British Columbia) (the “ BCBCA ”) as 1303714 B.C. Ltd. and changed its name to “Aclara Resources Inc.” on October 4, 2021. Our head office is located at Cerro el Plomo 5630, Office 901 9th floor, Las Condes, Región Metropolitana de Santiago, Chile. Our telephone number at our head office is +56 2 25651000. Our registered office is located at Suite 1700, 666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8.

The following chart identifies our subsidiaries, their applicable governing jurisdictions and the percentage of their voting securities which are beneficially owned, or controlled or directed, directly or indirectly, by the Company.

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Aclara Resources Inc.
(British Columbia)
100% (held via Chilean branch)
REE UNO SpA
(Chile)
100%
Prospecciones Greenfield SpA
(Chile)
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BUSINESS OF THE COMPANY

Our Business

Aclara is a development-stage rare earth mineral resources company with 451,585 hectares of mining concessions located in the Maule, Ñuble, Biobío and Araucanía regions of Chile. Aclara is initiating the development of its resources through the Penco Module, which covers a surface area of approximately 600 hectares and which has ionic clays that are rich in REE. Aclara is currently focused on the development and on the future construction and operation of the Penco Module, which will aim to produce a rare earth concentrate through a processing plant that will be fed by clays from nearby deposits. In addition to the Penco Module, Aclara will conduct exploration activities in order to determine if there are deposits within its other mining concessions that can be developed economically and with an adequate environmental footprint.

Principal Features of our Business

We believe that the following are the principal features of the Company’s business:

Our Product: HREE are critical to the global clean energy transition

The global transition to clean energy has helped to drive an expanding market for REE due to their valuable properties, and we believe that this trend will continue. Dy and Tb, which are HREE, and Nd and Pr, which are LREE, have magnetic attributes and are critical components in the production of high-performance permanent magnets. HREE have received the second highest supply risk score among raw materials according to the European Commission’s “Study on the review of the

list of Critical Raw Materials”. Nd magnets offer superior performance as they are lighter and stronger compared to other type of magnets, and have the ability to be engineered into any shape or size. The performance of Nd magnets can be complemented with Dy and Tb, to improve their magnetic performance and increase their ability to maintain their magnetism at high temperatures according to Argus.

The predominant uses of Nd magnets are in the EV industry and in wind turbines. Incorporation of Dy and Tb into Nd magnets delivers enhanced operating performance by enabling them to operate at higher temperatures (magnets with HREE can operate up to 240 °C as compared to 60 °C for those magnets without HREE), without losing their magnetic properties (high coercivity). The improved performance provided by incorporation of HREE is an important quality for permanent magnets used in EVs, military applications, and various electronic devices. In EVs, permanent magnets result in increased range autonomy, better use of space, lower weight and lower battery costs, the latter as a result of reduced lithium, cobalt and nickel content. According to Roskill, Nd permanent magnets are the permanent magnets that offer the best performance and optimisation potential in electric motors, with 90% of EV models using them as part of their drivetrain, including Tesla’s Model S, Model X and Model 3. In wind turbines, Nd magnets are a preferred alternative to traditional geared systems to generate wind power, as magnets require less maintenance, leading to longer wind turbine operating lives with lower operating costs. This advantage is particularly important for offshore wind turbines.

Penco Module’s Estimated Basket Economics (% Value by REE)

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Other; 20%
Dy; 32%
Pr; 4%
54% HREE (Dy + Tb)
(over the life of the mine)
Nd; 22%
Tb; 22%
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Compared to existing REE global exploration and development projects and operations, we believe that our ionic clayhosted deposit will produce one of the highest value per kilogram REO concentrate in the world. We expect that 80% of the value of the REO basket that we will produce from the Penco Module will be derived primarily from Dy, Tb, Nd and Pr. As of November 2021, we estimate the basket has a value of US$75/kg, the third most valuable basket amongst the companies that we have identified as our peers, and more than two times the basket value of the highest-value non-Chinese producer amongst the companies that we have identified as our peers.

Comparable Peers Rare Earth Element Basket Values

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Source: Aclara peer analysis based on the Technical Report and peer information sourced from public reports and press releases. Prices per Asian Metals

Penco basket price assumes LOM average basket composition

** Mt. Weld, owned by Lynas, and Mountain Pass, owned by MP are the only REE assets amongst the peer group that are currently in production

Our Deposit: Aclara offers a superior source of HREE outside of China

Minimal development expenditures: low strip ratio, no blasting required, simple machinery, and conventional open pit mining methods
Low processing costs: amenable to standard leaching techniques, with no grinding and milling required, that separates low-value elements lanthanum, cerium, and samarium as waste
Negligible radioactivity: unlike the majority of hard rock REE projects, negligible radioactivity in the deposits and in the end product
High-value end product: containing the high-priced HREE

Our Sustainable Operations: We believe that our ESG advantage ideally positions Aclara to become the sustainable REE supplier of choice for the world’s leading clean-tech companies

Sustainable extraction process: no blasting, no tailings dam and minimal water consumption due to a high level of water recirculation
Negligible radioactivity in the deposits and in the end product
Traceable production
We have benefited from Hochschild Mining’s demonstrated track record of operational success, sustainability-focused culture, and high standards of corporate governance

Our End-Market: Compelling market backdrop for REE underpinned by exponential demand growth and constrained supply

Forecast Global Sales of Electric Vehicles (Millions of Vehicles)

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EV Demand 2020-2030 (SDS Scenario) EV´s Demand 2020-2030 (STEPS Scenario)
60 60
50 50
40 40
30 30
20 20
10 10
0 0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Passenger BEV Passenger PHEV Comercial EV Passenger BEV Passenger PHEV Comercial EV
EV units mm EV units mm
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Source: IEA, Global EV Outlook 2021-2030

4 “ The IEA’s Sustainable Development Scenario (SDS) outlines a major transformation of the global energy system, showing how the world can change course to deliver on the three main energy-related SDGs simultaneously. To achieve the temperature goal, the Paris Agreement calls for emissions to peak as soon as possible and reduce rapidly thereafter, leading to a balance between anthropogenic emissions by sources and removals by sinks (i.e. net-zero emissions) in the second half of this century. The SDS is consistent with the direction needed to achieve the objectives of international climate goals.” (IEA)

5 “The Stated Policies Scenario reflects the impact of existing policy frameworks and today’s announced policy intentions. The aim is to hold up a mirror to the plans of today’s policy makers and illustrate their consequences for energy use, emissions and energy security.” (IEA)

Forecast Global Offshore Wind Demand (GW)

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Source: IRENA Report, Future of Wind (2019)

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Permanent Magnets Demand 2020-2030
300
250 CAGR 9%
200
150
100
50
0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Others ICE BEV PHEV Commercial EV Wind Power Electronics
Tonnes (000)
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Source: CRU 2021

Supply of both HREE and LREE, as well as further downstream processing, are currently dominated by China, which in 2020, was estimated by the USGS to contribute 58% of global REO production (in 2012, USGS estimated that China contributed 91% of global REE production). Furthermore, it is estimated that China imported 100% of the REO produced from Myanmar’s ionic clay production facilities, increasing their supply control of Dy and Tb to approximately 90%, as well as Nd and Pr to approximately 70%. In addition, according to CRU, China refines 100% of the HREE supply. Stricter environmental policies and measures to curb illegal production of REE are expected to constrain unlicensed, low-cost Chinese supply from 60,000 tonnes (57%) in 2017 to 8,000 tonnes (5%) in 2021, limiting REO production in China, according to Argus, and potentially making HREE more scarce. While there are several potential new REE projects outside of China, only two projects, owned by Lynas and MP, have initiated production in the last 10 years, and both companies are focused primarily on production of LREE. Neither production facilities owned by Lynas and MP, nor the vast majority of other potential development assets,

are enriched in HREE[6] , positioning Aclara to take advantage of a compelling market opportunity and backdrop for HREE production outside of China. For these reasons, the Penco Module provides a compelling basket composition compared to those produced by MP and Lynas, positioning itself in a privileged market position.

Our Growth Objectives:

Robust Starter Project

Aclara’s mission is to create a geopolitically independent, sustainable HREE supply chain for critical sectors in the growing green energy economy. The first step towards achieving our mission is to execute our Penco Module development project, which is expected to benefit from low estimated initial capital expenditures of approximately US$125[7] million in 2023 (driven by access to existing nearby key infrastructure including, among other things, power, motorways, port and airport access and a local professional workforce). We expect to achieve commercial REE production from the Penco Module in 2024 with a mine life of 12 years. The Penco Module is estimated to contribute approximately 2% of global Dy production, or approximately 28% excluding China and Myanmar[8] .

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(1) Includes US$10M site costs; capital expenditures to be incurred between 2023-2026

(2) Shown on an after-tax basis

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6 Source: Hallgarten & Company; peer information based on public reports and press releases

7 Excludes capital expenditures incurred in years 2021; estimated capital expenditures to be incurred in years 2023-2026 are approximately US$129 million. 8 Estimates based on Technical Report average annual production divided between estimated production by country (USGS)

Penco Module EBITDA Forecast (US$M)

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Source: Technical Report
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Multi-Pronged Organic Growth Strategy

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Catalina Project V é ronica Project
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As our Company matures, we intend to explore additional value-creation opportunities. Our Penco Module plan contemplates producing and selling a concentrate, which will be further refined by third parties separating the concentrate into individual oxides. There are several concentrate separation alternatives we believe will be available to Aclara, including utilizing: (i) existing excess separation capacity in China, (ii) existing plants outside of China, located in Silmet, Estonia (owned by Neo Performance Minerals) or India (owned by Toyota), and (iii) new separation plants that are either under construction (owned by MP Materials or Lynas) or may potentially be built in the future (planned by Pensana). Furthermore, we intend to investigate vertical integration options including, the opportunity to build our own separation plant, providing a compelling opportunity for Aclara to capture additional value from our geopolitically independent, high quality and sustainable product.

We anticipate targeting multiple original equipment manufacturers (such as Tesla, Toyota, BMW, Siemens, Volkswagen, General Electric and Mercedes) that may be seeking long-term traceable HREE supply and would value a geopolitically independent, high quality and sustainable products.

Our Team: Highly qualified management team with extensive expertise in developing and operating projects within the extractive industry in Latin America, who benefit from an established relationship with our Principal Shareholders

Competitive Conditions

Aclara is a development-stage rare earth mineral resources company with 451,585 hectares of mining concessions located in the Maule, Ñuble, Biobío and Araucanía regions of Chile. The Company’s competitive position is primarily determined by its high end-product quality (approximately 93% purity) and the high environmental standard of it processes, compared to other producers and projects throughout the world. Also, its high-value REE basket composition strengthens the Company’s ability to maintain its financial integrity through metal price cycles. Prices for REE are determined by international markets - largely dominated by China in mining and downstream processing – over which the Company has no influence or control. Costs are governed to a large extent by the grade, nature and location of the Company’s mineral resources as well as by input costs and the level of operating and management skill employed in the production process. In contrast with diversified mining companies, the Company is primarily focused on the exploration and development, and future production, of its REE deposits, and is therefore subject to distinct competitive advantages and disadvantages related to the prices of REE. If REE commodity prices increase, the Company will be in a relatively stronger competitive position than diversified mining companies that produce, develop and explore for other minerals in addition to REE if the prices of those other minerals do not also increase. Conversely, if REE commodity prices decrease, the Company will be at a competitive disadvantage to diversified mining companies. See “Industry Overview”.

The mining industry is competitive, particularly in the acquisition of mineral reserves and additional mineral resources in all phases of operation, and the Company competes with other companies possessing similar or greater financial and technical resources. The Company also competes with other mining companies and third parties (including hard rock operators such as: MP Materials, Lynas Rare Earths, Rainbow Rare Earths, Hastings, Iluka, Pensana Rare Earths, Energy Fuels, Peak Resources, Search Minerals, ASM, Greenland Minerals, Texas Mineral Resources, Appia, Northern Minerals, Arafura Resources, Vital Metals, Enova Mining, Torngat Metals, Namibia Critical Metals, Commerce Resources and RareX) over sourcing raw materials, equipment and supplies in connection with its production, development and exploration operations, as well as for skilled and experienced personnel and transportation capacity. See “Risk Factors”.

Price of Rare Earth Elements

The Company’s financial flexibility is highly dependent on the prevailing prices for the commodities it intends to produce, and HREE and LREE range in price:

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Additionally, the recent shift in demand driven by the start of the EV revolution is resulting in increased prices of Dy and Tb.

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Source: Asian Metals

While the Company’s overall strategy is to remain unhedged, circumstances may arise where increased certainty of cash flows is considered more important to long term value creation than providing investors with short term exposure to the volatility of metal prices. In these circumstances, the Company may elect to fix prices within a contractual quotation period or to lock in future prices through the variety of financial derivative instruments available.

Specialized Skills and Knowledge

The nature of the Company’s business requires specialized skills, knowledge and technical expertise in the areas of geology, engineering, mine planning, mine operations, metallurgical processing, and environmental compliance. In addition to the specialized skills listed above, the Company also relies on staff members, contractors and consultants with specialized knowledge of logistics and operations in Chile and local community relations. In order to attract and retain personnel with the specialized skills and knowledge required for the Company’s operations, the Company maintains competitive remuneration and compensation packages. To date, the Company has been able to meet its staffing requirements.

Employees

The Company and its subsidiaries employed a total of 46 employees as at September 30, 2021 . None of our employees are currently covered by a collective bargaining agreement, and we believe our present employee relations are good.

Foreign Operations

The Penco Module is located in Biobío Region, Chile and is the only mineral project material to the Company for the purposes of NI 43-101. Foreign operations accounted for approximately 100% of the Company’s assets as at September 30, 2021. Accordingly, the Company is entirely dependent on its foreign operations for the exploration and development of mineral properties and for production of metals.

Chile is well-known as a mining jurisdiction globally. The country boasts a robust supplier network, a mining friendly government, and a relatively stable economy with an investment grade credit rating. Approximately 88% of the Company’s operating costs are denominated in Chilean peso. As at the date of this prospectus, the Company has not hedged its exposure to Chilean peso/U.S. dollar exchange rate fluctuations, or any other exchange rate fluctuations applicable to its business, and is therefore exposed to currency fluctuation risks. See “Risk Factors – Risks Related to Our Business and Industry – Currency fluctuations can result in unanticipated losses”. The Company’s operations are subject to Chilean regulations pertaining to

environmental protection, the use and development of mineral properties and the acquisition or use of rural properties by foreign investors or Chilean companies under foreign control and various other Chilean regulatory frameworks. See “– Regulatory Framework” below.

Corporate Structure Controls

The risks of the corporate structure of the Company and its subsidiaries are risks that are typical and inherent for issuers who have material assets and property interests held indirectly through foreign subsidiaries and located in foreign jurisdictions. As a result, the Company’s business and operations are exposed to various levels of political, economic and other risks and uncertainties associated with operating in a foreign jurisdiction such as differences in laws, business cultures and practices, banking systems and internal controls over financial reporting. For a description of risks associated with the Company’s operations in Chile, please see “Risk Factors – Risks Related to the Company’s Foreign Operations”.

Such risks are mitigated by the Board exercising control over the entire corporate structure by having members appointed to the boards of directors of the Company’s subsidiaries, by the use of local experts (legal, accounting, tax and directors) and exercising controls over the use of cash, performing regular reviews of the consolidated books and records at the Company’s head office and frequent personal inspection and visits to the offices and project locations of the foreign subsidiaries by the Company’s key management on a regular basis.

Management of the Company has control over each of its subsidiaries that hold the Penco Module. Therefore, the management of the Company: (i) through the Company’s indirect shareholdings of its subsidiaries, can impact the appointment and dismissal of its subsidiaries’ directors and officers; (ii) can effectively instruct its subsidiaries’ directors and officers to pursue the Company’s business activities; and (iii) has legal rights, through the Company as a direct or indirect shareholder, as applicable, to require the directors and officers of the Company’s subsidiaries to comply with their fiduciary obligations and can also enforce such rights by way of shareholder remedies available to it. As a result, senior management of the Company can effectively align the Company’s business objectives and effect the implementation of same at the corporate subsidiary level.

The Company has the ability to remove and appoint directors and officers of its subsidiaries by the signing and filing of board resolutions related thereto with the respective company registry. The Board, through its corporate governance practices, regularly receives management and technical updates and progress reports in connection with the Penco Module, and in so doing, is able to maintain effective oversight of operations. The opening and closing of bank accounts of the Company’s subsidiaries is controlled and approved by the Company’s Chief Executive Officer or Chief Financial Officer. The Board is able to cause the Company’s subsidiaries to transfer funds and accomplish the various operating aspects of the business by way of its ability to exert effective control over each such entity as discussed above. No money can transfer without at least one senior officer of the Company approving, be it the Chief Executive Officer or the Chief Financial Officer. The Board is not restricted in accessing minute books and corporate records and documents of any of its subsidiaries.

Management Experience in Chile

All of the Company’s business is currently conducted in Chile. The majority of the Company’s officers have experience conducting business in markets across Latin America. Moreover, the Company’s officers frequently review relevant materials created by its Chilean legal counsel and communicate with Chilean legal counsel, the officers of the Company’s subsidiaries, and local consulting staff whereby they are apprised of new developments in the legal regime and new requirements that come into force from time to time such that management is kept aware of relevant material developments in Chile as they pertain to and affect the Company’s business and operations. Any material developments are to be discussed with the directors at the Board level. Additionally, directors and officers of the Company will attend seminars and presentations from time to time provided by legal and accounting firms on developments in Chile. The directors and officers also work closely with the Company’s Chilean counsel and local consulting staff to understand and subsequently adjust firm strategies and practices in connection with changes in Chilean laws and regulatory regimes.

Operations in Chile

Certain of the senior officers and certain directors of the Company reside in Chile, and other senior officers and directors of the Company also visit Chile on a regular basis. Taken together, this ensures that the Company retains effective control and management of the operations of the Company in Chile. The Company also relies on the expertise and advice of Chilean counsel in conducting its business operations in accordance with local business culture and practices. In addition, the Company

hires and engages local experts and professionals (i.e. legal, accounting and tax consultants) to advise the Company with respect to current and new regulations in respect of banking, financial and tax matters in Chile. The Company utilizes and will continue to utilize large, established and well recognized financial institutions in both Canada and Chile.

The Company also arranges for meetings with local management, the Company’s consultants and vendors, and other local officials and service providers, as deemed appropriate. Each of the Company’s directors has or will be required to visit the Company’s properties in Chile, and attended corporate presentations outlining the Company’s local activities, operations and applicable laws, among other matters. The Board intends to hold at least one meeting in Chile each year. Additional visits by directors will also occur on an as needed basis.

Business Language in Chile

Business in Chile is primarily conducted in Spanish and English. The majority of the senior officers of the Company, as well as Chilean counsel to the Company, are fluent in both Spanish and English. It is intended that any additional advisors to the Company in Chile will be fluent in English. The primary language used in meetings of management and the Board is English. Material documents relating to the Company that are provided to the Board are in English. To the extent that any original documentation is in Spanish, Chilean counsel or the respective officers of the Company or other consultants located in Chile can assist with any translation needs. The Company does not currently have a formal communication plan or policy in place and has not to date, experienced any communication-related issues. The Company has not experienced and does not anticipate experiencing communication related issues in connection with its operations in Chile. Numerous service providers and consultants under the Company’s employ are fluent in Spanish and English and assist the Company as required. The Company will, from time to time, re-evaluate whether a formal communication policy is necessary.

Internal Control Over Financial Reporting

The Company maintains internal control over financial reporting with respect to its Chilean operations by taking various measures. Differences in banking systems and controls between Canada and Chile are addressed by having controls over cash in both locations; particularly over access to cash, cash disbursements, appropriate authorization levels, and performing and reviewing bank reconciliations on a monthly and quarterly basis. Cash balances are provided weekly to the Company’s management. Certain subsidiaries of the Company maintain various cash and investment accounts with Chilean banks and have extensive finance and treasury functions, based in Chile, under the direction of the Company’s Chief Financial Officer.

The difference in cultures and practices between the two countries is addressed by employing competent staff in both countries who are familiar with the local laws, business culture and standard practices, have local language proficiency, are experienced in working in the respective jurisdictions and dealing with the respective government authorities, and have experience and knowledge of the local banking systems and treasury requirements. The Company documents and assesses the design of internal controls over financial reporting on an annual basis. Furthermore, key controls for the accounts in scope are tested across the Company on an annual basis. This process is undertaken by the Company’s Chief Financial Officer.

Regulatory Framework

The Company’s activities are subject to Chilean laws and regulations which are generally applicable to all companies in the mining sector. The legal framework which regulates the Company as a holder of mining concessions is contained in the Chile’s Constitution, the Constitutional Law Governing Mining Concessions (Law 18,097 of January 21, 1982) and the Mining Code (Law 18,248 of October 14, 1983) (the “ Mining Code ”) (collectively, the “ Mining Legislation ”). Under the Mining Legislation, the Chilean State is the owner of all mineral and fossil substances, regardless of who owns the surface land in which such substances are located. Private persons and companies may obtain mining concessions for exploration and exploitation of mineral resources. These concessions are granted by judicial resolutions in accordance with the Mining Code.

Mining concessions are transferable, mortgageable and irrevocable and regulated by the same civil law that regulates real estate rights generally. Generally, the owner of a mining concession may occupy as much of the surface land as is necessary for mining activities upon the creation of a mining easement or by other rights granted upon other authorization given by the owner of the surface land, such as a lease agreement, easement or other title. Mining easements can be obtained by way of direct negotiation with the surface land owner or, if the latter refuses to grant such rights, by way of a summary procedure before the relevant court. Regardless of how the mining easement is obtained, the party granting the easement is entitled to compensation should the mining activities and works caused by the owner of the mining concession cause damage. Exploitation concessions have an indefinite duration. Exploration concessions are granted for two years and may be extended for a maximum

of two additional years subject to waiving at least half of the area originally allocated. Prior to the expiration of the first or the second two-year period, exploration concessions can be converted to exploitation concessions. If they are not so converted, the exploration concession terminates.

Owners of mining concessions must pay an annual fee equivalent to approximately US$1.40 per hectare in the case of exploration concessions and approximately US$6.80 per hectare in the case of exploitation concessions. However, the latter fees, within certain limits, may be credited to income taxes originated through the exploitation of the concession. Payments of the annual fees must be made in March of each year. Failure to make the annual fee payments may result in the loss of title to the concession through its auction.

The Company owns mining concessions granted by the Chilean Ordinary Courts for its exploration and exploitation operations. In 2020, the Company paid total concession fees of US$342,724.

Pursuant to the Mining Code, all mining concessions, as well as certain raw materials, assets and other property permanently dedicated to the exploration or extraction of minerals cannot be subject, except in extremely limited circumstances, to an order of attachment.

Environmental, Health and Safety Matters

The Company’s activities are subject to national, regional and local regulations as well as international treaties subscribed by Chile and enacted as Chilean domestic law regarding the protection of the environment, natural resources and the effect of the environment on human health and safety, including laws and regulations concerning water, air and noise pollution, the handling, disposal and transportation of hazardous waste and occupational health and safety.

The General Environmental Law (Law N° 19,300), enacted in March 1994 and modified by Law N° 20,417, enacted in 2010 (collectively, the “ General Environmental Law ”), establishes the general environmental legal framework in Chile, including the establishment of a range of environmental management mechanisms known as the Environmental Impact Assessment System ( Sistema de Evaluación de Impacto Ambiental ), the Emission Standards and the Environmental Quality Standards, among others. Chilean environmental laws and regulations, and the enforcement thereof, have become increasingly stringent since 2010 and even more due to recent changes. Such amendments include, among other significant modifications, the creation of a new institutional framework comprised by: (i) the Ministry of the Environment ( Ministerio del Medio Ambiente ); (ii) the Council of Ministers for Sustainability ( Consejo de Ministros para la Sustentabilidad ); (iii) the Environmental Assessment Service ( Servicio de Evaluación Ambiental ); (iv) the Bureau of the Environment ( Superintendencia del Medio Ambiente ); and (v) the Environmental Courts ( Tribunales Ambientales ), each of which are in charge of designing, evaluating and enforcing laws and regulations relating to projects and activities that could have an environmental impact. These institutions are fully operational. Recent legal and regulatory changes are likely to impose additional restrictions or costs on the Company and also increased fines due to non-compliance with such laws and regulations, relating to environmental litigation and protection of the environment, particularly those related to flora and fauna, wildlife protected areas, water quality standards, mine closure, air emissions, and soil pollution. Since the Bureau of the Environment became fully operational on December 28, 2012, infringement of environmental regulations may result in fines of up to approximately US$8.7 million, the closure of facilities and the revocation of environmental approvals. The Company incurs, and may be required in the future to incur, substantial capital and operating costs related to environmental compliance. However, many of these costs are inextricably intertwined with the operation of the Company’s business as a whole.

The General Environmental Law, as complemented by additional regulations, enables the Chilean government to: (i) bring administrative and judicial proceedings against companies that violate environmental laws; (ii) close non-complying facilities; (iii) revoke required operating licenses; (iv) require that companies to submit their projects for environmental evaluation as required by applicable law; and (v) impose sanctions and fines when companies act negligently, recklessly or deliberately in connection with environmental matters. The General Environmental Law also grants citizens the right to bring civil actions against companies that are not in compliance with environmental laws and regulations when such companies have caused “environmental damage,” as defined in such law, after such non-compliance has been established by a judicial proceeding.

Additionally, citizens affected by environmental pollution may file a petition for relief to Chilean Courts of Appeal, requiring the suspension of the offending activity and the adoption of protective measures through the judicial process called recurso de protección (constitutional protection action).

The General Environmental Law and its regulations contain certain rules on environmental impact assessment, which have been in effect since April 1997, and that provide that the Company must evaluate the environmental impact of any future project or activity listed in article 10 of the General Environmental Laws by means of an environmental impact declaration or an environmental impact study depending on the significance of the environmental impacts associated. The Company has conducted these environmental impact studies pursuant to the General Environmental Law.

Health and safety in the workplace are among our highest priorities, and our policies and procedures seek to eliminate accidents. Regulations were enacted in February 2004 governing safety standards for mining operations. Pursuant to these regulations, all mining companies, including the Company, are required to provide closure plans for their mining facilities, demonstrating compliance with safety standards. These plans must be updated every five years and must consider the requirements set forth in the environmental authorization issued for the respective facility, if any. A new mine closure regulation, Law N° 20,551, which includes health, safety and environmental requirements along with mandatory provisions that require financial guarantees, was enacted in 2011, and became effective in 2012.

Mining is an inherently dangerous activity that involves substantial risks. On November 16, 2021, a fatal accident occurred in our operations. An employee of Empresa Aninat Maquinaria y Construcción Limitada, one of our contractors, suffered a fatal accident due to an incident involving heavy machinery.

Social and Environmental Policies

Following closing of the Initial Public Offering, we will adopt a written code of ethics (the “ Code of Ethics ”) that will apply to all of our officers, directors, employees, contractors and agents acting on behalf of the Company. The objective of the Code of Ethics is to provide guidelines for maintaining our and our subsidiaries’ integrity, trust and respect. The Code of Ethics will address compliance with laws, rules and regulations, conflicts of interest, confidentiality, commitment, preferential treatment, financial information, internal controls and disclosure, protection and proper use of our assets, communications, fair dealing, fair competition, due diligence, illegal payments, equal employment opportunities and harassment, privacy, use of Company computers and the internet, political and charitable activities and reporting any violations of law, regulation or the Code of Ethics. Any person subject to the Code of Ethics should report all violations of law, regulation or of the Code of Ethics of which they become aware to any one of the Company’s executive officers.

Following closing of the Initial Public Offering, we will adopt an anti-bribery and anti-corruption compliance policy (the “ Anti-Bribery Policy ”) which will establish our commitment to comply fully with Canada’s Corruption of Foreign Public Officials Act and the United States Foreign Corrupt Practices Act of 1977 and any local and foreign anti-bribery or anticorruption laws and regulations that may be applicable. All officers, directors, employees, contractors and agents acting on behalf of the Company (“ Company Personnel ”) shall comply with all laws prohibiting improper payments to domestic and foreign officials. All Company Personnel shall conduct the Company’s business legally and ethically. Gifts, payments or offerings of anything to influence sales or other business, bribes, kickbacks, or other questionable inducements, directly or indirectly to government officials are prohibited. The Anti-Bribery Policy will provide a guideline of prohibited payments, as well as the consequences of non-compliance. The Anti-Bribery Policy will also set out strategies we have adopted to mitigate bribery and corruption risk. The Board will be responsible for monitoring compliance with the Anti-Bribery Policy and initiating investigations of reported violations.

Upon closing of the Initial Public Offering, the Board will form the Sustainability Committee, which will be charged with overseeing and making all necessary recommendations to the Board in connection with sustainability issues as they affect the Company’s operations. In particular, it will focus on compliance with national and international standards to ensure that effective systems of standards, procedures and practices are in place at each of the Company’s operations. The Sustainability Committee is also responsible for reviewing management’s investigation of incidents or accidents that occur in order to assess whether policy improvements are required.

See “Directors and Executive Officers – Corporate Governance”.

INDUSTRY OVERVIEW

The Role of REE

REE, or lanthanides, are minerals found in natural deposits and can be separated based on their atomic weight into two sub-categories: (i) HREE: yttrium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium, (ii) LREE: lanthanum, cerium, praseodymium, neodymium, and samarium. Despite their name, REE are more common than silver, gold and platinum in the earth’s crust; however, mining of REE is less common as they are not typically concentrated in economic quantities. Furthermore, REE mining is usually associated with radioactive elements such as thorium or uranium, which can be difficult and expensive to handle. The majority of known global REE production originates from China, followed by the U.S., Myanmar, Australia and others.

2020 Estimated REE Production by Country

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Other, 6.3%
Australia, 7.1%
U.S., 15.8%
China, 58.3%
Myanmar, 12.5%
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Source: USGS REE Critical Mineral Resources of the U.S.

REE are a Rapidly Growing Market

Demand for REE has grown considerably over the last three years. The driver of this increase has been the consumption of REE in growing applications, such as permanent magnets used in EVs, offshore wind turbines and other technological applications. According to Adamas, permanent magnets accounted for approximately 35% of REE demand by volume and approximately 91% by value in 2018.

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Source: Adamas, 2019. Rare Earth Elements: Market Issues and Outlook

Permanent Magnets in a Green Economy

The strongest known permanent magnet is the Nd magnet, also known as an NdFeB or Neo magnet, and is the most widely used commercial REE magnet. Dy and Tb are critical metals to the magnet’s composition to increase its operating temperature from 60 °C up to a maximum of 240 °C (Adamas Intelligence). This characteristic, inherent to Dy and Tb, is a necessary feature for permanent magnets used in EVs, as well as military applications, and various electronic devices, where an operating temperature greater than 80 °C is required (Argus, Adamas Intelligence).

REE magnets are shaping the future of the EV and wind power generation industries. Coordinated global efforts by countries to de-carbonize their economies has spurred research and development in green energy technologies. Innovations in the chemistry of Nd magnets has resulted in the improved strength and operating characteristics of REE magnets; by substituting small amounts of Nd with Dy, Nd magnets are able to improve the magnet’s resistance to demagnetization, and by extension, performance at high temperatures. As a result, Dy demand is expected to outpace supply through to 2030.

Dy Supply vs. Demand (tonnes)

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Source: CRU

Notes: *Other: Lynas (Mt. Weld), MP (Mountain Pass), India (Tamil Nadu/Kerala), Russia (Lovozero), Brazil (Buona Norte), Vietnam (Dong Pao), Burundi (Rainbow Rare Earths), US (Energy Fuels), Australia (Iluka Resources), Madagascar (Rio Tinto), Thailand (unidentified)

** New Projects: Energy Fuels, Serra Verde, the Penco Module, Vital Metals, Hasting Tech Metals, Arafura Resources, Peak Resources, Pensana, Northern Minerals, Australian Strategic Materials, Ionic Rare Earths

The EV Revolution

Automobile manufacturers are in the midst of a large-scale electrification in order to meet government policies and regulations aimed at reducing the sale of vehicles with internal combustion engines, and have publicly committed to the electric revolution: Tesla (estimates 1.4 million EV production capacity by 2022), Volkswagen (targets approximately 50% batteryelectric vehicle sales by 2030); Toyota (in the U.S., targets 70% sales from EV by 2030); Mercedes (aims to become all-electric by 2030); Ford (targets 40% global sales from EV by 2030); Honda (in North America, targets 40% sales from EV by 2030, 80% by 2035 and internal combustion engine eliminated by 2040); BMW (targets 20% sales from battery/plug-in hybrids by 2023); and Volvo (targets 100% sales from EV by 2030). In addition, by 2035, the U.K. is expected to prohibit the sale of nonelectric vehicles, while in China, the country is aiming to sell exclusively “eco-friendly” focused on new-energy and hybrid vehicles according to Nikkei Asia, and California targets 100% EV adoption by 2030.

REE based permanent magnets have emerged as the leading technology in EV motors. In 2017, Tesla announced it was shifting away from the induction motor, based on copper coils, to REE based magnets due to their lower cost, higher power

density and increased range. In early 2021, General Motors announced a target to be exclusively selling zero emissions vehicles by 2035 with each car featuring permanent magnet motors in addition to a smaller induction motor.

Government policies, industry offerings and consumer adoption of EV technology has the industry poised for rapid growth. According to the IEA, EV demand is estimated to have a CAGR of 31% in the Sustainable Development Scenario (SDS) and a CAGR of 24% in Stated Policies Scenario (STEPS) from 2020 to 2030.

EV Demand 2020-2030 (SDS Scenario)

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60
50
40
30
20
10
0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Passenger BEV Passenger PHEV Comercial EV
EV units mm
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Source: IEA (SDS Scenario)[9] Note: BEV: Battery Electric Vehicles, PHEV: Plug in hybrid Electric Vehicles, Commercial EV: light, medium and heavy vehicles

Growing Demand for Wind Energy

Global installed capacity of wind power has nearly quadrupled over the past decade, spurred by falling costs, which have declined over 30% on average between 2010 – 2020 (IRENA: Power Generation Costs, 2020). Off-shore wind power generation is well suited to meet the required need for capacity additions as it can be deployed on a large scale with annual wind installations expected to grow at a CAGR of 12% between 2020 and 2030.

Wind turbine sizes have grown relative to installed capacity, stemming from larger rotors and lighter drivetrains. By utilizing permanent magnets, wind turbines are able to operate more efficiently at slower wind speeds, and with fewer mechanical parts, improving their economic viability. As a result, total metal requirements for next generation direct drive wind turbines is expected to increase the demand for REE.

9 The IEA’s Sustainable Development Scenario (SDS) outlines a major transformation of the global energy system, showing how the world can change course to deliver on the three main energy-related SDGs simultaneously. To achieve the temperature goal, the Paris Agreement calls for emissions to peak as soon as possible and reduce rapidly thereafter, leading to a balance between anthropogenic emissions by sources and removals by sinks (i.e. net-zero emissions) in the second half of this century. The SDS is consistent with the direction needed to achieve the objectives of international climate goals. ( IEA)

Forecast Wind Power Demand (GW)

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Source: Onshore vs. Offshore Wind power GW forecast 2020-2030 and the IRENA Report

Mineral Intensity for Wind Power by Turbine Type (kg/MW)

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Source: IRENA Report, Future of Wind (2019)

As a result of the expected growth in EVs and wind energy, CRU is forecasting the price for Dy and other critical REE to rise. The price of Dy used in permanent magnets will increase above historical levels, while Argus estimates prices for Nd, Pr and Tb to rise at similar rates.

Base Case Nominal Dy Price Forecast (US$/kg)

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$800 100%
$636
$581
$600 $533 75%
$490 $503 $483
$395 $411 $423 $437
$400 $348 50%
$230
$209
$156
$200 51% 25%
34% 10% 13% 12% 10% 9% 9%
4% 3% 3% 3%
- 0%
2018 2019 2020 2021 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Jan-Jun YTD Jul-Dec
Annual increase (%) Dysprosium - Base
US$ / kg % increase
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Source: Historic Prices by Asian Metals. Future prices by CRU

Price forecasts for REE (La, Ce, Pr, Nd, Sm, Eu, Gd, Tb, Ho, Er, Tm, Yb, Lu, and Y), excluding Dy, have been sourced from Argus.

Spot REE Prices and Penco Module Basket Price at Various Reference Periods (USS$/kg)

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Source: Historic Prices by Asian Metals. Argus Forecast prices are as the report publishing date (March 26, 2021)

Concentrated Production and Processing of REE

The extraction and production of REE has been dominated by China since the 1990s. Abundant ion-adsorption clay deposits and low cost of extraction owing to less stringent regulatory and environmental standards have historically been a competitive advantage. Today, according to USGS, China is estimated to account for approximately 58% of mining supply, with Myanmar representing approximately 13%, followed by Australia and the U.S. at a combined estimate of 23%. Furthermore, China imports 100% of Myanmar ionic clay production, increasing their supply control on Dy and Tb to approximately 90% and Nd and Pr to approximately 70%. China’s refining capabilities has correspondingly increased to account for a disproportionately large share of the market at 85% for LREE and at 100% for HREE.

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Evolution (1990-2020): Global REO Production (Tonnes)
250,000
200,000
150,000
100,000
50,000
0
China Myanmar US Australia Other
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
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Source: USGS Geological Survey 1991-2021

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Evolution (2001-2020): Global DyTb Production (Tonnes)
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
China China Unlicensed Myanmar Other China HREE Quota
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Source: REO production based on USGS and Dy and Tb distribution based on papers and press releases: Dy and Tb Production is estimated and does not correspond to official numbers. Argus: % of unlicensed production

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Source: Ministry of Land and Resources and Ministry of Industry and Information Technology

Beyond supply and refining, China has expanded its downstream operations to include metal and alloy production as well as magnets, effectively controlling the entire value chain. According to Yang, Y., Walton, A., Sheridan, R. et al.’s “REE Recovery from End-of-Life NdFeB Permanent Magnet Scrap: A Critical Review,” China is the leading producer of NdFeB

magnets, with Japan as the only other country producing NdFeB magnets at scale, primarily through Hitachi. The United States does not presently produce permanent magnets.

Shifting Global Supply Chains

China’s historical attempts to limit REE exports in 2010 prompted many Western countries, and their allies, to seek new mine extraction sites and create domestic processing capabilities. In the U.S., former President Donald Trump signed Executive Order 13817 (A Federal Strategy to Ensure Secured and Reliable Supplies of Critical Minerals) in 2017 and deemed 35 minerals critical to domestic security, including all REE. In addition to mineral extraction, the Pentagon announced in 2021 the Defense Production Act Title III, and invested in MP’s Mountain Pass LREE processing plant in California along with the largest REE mining and processing company outside of China, Australia’s Lynas, to fund construction of a LREE processing plant in Hondo, Texas. The Australian government announced a similar program, the Modern Manufacturing Initiative, with a mandate to award up to A$1.3 billion, from 2021 through 2024, to stimulate growth across several industries that consume REE, including resource technology for critical mineral processing, as well as recycling and clean energy. In Canada, the government has designated 31 minerals as critical. The list is part of Canada’s commitment to develop a critical minerals strategy and improve domestic supply chains. The program’s goal will be to identify ways to bolster the countries critical mineral supply, develop the supply chain, target mineral development policies, coordinate international engagement, and support research and development. Additionally, the U.S., Europe and Russia have identified REE as critical minerals where a diversified supply is required. Specifically, the following is USGS’ classification of critical, non-critical and near-critical supply risk of REE and other elements, as well as importance of REE and other elements to clean energy:

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Aclara believes that it is well positioned to contribute to the supply of critical HREE to meet the needs of a secure global supply chain.

THE PENCO MODULE

Overview

The scientific and technical information below with respect to the Penco Module has been derived from and based on the assumptions, qualifications and procedures set out in the Technical Report prepared by Ausenco and authored by Francisco Castillo, Alejandro Solar, Manuel Hernandez, Luis Oviedo, P. Geo., Scott Weston, P. Geo., Scott Elfen, P.E. and Gavin Beer, P.E.

A copy of the Technical Report can be found on SEDAR at www.sedar.com to obtain further particulars regarding the Penco Module. Figures or charts referred to in this summary but not reproduced in the prospectus may be viewed in the Technical Report. Table references are to tables in the Technical Report, certain of which are reproduced in the prospectus. Technical information in this prospectus regarding the Penco Module should be read in the context of the qualifying statements, procedures and accompanying discussion within the complete Technical Report and the summary provided in the prospectus is qualified in its entirety by the Technical Report.

Project Description, Location and Access

Project Location

The Penco Module is located within the boundaries of the Penco and Concepción districts, in the Biobío Region, Chile as depicted below. The majority of the deposits associated with the Penco Module are located in the Penco district.

Project Ownership

REE Uno is a capital company incorporated as a corporation by shares (sociedad por acciones) in accordance with articles 424 to 446 of the Code of Commerce of the Republic of Chile. REE Uno is the sole holder and owner of the Penco Module. Pursuant to the Demerger Transactions, all of the shares of REE Uno, which were previously owned by Hochschild Mining Holdings Limited (“ HM Holdings ”), were acquired by the Company on October 15, 2021. See “Demerger Transactions”.

Mineral Tenure, Surface Rights, Water Rights, Royalties and Agreements

REE Uno owns 451,585 hectares of mining rights, distributed in the Maule, Ñuble, Biobío and Araucanía Regions. These mining rights consist of exploitation concessions and exploration concessions.

The Penco Module covers a surface area of approximately 600 hectares. The properties of REE Uno are comprised of 743 exploration concessions and 50 exploitation concessions, covering a total area of 451,585 hectares. The Penco Module currently has sufficient surface rights acquired to support construction and development of the planned mining related infrastructure. At the effective date of the Technical Report, the terms and the compensation of a mining land use easement had been agreed with the owner of the Luna extraction area’s surface rights. This land use easement would cover all of the hectares of the Luna extraction area, and such land use easement would be valid for the period of time required to exploit the Luna extraction area. The formal agreement in respect of this mining easement remains in the drafting process.

REE Uno holds water rights that meet the projected water requirements of the Penco Module. There are no third-party royalties, back-in rights, payments, or other encumbrances associated with the Penco Module.

Project Location

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History

From 2012 to 2018, Minera BioLantánidos (“ MBL ”) was majority owned (94%) by FIP Lantánidos, a Chilean private fund controlled by a private equity firm named Minería Activa. During 2018 and 2019, HM Holdings invested in the project, acquiring a 6.2% equity stake with an option to further increase its ownership. At the end of 2019, HM Holdings acquired the remaining 93.8% of the project.

In 2012, MBL had started an exploration program in the Penco area following an ion adsorption clay modelling for lanthanides, with focus in the migmatites and the pegmatites of the Coastal Batholith, leading to the discovery of the peraluminous granite of Penco.

In 2014, high rare earth element (REE) anomalies were detected in outcrops, slopes by new roads involving radiometric flights, NanoTEM, LiDAR topography, and surface sample ICP analysis. This sampling confirmed that the garnet granite (peraluminous granite) is strongly correlated to the radiometric thorium anomaly. In early 2015, concentrate samples using a pilot plant located in the project area were produced.

During the same period, MBL started sonic drills for saprolite, without water injection or additives. In September 2014, a second sonic machine was introduced concluding the program in June 2015. The program completed 4,888 meters in 166 sonic drill-holes and 1,171 meters in 11 diamond drill-holes. During this period, Marisol, Alexandra, Victoria (Norte and Sur), Luna, and Maite were the defined zones of mineralized material. In August 2015, MBL started a new phase completing 3,239 meters with 125 sonic drill holes. The last phase, during 2017-2018, completed 5,522 meters in 176 sonic drill holes.

In 2020, MBL undertook a drill program to characterize the mineralogy, analyse the REE-total and REE exchangeable grades for a new updated resource model and estimation drilling 6,486 meters in 220 sonic drill holes. From December 2020 to March 2021, a new brownfield and infill campaign was executed with a total of 6,418 meters in 259 sonic drill holes to extend the known mineralized orebodies, totalling 6,700 samples.

Geological Setting, Mineralization and Deposit Types

The Penco Module covers an area of six kilometers by three kilometers, located in the Coastal Range in the Biobío Region in central-southern Chile, and is hosted in a carboniferous granitoid batholith complex intruding the eastern metamorphic basement series. Four main rock complexes are recognized: Metapelites (Paleozoic basement), Eastern Concepcion Plutonic Complex (oldest intrusion, east of the Penco Module), Penco Granitoid Complex (host of REE-rich ore bodies) and the Quartz-Diorite (youngest intrusion). Locally, REE anomalies were detected through soil analysis, using a portable XRF in roadcut exposures. These findings were better defined by a radiometric flight, NanoTEM and LiDAR topography, confirming that the garnet-bearing granitoid is strongly correlated with the radiometric anomaly of thorium (Th).

These rock complexes contain an extensive and deeply weathered regolith (+/- 40 meters). The regolith contains abundant clay minerals that were locally enriched with REE in the favorable horizons. MBL carried out a geochemical program in the zone that found significant yttrium (Y), cerium (Ce) and thorium (Th) anomalies.

The regolith profile developed clay minerals with capacity for cation adsorption. Of such clay minerals, the garnetbearing granitoid is the source of the REE mineralization and is the richest in exchangeable REE. Other lithologies such as the biotite-bearing diorite and metapelites contain decreasing levels of exchangeable REE, based on proximity to the garnet-bearing granitoid, due to secondary enrichment of REE-rich fluids sourced from the garnet-bearing granitoids following lateral migration under specific geochemical conditions (pH, alteration). Thus, mineralization depends on garnet-bearing granitoids weathering intensity and topography (flatter relief allows for thicker regolith profiles and preserves ore bodies).

The Penco regolith profile is up to 35 meters thick and comprises, from the bottom up: unaltered bedrock, transitional zone, semi-weathered zone, completely weathered zone, pedolith and topsoil.

The regolith profile is identified as the biotite-bearing diorite, metapelite and garnet-bearing granitoid, the latter was used ahead as the model. Apart from core logging, geochemistry (major elements and total REE), mineralogy, pH, and exchangeable REE with ammonium sulfate were used to define the geologic units.

In this type of regolith deposit, typical hydrothermal alterations and structures do not seem to be useful for the definition of mineralization units as they do not seem to control the occurrence.

Exploration

Heavy REE anomalies were detected analyzing soil geochemistry with yttrium (Y), cerium (Ce), and thorium (Th) readings using a portable XRF in roadcut exposures. These findings were subsequently tested by radiometric flight and NanoTEM, confirming a strong correlation between the garnet-bearing granitoid and a radiometric thorium (Th) anomaly. In 2014, a drilling program was carried out, including 4,888 meters in 166 sonic drill holes and 1,171 meters in 11 diamond drill holes, additional campaigns were carried out completing 3,239 meters in 125 sonic drill holes during 2015, and 5,522 meters in 176 sonic drill holes during 2017-2018.

In 2020-2021, MBL completed a drilling infill-exploration campaign to characterize the mineralogy and establish a new geological domain with a resource estimation of the Maite, Victoria (Norte and Sur), Luna and Alexandra orebodies, totaling 12,909 meters in 479 sonic drill holes. Based on this database, geological domains for the four mineralized bodies were determined.

The geological characteristics of the area show good possibilities of finding more prospects of this type. Geochemical maps show other anomalies to the northeast and the geological environment to the north and south of the Penco Module is very similar. Thus, exploration must prioritize looking for more garnet-bearing granitoid occurrences in this belt.

Drilling

The sonic drilling generates high frequency vibrations at approximately 150 hertz. These waves reduce the friction in the drilling bit which prevents clay from sticking to the bit. This improves drilling speed, making it faster than traditional methods. It is necessary to completely remove the drilling column until reaching the drilling barrel, where the sample is retained, in order to retrieve it. Then, with the help of sonic vibration plus pneumatic pressure, the sample is expelled from the interior of the drilling barrel and deposited inside a polyethylene sleeve previously installed on the outside of the barrel.

Occasionally, it is necessary to inject pressurized water. A drilling diameter of 4 ½ inches was used, which generated between 15 and 20 kilograms of samples per 2-meter interval.

All drills were vertical, and the diameter of the cores were 3.25 inches (8.25 centimeters). Cores were recovered in 1-2 metre intervals and encased in plastic bags. The average sample length was 2 meters, except for limits between geological horizons or structures taking a 1-meter sample. The drills averaged 30-40 meters in depth (ranging between 10 and 50 meters). The cores were logged, photographed and mapped and split lengthwise manually. The minimum sample mass required to adequately produce samples that represent the core’s original granulometric distribution were taken into account for the sampling and preparation protocol and quality assurance / quality control (“ QA/QC ”) structure.

In general, the drills are in good condition and validate the correct transcription of grades from the certificates to the database; Ausenco reviewed portions of the certificates, finding no errors. Likewise, during the field visit, the logs were partially inspected, verifying that they are representative of what was observed in the cores of each of the sectors.

Additionally, the protocols for handling, logging, sampling and QA/QC of the sonic drilling samples have a sufficient level of detail, concluding that the processes are appropriate. Regarding the handling of the data obtained during the aforementioned processes, the manual of use of the software for the administration of the database and the QA/QC (GEMM) has a good level of detail, concluding that it allows a safe and secure handling of data.

Sample Preparation, Analysis and Security

The exploration and production work completed by MBL was conducted using documented procedures and involved the verification and validation of exploration and production data prior to consideration for geological modelling and mineral resource estimation. During drilling, experienced geologists implemented industry standard measures designed to ensure the consistency and reliability of the exploration data. Quality control failures are investigated and appropriate actions are taken when necessary, including requesting re-assaying of certain batches of samples.

The first site visit was conducted on December 3, 2020 and December 4, 2020 and included Luis Oviedo (P. Geo.) and Francisco Castillo (P. Eng.), each of whom is a “qualified person” under NI 43-101. The second site visit was held on July 28, 2021 to verify the work produced by the new drilling program. The main difference with this campaign was the quality of the mineral resource, with a substantial increment in measured and indicated mineral resource values and a minor increase in the total volume of the mineral resource.

During the visits, all aspects that could materially impact the integrity of the drill holes and sampling databases (core logging, sampling, and database management) were reviewed with local staff. Also, Ausenco was able to interview staff to ascertain exploration procedures and protocols. Ausenco toured the area and observed drill sites, collars and field status of the demarcations, and examined cores from a number of drill holes, finding that the logging information accurately reflects the actual core. The lithology and grade contacts checked by Ausenco matched the information reported in the core logs. Ausenco reviewed the drill hole databases for the preparation of this technical report and Ausenco concluded that it is adequate to produce the block models, tonnage and grade evaluations to a satisfactory degree. A complete review of the QA/QC was made without identifying any significant problems.

Ausenco believes that the aforementioned desktop and in-the-field reviews have the standard limitations of this type of work, but indicate that the level of data verification conducted is adequate. No verification samples were taken however, a representative of Ausenco visited the Penco Module on two occasions and reviewed in detail the complete process of production of the samples and the database. The boreholes were reviewed together with the geologists and project technicians. In addition, the number of samples to make a valid verification must be a geostatistical accepted quantity, which implies a high number of them. Also, the process of handling and analysis of these samples is complex and unusual, and there is, at least in Chile, no third-party laboratory other than the one used by Aclara to perform these analyses. The QA/QC samples were reviewed in detail and the results were satisfactory. Ausenco believes that all this indicates that verification samples were not necessary.

Mineral Processing and Metallurgical Testing

The metallurgical tests developed by the University of Concepción (Chile) and the University of Toronto (Canada), together with the tests developed on a pilot scale in Chapi (Peru), provide enough information to propose a design. Numerous tests have been developed in a period of seven years that have allowed to define a process and the parameters necessary for the production of rare earth carbonates to be defined.

The main variables studied are the following:

definition of the leaching reagent and its optimal concentration;
definition of rare earth and impurity precipitation reagent;
determination of leaching pH that optimizes extraction;
determination of pH for the precipitation of impurities;
determination of pH for precipitation of rare earth;
determination of solid / liquid ratio in mineral leaching;
effect of agitation on rare earth extraction;
kinetics of leaching, impurity precipitation, and rare earth precipitation;
effect of temperature on leaching;
configuration of the countercurrent extraction process and number of stages;
effect of particle size on leaching;
sulfuric acid consumption;
use of flocculant and its effect on leaching;
study of the effect of seeds on crystal growth; and
evaluation of the use of NaOH as a precipitating reagent.

The main results with which the process design was carried out are:

leaching reagent to be used for the extraction process is ammonium sulfate;
optimal concentration of ammonium sulfate is 0.15 molarity;
optimum pH of extraction is 3.0 to 4.0 molarity;
optimal ratio of solid / liquid extraction of 1/3;
extraction time greater than 7 minutes;
use ammonium bicarbonate to precipitate impurities at a pH between 5.5 to 6.0;
reaction time in impurity precipitation is 30 minutes;
use ammonium bicarbonate to precipitate rare earth at a pH between 7.0 to 7.5;
rare earth precipitation time is 120 minutes;
it is possible to carry out a sequential extraction circuit because the concentration of REE in the solution increases as the circuit progresses, being able to be reused and not lose extraction capacity;
the results show that it is possible to recover rare earth through a clay washing process in the sequential extraction tests; in addition, the washing stage allows to eliminate the ammonium retained in the clays; and
drained washing solutions do not contain rare earth or ammonium ions, which demonstrates the high effectiveness of the washing process.

The net process recovery of REE determined in metallurgical testing and the product quality are shown in the following tables. The recovery of the plant is based on the high efficiency in the rare earth precipitation reactions together with the efficiency of the technology, of the solid / liquid separation system, and washing allow to achieve a recovery of 98.1% and a product quality of 91.9% total rare earths.

Leaching and Plant Recovery

Element	Leaching	Plant Recovery	Total Recovery
	%	%	%
Y	46.39	98.4	45.63
La	13.35	99.1	13.24
Ce	2.31	98.1	2.26
Pr	14.68	98.9	14.53
Nd	15.33	99.1	15.19
Sm	19.10	98.0	18.72
Eu	36.55	97.3	35.56
Gd	23.68	99.1	23.46
Tb	32.72	95.8	31.34
Dy	36.36	92.7	33.71
Ho	39.35	97.1	38.22
Er	40.35	96.5	38.94
Tm	38.49	95.1	36.59
Yb	36.28	94.4	34.24
Lu	37.91	90.5	34.29
REE Total	18.49	98.1	18.13

Rare Earth Product Quality

Description – DryFiltered Product	Unit	Value
Drycarbonate	t/a	1,275
REE Law	%	51.4
REE2(CO3)law	%	91.9
EqREEO Law	%	91.9

Section 13 of the Technical Report presents additional details with respect to the tests developed and the results and conclusions thereof.

Mineral Resource Estimates

The modeling and mineral resource estimation were conducted using Leapfrog 6.0, Sage2001 and Datamine Studio Software. The support for the mineral resources estimate is the data collected from the 2020 and 2021 drill and mapping programs, comprised of: 381 sonic drill holes (comprising 10,493 meters of drilling) and 5,009 samples (185 of these are in the Victoria area, 87 in the Maite area, 38 in the Luna area and 71 in the Alexandra area).

The lithologies are garnet granitoid (GG), diorite (DRT), metapelite (MP) transformed in 4 layers of regolith (A to D). These lithologies and regolith layers were modeled and later combined according to the previously described geology to obtain the UG model (geological units). The Company and Ausenco agreed to estimate only B1, B2 and C1 levels because they contain the mineralization. Levels A, C2 and D were excluded because they did not present grades of economic interest.

Using Pearson’s correlation coefficient, two groups represent the total rare earth grades in direct relation with heavy and light rare earth elements. Europium was not correlated with any group and was analyzed separately.

Group 1 (Heavy Rare Earth Elements (HREE)):

dysprosium;
terbium;
lutetium;
yttrium;
gadolinium;
erbium;
holmium;
ytterbium; and
thulium.

Group 2 (Light Rare Earth Elements (LREE)):

neodymium;
praseodymium;
lanthanum;
samarium; and
cerium.

The length of two meters was applied to generate the composite intervals, respecting the contacts between the different estimation domains. Contact plots for each domain to determine REE were prepared in order to estimate if the contact between the domains is soft or hard. Cumulative probability distribution by estimation domain was used to define grade outliers. Outlier values can impact the grade estimation through the smearing of anomalous high grades, and subsequently cause grade overestimation. Restriction was applied to high grade values, replaced by the value of the defined outlier limit.

Down-the-hole and directional correlograms were constructed for HREE and LREE for all sectors to provide search distance and anisotropy direction to be used in the estimation. Blocks of 10 meters x 10 meters x 2 meters, non-rotated, were considered. The grades of the 15 total rare earth elements were estimated by domains using ordinary kriging. The grade estimation was completed in three passes, using samples with at least three drill-hole in the first pass, with two in the second and at least one in the third pass.

The mineral resource classification should integrate criteria addressing at least the following four parameters:

geological continuity of the mineralization (confidence in location, geometry and thickness between drill holes);
grade continuity;
data quality and support (multiple points of support); and
reasonable prospects for economic extraction.

Measured Resources

To date, the Penco Module does not have production data, so the short-range continuity has not been studied in detail. Thus, the level of confidence defined in this category of mineral resources is suitable for generating volumes that are associated with quarterly or broader production plans, where the error of the fine produced should not exceed 15% in 90% of the cases.

For the materialization of the criteria adopted, the blocks estimated with at least three drill holes and the closest sample less than 40 meters or, those blocks that were estimated with two drillings, but the nearest sample is at 24 meters maximum.

Indicated Resources

The level of confidence defined is suitable for volumes that are associated with one-year production plans, where the error of the fine produced, should be maintained and should not exceed 15% for 90% of the cases.

This category includes blocks estimated with at least three drill holes and the closest sample is less than 75 meters or, those blocks that were estimated with less than three drill holes, but the closest sample is at a maximum of 40 meters.

Inferred Resources

Included in this category are all those estimated blocks that have not been classified as measured or indicated mineral resources.

For the Luna and Alexandra sectors, peripheral perimeters were generated, with a 50 m distance from the edge of the last drilling run, in order to control that the classification of measured or indicated resources is not affected by blocks that could potentially be considered extrapolated.

During the development of the resource estimation and mining studies, MBL detected that its previous methodology to determine the extraction value had a bias of around 5% average downward, considering all the elements. Therefore, MBL determined the correction factors for heavy rare earth, light rare earth and europium. This correction was applied only to the extraction values within the estimation domains corresponding to garnet granitoid lithology.

Reasonable prospects of eventual economic extraction were addressed by applying a resource pit shell defined using Whittle software and the parameters outlined in the following tables. Pit slope angles were derived from a study carried out by Lancuyén Ingeniería (2021). The valuation of each block will be calculated using the net smelter return (“ NSR ”) methodology.

Metal Prices

Element	USD/kg
Dy2O3	566.37
Nd2O3	97.34
Tb4O7	1,415.92
Lu2O3	707.96
Y2O3	7.39
Er2O3	34.64
Gd2O3	37.16
Pr6O11	106.19
Ho2O3	111.50
Yb2O3	17.66

Element	USD/kg
La2O3	2.86
Eu2O3	49.35
Sm2O3	2.45
Ce2O3	2.01
Tm2O3	0.00

Operating and Financial Parameters

Element	Conversion Factor
Dy2O3	1.1477
Nd2O3	1.1664
Tb4O7	1.1761
Lu2O3	1.1371
Y2O3	1.2699
Er2O3	1.1435
Gd2O3	1.1526
Pr6O11	1.2081
Ho2O3	1.1455
Yb2O3	1.1386
La2O3	1.1727
Eu2O3	1.1580
Sm2O3	1.1596
Ce2O3	1.1712
Tm2O3	1.1421

Conversion Factors

Item	Unit	Value
Processing Cost	US$/t processed	7.13
G&A	US$/t processed	2.66
Discount	USD/kg concentrate	7
Selling Cost	USD/kg concentrate	0.032
Concentrate Purity	%	92.61%
Concentrate Moisture	%	<1%

Mining Cost

Item	Unit	Alex.	Luna	Maite	V. Norte	V. Sur
Mining Cost	US$/t mat	2.14	1.96	2.25	2.00	1.86

Inter Ramp and Overall Slope Angles

	Silty Clay	Maicillo
Parameter	Dry Talus	Dry Talus
Overall Slope	25°	30°

Mineral Resource Statement

Mineral resources consider geology, mining, processing and economic constraints, and have been confined within appropriate Lerchs Grossmann pit shells, and therefore are classified in accordance with the 2014 CIM Definition Standards. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

The Penco Module mineral estimate was prepared by Luis Oviedo, Senior Geologist, and Francisco Castillo, Ausenco Principal Resource Engineer. Mr. Luis Oviedo and Mr. Francisco Castillo are “qualified persons” (as defined under NI 43-101) for the purposes of the estimate and are registered members of the Chilean Mining Commission. The effective date of the mineral resource estimate is August 19, 2021.

The Mineral Resources are not mineral reserves as they do not have demonstrated economic viability. Mineral Resources are presented in the following tables applying cut-off NSR of 9.79 US$/t.

Mineral Resource Statement

Category	Tonnage (t)	NSR (US$/t)	REYT (ppm)	TREO (ppm)	Recovery
Measured	15,357,416	28	2,080	2,467	18%
Indicated	5,323,628	25	1,945	2,309	17%
Measured + Indicated	20,681,044	27	2,045	2,426	18%
Inferred	2,083,200	24	1,936	2,299	16%

Mineral Resource Statement by Sector

Sector	Category	Tonnage (t)	NSR (US$/t)	REYT (ppm)	TREO (ppm)	Recovery
Victoria Norte	Measured	5,210,244	29	2,394	2,837	18%
	Indicated	791,558	22	2,285	2,706	14%
	Inferred	177,568	20	2,368	2,803	13%

	Category	Tonnage (t)	NSR (US$/t)	REYT (ppm)	TREO (ppm)	Recovery
Victoria Sur	Measured	1,496,982	24	1,639	1,943	19%
	Indicated	563,052	26	1,864	2,211	18%
	Inferred	369,265	23	2,021	2,397	15%

	Category	Tonnage (t)	NSR (US$/t)	REYT (ppm)	TREO (ppm)	Recovery
Luna	Measured	1,104,992	30	1,353	1,617	26% 25% 31%
	Indicated	708,122	25	1,185	1,418
	Inferred	311,517	26	1,105	1,321

	Category	Tonnage (t)	NSR (US$/t)	REYT (ppm)	TREO (ppm)	Recovery
Alexandra	Measured	2,160,105	26	2,082	2,473	15% 14% 14%
	Indicated	1,450,332	23	2,053	2,439
	Inferred	749,167	23	2,038	2,420

	Category	Tonnage (t)	NSR (US$/t)	REYT (ppm)	TREO (ppm)	Recovery
Maite	Measured	5,385,093	28	2,046	2,427	18% 17% 17%
	Indicated	1,810,565	26	2,033	2,410
	Inferred	475,684	26	2,094	2,482

Mineral Resource Statement by Rare Earth Elements

Category	Tonnage (t)	Y (ppm)	La (ppm)	Ce	Pr (ppm)	Nd (ppm)	Sm (ppm)	Eu (ppm)	Gd (ppm)	Tb (ppm)	Dy (ppm)	Ho (ppm)	Er (ppm)	Tm (ppm)	Yb (ppm)	Lu (ppm)
				(ppm)
Measured	15,357,416	359	346	696	75	326	54	3	52	9	63	13	39	6	35	5
Indicated	5,323,628	349	316	640	73	300	50	3	50	9	61	13	38	5	34	5
Measured +	20681044	356	338	682	74	319	53	3	52	9	62	13	39	6	35	5
Indicated	,,
Inferred	2,083,200	352	313	631	74	297	50	3	50	9	61	13	38	6	35	5

Mineral Resource Statement by Rare Earth Elements and Sectors

Sector	Category	Tonnage (t)	Y (ppm)	La (ppm)	Ce (ppm)	Pr (ppm)	Nd (ppm)	Sm (ppm)	Eu (ppm)	Gd (ppm)	Tb (ppm)	Dy (ppm)	Ho (ppm)	Er (ppm)	Tm (ppm)	Yb (ppm)	Lu (ppm)
Victoria Norte	Measured	5,210,244	384	420	831	76	384	61	3	57	9	65	14	41	6	38	5
	Indicated	791,558	336	405	822	76	372	59	3	53	9	58	12	37	5	33	5
	Inferred	177,568	343	410	865	82	385	60	2	54	9	60	13	38	6	35	5
Sector	Category	Tonnage (t)	Y (ppm)	La (ppm)	Ce (ppm)	Pr (ppm)	Nd (ppm)	Sm (ppm)	Eu (ppm)	Gd (ppm)	Tb (ppm)	Dy (ppm)	Ho (ppm)	Er (ppm)	Tm (ppm)	Yb (ppm)	Lu (ppm)
Victoria Sur	Measured	1,496,982	279	267	547	59	260	46	3	46	8	53	10	28	4	25	4
	Indicated	563,052	316	308	626	67	293	50	3	50	9	58	12	34	5	31	4
	Inferred	369,265	348	332	681	75	312	51	3	52	9	62	13	38	6	35	5
Sector	Category	Tonnage (t)	Y (ppm)	La (ppm)	Ce (ppm)	Pr (ppm)	Nd (ppm)	Sm (ppm)	Eu (ppm)	Gd (ppm)	Tb (ppm)	Dy (ppm)	Ho (ppm)	Er (ppm)	Tm (ppm)	Yb (ppm)	Lu (ppm)
Luna	Measured	1,104,992	380	172	333	43	171	31	3	42	8	65	14	42	6	38	5
	Indicated	708,122	347	149	278	37	150	27	3	37	7	57	13	38	5	33	5
	Inferred	311,517	307	146	274	36	141	25	3	34	7	51	11	33	5	29	4
Sector	Category	Tonnage (t)	Y (ppm)	La (ppm)	Ce (ppm)	Pr (ppm)	Nd (ppm)	Sm (ppm)	Eu (ppm)	Gd (ppm)	Tb (ppm)	Dy (ppm)	Ho (ppm)	Er (ppm)	Tm (ppm)	Yb (ppm)	Lu (ppm)
Alexandra	Measured	2,160,105	394	330	662	81	317	54	3	54	10	68	15	44	6	40	6
	Indicated	1,450,332	394	323	650	79	310	53	3	54	10	68	15	43	6	39	6
	Inferred	749,167	381	327	645	81	312	54	3	54	9	66	15	42	6	38	6
	Total	4,359,603	392	327	655	81	313	54	3	54	10	68	15	43	6	39	6
Sector	Category	Tonnage (t)	Y (ppm)	La (ppm)	Ce (ppm)	Pr (ppm)	Nd (ppm)	Sm (ppm)	Eu (ppm)	Gd (ppm)	Tb (ppm)	Dy (ppm)	Ho (ppm)	Er (ppm)	Tm (ppm)	Yb (ppm)	Lu (ppm)
Maite	Measured	5,385,093	338	338	696	83	323	53	3	51	9	60	12	37	5	33	5
	Indicated	1,810,565	330	339	697	83	322	53	3	50	8	59	12	36	5	32	5
	Inferred	475,684	343	348	718	85	330	54	2	51	9	60	12	37	5	33	5

Mineral Resource Statement Grade of REO by Elements

Category	Tonnage (t)	Grade (REO)	Y2 O3	La2 O3	Ce2 O3	Pr6O 11	Nd2 O3	Sm2 O3	Eu2 O3	Gd2 O3	Tb4 O7	Dy2 O3	Ho2 O3	Er2 O3	Tm2 O3	Yb2 O3	Lu2 O3	REO total conte nt(t)
		ppm	pp m	ppm	ppm	ppm	ppm	Ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm
Measured	15,357,4 16	2,467	456	406	816	91	380	62	3	60	11	72	15	44	6	40	6	37,88 7
Indicated	5,323,62 8	2,309	443	371	749	88	350	58	3	57	10	70	15	43	6	39	6	12,29 2
Measured + Indicated	20,681,0 44	2,426	452	397	798	90	372	61	3	59	10	71	15	44	6	40	6	50,17 8
Inferred	2,083,20 0	2,299	447	367	740	89	346	58	3	57	10	70	15	44	6	40	6	4,788

Mineral Resource Statement by REO Elements and Sector

Sector	Category	Tonnage (t)	Grade (REO)	Y2O3	La2O3	Ce2O3	Pr6O11	Nd2O3	Sm2O3	Eu2O3	Gd2O3	Tb4O7	Dy2O3	Ho2O3	Er2O3	Tm2O3	Yb2O3	Lu2O3	REO total content (t)
			ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm	ppm
	Measured	5,210,244	2,837	487	493	973	91	448	71	3	66	11	74	16	47	7	43	6	14,782
	Indicated	791,558	2,706	427	475	963	91	434	69	3	62	10	67	14	42	6	38	5	2,142
Victoria Norte	Measured +	6001802	2820	49	491	91	91	446	1	3	6	11	3	16	4		43	6	16924
	Indicated	,,	,	7		7			7		5		7		7	7			,
	Inferred	177,568	2,803	436	481	1,014	99	449	70	3	62	10	69	15	43	6	40	6	498
	Measured	1,496,982	1,943	354	313	641	72	303	54	3	53	9	61	12	32	5	28	4	2,909
	Indicated	563,052	2,211	401	361	733	82	342	58	3	57	10	66	13	39	6	35	5	1,245
Victoria Sur	Measured +	2060034	2016	367	326	666	74	313	55	3	54	10	62	12	34	5	30	4	4154
	Indicated	,,	,																,
	Inferred	369,265	2,397	442	389	798	90	364	60	3	60	11	71	15	43	6	39	6	885
	Measured	1,104,992	1,617	482	202	390	51	200	35	3	48	10	75	16	48	7	43	6	1,787
	Indicated	708,122	1,418	440	175	325	45	175	31	3	43	9	65	15	43	6	38	5	1,004
Luna	Measured +	1813113	1539	466	192	364	49	190	34	3	46	9	71	16	46	6	41	6	2791
	Indicated	,,	,																,
	Inferred	311,517	1,321	389	171	320	43	164	29	4	39	8	59	13	38	5	34	5	411
	Measured	2,160,105	2,473	500	387	775	98	369	62	3	62	11	78	17	50	7	45	7	5,341
	Indicated	1,450,332	2,439	500	379	761	96	361	62	3	62	11	78	17	49	7	45	6	3,537
Alexandra	Measured +	3610437	2459	500	384	769	97	366	62	3	62	11	78	17	50	7	45	6	8878
	Indicated	,,	,																,
	Inferred	749,167	2,420	484	384	755	98	364	62	3	62	11	76	17	48	7	43	6	1,813
	Measured	5,385,093	2,427	430	396	816	100	377	62	3	58	10	69	14	42	6	38	5	13,067
	Indicated	1,810,565	2,410	420	398	817	100	375	61	3	57	10	67	14	41	6	37	5	4,364
Maite	Measured +	7195658	2422	427	396	816	100	376	62	3	58	10	69	14	42	6	38	5	17431
	Indicated	,,	,																,
	Inferred	475,684	2,482	436	408	841	103	385	63	3	59	10	69	14	42	6	38	5	1,181

Mining Methods

As the aforementioned technical studies for the preliminary economic assessment of the Penco Module were developed, the following outcomes were obtained based on the available information:

The final sequence obtained, following the plans indicated in the previous point, corresponds to Victoria Sur - Victoria Norte - Luna - Maite - Alexandra.
A sequential exploitation of the sectors is carried out; once mining has been completed in one sector, then begins in another.
Regarding the final pit shells selected by sector, the following figure shows a representation of the mining phases.

Mining Phases Location

==> picture [362 x 198] intentionally omitted <==

Overall pit angles per rock type were used in the pit optimization analysis. No final pit and mining phase designs were generated during this stage of the project.
The Penco Module consists of five pits: Victoria Norte, Victoria Sur, Alexandra, Maite, and Luna. In addition, there are waste disposal facilities called Jupiter and Neptuno plus three temporary topsoil deposits or stockpiles.
Three types of materials are obtained from mining the deposits: mineralized material, waste, and topsoil, which are destined for processing plants, disposal areas and temporary stockpiles. Mineralized material will be sent to the processing plant, the waste filtered tailings (mineralized materials that have already been processed) will be sent to the waste disposal facilities and the topsoil will be sent to temporary stockpiles.
The production plan reflects a production rate of 1,765,680 tonnes dry per annum of mineralized material, resulting in a project life of 12 years considering a ramp-up (75% of the expected process plant feed) and final period of six months.

Annual Production Plan

==> picture [449 x 235] intentionally omitted <==

----- Start of picture text -----

Production Plan
3,500 600
3,000 500
2,500
400
2,000
300
1,500
200
1,000
100
500
0 0
1 2 3 4 5 6 7 8 9 10 11 12
Periods (years)
Mineral Resources (Kt) Waste (Kt) EV (g/t)
Kt/y
Extraction Value (g/t)
----- End of picture text -----

Together, the Jupiter and Neptuno deposits have a total capacity of approximately 21.2 million cubic meters, therefore, they have 12% of available volume.
Regarding the temporary topsoil stockpiles, the three projected sectors together have a capacity of 1.5 million cubic meters, while the estimated volume of topsoil to be managed corresponds to approximately 900 cubic meters (without considering the volumes of topsoil for additional infrastructure) corresponding to the mined material from the pits, preparation of disposal zones, and the processing plant foundation area. This volume considers a 50centimeter-thick layer and a 12% swelling factor.

Processing and Recovery Operations

The facilities have been designed to treat 240 tonnes per hour of wet mineral and, through a leaching and precipitation process, obtain rare earth carbonate at a rate of 1,227 tonnes per year.

The mineralized material from the mine remains in stockpile for 6 days with the purpose of squeezing the mineral from the excess water, then the mineral goes to a size selection process by means of a washing drum and a wet screen. The mineralized material continues the counter-current leaching process in thickeners using ammonium sulfate as a leaching reagent in an aqueous solution at a pH between 3.0 and 4.0. The pulp (spent ore + liquid) is separated by means of a plate filter where the tailings are washed with water to reduce the contribution of stock solution in the impregnation of the mineral. These tailings go to a stacking sector and is then removed by trucks to its final disposal.

The solution rich in rare earth and pollutants generated in the extraction process is sent to the impurity precipitation stage, which is achieved by the ammonium bicarbonate reagent in aqueous solution at a pH between 5.0 and 5.5. Aluminum and iron precipitate are separated using a polishing filtering system and sent to the spent ore pile for final disposal. The liquid product rich in rare earth is sent to the carbonation sector which also uses ammonium bicarbonate in aqueous solution, but at a more basic pH between 7.0 to 7.5. The product, rare earth carbonate, is separated with a polishing filtering system, where a part of the solution is recycled to the leaching process and the other weaker solution, product of the washings, is sent to the water recovery system, which is still under development. The wet product is discharged into a tank which contains abundant water in order to wash the product and then this pulp is discharged into a plate filter that again proceeds to wash the product. The liquid is sent to the water recovery system and the product to the drying and packaging process.

A simplified diagram of the process is set forth in the below diagram and a detailed description of the process is also presented in Section 17 of the Technical Report.

Process Flowsheet

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Project Infrastructure

Infrastructure to support the Penco Module will consist mainly of site civil work, site facilities and building, a water system, and site electrical. Site civil work will include designs for the following infrastructure:

access and internal roads;
process facility platforms; and
disposal zones.

Site facilities will include both mine facilities and process facilities:

The mine facilities will include the administration offices, canteen, mine workshop and change house. Explosives storage is not considered due to the operational definition of not considering drilling and blasting unit operations.
The process facilities will include the process plant, administration offices, laboratory, warehouse, fuel storage, and miscellaneous facilities.
Process facilities will be serviced with fresh water taken from the Penco water intake, fire water, compressed air, power and communication. In addition, a potable water tank that will be supplied by a tank truck will be considered in the Penco Module.

Roads and Logistics

Access to the site from the town of Penco is five kilometers via Route 150 that connects with a seven-kilometer paved road that leads to the Penco Module site. To access the different Penco Module areas, about 10 kilometer of existing roads will be used without modifications, five kilometer of existing roads will be improved, and 15 kilometer of new roads will be developed.

Waste Disposal Facilities

The Penco Module’s operation contemplates two waste disposal facilities (“ WDFs ”): Júpiter, located near the process plant; and Neptuno, located 1 km southwest of Jupiter. The WDFs are designed to consist of co-placement of waste residual

soil and filtered tailings from the process plant. It is important to note that no comminution process is contemplated and that filtered tailings are obtained with pressure filters incorporated in the process plant to produce cake material that can be transported by trucks or conveyors. No civil infrastructure-like buildings or roof structures are required, nor is a bottom geomembrane. The proposed location of the WDFs are shown in the following figure.

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Waste Disposal Facilities Location
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The primary design objectives for the WDFs are the secure confinement of waste residual soil and filtered tailings from the process plant and the protection of regional groundwater and surface water during mine operations and in the long term (post-closure).

WDFs were designed under geotechnical campaign outcomes, which provided information from laboratory programs defined to characterize both, founding geotechnical properties and waste materials. Preliminary Stability analyses were completed to assess the performance (i.e. factor of safety) of the WDF under static and pseudo static (seismic) loading conditions. The WDFs show a static factor of safety above 1.5 and a pseudo-static factor of safety above 1.1 that meet international standards.

Water Management

A projected water balance results in a consumption of 11.7 m3/h of fresh water for the process plant. Considering other water consumptions related to services and road wetting, the estimated total consumption of fresh water is 35 m3/h. The water supply consists of catchment and drive system from the Penco creek, where the water will be fed to the processing plant through a pipeline that will supply the required water for the Penco Module. The catchment will be set by a water intake.

This process has the restriction of not generating liquid industrial waste, except for those contained in the impregnation of the solids discarded in mineral rubble or impurities. To achieve this condition, the design considers recovering the water from the weak solutions generated in the process (weak solutions from filtrations and repulping mainly) and treating them with reagents and technologies available in the industry in such a way that the recovered water returns to the process, significantly reducing the consumption of fresh water and the precipitate generated is deposited next to the rubble in its final disposal. This stage of water recovery is under development. Laboratory tests will soon begin to conform to the assumptions of the proposed design.

The overall water management concept for rainwater is to convey, evacuate and drain it in the extraction zones and in the WDF. Water management components in each area consist of evacuation channels, contour channels and discharge to ravines.

Built Infrastructure

The processing plant and associated infrastructure covers an area of 13.6 hectares, where there will be facilities and areas associated with ore processing, waste management and personnel services. The process plant area includes the following facilities:

Area 100 – Ore stacking and feeding, including a roofed shed without walls for a limited sector where ore blending will take place.
Area 200 – Mineral leaching, including thickeners, plate filters, belt filter, belt conveyor, receptions tank, wet screen and dosage pumps.
Area 300 – Impurities precipitation, including precipitation reactors, polishing filter, tanks, and dosage pumps.
Area 400 – Precipitation and drying of carbonates, including reactors carbonation, polishing filters, tank repulping, plate filter, drying, packaging, hopper, belt conveyor and dosage pump.
Area 500 – Water recovery system, including precipitation reactors, dosage pumps, nanofiltration, reverse osmosis and ion exchanges, and hopper.
Area 600 – Reagent warehouse, including a storage warehouse for chemical products for the various chemical products required in the process.
Area 700 – Administration, offices and laboratory, including an administrative building, laboratory, dining hall, dressing rooms and control room.
Area 800 – Geological core sample warehouse.
Area 900 – Spend ore stacking.

Accommodation

All employees will be housed offsite because of the location of the Penco Module close to Penco and Concepción districts. No accommodation camp is considered.

Power and Electrical

Average power demand will be 4.0 megawatts. For the process plant operation, the electrical power is considered to come from an existing line of 15 kilovolts at 152 Route, located 300 meters from the plant. For the operation of the water intake, a new line of 15 kilovolts will tie-in to an existing line close to the water intake at 0-390 Route. To supply some critical process loads, a diesel generator of 1 megawatt, in low voltage (380 volts) will be considered.

Environmental Studies, Permitting and Social or Community Impact

The Penco Module is located in Biobío Region, within Penco and Concepción districts, southeast of the city of Penco, covering an approximate intervention area of 240 hectares. Being a mining project that considers exploitation, processing plants and waste and sterile disposal, the Penco Module entered the Environmental Impact Assessment System, as established in paragraph (i) of Law 19.300 on General Environmental Bases modified by Law 20.417/2010, by means of an Environmental Impact Assessment (“ EIA ”).

Environmental Considerations

In accordance with the provisions of article 18, letter (e) of the Regulation for the Environmental Impact Assessment System (D.S. N°40/2012), the Penco Module’s EIA presented several baseline studies for different environmental components such as: climate and meteorology, air quality, noise and vibrations, geology and geomorphology, hydrology, hydrogeology, water quality, soil science, flora and vegetation, terrestrial fauna, limnology, archaeology, landscape, human environment, protected areas, among others. From these studies, the EIA determined the existence of environmental impacts deemed as significant for soil, terrestrial fauna and flora and vegetation. These impacts will be addressed by the Penco Module through mitigation, reparation and/or compensation measures, such as conservation plans and afforestation for native forest and protected species, relocation plans for low mobility fauna, the removal, storage and replacement of the topsoil cover during

closure, among others. Monitoring measures are also in place to verify the correct application of these measures and compliance with the expected results.

In terms of wastes and emissions, these will be managed through mitigation measures (to minimize generation) and appropriate disposal by authorized contractors and offsite final disposal sites. Mining waste will be generated at the extraction zones and by the process plant and will de disposed of at the Jupiter and Neptuno disposal zones. In Addendum N°1 of the EIA, a complete characterization of the material was carried out, consisting of total rock, synthetic precipitation leaching procedure, mineralogy and pH analysis. Although specific values of manganese (Mn), ammonium (NH4) and sulfate (SO4) slightly exceeded the maximum permissible concentrations in reference water standards (D.S N°90/2000 and NCh 1.333) it is highly unlikely that laboratory conditions (acid rainwater in agitation for 18 hours) will be replicated on the field. Additionally, water management measures and infrastructure, such as contour and discharge channels, will be put in place in order to minimize surface runoff entering the disposal zones and reduce infiltration, helped also by the level of compaction that the waste will have in the disposal areas. Considering these facts, the concentrations of any contaminants are expected to be much lower and under full compliance with relevant water reference standards. Contingency and emergency measures will also be in place in case any exceedances occur.

Closure and Reclamation Considerations

Regarding the closure plan, the EIA includes a preliminary version of the mine closure plan (presented as Sectorial Environmental Permit 137 under the EIA). Subsequently, once the necessary environmental license has been obtained, a specific sectoral application must be presented to the National Geology and Mining Service (SERNAGEOMIN) to obtain the final mine closure plan permit. The technical requirements for this permit are to include all measures to provide physical and chemical stability of the Penco Module area and a financial assessment of the costs of closing all mine facilities.

The main closure measures identified at this stage are the replacement of the previously removed topsoil layer on disposal zones and the subsequent revegetation with native species, that will allow for a much better recovery of the local ecosystems and possible alternative land use.

Permitting Considerations

The Penco Module, submitted for environmental assessment in 2018, has now completed and filed the Addendum N°2 to the EIA. This document corresponds to the responses to inquiries from relevant government services and raised by the community as a result of the Citizen Participation process (PAC).

As part of the review of the EIA, one environmental authority, which is part of the Environmental Assessment Service (SEA), has expressed concern about the possible effects of an area of the Penco Module over which cultural activities of two local indigenous groups are carried out and requested a complementary anthropological characterization of the area and communities to rule out an eventual Indigenous Consultation Process and to determine the appropriate mitigation and/or compensation measures, if applicable. If such consultation process is required, it could extend the environmental licensing process for approximately six additional months. On the other hand, the National Corporation for Indigenous Development (CONADI) has officially informed of their conformity with the information provided in the EIA and considers that there will be no negative effects on these cultural practices. Following SEA’s request, the Company conducted an anthropological characterization and further described the cultural activities performed by these groups in neighboring areas to the Penco Module. This additional information was included in Addendum N°2, and the Company expects that it will confirm CONADI’s assessment on the nonexistence of significant impacts on the aforementioned cultural activities.

Although it is expected that after Addendum N°2 the environmental authority will proceed with considering the Penco Module and issuing the corresponding environmental license, it is possible that a new round of review is opened, which would require a new Addendum to be presented (Addendum N°3). To minimize this possibility, Addendum N°2, which was submitted on October 29, 2021, was presented with the highest sufficiency of information possible, in order to obtain a vote for its approval by the Environmental Assessment Commission during the first quarter of 2022.

In addition to the above, a strategic approach with the different government technical services that will review the addendum and technically pronounce in favor or against the Penco Module has been undertaken. It is recommended to maintain this contact with the authorities in order to have a better understanding of their concerns about the Penco Module and find the best way to resolve them, including the rule out of an eventual Indigenous Consultation Process.

Social Considerations

Finally, the Company has developed a community relations plan in respect of the Penco Module since August 2020, which aims to communicate the most relevant milestones and aspects of the Penco Module, as well as to guide the proper development of the community relationship with the main stakeholders and propose the actions to be carried out during the stages of evaluation, construction, operation, and closure. Currently, a strategy of relationship with stakeholders is carried out through participation meetings aimed at establishing a space for open, voluntary, official, and permanent dialogue between the Penco Module and its stakeholders.

In addition, the matrix of local stakeholders is updated monthly according to progress generated by meetings with new stakeholders who express interest in the development of the Penco Module, as well as weekly meetings are held with different local, regional, and national authorities in order to publicize and clarify concerns regarding the Penco Module.

Capital and Operating Costs

Capital Cost Estimates

Capital cost is defined as the capital expenditure required to engineer, design, procure, construct and commission the works required for the Penco Module scope within its defined battery limits. The capital includes mine direct costs and plant directs costs, inclusive of the Penco Module’s indirect costs and contingency. The estimate conforms to AACE International Class 5 guidelines for a concept estimate with an expected accuracy range of -15% to -30% on the low side of the range and +20% to +50% on the high side of the range. All costs are expressed in U.S. dollars. The estimate base date is as of the third quarter of 2021 (“ Q3 2021 ”). A summary of the total capital cost is shown in the following table.

Capital Cost Estimate Summary

Description	M US$
Initial Cost	$118.6
Sustaining Capital	$ 29.4
Total Initial + Sustaining Costs	$148.0

Operating Cost Estimates

The operating cost estimate is presented in table below at a ±30% accuracy, using a base date as of the second quarter of 2021 (“ Q2 2021 ”), and considering an annual treatment of 1,766,016 dry tonnes of ore, with an average REE grade of 2,045 parts per million and 18.49% average recovery.

Operating Cost Estimate Summaries

Item	US$/y	US$/t
G&A	3,677,019	2.08
Labour	1,053,803	0.60
Mobile equipment	1,750,117	0.99
Other	873,100	0.49
Mine	7,110,798	4.03
Labour	919,282	0.52
Loading	724,331	0.41
Hauling	1,556,497	0.88

Item	US$/y	US$/t
Ancillary	677,553	0.38
Contractor	3,233,135	1.83
Process	12,865,027	7.28
Labour	1,436,104	0.81
Power	2,997,300	1.70
Reagent and supplies	4,357,710	2.47
Spent ore transportation	1,437,063	0.81
Spare and maintenance	1,681,478	0.95
Laboratory and packing	955,372	0.54
TOTAL	23,652,844	13.39

One of the most important expenses is the consumption of reagents, which is detailed in the following table:

Item	US$/y	US$/t
Fresh Water	51,386	0.029
Potable Water	4,380	0.002
R.O. Water	1,066,806	0.604
Sulphuric Acid	319,266	0.181
Flocculant	564,729	0.320
Ammonium Sulfate Solid	664,180	0.376
Ammonium Bicarbonate Solid	1,548,993	0.877
Calcium Hydroxide Solid	137,970	0.078
TOTAL	4,357,710	2.468

Economic Analysis

An engineering economic model was developed to estimate annual pre-tax and post-tax cash flows and sensitivities of the Penco Module based on a 5% discount rate. It must be noted, however, that tax estimates involve many complex variables that can only be accurately calculated during operations and, as such, the after-tax results are only approximations. Sensitivity analysis was performed to assess impact of variations in rare earth oxides prices, head grades, operating costs and capital costs. The capital and operating cost estimates were developed specifically for the Penco Module and are summarized in Section 21 of the Technical Report (presented in Q3 2021 dollars). The economic analysis was run with no inflation (constant dollar basis).

Financial Model Parameters

The economic analysis was performed using the following assumptions:

Construction starts on January 1, 2023.
Ramp up production start-up in the first quarter of 2024 and full process plant production will be achieved in the fourth quarter of 2024.

Mine life of 12 years.
Cost estimates in constant Q3 2021 U.S. dollars.
No price inflation or escalation factors were taken into account.
Results are based on 100% ownership.
Capital costs funded with 100% equity (i.e. no financing costs assumed).
All cash flows discounted to beginning of construction January 1, 2023.
All rare earth products are assumed sold in the same year they are produced.
Project revenue is derived from the sale of rare earth concentrates.
No binding contractual arrangements for treatment currently exist.
Project site purchase cost of US$10 million that will be sold at the end of the life of the mine.
Separation Fee of US$5/kg of REO (as more fully described in Section 19 of the Technical Report).

Rare Earth Oxides Price Forecast

Base case for rare earth oxides prices were based on a study done by a third-party consultant and detailed in Section 19 of the Technical Report. The forecasts used are meant to reflect the rare earth oxides prices expectation over the life of the Penco Module. Additionally, low and high price scenario forecasts have been defined. The basket price based on rare earth oxide equivalent (“ REO Eq ”) production is detailed in the figure below.

Rare Earth Oxides Basket Price for the LOM

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Basket Price
$225
$200
$175
$150
$125
$100
$75
$50
$25
--
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Base Case Low High
USD/Kg REO Eq
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Note: Basket price has been calculated using the distribution of each element as a percentage of the total rare earth element oxides multiplied by the price projection of each element. Source: Prepared by Argus Media (La, Ce, Pr, Nd, Sm, Eu, Gd, Tb, Ho, Er, Tm, Yb, Lu, Y) & by CRU (Dy).

Concentrate Production

The Penco Module will produce a rare earth carbonate concentrate for which the REO Eq content is shown below. The concentrate produced is expected to have a 92.6% REO Eq content.

Production REO Eq (t)

Production of Concentrate REO Eq (t)

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1,400
1,156
1,200
1,000 917
878 872
803
773
800 742 727
654
594
553
600
400
233
200
--
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Y2O3 La2O3 Ce2O3 Pr6O11 Nd2O3 Sm2O3 Eu2O3 Gd2O3
Tb4O7 Dy2O3 Ho2O3 Er2O3 Tm2O3 Yb2O3 Lu2O3
REO Eq (t)
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Production REO (t)

Year	% of Total REO	Total LOM	2024	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035
Y2O3	47.4%	4,222	254	333	498	401	402	428	406	374	284	332	381	128
La2O3	11.6%	1,031	66	108	194	131	52	93	98	95	64	54	60	18
Ce2O3	4.0%	353	27	33	29	29	24	51	37	37	32	23	22	9
Pr6O11	2.9%	260	17	27	42	29	15	26	26	24	16	16	16	5
Nd2O3	12.5%	1,113	70	112	176	121	66	115	115	103	72	70	72	21
Sm2O3	2.6%	227	15	22	31	22	16	25	24	21	15	16	16	5
Eu2O3	0.2%	22	2	2	2	2	2	2	2	2	1	2	2	1
Gd2O3	3.1%	280	18	25	34	26	24	29	28	26	19	22	23	7
Tb4O7	0.7%	66	4	6	7	6	6	7	6	6	4	5	6	2
Dy2O3	5.5%	489	30	41	52	41	50	52	47	43	32	41	47	14
Ho2O3	1.3%	118	7	9	13	10	12	12	11	10	8	10	11	3
Er2O3	4.0%	352	20	27	39	31	35	37	34	31	23	30	34	10
Tm2O3	0.5%	47	3	4	5	4	5	5	5	4	3	4	5	1
Yb2O3	3.1%	279	17	22	29	22	27	30	28	24	18	26	28	8
Lu2O3	0.5%	40	2	3	4	3	4	4	4	4	3	4	4	1
TOTAL REO	100%	8,901	553	773	1,156	878	742	917	872	803	594	654	727	233

Economic Analysis

The economic analysis was performed assuming a 5% discount rate. Cash flows have been discounted to the beginning of construction January 1, 2023, assuming that the Penco Module’s execution decision will be made and major project financing would be carried out at this time.

For the base case price scenario, the pre-tax net present value discounted at 5% is US$228 million, the internal rate of return is 25.0%, and payback is 4.8 years. On an after-tax basis, the net present value discounted at 5% is US$178 million, the internal rate of return is 23.0%, and the payback period is 4.7 years. A summary of the Penco Module’s economics is included in the following table.

Price Scenario	Base Case	Low Price	High Price
General	LOM Total / Avg.	LOM Total / Avg.	LOM Total / Avg.
Basket Price (1) (USD/Kg REO)	$96	$75	$138
Mine Life (years)	12	12	12
Total Waste Tonnes Mined (kt dry)	7,309	7,309	7,309
Total Process Plant Feed Tonnes (kt dry)	19,856	19,856	19,856
Strip Ratio	0.368	0.368	0.368
Production	LOM Total / Avg.	LOM Total / Avg.	LOM Total / Avg.
Process Plant Head Grade Extraction Value REE (ppm)	378	378	378
Metallurgic Efficiency (%)	98%	98%	98%
Production REO (t)	8,901	8,901	8,901
Total Average Annual Production REO (t)	774	774	774
Operating Costs	LOM Total / Avg.	LOM Total / Avg.	LOM Total / Avg.
Mining Cost (USD/t Mined dry)	$3.11	$3.11	$3.11
Processing Cost (USD/t Processed dry)	$7.13	$7.13	$7.13
G&A Cost (USD/t Processed dry)	$2.20	$2.20	$2.20
Treatment & Transport Costs (USD/kg REO)	$5.03	$5.03	$5.03
Total Operating Costs (2) (USD/t Processed dry)	$13.59	$13.59	$13.59
Cash Costs (3) (USD/kg REO)	$36	$36	$36
AISC (4) (USD/kg REO)	$39	$39	$39
Capital Costs	LOM Total / Avg.	LOM Total / Avg.	LOM Total / Avg.
Initial Capital (USD M)	$119	$119	$119
Purchased Land Cost (USD M)	$10	$10	$10
Sustaining Capital (USD M)	$29	$29	$29
Closure Costs (USD M)	$18	$18	$18
Salvage Costs (USD M)	$15	$15	$15

Financials	LOM Total / Avg.	LOM Total / Avg.	LOM Total / Avg.
EBITDA LOM (USD M)	$539	$350	$906
Avg. EBITDA LOM (USD M)	$47	$30	$79
Pre-Tax NPV (5%) (USD M)	$228	$104	$467

Pre-Tax IRR (%)	25.0%	17.1%	34.9%
Pre-Tax Payback (years)	4.8	5.3	4.1
Post-Tax NPV (5%) (USD M)	$178	$87	$354
Post-Tax IRR (%)	23.0%	16.2%	31.9%
Post-Tax Payback (years)	4.7	5.3	4.0

Notes:

(1) Basket price has been calculated using the distribution of each element as a percentage of the total rare earth element oxides multiplied by the price projection of each element, which have been sourced by Argus Media (La, Ce, Pr, Nd, Sm, Eu, Gd, Tb, Ho, Er, Tm, Yb, Lu, Y) and CRU (Dy).

(2) Operating Cost differs from what is presented in Section 21 of the Report due to Economic Analysis shows Operating Cost for the LOM Avg, but Section 21 presents cost for a single year for design purposes

(3) Cash costs consist of mining costs, processing costs, mine-level general & administrative expenses, treatment and transportation costs.

(4) AISC includes cash costs plus sustaining capital, closure cost and salvage value.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis (the “ MD&A ”) is prepared as of the date of this prospectus and is intended to assist readers in understanding the financial performance and financial condition of the Company. The Company is and will remain a holding company and its assets currently consist solely of interests in its wholly-owned subsidiary, REE Uno, and the only business of Aclara is the business of its subsidiaries.

The MD&A provides information concerning the Company’s financial condition as at September 30, 2021, December 31, 2020 and December 31, 2019 and results of operations for the three and nine months ended September 30, 2021 and September 30, 2020 and fiscal years ended December 31, 2020, December 31, 2019 and December 31, 2018. The MD&A should be read in conjunction with the audited financial statements and interim financial statements of REE Uno included elsewhere in this prospectus. The Company’s financial statements are prepared in accordance with International Financial Reporting Standards (“ IFRS ”). The financial information in this MD&A is reported in United States dollars.

Cautionary Note Regarding Forward-Looking Information

This MD&A contains forward-looking information, such as statements regarding the Company’s future plans and objectives that are subject to various risks and uncertainties, as set forth in “Forward-Looking Information” and “Risk Factors” in this prospectus. The Company cannot assure readers that such information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future periods. Readers are cautioned not to place undue reliance on this forward-looking information.

Overview

Aclara is a development-stage rare earth mineral resources company with 451,585 hectares of mining concessions located in the Maule, Ñuble, Biobío and Araucanía regions of Chile. Aclara is initiating the development of its resources through the Penco Module, which covers a surface area of approximately 600 hectares and which has ionic clays that are rich in REE. Aclara is currently focused on the development and on the future construction and operation of the Penco Module, which will aim to produce a rare earth concentrate through a processing plant that will be fed by clays from nearby deposits. In addition to the Penco Module, Aclara will conduct exploration activities in order to determine if there are deposits within its other mining concessions that can be developed economically and with an adequate environmental footprint.

Background

On November 9, 2018, a wholly owned subsidiary of Hochschild Mining subscribed for new 591,326,947 A-series shares of REE Uno, representing 4.84% of REE Uno’s outstanding share capital, and subsequently increased its interest in REE Uno through a number of transactions. Since August 22, 2019, REE Uno has been an indirect wholly-owned subsidiary of Hochschild Mining.

Outlook

The Company’s focus for the next twelve months is expected to include:

completing the Initial Public Offering;
identifying process optimizations for the Penco Module;
completing a feasibility study for the Penco Module;
engaging in brownfield exploration to potentially increase the life of the mine of the Penco Module; and
engaging in greenfield exploration to explore potential new modules.

Selected Interim and Annual Information

The Company is still at the development stage and has therefore not earned any revenues. The majority of activities undertaken in the nine months ended September 30, 2021 as well as the year ending December 31, 2020 were related to, among other things, engineering of the Penco Module, exploration, permitting, community relations and mine and process engineering. The following tables set out selected aspects of the Company’s Income statement for the three and nine months ended September 30, 2021 and 2020, and for the years ended December 31, 2020, 2019 and 2018.

	Three months ended September 30,	Three months ended September 30,	Nine months ended September 30,	Nine months ended September 30,
(in thousands of US$)	2021	2020	2021	2020
Income statement
Loss for the period from continuing operations	(172)	(460)	(75)	(486)
Basic loss per share US$	(0.00001)	(0.00004)	(0.00004)	(0.00004)
Diluted loss per share US$	(0.00001)	(0.00004)	(0.00004)	(0.00004)

		Years ended December 31,
(in thousands of US$)	2020	2019	2018
Income statement
Loss for the year from continuing operations	(791)	(312)	(248)
Basic loss per share US$	(0.00006)	(0.00003)	(0.00002)
Diluted loss per share US$	(0.00006)	(0.00003)	(0.00002)

The loss for the nine months ended September 30, 2021 was US$75 thousand, which primarily comprised administrative expenses of US$88 thousand and positive greenfield exploration expenses of US$17 thousand, which included a reversal of a provision for US$269 thousand made in 2020 and greenfield exploration expenses of US$252 thousand. The loss for the year ended December 31, 2020 was US$791 thousand and primarily comprised administrative expenses of US$237 thousand and greenfield exploration expenses of US$554 thousand. During 2019 and 2018, the Company’s activities were managed by its previous owner. The loss for the year ended December 31, 2019 was US$312 thousand, which was primarily comprised of administrative expenses of US$75 thousand, greenfield exploration expenses of US$223 thousand, and net finance expenses of US$11 thousand. Finally, the loss for the year ended December 31, 2018 was US$248 thousand, which primarily comprised of administrative expenses of US$90 thousand, greenfield exploration expenses of US$85 thousand, net finance expenses of US$86 thousand and positive income tax of US$13 thousand.

The following tables set out selected aspects of the Company’s statement of financial position for nine months ended September 30, 2021 and years ended December 31, 2020, and 2019.

	Nine months ended September 30,	Years ended December 31,
(in thousands of US$)	2021	2020	2019
Statement of financial position
Total assets	37,258	32,072	20,817
Cash and cash equivalents	1,510	1,265	1,220
Property, plant and equipment	513	536	200
Evaluation and exploration assets	32,517	27,831	17,935
Total liabilities	2,151	6,032	1,810
Current liabilities	2,151	6,032	1,810
Total equity	35,107	26,040	19,007

The balance of evaluation and exploration assets include all capitalized expenses related to the development of the Penco Module. Capitalized expenses mainly comprise brownfield exploration, engineering activities, permitting expenses, and management expenses. See “-Results of Operations”.

As of October 31, 2021, the Company had US$2.4 million cash and cash equivalents and a working capital deficiency of US$2.0 million.

The following tables set out selected aspects of the Company’s statement of cash flows for nine months ended September 30, 2021 and 2020, and years ended December 31, 2020, and 2019.

	Nine months ended September 30,	Nine months ended September 30,
(in thousands of US$)	2021	2020
Statement of cash flows
Cash flows used in operating activities	(675)	(713)
Cash flows used in investing activities	(9,179)	(4,559)
Cash flows generated from financing activities	10,250	6,000
	Years ended December 31,
(in thousands of US$)	2020	2019	2018
Statement of cash flows
Cash flows from/(used in) operating activities	2,511	204	(676)
Cash flows used in investing activities	(8,591)	(717)	(344)
Cash flows generated from financing activities	7,000	492	4,032

Discussion of Results and Operations Update

As a development stage company with a single material mineral project, the Penco Module, the Company has not generated and does not report any revenue.

The following section of this MD&A describes the exploration and development activities (and related expenditures incurred) at the Penco Module for the nine months ended September 30, 2021 and the years ended December 31, 2020, 2019 and 2018. For additional details concerning the Company’s planned development activities for the Penco Module, including a description of the anticipated expenditures and the anticipated timing and costs required to take the Penco Module to the next level of anticipated project development, see “Business of the Company”, “The Penco Module — Capital and Operating Costs” and “Use of Proceeds”. The risks associated with the development of the Penco Module are set out in “Risk Factors — Risks Related to our Business and Industry”.

Exploration Activities

Following the change in REE Uno’s ownership, the resources at the Penco Module were retested in 2020. For this purpose, the Company drilled 6,486 metres in 220 sonic drill holes that were included in the Technical Report.

In the first half of 2021 (“ H1 2021 ”), the Company carried out a brownfield exploration programme to add new resources and increase the life of mine of the Penco Module. In total, 6,418 metres in 259 sonic drill holes were executed and were considered for resource estimation as part of the Technical Report.

In Q3 2021, as part of the brownfield exploration programme, the Company completed a drilling campaign of 697 metres.

Penco Module Development

The Company’s principal business has been the development of the Penco Module, including exploration, drilling, engineering and design, metallurgical testing, social engagement with local communities, environmental base line studies and permitting related activities.

During 2020, the Company’s technical team focused on producing an internal scoping study to define, albeit preliminarily, the Penco Module. Several initial tests were performed by experts from the University of Toronto on samples from the Penco Module deposits. Pentatech and Dewatering Solutions from Peru performed conceptual engineering and initial testing to define the Penco Module. Initial batch pilot testing was carried out at Chapi (Peru) to test REE recoveries, impurities and carbonates precipitation behaviors from processing different geometallurgical samples. Equipment testing was also initiated and performed by companies including Outotech and Tenova. Radioactivity tests were also performed by ANSTO on some of the solids and liquids produced during the batch pilot testing. Other initial studies such as geotechnical and topographic studies for the processing plant area, stability analysis of waste dumps, roads study and water intake study for the Penco Module were conducted. In November 2020, Ausenco was hired to perform general engineering, mining study and process design towards a feasibility study.

General Engineering

The Company continued the development of the Penco Module with the support of Ausenco. The following section provides an overview of the activities carried out by Ausenco for the specified period.

The work completed by Ausenco up until the end of the first quarter of 2021 included the review of information and studies provided by the Company, the development of preliminary engineering and the estimation of a Class 5 capex. The main inputs for this capex estimation were the process design and the mining study with the 2020 geological exploration campaign. Other studies including mechanical, civil, geotechnical and hydraulic engineering focused on areas other than the process plant, the preliminary designs for the water system from the water intake to the process plant, mining roads and disposal facilities.

Subsequently, during Q2 2021, the Company evaluated various options to advance the operations of the Penco Module, requiring Ausenco to develop the Technical Report. The scope of the Technical Report included optimizations to the design of the process plant and incorporated results from the 2021 exploration campaign.

The work done by Ausenco to the end of Q3 2021 mainly related to the development of the Technical Report. Ausenco advanced the following: mineral resource estimate, mining study, process design, waste disposal facility review, costs estimation and economic analysis.

Mining Study

The Company completed a preliminary resource estimation and mining study based on an exploration campaign conducted in 2020. The mining study included the development of design criteria, trade-off studies, pit and phase selection, production schedules and mining equipment. In 2021 to date, the Company has continued its drilling programs in zones adjacent to the 2020 exploration campaign to further its assessment of the Penco Module and to update the mineral resource estimation. Ausenco has supported the Company’s work through the definition of domains, composition, variographic studies and the estimation of block models in order to include the results in the Technical Report. The latest mining study includes revised design criteria, economic envelope analysis and mining phase selection.

During the development of the resource estimation and mining studies, the Company detected that its previous methodology to determine the extraction values had a bias of around 5% average downward, considering all elements. Therefore, the Company set correction factors for HREE, LREE and Europium. This correction was applied by Ausenco in the block model to the extraction values within the estimation domains corresponding to garnet granite lithology. With this modified block model, the mining study (including the production schedule) was updated by Ausenco and included in the Technical Report.

Process Design

Since the Company’s initial mining study, Ausenco has developed a trade-off study for the leaching circuit, which includes four new alternatives. During Q2 2021, following extensive review, a counter current decantation leaching system was selected as the most economically attractive option. Ausenco continues to assist the Company in the process design and has facilitated contacting vendors for performance testing in order to define the technology and validate its efficiency and operability prior to initiating commercial scale construction.

In addition to the activities related to the Technical Report, the process team continued the development of the process pre-feasibility engineering with the purpose of finalizing the preliminary design. These activities included the development of

the plant design criteria, mass balance considering the option of recirculation of the treated water in the plant, definition of the main process equipment, the trade-off for water treatment system, the trade-off for the leaching system, operating costs, analysis and review of vendors and laboratory tests and assistance to the Company in meetings with equipment suppliers.

Environmental, Social and Governance

Environment and Permits

In 2020, one of the Company’s principal activities comprised the review of technical requirements for Addendum N°1 of the EIA, such as chemical and physical stability of mining wastes, and expert report for flora and vegetation.

Addendum N°1 of the EIA was submitted to the Environmental Assessment Service on November 19, 2020.

One of the Company’s primary objectives was the commencement of meetings with technical authorities to introduce the new team and communicate the projected schedule for all new requirements during the evaluation process. The most important authorities contacted were the Environmental Assessment Service, Geology and Mining Service (SERNAGEOMIN), Water Agency (DGA), and Forrest Corporation (CONAF).

The Company continued its environmental assessment process in H1 2021. In January 2021, a new Citizen Participation Process (PAC) was carried out, requested by the Environmental Assessment Service. This process included the holding of virtual meetings and door-to-door field activity.

At the end of February 2021, the complementary ICSARA was issued with 136 questions from technical authorities with environmental responsibilities. In late April 2021, the Citizen ICSARA was issued with approximately 1,150 questions, as a result of the PAC. The Company has filed a response to all questions in the Addendum N°2.

During the period of Q3 2021, environmental baseline campaigns were developed (Flora, Fauna, Human Environment, Air, Landscape, etc.) to collect specific information and support the observations in the complementary Addendum N°2. Furthermore, the Company completed a technical document answering 136 questions of the complementary ICSARA and started a peer review process for validation.

On October 29, 2021, Aclara submitted to the Environmental Assessment Service Addendum N°2 to the EIA in response to the complementary ICSARA. In the fourth quarter of 2021 (“ Q4 2021 ”), the initiation of the main sectorial development permits (mine closure, water intake, forestry plans, buildings, among others) should take place. However, completing the EIA process and obtaining the necessary licenses and permits is not guaranteed. See “Risk Factors - The Company may fail to comply with the law or may fail to obtain or renew necessary permits and licenses” for further discussion regarding the requirement for the Company to obtain or renew further government permits and licenses for its current and contemplated operations.

Occupational Health and Safety

As of October 31[st] , 2021, the occupational health and safety team led all practices, protocols, rules and compliance with new governmental requirements as a result of the COVID-19 pandemic. In addition, main activities were primarily related to exploration campaigns, environmental baseline studies, engineering, field visits with communities, compliance with the requirements relating to office working and COVID-19 protocols.

A risk prevention plan for the Penco Module is being prepared and is expected to be completed by the end of 2021.

The schedule for Q4 2021 envisages the conclusion of the risk prevention plan and training for the Company’s employees (such as first aid and vehicle driving).

On November 16, 2021, a fatal accident occurred in our operations. An employee of Empresa Aninat Maquinaria y Construcción Limitada, one of our contractors, suffered a fatal accident due to an incident involving heavy machinery.

Community Relations

In 2020, after the inaugural baseline study in March, the Company started field work in conjunction with the leaders of different organizations in Penco (including from various neighbourhoods, schools and, environmental organizations). The principal aim of the study was to introduce the Penco Module to key stakeholders, explain its processes, the various milestones of the Penco Module’s environmental assessment and detail Penco Module’s technical aspects. Challenges were encountered in facilitating meetings with all local communities due to the COVID-19 related restrictions. However, the Community Relations team were able to adapt to the circumstances and hold meetings with community leaders.

As of September 30 2021, the Company maintained an open and constant dialogue with the communities to highlight positive attributes of the Penco Module and to address potential concerns. The dialogue with communities has been supported by monthly meetings (known locally as ‘juntas de participación’), that were complemented by site visits to the project area, and specific meetings in relevant neighborhoods.

The Community Relations plan for Q4 2021 will see further interaction with local environmental organizations focusing on the Company’s activities such as base line studies, geology, and tests on the protected Queule tree.

Three months ended September 30, 2021

During the three months ended September 30, 2021, the Company incurred a loss for the period of US$172 thousand.

Exploration expenses correspond to greenfield activities, which are related to superficial mapping works, geophysics and topographic studies. Superficial mapping mainly consists of collecting soil samples of up to two meters to test different anomalies that could lead to discovery of new ionic clays areas. During the three months ended September 30, 2021, the Company expensed US$139 thousand while for the same period in 2020 the Company expensed US$89 thousand.

Administrative expenses include both legal and accounting expenditures. During the three months ended September 30, 2021, the Company incurred US$31 thousand in administrative expenses and US$371 thousand during the three months ended September 30, 2020.

Finance costs and finance income were steady for both periods.

	Three months ended September 30,	Three months ended September 30,
(in thousands of US$)	2021	2020
Exploration expenses	(139)	(89)
Administrative expenses	(31)	(371)
Finance costs	(2)	-
Finance income	-	-
Loss from continuing operations before income tax	(172)	(460)

The breakdown of exploration and administrative expense during the three months ended September 30, 2021 and September 30, 2020, are as follows:

	Three months ended September 30,	Three months ended September 30,
(in thousands of US$)	2021	2020
Exploration expense
Personnel expenses	45	31
Freights	2	-
Travel expenses	3	2
Rentals	9	9
Contractors	5	-

Security	-	-
Analysis	31	9
Technology and systems	-	-
Studies	11	8
Third party services	16	-
Supplies	12	-
Repair and maintainance	-	16
Advertising	-	13
Other	5	1
Total	139	89
Administrative expense
Personnel expenses	-	9
Professional fees	9	114
Travel expenses	-	5
Third party services	-	217
Depreciation and amortization	22	15
Other expenses	-	11
Total	31	371

Nine months ended September 30, 2021

During the nine months ended September 30, 2021, the Company reported a loss for the period of US$75 thousand.

During the nine months ended September 30, 2021, the Company recorded positive exploration expenses of US$17 thousand due to a provision reversal. This provision was related to greenfield exploration expenses and was considered at the end of 2020; however, some greenfield activities did not take place at the end. During the nine months ended September 30, 2020, exploration expenses were US$89 thousand.

Administrative expenses include both legal and accounting expenditures. During the nine months ended September 30, 2021, the Company incurred US$88 thousand in administrative expenses and US$398 thousand during the nine months ended September 30, 2020.

Finance costs and finance income were almost flat for both periods.

	Nine months ended September 30,	Nine months ended September 30,
(in thousands of US$)	2021	2020
Exploration expenses	17	(89)
Administrative expenses	(88)	(398)
Finance costs	(4)	(1)
Finance income	-	2
Loss from continuing operations before income tax	(75)	(486)

The breakdown of exploration and administrative expense during the nine months ended September 30, 2021 and September 30, 2020, are as follows:

	Nine months ended September 30,	Nine months ended September 30,
(in thousands of US$)	2021	2020
Exploration expense
Personnel expenses	46	31
Freights	3	-
Travel expenses	5	2
Rentals	2	9
Contractors	15	-
Security	3	-
Analysis	(200)	9
Technology and systems	12	-
Studies	25	8
Third party services	37	-
Supplies	23	-
Repair and maintainance	-	16
Advertising	-	13
Other	12	1
Total	(17)	89
Administrative expense
Personnel expenses	-	9
Professional fees	29	114
Travel expenses	-	5
Third party services	-	217
Depreciation and amortization	59	42
Other expenses	-	11
Total	88	398

Year ended December 31, 2020

During the twelve months ended December 31, 2020, the Company incurred a loss of US$791 thousand. Exploration expenses comprise all activities from greenfield exploration. Greenfield exploration occurs outside of the Penco Module area and have the objective to find resources that can support new operation modules. The Company has increased the exploration expense in 2020 mainly due to more superficial mapping compared to 2019 and 2018.

Administrative expenses are related to the requisite legal and accounting expenses to comply with minimum government reporting regulations. In 2020, legal and accounting expenses have been contracted with third-party consultants and are shown as professional fees. In 2019 and 2018, the previous owner managed these activities internally and are shown as personnel expenses. The increase in administrative expenses in 2020 is mainly explained by the increased number of activities and investments to develop the Penco Module. Other administrative expenses relating to the Penco Module have been capitalized.

Finance income and finance costs are associated with investments in short-term deposits and interest-bearing bank accounts respectively.

		Years ended December 31,	Years ended December 31,
(in thousands of US$)	2020	2019	2018
Exploration expenses	(554)	(223)	(85)
Administrative expenses	(237)	(75)	(90)
Finance costs	(2)	(54)	(108)
Finance income	2	43	22
Loss from continuing operations before income tax	(791)	(309)	(261)

The breakdown of exploration expense for the years ended December 31, 2020, 2019 and 2018 are as follows:

		Year ended December 31,
(in thousands of US$)	2020	2019	2018
Personnel expenses	117	-	-
Professional fees	14	181	66
Mining rights	90	17	–
Rentals	18	19	18
Subscriptions	13	-	-
Repair and maintenance	16	-	-
Analysis	268	-	-
Studies	8	-	-
Others	10	6	1
Total	554	223	85

The breakdown of administrative expense for the years ended December 31, 2020, 2019 and 2018 are as follows:

		Year ended December 31,
(in thousands of US$)	2020	2019	2018
Personnel expenses*	-	14	23
Professional fees	179	-	4
VAT not recoverable	-	4	-
Depreciation and amortization	58	57	63
Total administrative	237	75	90
*Personnel expenses were capitalized during the year
2020.

Evaluation and exploration assets

The following table sets out selected aspects of the Company’s evaluation and explorations assets for as at September 30 2021 and for the years ended December 31, 2020, and 2019.

(in thousands of US$)
Balance at January 1, 2019	16,352
Additions	717
Foreign exchange effect	874
Balance at December 31, 2019	17,943
Additions	8,297
Foreign exchange effect	1,599

Balance at December 31, 2020	27,839
Additions	9,070
Subsidy	(121)
Foreign exchange effect	(4,264)
Balance at September 30, 2021	32,524
Accumulated amortization and impairment
Balance at December 31, 2019	8
Balance at December 31, 2020	8
Foreign exchange effect	(1)
Balance at September 30, 2021	7
Net book value as at December 31, 2019	17,935
Net book value as at December 31, 2020	27,831
Net book value as at September 30, 2021	32,517

There were no borrowing costs capitalized in evaluation and exploration assets as there are no qualifying assets. There are no restrictions on ownership of evaluation and exploration assets. There are no capital commitments for evaluation and exploration assets.

As of September 30, 2021 and December 31, 2020, the Company has not recognized any impairment as no indicators of impairment were identified in the Penco Module.

The classification of evaluation and exploration assets is as follows:

(in thousands of US$)	Nine months ended September 30, 2021	Year ended December 31, 2020	Year ended December 31, 2019
Cost
Rare earth Project	32,072	27,200	17,336
Cost of production plant (Corfo)	404	461	438
Cost of biodegradable desorbents (Innova Corfo)	-	123	117
Research and development study costs	39	45	42
Protection costs rust procedures (Committee Bío-bio)	9	10	10
Total	32,524	27,839	17,943
Accumulated amortization and impairment
Amortization for the year	7	8	8
Total	7	8	8
Net book value as at period/year ended	32,517	27,831	17,935

According to the policy of capitalization of evaluation and exploration expenses, costs of mineral properties are capitalized as exploration and evaluation assets on a project by-project basis. As at September 30, 2021 and December 31, 2020 the Company’s principal business has been the development of the Penco Module. The Company capitalizes expenses related to researching and analyzing historical exploration data, gathering exploration data through geophysical studies, exploratory drilling and sampling, determining and examining the volume and grade of the resource, surveying transportation and infrastructure requirements, and conducting market and finance studies.

After REE Uno was bought by Hochschild Mining, investment in the Penco Module increased. The total capitalized in the nine months ended September 30, 2021 and the year ended December 31, 2020 is detailed below:

(in thousands of US$)	Nine months ended September 30, 2021	Year ended December 31, 2020
Personnel expenses	1,643	1,527
Professional fees	1,003	1,034
Environmental impact study	472	446
Geochemical study	163	209
Diamond drilling	807	1,195
Engineering services	795	1,244
Mining rights	341	180
Feasibility study	1,520	93
Other	2,326	2,369
Total	9,070	8,297

Financial Instruments

Nature and Extent

The Company’s financial instruments consist of cash and cash equivalents. Cash and cash equivalents are included in current assets due to their short-term nature. The fair value of cash and cash equivalents approximates their book value.

The Company’s financial instruments were broken down as follows:

(in thousands of US$)	As at
	September 30, December 31, December 31, 2021 2020 2019
Cash and cash equivalents Current demand deposit accounts Time deposits Mutual funds	1,510 1,265 403 - - 801 - - 16
Total Cash and cash equivalents	1,510 1,265 1,220

In 2020, the Company cleared its last time deposit. As at September 30, 2021 and December 31, 2020, the Company had no time deposits nor mutual funds as the strategy was to maintain cash in the current demand deposit accounts. In contrast, as at December 31, 2019 and 2018, the Company invested part of its cash in time deposits and mutual funds.

Financial Instrument Risks

The Company manages risks to minimize potential losses. The primary objective is to ensure that the risks are properly identified and that the capital base is adequate in relation to those risks. The Company’s risk exposure is summarized below.

Foreign Currency Risk

The Company is in the pre-operational stage and accordingly, no income or operating costs have been recorded. The principal disbursements are denominated in Chilean pesos. The Company has deposits, trade and other payables and account payables to related parties stated in U.S. dollars.

Credit Risk

Risks related to the Company’s inability to make payment of their obligations as they become due. The Company is not exposed to credit risk as it does not have commercial activities.

Liquidity Risk

This refers to risks related to the Company’s inability to obtain funds required to comply with its commitments, including the inability to sell a financial asset quickly enough and at a price close to its fair value. Management regularly monitors the Company’s level of short- and medium-term liquidity, and access to credit lines, in order to ensure appropriate financing is available for its operations. As of the date of this report, the Company has no credit lines available.

Liquidity and Capital Resources

Off-Balance Sheet Commitments

The Company has no off-balance sheet commitments.

Contractual Obligations

The Company’s contractual obligations as at September 30, 2021 that need to be satisfied with cash and their approximate timing of payment are as follows:

	Q4	FY	FY	FY	FY	FY
(inthousands ofUS$)	2021	2022	2023	2024	2025	2026
Office leases	13	22	-	-	-	-
Vehicles lease	7	27	9	-	-	-
Warehouse leases	31	17	-	-	-	-
Land acquisition	220	220	6,000	1,300	1,300	1,300
Total Contractual Obligations	271	286	6,009	1,300	1,300	1,300

Cash and Liquidity

As of December 31, 2019, the Company had received capital contributions from its previous owners for the development of the feasibility study of US$492 thousand.

As of December 31, 2020, the Company had received an aggregate of US$7 million as capital contributions and a related party loan of US$2.5 million from HM Holdings, the proceeds of which were applied to finance engineering activities, permitting and ESG expenses, brownfield exploration and administrative expenses.

Year to date, the Company received capital contributions of US$9.75 million and an additional related party loan of US$1.0 million from HM Holdings, the proceeds of which were used to fund activities in connection with the Penco Module, including brownfield exploration activities, the development of the Technical Report, optimization studies, permitting activities, administration costs, and salaries, as well as greenfield exploration activities for development of future modules.

On September 8, 2021, the Company converted the loan payable to HM Holdings of US$3.5 million into a capital contribution.

As of September 30, 2021, the Company had cash and cash equivalents of US$1.5 million.

On October 15, 2021, the Company received an additional capital contribution of US$1.5 million from HM Holdings.

On October 26, 2021, the Company received a related party loan of US$1.5 million from HM Holdings. The loan has a duration of three months and an annual interest rate of 5.0%. The purpose of this loan is to fund the Company’s activities until the completion of the Offering.

The Company is executing the Offering to raise sufficient funds to keep developing the Penco Module, as well as other activities related to exploration, permitting processes and engineering in connection with potential new modules for the following twelve months and beyond. If the Offering is not completed, the Company has the support of its parent company, Hochschild Mining, which may provide the necessary funds for continued operations (which financial support would terminate effective upon completion of the Offering).

The Company did not have any commercial debt as of September 30, 2021.

Capital Resources

The Company’s focus going forward is the advancement and development of the Penco Module and future modules. The primary uses of capital resources in the next twelve months are expected to be:

Activities in connection with the Penco Module: Feasibility study Brownfield exploration Permitting activities Surface land purchase Construction capital expenditures Exploration, permitting processes and engineering activities in connection with potential new modules Working capital and general corporate purposes TOTAL	(in thousands) $13,509 $2,991 $2,981 $594 $7,346 $7,065 $5,638
	$40,125

Although the above represents management’s current budget estimates, there can be no assurance that actual expenses will not materially differ from those set out above. For more information on the factors that can cause actual results to materially differ from current estimates, please see “Risk Factors”.

As the Company does not currently have cash flow from operating activities, the Company will be relying on further equity financing, debt financing, or a strategic partnership as the most likely sources of funds for the development of the Penco Module and future modules.

Related Party Transactions

Key Management Compensation

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company.

Nine months ended September 30, 2021

nths ended September 30, 2021
		As at
	September 30,		September 30,
(in thousands of US$)	2021		2020
Short-term employee benefits	452		189
Total compensation paid to key management personnel	452		189

The remuneration for the Company’s key management for the nine months ended September 30, 2021 was US$452 thousand and for the nine months ended September 30, 2020 was US$189 thousand. The number of key management employees of the Company was four at September 30, 2021 and two at September 30, 2020.

Year ended December 31, 2020

		Years ended December 31,	Years ended December 31,
(in thousands of US$)	2020	2019	2018
Short-term employee benefits	192	-	-
Total compensation paid to key management personnel	192	-	-

For the year ended December 31, 2020, the remuneration of the Company’s key management was US$192 thousand and nil for the previous two years as there was no key management personnel.

Related Party Transactions

The Company had the following related-party balances and transactions during the nine months ended September 30, 2021 and years ended December 31, 2020 and 2019.

Minera Hochschild Chile SCM and Compañía Minera Ares S.A.C., as members of Hochschild Mining group, are both related parties and have granted intercompany administrative services since 2019.

FIP Lantánidos was a related party prior to the acquisition of REE Uno by Hochschild Mining. As at the date of this MD&A, the Company has no obligations with FIP Lantánidos.

Nine months ended September 30, 2021

	Account	Payables
	September 30,	December 30,
(in thousands of US$)	2021	2020
FIP Lantánidos	-	-
HM Holdings	-	2,500
Compañía Minera Ares S.A.C.	1,226	875
Minera Hochschild Chile SCM	262	435
Total	1,488	3,810

The account payables of Compañia Minera Ares S.A.C. and Minera Hochschild Chile SCM correspond to services granted to the Company, which are paid on an annual basis.

As of September 30, 2021, all accounts are, or were, non-interest bearing. No security has been granted or guarantees given by the Company in respect of these related party balances.

Principal transactions between affiliates are as follows:

	September 30,	September 30,
(in thousands of US$)	2021	2020
Expense recognised and capitalized for the services performed by Compañia Minera Ares S.A.C.	351	-

Year ended December 31, 2020

	Account	Payables
	Years ended	December 31,
	2020	2019
FIP Lantanidos	-	-
HM Holdings	2,500	-
Compañía Minera Ares S.A.C.	875	502
Minera Hochschild Chile SCM	435	1,013
Total	3,810	1,515

As of December 31, 2020, all accounts are, or were, non-interest bearing. No security has been granted or guarantees given by the Company in respect of these related party balances. The account payables at December 31, 2020 of US$2.50 million corresponds to the interest-free loan from HM Holdings that is repayable on demand. The Company converted this loan into a capital contribution on September 8, 2021. The account payables of Compañia Minera Ares S.A.C. and Minera Hochschild Chile SCM correspond to services granted to the Company, which are paid on an annual basis.

Principal transactions between affiliates are as follows:

	Years ended	December 31,
(in thousands of US$)	2020	2019
Expense recognised and capitalized for the services performed by Compañia Minera Ares S.A.C.	(549)	(326)
Loan from HM Holdings	2,500	-

Outstanding Share Data

As of October 15, 2021, REE Uno had 27,967,059,967 outstanding A-series shares.

Significant Accounting Policies

Our accounting policies are described in Note 2 of the financial statements, which are included in this prospectus.

CONCURRENT INITIAL PUBLIC OFFERING

The aggregate net proceeds of the Offering and the Concurrent Private Placement are estimated to be approximately $115,564,938 ($123,956,201 if the Over-Allotment Option is exercised in full and $132,798,757 if the Over-Allotment Option and the Private Placement Option are exercised in full), after deducting the underwriters’ fee of $5,925,545 and the expenses of the Offering and the Concurrent Private Placement which are estimated to be approximately $3,700,000. We will use the net proceeds from the Offering and the Concurrent Private Placement to advance the exploration and development of the Penco Module, the exploration of potential new modules, and for working capital and general corporate purposes.

In consideration for their services in connection with the Initial Public Offering, we have agreed to pay an underwriters’ fee, which is equal to $  per Offered Share (being 6.0% of the Initial Public Offering Price), including any Common Shares purchased on exercise of the Over-Allotment Option, if any. The obligations of the underwriters under the Underwriting Agreement are conditional and may be terminated at their discretion upon the occurrence of certain stated events, including “material change out”, “disaster out”, “proceeding to restrict distribution out” and “market out” clauses.

Pursuant to the Underwriting Agreement, each of the Company and our executive officers and directors, and the Principal Shareholders, have agreed that he, she or it will not, directly or indirectly, without the prior written consent of RBC Dominion Securities Inc. and Canaccord Genuity Corp., on behalf of the underwriters, such consent not to be unreasonably withheld, issue, offer or sell or grant any option, warrant or other right to purchase or agree to issue or sell or otherwise lend, transfer, assign or dispose of any of our equity securities, or other securities convertible or exchangeable into or otherwise exercisable into our equity securities (including without limitation by making any short sale, engaging in any hedging, monetization or derivative transaction or entering into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Company’s securities or securities convertible into, exchangeable for, or otherwise exercisable into Company’s securities), or agree or publicly announce any intention to do any of the foregoing, in each case, for a period commencing on the date hereof and ending 180 days after the closing date of the Initial Public Offering, subject to certain limited exceptions, including the sale of our securities pursuant to the exercise of the Over-Allotment Option, or the issuance of our securities pursuant to or in connection with our equity incentive compensation plans.

In addition, pursuant to the Investor Rights Agreement, each of the Principal Shareholders will agree not to sell any Common Shares held by them on closing of the Initial Public Offering and closing of the Concurrent Private Placement, for a period of 12 months after the closing of the Initial Public Offering. See “Agreements with Principal Shareholders – Investor Rights Agreement”.

Shareholders holding 51% of the Company’s issued and outstanding Common Shares immediately following closing of the Initial Public Offering (approximately 49% if the Over-Allotment Option is exercised in full and approximately 51% if the Over-Allotment Option and the Private Placement Option are exercised in full) will be subject to these lock-up arrangements.

USE OF PROCEEDS

Neither the Company nor Hochschild Mining will realize any proceeds from the distribution of the Demerged Aclara Shares.

DESCRIPTION OF SHARE CAPITAL

The following describes material terms of our share capital upon completion of the Demerger, Initial Public Offering and the Concurrent Private Placement. The following description may not be complete and is subject to, and qualified in its entirety by reference to, the terms and provisions of our articles (“ Articles ”).

Authorized Share Capital

Immediately prior to closing of the Initial Public Offering and upon completion of the Demerger, our authorized share capital will consist of (i) an unlimited number of Common Shares; and (ii) an unlimited number of preferred shares, issuable in series.

Upon completion of the Demerger, the Concurrent Private Placement and the Initial Public Offering, an aggregate of 155,926,319 Common Shares, based on the midpoint of the estimated price range of the Initial Public Offering Price (160,751,657 Common Shares if the Over-Allotment Option is exercised in full and 165,704,776 Common Shares if the Over-Allotment Option and the Private Placement Option are exercised in full) and no preferred shares will be issued and outstanding.

Common Shares

Rank

The Common Shares rank pari passu with respect to the payment of dividends, return of capital and distribution of assets in the event of our liquidation, dissolution or winding-up.

Dividend Rights

Shareholders are entitled to receive dividends on a pari passu basis out of our assets legally available for the payment of dividends at such times and in such amount and form as our Board may from time to time determine, subject to any preferential rights of the holders of any outstanding preferred shares. See “Dividend Policy”.

Voting Rights

Shareholders are entitled to one vote in respect of each Common Share held at meetings of Shareholders, as described below.

Conversion

The Common Shares are not convertible into any other class of shares or other securities of the Company.

Meetings of Shareholders

Shareholders will be entitled to receive notice of any meeting of Shareholders and may attend and vote at such meetings, except those meetings where only the holders of shares of another class or of a particular series are entitled to vote. A quorum for the transaction of business at a meeting of Shareholders is present if Shareholders who, together, hold not less than 25% of the votes attaching to our outstanding shares entitled to vote at the meeting are present in person or represented by proxy.

Pre-Emptive Rights

Shareholders will have no pre-emptive or retraction rights under our Articles. The Principal Shareholders will be entitled to certain pre-emptive rights to subscribe for additional Common Shares and top-up rights in certain instances, as provided for in the Investor Rights Agreement. See “Agreements with Principal Shareholders – Investor Rights Agreement – Pre-Emptive Rights and Top-Up Rights”.

Retraction Rights

Shareholders will have no retraction rights.

Redemption Rights

The Company will have no redemption or call rights in respect of the Common Shares.

Liquidation Rights

Upon our liquidation, dissolution or winding-up, whether voluntary or involuntary, the Shareholders, without preference or distinction, will be entitled to receive rateably all of our assets remaining after payment of all debts and other liabilities, subject to any preferential rights of the holders of any outstanding preferred shares.

Preferred Shares

Preferred shares may at any time and from time to time be issued in one or more series. Subject to the provisions of the BCBCA and our Articles, our Board may, by resolution, from time to time before the issue thereof determine the maximum number of preferred shares of each series, create an identifying name for each series, attach special rights or restrictions to the preferred shares of each series including, without limitation, any right to receive dividends (which may be cumulative or non-cumulative and variable or fixed) or the means of determining such dividends, the dates of payment thereof, any terms or conditions of redemption or purchase, any conversion rights, any retraction rights, any rights on our liquidation, dissolution or winding up and any sinking fund or other provisions, the whole to be subject to filing a Notice of Alteration to our Notice of Articles to create the series and altering our Articles to include the special rights or restrictions attached to the preferred shares of the series.

Except as provided in any special rights or restrictions attaching to any series of preferred shares issued from time to time, the holders of preferred shares will not be entitled to receive notice of, attend or vote at any meeting of Shareholders.

Preferred shares of each series, if and when issued, will, with respect to the payment of dividends, rank on parity with the preferred shares of every other series and be entitled to preference over the Common Shares and any other of our shares ranking junior to the preferred shares with respect to payment of dividends.

In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of preferred shares will be entitled to preference with respect to distribution of our property or assets over the Common Shares and any other of our shares ranking junior to the preferred shares with respect to the repayment of capital paid up on and the payment of unpaid dividends accrued on the preferred shares. We currently anticipate that there will be no pre-emptive, subscription, redemption or conversion rights attaching to any series of preferred shares issued from time to time.

Advance Notice Provisions

We have included certain advance notice provisions with respect to the election of our directors in our Articles (the “ Advance Notice Provisions ”). The Advance Notice Provisions are intended to: (i) facilitate orderly and efficient annual general meetings or, where the need arises, special meetings; (ii) ensure that all Shareholders receive adequate notice of Board nominations and sufficient information with respect to all nominees; and (iii) allow Shareholders to register an informed vote. Only persons who are nominated by Shareholders in accordance with the Advance Notice Provisions will be eligible for election as directors at any annual meeting of Shareholders, or at any special meeting of Shareholders if one of the purposes for which the special meeting was called was the election of directors.

Under the Advance Notice Provisions, a Shareholder wishing to nominate a director would be required to provide us notice, in the prescribed form, within the prescribed time periods. These time periods include, (i) in the case of an annual meeting of Shareholders (including annual and special meetings), not less than 30 days prior to the date of the annual meeting of Shareholders; provided, that if the first public announcement of the date of the annual meeting of Shareholders (the “ Notice Date ”) is less than 50 days before the meeting date, not later than the close of business on the 10[th] day following the Notice Date; and (ii) in the case of a special meeting (which is not also an annual meeting) of Shareholders called for any purpose which includes electing directors, not later than the close of business on the 15[th] day following the Notice Date, provided that,

in either instance, if notice-and-access (as defined in National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer ) is used for delivery of proxy related materials in respect of a meeting described above, and the Notice Date in respect of the meeting is not less than 50 days prior to the date of the applicable meeting, the notice must be received not later than the close of business on the 40[th] day before the applicable meeting.

Forum Selection

We have included a forum selection provision in our Articles that provides that, unless we consent in writing to the selection of an alternative forum, the Supreme Court of British Columbia, Canada and the appellate courts therefrom, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us; (iii) any action or proceeding asserting a claim arising pursuant to any provision of the BCBCA or our Articles; or (iv) any action or proceeding asserting a claim otherwise related to the relationships among us, our affiliates and their respective Shareholders, directors and/or officers, but excluding claims related to our business or the business of such affiliates. The forum selection provision also provides that our securityholders are deemed to have consented to personal jurisdiction in the Province of British Columbia and to service of process on their counsel in any foreign action initiated in violation of the foregoing provisions.

THE DEMERGER

In October 2019, Hochschild Mining (via a subsidiary) acquired 100% of the Aclara Project. At the time of the acquisition, Hochschild Mining considered that the acquisition of the Aclara Project represented an opportunity for Hochschild Mining to acquire a unique rare earth deposit whilst maintaining its primary focus on the exploration, mining, processing and sale of precious metals. Since its acquisition, Aclara has continued to be run as an independent business unit within Hochschild Mining. Aclara’s primary growth opportunities going forward are expected to be in expanding its rare earth business.

Assuming the Conditions are satisfied, the Demerger will be effected by Hochschild Mining distributing the Demerged Aclara Shares to Hochschild Mining Shareholders by way of the Demerger Dividend. The Demerger will result in two separately listed companies, being (i) Aclara, which has applied to list its Common Shares on the TSX and (ii) Hochschild Mining, which will continue to be traded on the main market for listed securities of the London Stock Exchange, and each with its own distinct investment prospects. Aclara will focus on rare earth mineral resources, whereas the primary focus of Hochschild Mining’s business is the exploration, mining, processing and sale of precious metals.

Reasons for the Demerger

Strategic focus on precious metals : although Hochschild Mining has applied its expertise to identifying and developing a rare earth mineral deposit, directors of Hochschild Mining believe that its strategic focus should remain on precious metals. In contrast, Aclara has a different strategic approach in order to succeed in the specialty rare earth industry and will be required to develop specific commercial capabilities and consider further integration down the permanent magnet value chain. Both are areas of expertise that Hochschild Mining does not currently possess and, even if it were to develop such expertise, this would not necessarily enhance Hochschild Mining’s precious metals business in the future.
Management focus : with Hochschild Mining’s management team focusing the majority of its time on precious metals deposits, an independent Aclara will benefit from a dedicated, standalone management team and board.
Access to capital : Hochschild Mining has a pipeline of precious metals opportunities with which Aclara currently competes for capital. At the same time, Aclara has an ambitious growth plan based on the development of several production modules and may eventually invest in building its own separation capabilities. Given Hochschild Mining’s likely future prioritisation of precious metal projects, a separately-listed Aclara will be in a significantly improved position to raise capital from investors who are keen to support a high-growth rare earth opportunity and may have a different approach than precious metals investors.
Independent valuation : separating Hochschild Mining’s precious metals and rare earth portfolio will allow the market to value each business independently, potentially leading to a re-rating of either or both businesses.

Steps of the Demerger

HM Holdings (a wholly-owned subsidiary of Hochschild Mining) was the sole shareholder of REE Uno, which holds all of the rights and title to the Penco Module;
HM Holdings is the sole shareholder of Aclara and incorporated Aclara on May 5, 2021;
Concurrently therewith, Aclara incorporated a branch in Chile, of which it is a direct parent;
On October 15, 2021, HM Holdings contributed all of its shares in REE Uno to Aclara, in exchange for shares of Aclara, and Aclara became the sole shareholder of REE Uno;
Immediately thereafter, Aclara allocated all of its shares in REE Uno to its branch; and
Prior to completion of the Initial Public Offering, HM Holdings will transfer to Hochschild Mining by way of dividend in specie Common Shares representing 80% of the issued and outstanding shares of the Company. On completion of the Initial Public Offering, HM Holdings will continue to retain Common Shares of Aclara representing 20% of the issued and outstanding Common Shares.

On completion of the Demerger and the Initial Public Offering, Aclara, including its subsidiary, REE Uno, will be separated from Hochschild Mining, by way of dividend in specie , which will result in two separately listed companies, being (i) Aclara, which has applied to list its Common Shares on the TSX and (ii) Hochschild Mining, which will continue to be traded on the main market for listed securities of the London Stock Exchange, and each with its own distinct investment prospects. Aclara will focus on rare earth mineral resources, whereas the primary focus of Hochschild Mining’s business is the exploration, mining, processing and sale of precious metals.

Conditions to the Demerger

The Demerger is conditional upon: (a) the approval of directors of Hochschild Mining; (b) the passing of an ordinary resolution at the extraordinary general meeting of Hochschild Mining on November 5, 2021 (or any adjournment thereof); (c) the completion of the Initial Public Offering on terms that are satisfactory to Hochschild Mining and Aclara; (d) the Listing; and (e) no other events or developments occurring or existing that, in the judgement of the board of directors of Hochschild Mining, in its sole and absolute discretion, would make it inadvisable to effect the Demerger.

The Demerger was approved by the board of directors of Hochschild Mining on October 16, 2021.

The extraordinary general meeting of Hochschild Mining was held on November 5, 2021, and the ordinary resolution (50% approval) was duly passed, with 99.27% of the votes cast being voted in favour.

Value and Ratio of the Demerger Dividend

Record Time of the Demerger Dividend

Corporate Structure Resulting from the Demerger

Pre-Demerger Corporate Structure

The following chart shows the corporate structure of the Company and Hochschild Mining, and the securityholdings of each of the Principal Shareholders and public shareholders of Hochschild Mining prior to the Demerger:

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Other Public Shareholders Pelham Investment
Corporation
61.68% 38.32%
Hochschild Mining
100%
HM Holdings
100%
Aclara
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Post-Demerger Corporate Structure

The following chart shows the corporate structure of Hochschild Mining, and the securityholdings of each of the Principal Shareholders and public shareholders of Hochschild Mining immediately following the Demerger and the Initial Public Offering and Concurrent Private Placement:

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Pelham Investment
Other Public Shareholders
Corporation
61.68% 38.32%
Hochschild Mining
100%
HM Holdings
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The following chart shows the corporate structure of the Company, and the securityholdings of each of the Principal Shareholders and public shareholders of the Company, immediately following the Demerger and the Initial Public Offering and Concurrent Private Placement: Other Public Shareholders Hochschild Mining Pelham Investment Corporation 100% 30.7% 49.3% HM Holdings 20% Aclara

Qualification of the Demerged Aclara Shares

Registration

Aclara DIs

Overview of Aclara DI Arrangements

A Depositary Interest (or DI) enables the holder to hold and settle transfers of Demerged Aclara Shares in CREST. CREST is a paperless settlement system that allows securities to be evidenced otherwise than by a certificate and transferred from one person’s CREST account to another electronically. Securities of issuers domiciled outside the United Kingdom and certain other jurisdictions, such as Aclara, cannot be held or settled directly in CREST, whilst Depositary Interests cannot be settled through CDS on the TSX. However, upon instruction from a holder of DIs to the UK Depositary (as defined below), the Demerged Aclara Shares represented through CREST in the form of Depositary Interests may be transferred into CDS.

Aclara, therefore, has entered into arrangements to enable holders of Demerged Aclara Shares to hold, and settle transfers of, Demerged Aclara Shares in CREST in the form of Aclara DIs. Each Aclara DI represents an entitlement to one

underlying Demerged Aclara Share. Although the Aclara DIs will be independent securities constituted under English law, they will reflect the same economic rights as are attached to the Demerged Aclara Shares.

Demerged Aclara Shares distributed to Hochschild Mining Shareholders whose shares in Hochschild Mining are held in uncertificated form through CREST will be registered in the name of Computershare Company Nominees Limited (the “ UK Depositary Nominee ”), which will hold those shares on behalf of Computershare Investor Services PLC, in its capacity as depositary for holders of Aclara DIs (the “ UK Depositary ”), on the shareholder register maintained by the Aclara’s transfer agent. The UK Depositary will issue and credit Aclara DIs to the entitled participants’ CREST accounts against the receipt of underlying Demerged Aclara Shares by the UK Depositary Nominee. An Aclara DI register of CREST participants will be held in the United Kingdom showing full details of the registered Aclara DI holders in a similar fashion to the register of legal ownership of Demerged Aclara Shares. The Aclara DI register will be wholly uncertificated and Aclara DIs can only be held and transferred between CREST participants.

The Aclara DIs will be created and issued under a Deed Poll to be executed by the UK Depositary (the “ Deed Poll ”), which will govern the relationship between the UK Depositary and the holders of the Aclara DIs.

Summary of the Principal Terms of the Deed Poll

Under the Deed Poll, the UK Depositary Nominee (as custodian on behalf of the UK Depositary) will hold the underlying Demerged Aclara Shares on trust for all holders of Aclara DIs as tenants in common and will hold on trust and pass on to holders of the Aclara DIs any stock or cash benefits received by it as holder of the underlying Demerged Aclara Shares.

Holders of Aclara DIs will be able to exercise the rights attached to the Demerged Aclara Shares represented thereby and will be treated in the same way as registered shareholders in respect of all other rights attaching to the Demerged Aclara Shares, in each case, so far as possible in accordance with applicable CREST Regulations, CREST requirements and applicable law. Holders of Aclara DIs must give prompt instructions to the UK Depositary or its nominated custodian, in accordance with any voting arrangements made available to them, to vote in respect of the underlying Demerged Aclara Shares on their behalf or to take advantage of any arrangements enabling holders of Aclara DIs to vote in respect of such shares as a proxy of the UK Depositary of its custodian.

Following the issue of the Aclara DIs, holders will be able to cancel their Aclara DIs in CREST in order to hold their underlying Demerged Aclara Shares directly on the Canadian register (upon sending an instruction to CREST to that effect).

Holders of Aclara DIs will be required to warrant, among other things, that Demerged Aclara Shares issued or transferred to the UK Depositary (or a custodian on its behalf, such as the UK Depositary Nominee) after the Demerger will be free and clear of all third party security interests and that such transfers are not in contravention of Aclara’s constitutional documents, or any contractual obligation binding on the holder or transferor, or any law or regulation or order binding on the holder or the transferor.

Subject to certain exceptions (including the fraud, negligence or wilful default of the UK Depositary), the UK Depositary, the UK Depositary Nominee and any custodian or agent appointed by them (and their respective officers, employees and agents) will be entitled to be indemnified against all liabilities incurred in the performance of their obligations under the Deed Poll and may make deductions from income or capital receipts which would otherwise be due to the Aclara DI holder and/or sell the underlying Demerged Aclara Shares and make such deductions from the proceeds of sale as may be required for this purpose or to meet any such liabilities of such Aclara DI holder.

The Deed Poll will permit the UK Depositary to charge Aclara DI holders fees and expenses and contains provisions excluding and limiting the UK Depositary’s liability. The UK Depositary will not be liable for any acts or omissions of Aclara or any refusal or failure of the CREST operator.

The liability of the UK Depositary in respect of each holder of Aclara DIs will be limited to the lesser of: (a) the value of the Demerged Aclara Shares and other deposited property properly attributable to the Aclara DIs to which the liability relates; and (b) the proportion of £5,000,000 which corresponds to the portion of the amount the UK Depositary would otherwise be liable to pay to the Aclara DI holder relative to the UK Depositary’s liability to all holders in respect of the same act, omission or event which gave rise to such liability or, if there are no such amounts, £5,000,000.

The UK Depositary will be able to terminate the Deed Poll by giving at least 30 days’ notice to Aclara DI holders. During such notice period, holders of Aclara DIs may cancel their Aclara DIs and withdraw their deposited property and, if any Aclara DIs remain outstanding after termination, the UK Depositary must as soon as reasonably practicable, among other things, (i) deliver the deposited property in respect of the Aclara DIs to the relevant holder of the Aclara DIs or (ii) at its

discretion, sell all or part of such deposited property, in which case it will as soon as reasonably practicable deliver the net proceeds of any such sale, after deducting sums due to the UK Depositary, together with any other cash held by it under the Deed Poll pro rata to the holders of Aclara DIs in respect of their Aclara DIs.

The Depositary and any custodian may hold, on behalf of holders of Aclara DIs, their money entitlements in client bank accounts outside the United Kingdom on a pooled basis, pending distribution, and such money may not be protected as effectively as money held in a bank account in the United Kingdom.

The UK Depositary will be able to amend the Deed Poll by giving 30 days’ notice to holders of Aclara DIs.

The UK Depositary will be able to require any holder of Aclara DIs to provide information in relation to their holdings of Aclara DIs, including information as to the capacity in which the Aclara DIs are owned or held and the identity of any other person with any interest of any kind in such Aclara DIs or the underlying Demerged Aclara Shares, and holders are bound to provide such information requested.

The Deed Poll will be governed by English law. A copy of the Deed Poll will be available on request from the UK Depositary.

Direct Registration Statements

Overview of the Direct Registration System

The Direct Registration System allows Hochschild Mining Shareholders to hold their assets in electronic book-entry form directly with an issuer, rather than holding their securities in certificated form. Shareholders who are issued with direct registration advices will not receive a physical certificate. Upon any changes to their accounts (for example, in the event of a transfer), holders of Demerged Aclara Shares will receive direct registration statements from Aclara evidencing their holdings.

Shareholders who use the Direct Registration System still receive dividend payments, proxy materials and, should such shareholders opt in (using the relevant proxy form), annual reports from Aclara.

Certificated UK Shareholders

Hochschild Mining Shareholders who hold their shares in Hochschild Mining in certificated form will receive, by post, direct registration advices or direct registration statements, which will reflect their ownership of Demerged Aclara Shares in book-entry form. They will not receive physical share certificates evidencing their ownership of Demerged Aclara Shares.

The use of direct registration advices and direct registration statements offers a number of advantages to issuing share certificates. For example, unlike share certificates, direct registration advices and direct registration statements cannot be lost or misplaced. Direct registration advices and direct registration statements are also not susceptible to the risks associated with processing physical securities, such as theft, forgery and the risk of certificates being lost.

DIVIDEND POLICY

We currently intend to retain any future earnings to fund the development and growth of our business and do not currently anticipate paying dividends on the Common Shares. Any determination to pay dividends in the future will be at the discretion of our Board and will depend on many factors, including, among others, our financial condition, current and anticipated cash requirements, contractual restrictions and financing agreement covenants, solvency tests imposed by applicable corporate law and other factors that our Board may deem relevant.

PRINCIPAL SHAREHOLDERS

Upon the completion of the Demerger, Initial Public Offering and the Concurrent Private Placement, based on the midpoint of the estimated price range of the Initial Public Offering Price, the Principal Shareholders will, directly or indirectly, own or control approximately 50.7% of the issued and outstanding Common Shares (approximately 49.1% if the Over-Allotment Option is exercised in full and approximately 50.7% if the Over-Allotment Option and the Private Placement Option are exercised in full). As a result, the Principal Shareholders will have significant influence over us and our affairs. See “Risk Factors”. In addition, each of the Principal Shareholders will be party to the Investor Rights Agreement that, among other things, will give each of them the right to nominate directors to our Board. See “Agreements with Principal Shareholders – Investor Rights Agreement”.

The following table sets out certain information with respect to the Principal Shareholders who, immediately following completion of the Demerger, the closing of the Initial Public Offering and closing of the Concurrent Private Placement, and based on the midpoint of the estimated price range of the Initial Public Offering Price, will, to our knowledge, beneficially own, control or direct, directly or indirectly, voting securities carrying 10% or more of the voting rights attached to any class of our voting securities.

Name of Shareholder	Type of Ownership	Immediately following the Demerger but prior to the closing of the Initial Public Offering	Immediately following the Demerger and closing of the Initial Public Offering (and assuming closing of the Concurrent Private Placement)	Immediately following the Demerger and closing of the Initial Public Offering (and assuming closing of the Concurrent Private Placement)
		Number of Common Shares Owned	Number of Common Shares Owned	Percentage of Outstanding Common Shares(1)(2)
Hochschild Mining(3) Pelham Investment Corporation(4)	Beneficial Direct	17,652,421 Common Shares 27,055,321 Common Shares	31,185,264Common Shares 47,796,691Common Shares	20.0% 30.7 %

Notes:

(1) Based on the midpoint of the estimated price range of the Initial Public Offering Price and assuming neither the Over-Allotment Option nor Private Placement Option is exercised. If the Over-Allotment Option is exercised in full, the underwriters will purchase an additional  Common Shares from the Company and the Principal Shareholders’ interest in the Company will be correspondingly reduced unless the Principal Shareholders exercise the Private Placement Option.

(2) Figure assumes completion of the Demerger and represents ownership on both a non-diluted and fully-diluted basis as no options (as defined herein) or other convertible securities will be outstanding immediately following closing of the Initial Public Offering and the Concurrent Private Placement.

(3) Common Shares are held by HM Holdings, a wholly-owned subsidiary of Hochschild Mining.

(4) Pelham Investment Corporation is an entity controlled by Eduardo Hochschild, the Chairman of the board of directors of Hochschild Mining. In addition, Pelham Investment Corporation controls approximately 38% of the ordinary shares of Hochschild Mining. Pelham Investment Corporation expressly disclaims beneficial ownership of the Common Shares held by Hochschild Mining.

All of the Common Shares held on completion of the Demerger, the Initial Public Offering and the Concurrent Private Placement, by the Principal Shareholders will be subject to contractual lock-up agreements with the underwriters and pursuant to the terms of the Investor Rights Agreement. See “Concurrent Initial Public Offering” and “Agreements with Principal Shareholders – Investor Rights Agreement”.

AGREEMENTS WITH PRINCIPAL SHAREHOLDERS

Concurrent Private Placement

Pursuant to a subscription agreement dated  , 2021 between the Company and each of the Principal Shareholders, each of the Principal Shareholders have severally agreed (approximately in proportion to their respective existing ownership in the Company following the Demerger) to purchase from the Company, on a prospectus-exempt basis in Canada, an aggregate of 34,274,213 Placement Common Shares (based on the midpoint of the estimated price range of the Initial Public Offering Price) at the Initial Public Offering Price for aggregate gross proceeds to the Company of $63,407,294. Closing of the Concurrent Private Placement is scheduled to occur concurrently with the closing of the Initial Public Offering, and closing of the Concurrent Private Placement to the Principal Shareholders and the closing of the Initial Public Offering are conditional on each other.

The Company has also granted each of the Principal Shareholders the right, but not the obligation, to subscribe for an additional 4,953,119 Common Shares (based on the midpoint of the estimated price range of the Initial Public Offering Price) for a period of 30 days from and including the closing date of the Initial Public Offering, if and only to the extent the underwriters exercise the over-allotment option, in whole or in part. The Private Placement Option will be exercisable up to the same proportionate size, and at the same pricing, as the exercise of the over-allotment option by the underwriters in the Initial Public Offering.

The Placement Common Shares, including any Common Shares that may be issued in connection with the Private Placement Option, will be subject to a statutory hold period. This prospectus does not qualify the distribution of the Common Shares pursuant to the Concurrent Private Placement or the Private Placement Option.

The underwriters in the Initial Public Offering will receive a cash commission equal to 3.5% of the aggregate gross proceeds of the Concurrent Private Placement to the Principal Shareholders.

Investor Rights Agreement

Effective upon closing of the Initial Public Offering, we will enter into an investor rights agreement with each of the Principal Shareholders (the “ Investor Rights Agreement ”) with respect to certain director nomination rights, governance matters and shareholder rights.

The following is a summary of the material attributes and characteristics of the Investor Rights Agreement. This summary is qualified in its entirety by reference to the provisions of that agreement, which contains a complete statement of those attributes and characteristics. The Investor Rights Agreement will be available for review under the Company’s profile on SEDAR at www.sedar.com on closing of the Initial Public Offering.

Board of Directors

The Principal Shareholders shall each have the right to designate a number of nominees for election to the Board equal to (a) four, provided that a Principal Shareholder holds at least 40% of the Common Shares outstanding (on a non-diluted basis), (b) three, provided that a Principal Shareholder holds at least 30% of the Common Shares outstanding, but less than 40% thereof (on a non-diluted basis), (c) two, provided that a Principal Shareholder holds at least 20% of the Common Shares outstanding, but less than 30% thereof (on a non-diluted basis), and (d) one, provided that a Principal Shareholder holds at least 10% of the Common Shares outstanding, but less than 20% thereof (on a non-diluted basis). If a Principal Shareholder holds less than 10% of the Common Shares outstanding (on a non-diluted basis), it shall not have any rights to designate a nominee for election to the Board.

Pre-Emptive Rights and Top-Up Rights

In the event of any distribution or issuance, including by way of a share dividend (a “ Distribution ”) of our Common Shares or of our securities convertible or exchangeable into Common Shares or giving the right to acquire Common Shares (other than options or other securities issued under compensatory plans or other plans to purchase Common Shares or any other securities in favour of our management, directors, employees or consultants, and certain other exceptions to be set forth in the Investor Rights Agreement) (the “ Convertible Securities ” and, together with the Common Shares, the “ Distributed

Securities ”), the Investor Rights Agreement will provide each of the Principal Shareholders, for so long as it owns, controls or directs at least 10% of our outstanding Common Shares (on a non-diluted basis), the right to subscribe for that number of Common Shares, or, as the case may be, for securities convertible or exchangeable into or giving the right to acquire, on the same terms and conditions, including subscription or exercise price, as applicable, mutatis mutandis (except for the ultimate underlying securities which shall be Common Shares), as those stipulated in the Convertible Securities, that number of Common Shares, respectively, which carry, in the aggregate, a number of voting rights sufficient to fully maintain the proportion of total voting rights (on a fully-diluted basis) associated with the then outstanding Common Shares (the “ Rights to Subscribe ”).

The Rights to Subscribe shall be issued to each of the Principal Shareholders in a proportion equal to their respective holdings of Common Shares and shall be issued concurrently with the completion of the Distribution of the applicable Distributed Securities. To the extent that any such Rights to Subscribe are exercised, in whole or in part, the securities underlying such Rights to Subscribe (the “ Subscription Securities ”) shall be issued and must be paid for concurrently with the completion of the Distribution and payment to us of the issue price for the Distributed Securities, at the lowest price permitted by the applicable securities and stock exchange regulations and subject (as to such price) to the prior consent of the exchanges but at a price not lower than (i) if the Distributed Securities are Common Shares, the price at which Common Shares are then being issued or distributed, (ii) if the Distributed Securities are Convertible Securities, the price at which the applicable Convertible Securities are then being issued or distributed; and (iii) if the Distributed Securities are voting shares other than Common Shares, the higher of (a) the weighted average price of the transactions on the Common Shares on the TSX (or such other primary stock exchange on which they are listed, as the case may be) for the 20 trading days preceding the Distribution of such voting shares or (b) the weighted average price of transactions on the Common Shares on the TSX (or such other primary stock exchange on which they are listed, as the case may be), the trading day before the Distribution of such voting shares.

The privileges attached to Subscription Securities which are securities convertible or exchangeable into or giving the right to acquire Common Shares shall only be exercisable if and whenever the same privileges attached to the Convertible Securities are exercised and shall not result in the issuance of a number of Common Shares which increases the proportion (as in effect immediately prior to giving effect to the completion of the Distribution) of total voting rights associated with the Common Shares after giving effect to the exercise by the holder(s) of the privileges attached to such Convertible Securities.

In addition, the Investor Rights Agreement will provide each of the Principal Shareholders, for so long as it owns, directly or indirectly, or exercises control or direction of at least 10% of our outstanding Common Shares (on a non-diluted basis), top-up rights in connection with the conversion, exercise or exchange of any Convertible Securities, including any Common Shares issued upon vesting pursuant to any compensatory plans or other plans to purchase securities of the Company so as to permit the Principal Shareholder to maintain its pro rata equity ownership in the Company.

The top-up right shall be exercisable from time to time following dilutive issuances that result in the reduction of the Principal Shareholder’s ownership by an aggregate of 1.0% or more (the “ Top-Up Threshold ”). The Top-Up Threshold shall be calculated by aggregating all dilutive issuances that occurred in each case from the later of: (i) the date of the Investor Rights Agreement; (ii) the date of the last top-up notice; and (iii) the date of completion of the last top-up offering.

Lock-up Arrangements

Pursuant to the Investor Rights Agreement, each of the Principal Shareholders will agree not to, directly or indirectly, effect a transfer of any Common Shares held by them on closing of the Initial Public Offering and closing of the Concurrent Private Placement, for a period of 12 months after the closing of the Initial Public Offering, unless permitted under the Investor Rights Agreement.

Registration Rights

The Investor Rights Agreement will provide each of the Principal Shareholders, provided it at the relevant time owns at least 10% of the Common Shares outstanding (on a non-diluted basis), with the right (the “ Piggy-Back Registration Right ”) to require us to include Common Shares held by the Principal Shareholders in any future public offering undertaken by us by way of prospectus that it may file with applicable Canadian securities regulatory authorities (a “ Piggy-Back Distribution ”). Upon written request of a Principal Shareholder, we will be required to use reasonable commercial efforts to cause to be included in the distribution all of the Common Shares that the Principal Shareholders request to be sold, provided that if the distribution involves an underwriting and the lead underwriter in the Initial Public Offering determines that the total number of

Common Shares to be included in such distribution should be limited for certain prescribed reasons, the Common Shares to be included in the distribution will be first allocated to us and the remainder to the participating Principal Shareholders, allocated proportionally between the participating Principal Shareholders.

In addition, the Investor Rights Agreement will provide each of the Principal Shareholders, if at the relevant time it owns at least 20% of the Common Shares outstanding (on a non-diluted basis), with the right (the “ Demand Registration Right ”) to require us to use reasonable commercial efforts to file one or more prospectuses with applicable Canadian securities regulatory authorities qualifying Common Shares held or controlled by the Principal Shareholders for public distribution (a “ Demand Distribution ”). The Principal Shareholders will be entitled to request not more than two Demand Distributions per calendar year, but no more than once during any 90-day period, and each Demand Distribution must be comprised of such number of Common Shares that would be expected to result in aggregate gross proceeds of at least $  million; provided that, if the Demand Distribution involves an underwriting and the lead underwriter in the Initial Public Offering determines that the total number of Common Shares to be included in such Demand Distribution should be limited for certain prescribed reasons, the Common Shares to be included in the Demand Distribution will be first allocated to the applicable Principal Shareholders in full and the remainder to be allocated us. Any Demand Distribution will be through underwriters selected by the Principal Shareholders in consultation with us.

Each of the Piggy-Back Registration Right and the Demand Registration Right will be exercisable at any time following the twelve (12) month lock-up period. The Piggy-Back Registration Right and the Demand Registration Right will be subject to customary conditions and limitations, and we will be entitled to defer any Demand Distribution in certain circumstances for a period not exceeding 90 days, provided we are not permitted to postpone the filing of any offering document for a period of more than 120 days in any twelve (12) month consecutive period. All expenses in respect of a Piggy-Back Distribution or a Demand Distribution will be borne by us, except that the fees of counsel of the Principal Shareholders, any underwriting fee, discount or commission will be borne by the applicable Principal Shareholders. The Investor Rights Agreement will provide that we will indemnify the applicable Principal Shareholders for any misrepresentation in a prospectus under which Common Shares held by a Principal Shareholder is distributed (other than in respect of any information provided by a Principal Shareholder, in respect of such Principal Shareholder, for inclusion in the prospectus) and the applicable Principal Shareholders will indemnify us for any information provided by a Principal Shareholder, in respect of such Principal Shareholder, for inclusion in the prospectus. Unless we propose to file a registration statement for the distribution of Common Shares to the public in the United States these registration rights will not require us to register Common Shares under the U.S. Securities Act.

Provided that, at the relevant time, a Principal Shareholder owns or exercises control or direction over at least 20% of the Common Shares outstanding (on a non-diluted basis), we shall not, without the prior written consent of the particular Principal Shareholder, which consent may be arbitrarily withheld, grant any registration rights to any person unless such rights are subordinated to the registration rights granted to the Principal Shareholders under the Investor Rights Agreement and are on terms reasonably satisfactory to the particular Principal Shareholder.

Term

The rights of each of the Principal Shareholders under the Investor Rights Agreement will terminate in respect of the particular Principal Shareholder will terminate on the earlier of: (a) the last day of the first continuous 180-day period during which the Common Shares owned, controlled or directed, directly or indirectly, in the aggregate, by such Principal Shareholder constitutes less than 10% of all of the issued and outstanding Common Shares (on a non-diluted basis) but only in respect of such Principal Shareholder and shall otherwise continue in full force and effect as between the Company and remaining Principal Shareholder; (b) the date on which the Investor Rights Agreement is terminated by written agreement of the Principal Shareholders and us; or (c) our dissolution or liquidation.

Transitional Services Agreement

Prior to closing of the Initial Public Offering, Aclara will enter into a transitional services agreement (the “ Transitional Services Agreement ”) with Hochschild Mining or a subsidiary thereof, pursuant to which Hochschild Mining will agree to provide certain transitional services to Aclara for 12 months following the implementation. The services that will be provided under the Transitional Services Agreement include:

Fixed services:

Accounting: Consolidation of monthly financial statements under IFRS and assistance in the preparation of quarterly and annual financial statements reports and in the application of IFRS, annual auditing process, and quarterly reviews.
Technical: Project management support in the development of a pre-feasibility study, piloting tests, optimisation projects, and the feasibility study.
Information Technology (“ IT ”): Helpdesk support, implementation of administration systems, including enterprise resource planning migration, contracts management, expense reports and fixed assets control, and software licenses.

Ad hoc services:

Legal: Advice on corporate and commercial matters.
Sustainability: Advice on permitting processes and documents and support in relation to the management of environmental investments.
Investor relations: Support in the preparation of press releases and reports to the market and communications with analysts and investors.
Internal auditing: Implementation and monitoring of internal auditing processes and controls.
Human resources: Support in the design and implementation of personnel compensation and incentive plans, benefits and support in relation to the recruitment and selection of key personnel.

Hochschild Mining will be required to use its best endeavours to provide the services to the same standard to which they were provided during the 12-month period prior to the closing of the Initial Public Offering.

Where Aclara identifies any service that was provided to it by Hochschild Mining but which has been omitted from the service descriptions, it will have the right to require Hochschild Mining to provide or procure the provision of the omitted service in the same manner and subject to the same terms as the services included in the descriptions.

Aclara will be obliged to pay fees for each service calculated in accordance with the terms of the Transitional Services Agreement. The fees will include charges from Hochschild Mining for the services along with charges for certain IT security measures and any third-party costs associated with the provision of the services or the passing on of the benefit of group contracts. The total fees that will be payable under the Transitional Services Agreement are estimated at approximately US$407,070.

Subject to certain conventional exceptions (e.g. in instances of fraud or personal injury caused by negligence) where both parties’ liability is uncapped, the maximum liability of either party in relation to the Transitional Services Agreement will be capped at 100% of the fees paid in the relevant contract year.

Aclara will be permitted to terminate certain services on prior written notice. Hochschild Mining will only be permitted to terminate the Transitional Services Agreement for unpaid service charges if the amount remaining unpaid after 30 days’ written notice to pay the unpaid sums due exceeds US$101,768. Either party will be permitted to terminate on written notice if the other party becomes insolvent or if the other party fails to remedy a material breach of the Transitional Services Agreement within 30 days of being given written notice of the breach.

CONSOLIDATED CAPITALIZATION

The following table sets forth our consolidated capitalization as at September 30, 2021 (i) on an actual basis and (ii) on a pro forma as adjusted basis to give effect to (a) the completion of the Initial Public Offering and the Concurrent Private Placement excluding the anticipated use of proceeds therefrom and (b) the Demerger (collectively, the “ Adjustments ”). This table is presented and should be read in conjunction with our audited financial statements for the period ended September 30, 2021 and the related notes included elsewhere in this prospectus and with the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Share Capital”.

(in thousands of US$) Cash and cash equivalents Debt Shareholders’ equity Equity share capital Other reserves Retained earnings Total equity Total capitalization Notes:		As at September 30, 2021	As at September 30, 2021	As at September 30, 2021	As at September 30, 2021
		Actual 1,510 - 40,518 (3,187) (2,224)			After giving effect to the Adjustments(1)
					93,836 -
					132,844 (3,187) (2,224)
		35,107			127,433
		35,107			127,433

(1) Without giving effect to the Over-Allotment Option or the Private Placement Option and based on the midpoint of the estimated price range of the Initial Public Offering Price.

PRIOR SALES

During the 12-month period preceding the date of this prospectus, the only issuances of Common Shares or securities convertible or exchangeable into Common Shares were the issuance on May 5, 2021 of 100 Common Shares for $1 in cash in connection with the incorporation of the Company and the issuance on October 15, 2021 of 88,262,106 Common Shares in connection with contribution by HM Holdings all of its shares in REE Uno to the Company in exchange for shares of Aclara. See “The Demerger”.

DIRECTORS AND EXECUTIVE OFFICERS

Directors

The Board reflects a broad range of experience and expertise. The following table sets forth the names, residence and positions of each person that will be a member of our Board prior to closing of the Initial Public Offering. Additional biographical information for each individual is provided below under “Biographical Information Regarding the Directors and Executive Officers”. Directors will serve until the first annual meeting of Shareholders or until their successors are elected or appointed, unless their office is earlier vacated.

Name, Province or State and Country of Residence(1)	Position/Title
Ramon Barua Lima, Peru Eduardo Hochschild(3)(6) Lima, Peru Paul Adams(1)(2)(3)(5)(6) Florida, United States Ignacio Bustamante(4)(6) Lima, Peru Catharine Farrow(1)(2)(4)(5)(7) Ontario, Canada Karen Poniachik(1)(4)(5) Región Metropolitana de Santiago, Chile Sanjay Sarma(1)(2)(3)(6) Massachusetts, United States	Director and Chief Executive Officer Director, Chairman of the Board Director Director Director Director Director

Notes:

(1) Independent director for the purposes of National Instrument 58-101 – Disclosure of Corporate Governance Practices (“ NI 58-101 ”) of the Canadian Securities Administrators. See “– Corporate Governance – Director Independence”.

(2) Member of our Audit Committee.

(3) Member of our CNCG Committee.

(4) Member of our Sustainability Committee.

(5) The election and/or appointment of Paul Adams, Karen Poniachik, and Catharine Farrow are expected to be effective immediately prior to filing of the final prospectus in connection with the Initial Public Offering.

(6) Nominees of the Principal Shareholders. See “Principal Shareholders – Investor Rights Agreement”.

(7) Lead independent director.

Executive Officers and Senior Management

The Company has an experienced management team with significant experience in the mining industry. The following table sets forth the names, residences and positions of each of our executive officers and senior management as of the date of this prospectus. Additional biographical information for each individual is provided below under “Biographical Information Regarding the Directors and Executive Officers and Senior Management”.

Name, State and Country of Residence	Position/Title
Ramon Barua Lima, Peru Rodrigo Ceballos Región Metropolitana de Santiago, Chile Francois Motte Sauter Región Metropolitana de Santiago, Chile Barry Murphy Ontario, Canada Mauricio Alvarez Región Metropolitana de Santiago, Chile Sebastian Rojas Región Metropolitana de Santiago, Chile	Chief Executive Officer President and General Manager Chief Financial Officer Chief Operating Officer General Counsel Sustainability Manager

Biographical Information Regarding our Directors and Executive Officers and Senior Management

Ramon Barua – Mr. Barua was the Chief Financial Officer of Hochschild Mining since June 2010. Prior to his appointment as Chief Financial Officer of Hochschild Mining, he served in various positions with other companies associated with the Group, namely Chief Executive Officer of Fosfatos del Pacifico S.A., General Manager for Hochschild Mining’s Mexican operations and Deputy Chief Executive Officer and Chief Financial Officer of Cementos Pacasmayo. Prior to joining Hochschild Mining, Mr. Barua was a Vice President of Debt Capital Markets with Deutsche Bank and a sales analyst with Banco Santander. Mr. Barua is an economics graduate of Universidad de Lima and holds an MBA from Columbia Business School.

Eduardo Hochschild – Mr. Hochschild has been Chairman of Hochschild Mining since 2006, and has over 30 years of experience in the extractive industries sector. Mr. Hochschild graduated from Tufts University, Boston with a Bachelor of Science degree in physics and mechanical engineering. He holds numerous board appointments, including as Chairman of Cementos Pacasmayo S.A.A and Non-Executive Chairman at non-profit organizations such as UTEC, TECSUP and the Institute of Contemporary Art and as Advisor to the Economic Counsel of the Conferencia Episcopal Peruana. Mr. Hochschild joined the Hochschild Group in 1987 as Safety Assistant at the Arcata unit, becoming Head of the Hochschild Mining Group in 1998.

Paul Adams – Mr. Adams is a non-executive director of Rolls Royce, a board member of OC Oerlikon Corporation AG, Pfäffikon and Aerion Corp. and a senior advisor to VulcanForms, Inc. Mr. Adams has deep experience across the aerospace industry and in engine manufacturing in particular, gained from over 30 years of leadership experience in the aviation industry. Mr. Adams has spent much of his career with Pratt & Whitney where he held various senior management roles including Chief Operating Officer before serving as President until 2016. He was Chief Operating Officer at Precision Castparts, the world’s largest supplier of aerospace metal, castings and forgings until 2018. Mr. Adams gained a degree in aerospace engineering from the University of Michigan and in 2013 was inducted to the National Academy of Engineering, Washington DC.

Ignacio Bustamante – Mr. Bustamante has been Chief Executive Officer of Hochschild Mining since June 2010. Mr. Bustamante previously served as Chief Operating Officer and General Manager of Hochschild Mining’s Peruvian operations. Prior to that, Mr. Bustamante worked for Zemex Corporation between 2003 and 2007, first as Chief Financial Officer and Vice President of Business Development, and later as President. Between 1998 and 2003, Mr. Bustamante served as Chief Financial Officer of Cementos Pacasmayo S.A.A. He also currently serves as Non-Executive Director of Profuturo AFP and Scotiabank Peru S.A.A. Mr. Bustamante holds a Bachelor degree in Business Administration and Accounting from the Universidad del Pacífico in Peru and an MBA from Stanford University.

Catharine Farrow – Dr. Farrow is a director of Franco-Nevada Corporation. She is a Registered Professional Geoscientist (PGO) with more than 25 years of mining industry experience. She also serves as a Director of Centamin plc and of Eldorado Gold Corporation and is active in the mining industry in both private companies and academia. From 2012 to 2017 she was Founding CEO, Director and Co-Founder of TMAC Resources Inc. Dr. Farrow has served on the Board of a number of notfor-profit and government Advisory Boards. She has been honoured as one of the 100 Global Inspirational Women in Mining (2015 and 2018) and is a past recipient of the William Harvey Gross Medal of the Geological Association of Canada (2000) and the Distinguished Alumni Award from the Acadia Alumni Association (2020). Dr. Farrow obtained her BSc (Hons) from Mount Allison University, her MSc from Acadia University and her PhD from Carleton University. She also holds the ICD.D designation.

Karen Poniachik – Ms. Poniachik has been Director of Columbia University’s Global Centers Santiago, which serves as Columbia University’s hub in Chile, since 2012. She is also a member of the board of directors of Jetsmart Airlines, Interchile ISA and Lundin Mining (a publicly traded diversified Canadian base metals mining company with operations in Brazil, Chile, Portugal, Sweden and the United States). She is also a member as of the advisory board of the Chilean American Chamber of Commerce, AmCham Chile, where she served as chair of the Corporate Governance, Ethics & Compliance Committee in 2019 and 2020. She has also been part of the boards of Metro S.A. and Nuevo Pudahuel, the advisory board of AME and worked as consultant to Maersk Chile. Previously, Ms. Poniachik served as Chile’s Minister of Mining from 2006-2008, during which time she chaired the boards of directors of state-owned companies Codelco, Enap and Enami. She was Chile’s Special Envoy to the Organization for Economic Co-operation and Development (OECD) in charge of the country’s accession process to the organization. She is also part of the advisory boards of Microsoft, Transforma Chile and Chilemujeres.

Sanjay Sarma – Mr. Sanjay is a Professor of Mechanical Engineering at Massachusetts Institute of Technology (MIT) and Vice President for Open Learning at MIT. He also currently serves as board member of Top Flight Technologies and G1S US and edX, the entity set up by MIT and Harvard to facilitate the distribution of free online education worldwide. Until October 2021, Mr. Sanjay was an independent non-executive director of Hochschild Mining. Mr. Sanjay’s previous professional experience includes being the founder and Chief Technology Officer of OAT Systems (subsequently acquired by Checkpoint Systems) and has worked at Schlumberger Oilfield Services.

Rodrigo Ceballos – Mr. Ceballos joined Aclara in March 2020 as General Manager and was appointed President and General Manager of the Company in October 2021. Rodrigo has more than 20 years of experience in the mining sector with special emphasis on molybdenum, rhenium and rare earth in Chile and England. Prior to joining the Company, he worked for Molidbenos y Metales S.A (Molymet) and Mathiesen Corporation, holding corporate positions in Finance, Business Development and Operations. In addition, Mr. Ceballos was a member of the Minor Metals and Molybdenum Committees of the London Metals Exchange, after the launch of the molybdenum and cobalt contracts. He is currently a board member of San Vicente de Paul, an international non-profit organization. Mr. Ceballos who holds an Industrial Engineering degree and a Major in Mining from the Universidad Católica de Chile and an MBA from the University of Cambridge, United Kingdom.

Francois Motte Sauter – Mr. Motte became the Chief Financial Officer of the Company in February 2021. He has more than 10 years of experience in the finance sector having worked for 9 years at Hochschild Mining in financial planning and controls, business development, investor relations and corporate finance. Mr. Motte graduated from Universidad de Lima with a Bachelor in Business Administration and holds a MSc in Innovation Management and Business Development from Aarhus University in Denmark. While pursuing his Master’s Degree, Mr. Motte worked for the Company as an independent consultant conducting extensive market research of the rare earth industry.

Barry Murphy – Mr. Murphy will become the Chief Operating Officer of the Company effective November 1, 2021. With more than 30 years of experience in the mining sector, Mr. Murphy has held senior positions with Torex Gold Resources, Inc., Yamana Gold Inc. and Anglo American and has led technical services and project development teams in Chile, Peru, Argentina, Mexico and South Africa. He was also appointed as an Independent Director of Adventus Mining Corporation in 2019. Barry graduated from the University of the Witwatersrand with a Bachelor of Science in Engineering, Mechanical Engineering and a Bachelor of Commerce from the University of South Africa.

Mauricio Alvarez – Mr. Alvarez is a corporate lawyer with over 20 years of professional practice in Chile, New York, Paris and Mexico City, in law firms and multinational mining and industrial companies. Mr. Alvarez has worked as in-house counsel for companies like Goldcorp Inc. (today Newmont Corporation), Codelco and Lafarge and at the law firms of Carey y Cia and Cleary Gottlieb, Steen & Hamilton. He has held positions of Legal Manager in Chile and at regional level for Latin America and in his last stage at Goldcorp, he was also Country Manager for the company’s operations in Chile. Mr. Alvarez is a lawyer from the University of Chile and he also holds a Master of Laws (LL.M) from the University of Chicago in the United States. He was a professor for more than 10 years of the Securities Market Course at the University of Chile Law School.

Sebastian Rojas – Mr. Rojas joined the Company in May 2020 as Sustainability Manager. Mr. Rojas has more than 13 years of experience in the mining sector, working on a wide range of sustainability matters, including in the environmental, safety and social areas. During his career he has also specialized in environmental and social permitting matters. Prior to joining Aclara, Mr. Rojas worked at Anglo-American and Arcadis Chile. Mr. Rojas holds a degree in Environmental Engineering from the Universidad Andres Bello in Chile and an MBA from the Universidad de Chile.

Ownership Interest

Immediately following completion of the Initial Public Offering, our directors and executive officers, as a group, are expected to beneficially own, or control or direct, directly or indirectly, 481,081 Common Shares, representing approximately 0.3% of our issued and outstanding Common Shares. This figure excludes 35,495,294 Common Shares, representing approximately 50.7% of our issued and outstanding Common Shares that will be beneficially owned by the Principal Shareholders immediately following closing of the Initial Public Offering, and assuming no exercise of the Over-Allotment Option or the Private Placement Option, and closing of the Concurrent Private Placement.

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Corporate Governance

We recognize that good corporate governance plays an important role in our overall success and in enhancing shareholder value and, accordingly, we will be adopting upon closing of the Initial Public Offering certain corporate governance policies and practices. The disclosure set out below describes our approach to corporate governance.

Composition of our Board and Board Committees

Under our Articles, our Board is to consist of a minimum of three (3) and a maximum of fifteen (15) directors as determined from time to time by the directors. Upon completion of the Initial Public Offering, our Board will consist of seven (7) directors, of which four (4) are considered to be independent under Canadian securities laws. Under the BCBCA, a director may be removed with or without cause by a resolution passed by an ordinary majority of the votes cast by shareholders present in person or by proxy at a meeting of shareholders and who are entitled to vote. The directors will be elected by Shareholders at each annual meeting of Shareholders, and all directors will hold office for a term expiring at the close of the next annual meeting or until their respective successors are elected or appointed. Our Articles provide that, between annual general meetings of Shareholders, the directors may appoint one or more additional directors, but the number of additional directors may not at any time exceed one-third of the number of current directors who were elected or appointed other than as additional directors.

Certain aspects of the composition and functioning of our Board are governed by the terms of the Investor Rights Agreement. See “Agreements with Principal Shareholders – Investor Rights Agreement – Nomination Rights”. The nominees for election by Shareholders as directors will be determined by our Compensation, Nominating and Corporate Governance Committee (“ CNCG Committee ”) in accordance with the provisions of applicable corporate law, the Investor Rights Agreement and the charter of our CNCG Committee. See also “– Committees of our Board – Compensation, Nominating and Corporate Governance Committee”.

Director Independence

Under NI 58-101, a director is considered to be independent if he or she is independent within the meaning of National Instrument 52-110 – Audit Committees (“ NI 52-110 ”). Pursuant to NI 52-110, an independent director is a director who is free from any direct or indirect relationship which could, in the view of our Board, be reasonably expected to interfere with a director’s independent judgment. Based on information provided by each director concerning his or her background, employment and affiliations, our Board has determined that, of the seven (7) directors on our Board at closing of the Initial Public Offering, Ramon Barua, Eduardo Hochschild and Ignacio Bustamante will not be considered “independent” within the meaning of applicable securities laws as a result of their respective relationships with us. Certain members of our Board are also members of the board of directors of other public companies. Our Board has not adopted a director interlock policy, but is keeping informed of other public directorships held by its members.

Meetings of Independent Directors and Conflicts of Interest

Our Board believes that given its size and structure, including the fact that a majority of our directors are independent, it is able to facilitate independent judgment in carrying out its responsibilities and will continue to do so following closing of the Initial Public Offering. To enhance such independent judgment, it is anticipated that the independent members of our Board will hold in camera meetings with members of management and non-independent directors not in attendance, as part of regularly scheduled Board meetings. Open and candid discussion among the independent directors is facilitated by the relatively small size of the Board. Our board of directors has not appointed an independent chair. However, as our Chairman is not an independent director, Catharine Farrow will be appointed as lead independent director by the Board and will be responsible for ensuring that the directors who are independent of management have opportunities to meet without management present, as required. The lead director shall be appointed and replaced from time to time by a majority of independent directors and shall be an independent director. Discussions will be led by the lead director who will provide feedback subsequently to the NonExecutive Chairman.

A director who has a material interest in a matter before our Board or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our Board or any committee on which he or she serves, such director may be required to absent himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors will also be required to comply with the relevant provisions of the BCBCA regarding conflicts of interest. Further, our directors and

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executive officers are prohibited from purchasing financial instruments designed to hedge or offset a decrease in the market value of our Common Shares.

Majority Voting Policy

Our Board believes that each of its members should carry the confidence and support of our Shareholders. To this end, the Board will adopt a majority voting policy (the “ Majority Voting Policy ”) to effect that a nominee for election as a director who does not receive a greater number of votes “for” than votes “withheld” with respect to the election of directors by Shareholders, the nominee shall tender his or her resignation to the Non-Executive Chairman promptly following the meeting of Shareholders at which the director was elected. Any resignation received by the Non-Executive Chairman will be promptly referred to the CNCG Committee. Our CNCG Committee will consider such offer and make a recommendation to our Board whether or not to accept it. Our Board will promptly accept the resignation unless it determines, in consultation with our CNCG Committee, that there are exceptional circumstances that should delay the acceptance of the resignation or justify rejecting it. Our Board will make its decision and announce it in a press release within 90 days following the meeting of Shareholders. A director who tenders a resignation pursuant to the Majority Voting Policy will not participate in any meeting of our Board or our CNCG Committee at which the resignation is considered.

Director Term Limits and Other Mechanisms of Board Renewal

Our Board is comprised of a diverse range of individuals who represent a mix of background, experience, skills and expertise, evidencing diversity in tenure, age and gender. Accordingly, our Board has not adopted, nor does it currently consider it necessary to adopt, director term limits or other automatic mechanisms of board renewal. Rather than adopting formal term limits, mandatory age-related retirement policies and other mechanisms of board renewal, the CNCG Committee of our Board will seek to maintain the composition of our Board in a way that provides, in the judgement of our Board, the best mix of skills and experience to provide for our overall stewardship. Our CNCG Committee is also expected to conduct a process for the assessment of our Board, each committee and each director regarding his, her or its effectiveness and performance, and to report evaluation results to our Board. See also “Directors and Executive Officers – Diversity”.

Mandate of our Board of Directors

Our Board is responsible for supervising the management of our business and affairs, including providing guidance and strategic oversight to management. Our Board will adopt a formal mandate in the form set forth in Appendix A that includes the following:

appointing the Chief Executive Officer;
appointment, evaluation and development of senior management and succession planning;
developing an environmental, social and governance policy;
approving the corporate goals and objectives that the Chief Executive Officer is responsible for meeting and reviewing the performance of the Chief Executive Officer against such corporate goals and objectives;
taking steps to satisfy itself as to the integrity of the Chief Executive Officer and other senior executive officers and that the Chief Executive Officer and other senior executive officers create a culture of integrity throughout the organization; and
reviewing and approving management’s strategic and business plans.

Our Board will adopt a written position description for the Chairman, which sets out the Chairman’s key responsibilities, including, among others, duties relating to setting Board meeting agendas, chairing Board and Shareholder meetings, director development and communicating with Shareholders and regulators.

Our Board will adopt a written position description for each of our committee chairs which sets out each of the committee chair’s key responsibilities, including, among others, duties relating to setting committee meeting agendas, chairing committee meetings and working with the respective committee and management to ensure, to the greatest extent possible, the effective functioning of the committee.

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Our Board will adopt a written position description for our Chief Executive Officer which sets out the key responsibilities of our Chief Executive Officer, including, among other duties in relation to providing overall leadership, ensuring the development of a strategic plan and recommending such plan to our Board for consideration, ensuring the development of an annual corporate plan and budget that supports the strategic plan and recommending such plan to our Board for consideration and supervising day-to-day management and communicating with Shareholders and regulators.

Orientation and Continuing Education

Following closing of the Initial Public Offering, we will implement an orientation program for new directors under which a new director will meet with the Non-Executive Chairman, members of senior management and our secretary. It is anticipated that new directors will be provided with comprehensive orientation and education as to the nature and operation of the Company and our business, the role of our Board and its committees, and the contribution that an individual director is expected to make. Our Board will be responsible for overseeing director continuing education designed to maintain or enhance the skills and abilities of the directors and to ensure that their knowledge and understanding of our business remains current. The chair of each committee will be responsible for coordinating orientation and continuing director development programs relating to the committee’s mandate.

Code of Ethics

Following closing of the Initial Public Offering, we will adopt the Code of Ethics that will apply to all of our officers, directors, employees, contractors and agents acting on behalf of the Company. The objective of the Code of Ethics will be to provide guidelines for maintaining our and our subsidiaries’ integrity, trust and respect. The Code of Ethics will address compliance with laws, rules and regulations, conflicts of interest, confidentiality, commitment, preferential treatment, financial information, internal controls and disclosure, protection and proper use of our assets, communications, fair dealing, fair competition, due diligence, illegal payments, equal employment opportunities and harassment, privacy, use of Company computers and the internet, political and charitable activities and reporting any violations of law, regulation or the Code of Ethics. Any person subject to the Code of Ethics should report all violations of law, regulation or of the Code of Ethics of which they become aware to any one of the Company’s executive officers. The CNCG Committee will be responsible for reviewing and evaluating the Code of Ethics at least annually and will recommend any necessary or appropriate changes to our Board for consideration. The CNCG Committee will assist the Board with the monitoring of compliance with the Code of Ethics, and will be responsible for considering any waivers of the Code of Ethics (other than waivers applicable to members of the CNCG Committee, which shall be considered by the Audit Committee, or waivers applicable to our directors or executive officers, which shall be subject to review by our Board as a whole). Our Board has ultimate responsibility for monitoring compliance with the Code of Ethics. In accordance with NI 58-101, the Code of Ethics will be filed with the Canadian securities regulatory authorities on SEDAR at www.sedar.com.

Anti-Bribery and Anti-Corruption Compliance Policy

We will adopt the Anti-Bribery Policy which will establish our commitment to comply fully with Canada’s Corruption of Foreign Public Officials Act and the United States Foreign Corrupt Practices Act of 1977 and any local and foreign antibribery or anti-corruption laws and regulations that may be applicable. Company Personnel shall comply with all laws prohibiting improper payments to domestic and foreign officials. All Company Personnel shall conduct the Company’s business legally and ethically. Gifts, payments or offerings of anything to influence sales or other business, bribes, kickbacks, or other questionable inducements, directly or indirectly to government officials are prohibited. The Anti-Bribery Policy will provide a guideline of prohibited payments, as well as the consequences of non-compliance. The Anti-Bribery Policy will also set out strategies we have adopted to mitigate bribery and corruption risk. The Board will be responsible for monitoring compliance with the Anti-Bribery Policy and initiating investigations of reported violations.

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Committees of our Board

Our Board will establish three committees, being the Audit Committee, the CNCG Committee and the Sustainability Committee.

Audit Committee

Our Audit Committee consists of three (3) directors, all of whom are persons determined by our Board to be both independent directors and financially literate within the meaning of NI 52-110. Our Audit Committee is comprised of Paul Adams, who acts as chair of this committee, Catharine Farrow and Sanjay Sarma. Each of our Audit Committee members has an understanding of the accounting principles used to prepare financial statements and varied experience as to the general application of such accounting principles, as well as an understanding of the internal controls and procedures necessary for financial reporting. Mr. Adams held various senior management roles, including President at Pratt & Whitney and Chief Operating Officer at Precision Castparts. Mr. Adam’s role in each of these companies has provided him with the ability to interpret and analyze financial statements. He has also completed the Stanford Executive Program at the Stanford Graduate Business School and is a board member of Rolls Royce, OC Oerlikon Corporation AG, Pfäffikon and Aerion Corp. and a senior advisor to VulcanForms, Inc. Dr. Farrow is a director of Franco-Nevada Corporation (a TSX listed company), Eldorado Gold Corporation and an audit committee member of the board of directors of Centamin plc (a TSX and LSE listed company) and was Founding CEO, Director and Co-Founder of TMAC Resources Inc. (a TSX listed company), and given her significant experience as a CEO, director and audit committee member of publicly listed companies, she is familiar with financial statements and financial matters. Dr. Farrow has also completed the Institute of Corporate Directors Course, which advanced her understanding of accounting principles. Mr. Sarma has significant experience as an entrepreneur, and is a professor of Mechanical Engineering at Massachusetts Institute of Technology (MIT) and Vice President for Open Learning at MIT. He received his Bachelor of Technology from the Indian Institute of Technology, Kanpur, his Masters from Carnegie Mellon University and his PhD from the University of California at Berkeley, and he sits on various boards and advises national governments and global companies. Through his education and experience, Mr. Sarma has gained familiarity and understanding of financial statements and financial matters. For additional details regarding the relevant education and experience of each member of our Audit Committee, see “Directors and Executive Officers – Biographical Information Regarding our Directors and Executive Officers and Senior Management”.

Our Board has adopted a written charter, which will be amended as part of the Offering in the form set forth in Appendix B, setting forth the purpose, composition, authority and responsibility of our Audit Committee, consistent with NI 52-110. The Audit Committee assists our Board in fulfilling its oversight of:

our financial statements and financial reporting processes;
our systems of internal accounting and financial controls;
the annual independent audit of our financial statements;
legal and regulatory compliance;
reviewing and recommending debt and equity financings, reviewing and monitoring compliance with debt covenants and reviewing the process and reports with which we measure financial results or performance;
related party transactions; and
public disclosure items such as quarterly press releases, investor relations materials and other public reporting requirements.

It is the responsibility of the Audit Committee to maintain free and open means of communication between the Audit Committee, the external auditors and management of the Company. The Audit Committee is given full access to the Company’s management and records and external auditors as necessary to carry out these responsibilities. The Audit Committee has the authority to carry out such special investigations as it sees fit in respect of any matters within its various roles and responsibilities. The Company shall provide appropriate funding, as determined by the Audit Committee, for the payment of compensation to the independent auditor for the purpose of rendering or issuing and audit report and to any advisors employed by the Audit Committee.

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External Auditor Service Fee

For the fiscal years ended December 31, 2020 and December 31, 2019, we incurred the following fees by our external auditor, EY Servicios Profesionales de Auditoría y Asesorías SpA:

ditor, EY Servicios Profesionales de Auditoría y Asesorías SpA:
(in US$) Audit fees(1) Audit related fees(2) Tax fees(3) All other fees(4) Total fees paid	Year Ended December 31, 2020 Year Ended December 31, 2019
	$15,087 $14,389 $58,871 - - - - -
	$73,958 $14,389

Notes: (1) Fees for audit service on an accrued basis. (2) Fees for audit-related services, including in connection with the Initial Public Offering. (3) Fees for tax compliance, tax advice and tax planning.

(4) All other fees not included above.

Compensation, Nominating and Corporate Governance Committee

Upon closing of the Initial Public Offering, the Board will form the CNCG Committee, that will initially be comprised of three (3) directors, the majority of whom will be persons determined by our Board to be independent directors, and will be charged with reviewing, overseeing and evaluating our compensation, corporate governance and nominating policies. Our CNCG Committee will be comprised of Eduardo Hochschild, who will act as chair of this committee, Sanjay Sarma and Paul Adams. No member of our CNCG Committee will be an officer of the Company, and as such, our Board believes that our CNCG Committee will be able to conduct its activities in an objective manner.

Our Board believes that the members of the CNCG Committee individually and collectively possess the requisite knowledge, skill and experience in governance and compensation matters, including human resource management, executive compensation matters and general business leadership, to fulfill the committee’s mandate. All members of the CNCG Committee have substantial knowledge and experience as current and former senior executives of large and complex organizations and on the boards of other publicly traded entities. For additional details regarding the relevant education and experience of each member of our CNCG Committee, including the direct experience that is relevant to each committee member’s responsibilities in executive compensation, see “Directors and Executive Officers – Biographical Information Regarding our Directors and Executive Officers and Senior Management”.

Our Board will adopt a written charter setting forth the purpose, composition, authority and responsibility of our CNCG Committee consistent with our Corporate Governance Guidelines. Our CNCG Committee’s purpose is to assist our Board in:

the appointment, performance, evaluation and compensation of our senior executives;
the recruitment, development and retention of our senior executives;
maintaining talent management and succession planning systems and processes relating to our senior management;
developing compensation structure for our senior executives including salaries, annual and long-term incentive plans including plans involving share issuances and other share-based awards;
establishing policies and procedures designed to identify and mitigate risks associated with our compensation policies and practices;
reviewing and, if appropriate, recommending to the Board the approval of any adoption, amendment or termination of our incentive or equity-based compensation arrangements (and the aggregate number of Common Shares to be reserved for issuance thereunder), and overseeing their administration and discharging any duties imposed on the committee by any such arrangements;
assessing the compensation of our directors;

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developing benefit retirement and savings plans;
developing our corporate governance guidelines and principles and providing us with governance leadership;
identifying and overseeing the recruitment of candidates qualified to be nominated as members of our Board;
monitoring compliance with the Code of Ethics and initiating investigations of reported violations thereof;
reviewing the structure, composition and mandate of Board committees; and
evaluating the performance and effectiveness of our Board and of our Board committees.

Our CNCG Committee will be responsible for establishing and implementing procedures to evaluate the performance and effectiveness of our Board, committees of our Board and the contributions of individual Board members. Our CNCG Committee will also take reasonable steps to evaluate and assess, on an annual basis, directors’ performance and effectiveness of our Board, committees of our Board, individual Board members, our Non-Executive Chairman and committee chairs. The assessment will address, among other things, individual director independence, individual director and overall Board skills, and individual director financial literacy. Our Board will receive and consider the recommendations from our CNCG Committee regarding the results of the evaluation of the performance and effectiveness of our Board, committees of our Board, individual Board members, our Non-Executive Chairman and committee chairs. In identifying new candidates for our Board, the CNCG Committee will consider what competencies and skills our Board, as a whole, should possess and assess what competencies and skills each existing director possesses, considering our Board as a group, as these may ultimately determine the boardroom dynamic. Our CNCG Committee will also be responsible for orientation and continuing education programs for our directors. See also “Directors and Executive Officers – Corporate Governance – Orientation and Continuing Education”.

Since incorporation, our Board has approved the compensation of our Chief Executive Officer, as well as, based on the recommendations of the Chief Executive Officer, the compensation of our other executive officers, including the NEOs (as defined herein). In anticipation of becoming a public company, our Board will adopt certain changes to the existing executive compensation regime. All such changes are subject to and conditional upon the successful completion of the Initial Public Offering. The compensation expected to be paid to NEOs for our first fiscal year as a public company is set forth below under “Executive Compensation – Summary Compensation Table”.

Further particulars of the process by which compensation for our executive officers is determined is provided under “Executive Compensation”.

Sustainability Committee

Upon closing of the Initial Public Offering, the Board will form the Sustainability Committee, that will initially be comprised of three (3) directors, and will be charged with overseeing and making all necessary recommendations to the Board in connection with sustainability issues as they affect the Company’s operations. In particular, it will focus on compliance with national and international standards to ensure that effective systems of standards, procedures and practices are in place at each of the Company’s operations. The Sustainability Committee is also responsible for reviewing management’s investigation of incidents or accidents that occur in order to assess whether policy improvements are required. Our Sustainability Committee will be comprised of Karen Poniachik, who will act as chair of this committee, Ignacio Bustamante and Catharine Farrow. None of the members of our Sustainability Committee will be an officer of the Company, and as such, our Board believes that our Sustainability Committee will be able to conduct its activities in an objective manner.

Diversity

We believe that having a diverse Board can offer a breadth and depth of perspectives that enhance our Board’s performance. We value diversity of abilities, experience, perspective, education, background, race and national origin. Recommendations concerning director nominees are expected to be based on merit and past performance as well as expected contribution to our Board’s performance and, accordingly, diversity is taken into consideration. At closing of the Initial Public Offering, two (2) of the seven (7) members on our Board, or 29%, will be female members. We have and will continue to recruit and select senior management candidates that represent a diversity of business understanding, personal attributes, abilities and experience. Currently, none (0%) of our executive officers are female.

We do not currently have a formal policy for the representation and nomination of women on our Board or our senior management, as we have been successful in recruiting and retaining qualified senior management under our existing recruitment

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policies and processes. We have not adopted formal targets for gender or other diversity representation in part due to the need to consider a balance of criteria for each individual appointment.

We anticipate that the composition of our Board and senior management will be shaped by the selection criteria to be established by our CNCG Committee. This will be achieved by, among other things, ensuring that diversity considerations are taken into account in Board vacancies and senior management, monitoring the level of female representation on our Board and in senior management positions, continuing to broaden recruiting efforts to attract and interview qualified female candidates, and committing to retention and training to ensure that our most talented employees are promoted from within our organization.

Directors’ and Officers’ Liability Insurance

Our and our subsidiaries’ directors and officers are covered under our existing directors’ and officers’ liability insurance. Under this insurance coverage, we and our subsidiaries will be reimbursed for insured claims where payments have been made under indemnity provisions on behalf of our and our subsidiaries’ directors and officers, subject to a deductible for each loss, which will be paid by us. Our and our subsidiaries’ individual directors and officers will also be reimbursed for insured claims arising during the performance of their duties for which they are not indemnified by us or our subsidiaries. Excluded from insurance coverage are illegal acts, acts which result in personal profit and certain other acts.

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EXECUTIVE COMPENSATION

Introduction

The following discussion describes the significant elements of the compensation program for the named executive officers (“ NEOs ”) of the Company. The discussion below also reflects certain contemplated changes to our compensation program that would be implemented in connection with, and contingent upon, completion of the Initial Public Offering. The anticipated NEOs for fiscal 2021 are:

Ramon Barua, Chief Executive Officer;
Rodrigo Ceballos, President and General Manager ;
Francois Motte Sauter, Chief Financial Officer ;
Barry Murphy, Chief Operating Officer ; and
Mauricio Alvarez, General Counsel .

Overview and Philosophy

Our compensation philosophy is to reward the successful achievement of annual and longer-term objectives. Performance conditions include both financial and non-financial measures—including the manner in which results are achieved – both at a corporate and individual level. These factors are evaluated each year as part of a balanced and disciplined approach to the compensation decision process. These considerations reinforce and promote responsible growth and maintain alignment with the Company’s risk framework. Our executive compensation program provides different components to align executive and shareholder interests. Our CNGG Committee has the primary responsibility for approving our compensation strategy and philosophy, and the compensation programs applicable to our executive officers.

The principles we follow to define, review, evaluate and adjust the compensation programs granted to our main executives are to:

attract, retain, and motivate the company executives and senior management;
provide management incentives that align with and support the Company’s business strategy; and
align management incentives with the creation of shareholder value.

The Company seeks to achieve this alignment over both the short and long term using an annual performance-related bonus, which rewards the achievement of a balanced mix of financial, operational and other relevant performance measures, and the use of the long-term incentive plan (the “ LTIP ”). Remuneration decisions are also driven by external considerations, in particular relating to the global demand for talent in the sector.

We offer our executive officers cash compensation in the form of an annualized base salary and an annual bonus.

As we transition from being a privately-held company to a publicly-traded company, we will continue to evaluate our philosophy and compensation program as circumstances require and plan to continue to review compensation on an annual basis. As part of this review process, we expect to be guided by the philosophy and objectives outlined above, as well as other factors which may become relevant, such as the cost to us if we were required to find a replacement for a key employee.

Compensation-Setting Process

Our CNCG Committee will be responsible for assisting our Board in fulfilling its governance and supervisory responsibilities, and overseeing our human resources, succession planning, and compensation policies, processes and practices. Our CNCG Committee will also be responsible for ensuring that our compensation policies and practices provide an appropriate balance of risk and reward consistent with our risk profile. Immediately prior to closing of the Initial Public Offering, our Board will adopt a written charter for our CNCG Committee setting out its responsibilities for administering our compensation programs and reviewing and making recommendations to our Board concerning the level and nature of the compensation payable to our directors and officers. Our CNCG Committee’s oversight will include reviewing objectives, evaluating

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performance and ensuring that total compensation paid to our executive officers and various other key employees is fair, reasonable and consistent with the objectives of our philosophy and compensation program. See also “Directors and Executive Officers – Committees of our Board – Compensation, Nominating and Corporate Governance Committee.”

Our CNCG Committee will evaluate our compensation programs on an annual basis and otherwise as circumstances require. As part of this evaluation process, we expect our CNCG Committee to be guided by the philosophy and objectives outlined above, as well as other factors which may become relevant, such as the cost to us if we were required to find a replacement for a key employee.

Principal Elements of Compensation

Our currently executive compensation program provides a mix of salary, incentives, and benefits paid overtime to align executive officer and shareholder interests. Upon completion of the Initial Public Offering, the compensation of our executive officers will include three major elements:

(i) base salary;
(ii) short-term incentives, consisting of an annual bonus; and
(iii) long-term equity incentives, consisting of cash and/or options, restricted share units (“ RSU s”) and/or performance share units (“ PSUs ”) granted from time to time under the LTIP.

Perquisites and personal benefits, including life, disability, health and dental insurance programs are not anticipated to be a significant element of compensation of our executive officers and are offered on a basis consistent with local market practice.

Base Salaries

Base salary is provided as a fixed source of compensation for our executive officers. Adjustments to base salaries are expected to be determined annually.

Annual Bonuses

Annual bonuses are designed to motivate our executive officers to meet our business and financial objectives, generally, and our annual financial performance targets, in particular. Annual bonuses will be granted in the amount of 0% to 120% of our executive officers’ annualized base salary and are based on our executive officers’ performance, where the target bonus shall equal 50% of the executive officer’s annualized base salary. The target bonus will correlate to substantial achievement by the Company of the goals and objectives set by the Board, and a maximum bonus will correlate to significant over-performance by the Company of the goals and objectives set by the Board. We currently anticipate making cash bonus payments in respect of the 2021 calendar year.

Long-term Incentives

The executive officers, along with our directors and employees, will be eligible to participate in our long-term incentive program, which will be comprised of cash and/or options, RSUs, PSUs and/or deferred share units (“ DSUs ”, and together with options, RSUs and PSUs, the “ Awards ”) issued pursuant to the LTIP. The purpose of the LTIP is to promote greater alignment of interests between directors, executive officers and employees and Shareholders, and to support the achievement of the Company’s longer-term performance objectives, while also providing an element of longer-term retention.

Our Board will be responsible for administering the LTIP, and the CNCG Committee will make recommendations to our Board in respect of matters relating to the LTIP, including grants made thereunder.

LTIP

In connection with the Initial Public Offering, we will adopt the LTIP to allow for a variety of equity-based awards that provide different types of incentives to be granted to our directors, officers and employees. The LTIP will facilitate granting of Awards representing the right to receive one Common Share (and in the case of RSUs, one Common Share, the cash equivalent of one Common Share, or a combination thereof) in accordance with the terms of the LTIP. In accordance with a participant’s

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grant agreement or any other provision of the LTIP, DSUs can be cash settled or settled in shares on a date that will not be earlier than the date the director’s tenure as a member of the Board ceases and will not be later than December 15th of the year following the year in which the director’s tenure as a member of the Board ceases. DSUs are available only to our Board (see “Director Compensation”). The following discussion is qualified in its entirety by the text of the LTIP.

Under the terms of the LTIP, our Board, or if authorized by our Board, the CNCG Committee, may grant Awards to eligible participants. Awards may be granted at any time and from time to time in order to (i) increase participants’ interest in the Company’s welfare; (ii) provide incentives for participants to continue their services; and (iii) reward participants for their performance of services. Participation in the LTIP is voluntary and, if an eligible participant agrees to participate, the grant of Awards will be evidenced by a grant agreement with each such participant. The interest of any participant in any Award is not assignable or transferable, whether voluntary, involuntary, by operation of law or otherwise, except upon the death of the participant.

The LTIP will provide that appropriate adjustments, if any, will be made by our Board in connection with a reclassification, reorganization or other change to our Common Shares, consolidation, distribution, merger or amalgamation, in the Common Shares issuable or amounts payable to preclude a dilution or enlargement of the benefits under the LTIP. In the event that a participant receives Common Shares in satisfaction of an Award during a black-out period, such participant shall not be entitled to sell or otherwise dispose of such Common Shares until such black-out period has expired.

The maximum number of Common Shares reserved for issuance, in the aggregate, under our LTIP will be 5% of the aggregate number of Common Shares issued and outstanding from time to time, which will represent 7,796,316 Common Shares after giving effect to the closing of the Initial Public Offering and the closing of the Concurrent Private Placement, assuming the midpoint of the estimated price range of the Initial Public Offering Price. The maximum number of Common Shares reserved for issuance, in the aggregate, under our LTIP to non-executive directors will be 1% of the aggregate number of Common Shares issued and outstanding as at the closing of the Initial Public Offering, which will represent 1,559,263 Common Shares, assuming the midpoint of the estimated price range of the Initial Public Offering Price The aggregate number of Common Shares (i) issued to insiders under the LTIP or any other proposed or established share-based compensation arrangement within any one-year period and (ii) issuable to insiders at any time under the LTIP or any other proposed or established share-based compensation arrangement, shall in each case not exceed 3% of the aggregate number of issued and outstanding Common Shares, being 4,677,790 Common Shares, assuming the midpoint of the estimated price range of the Initial Public Offering Price, or such other number as may be approved by the TSX and Shareholders of the Company from time to time. All of the Common Shares covered by the exercised, cancelled or terminated awards will automatically become available Common Shares for the purposes of awards that may be subsequently granted under the LTIP. As a result, the LTIP is considered an “evergreen” plan. As an evergreen plan, the LTIP will be subject to shareholder approval every three years pursuant of the rules of the TSX.

The exercise price of any option shall be fixed by the Board when such option is granted, but shall be no less than the closing price of the Common Shares on the TSX on the day prior to the date of grant (the “ Market Value ”). An option shall be exercisable during a period established by our Board, which shall commence on the date of the grant and shall terminate no later than ten years after the date of granting the option, or such shorter period of time as the Board may determine. The LTIP will provide that the exercise period shall automatically be extended if the date on which such option is scheduled to terminate shall fall during a black-out period. In such cases, the extended exercise period shall terminate 10 business days following the last day of the blackout-period.

In order to facilitate the payment of the exercise price of options, the LTIP has a cashless exercise feature pursuant to which a participant may elect to undertake either a broker assisted “cashless exercise” or a “net exercise” subject to the procedures set out in the LTIP, including the consent of the Board, where required, and the following calculation:

X = Y * (A-B) / A

Where:

X = the number of Common Shares to be issued to the participant;

Y = the number of Common Shares underlying the options to be surrendered;

A = the market value of the Common Shares as at the date of the surrender; and

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B = the exercise price of such options.

Our Board will be authorized to grant RSUs, PSUs and DSUs evidencing the right to receive Common Shares (issued from treasury or purchased on the open market), cash based on the value of a Common Share or a combination thereof at some future time to eligible persons under the LTIP. RSUs generally become vested, if at all, following a period of continuous employment. PSUs are similar to RSUs, but their vesting is, in whole or in part, conditioned on the attainment of specified performance metrics as may be determined by the Board. The terms and conditions of grants of RSUs and PSUs, including the quantity, type of award, grant date, vesting conditions, vesting periods, settlement date and other terms and conditions with respect to these awards will be set out in the participant’s grant agreement.

Subject to the achievement of the applicable vesting conditions, the payout of an RSU or PSU will generally occur on the settlement date. The payout of a DSU will generally occur upon or following the participant ceasing to be a director, executive officer, employee or consultant of the Company, subject to satisfaction of any applicable conditions.

The following table describes the impact of certain events upon the rights of holders of Awards under the LTIP, including termination for cause, resignation, termination other than for cause, retirement and death, subject to the terms of a participant’s employment agreement or grant agreement:

Event Provisions

Provisions

Termination for cause
Resignation
Termination other than for cause
Retirement
Death

Immediate forfeiture of all vested and unvested Awards.
Forfeiture of all unvested Awards and the earlier of the original expiry date and
90 days after resignation to exercise vested Awards or such longer period as the
Board may determine in its sole discretion.
Subject to the terms of the grant or as determined by the Board, upon a
participant’s termination without cause, the number of Awards that may vest is
subject to pro-ration over the applicable performance or vesting period.
Upon the retirement of a participant’s employment with the Company, any
unvested Awards held by the participant as at the retirement date will continue
to vest in accordance with its vesting schedule, and all vested Awards held by
the participant at the retirement date may be exercised until the earlier of the
expiry date of the Awards or three years following the retirement date; provided
that, if the participant breaches any post-employment restrictive covenants in
favour of the Company (including non-competition or non-solicitation
covenants), then any Awards held by such participant, whether vested or
unvested, will immediately expire and the participant shall pay to the Company
any “in-the-money” amounts realized upon exercise of options following the
retirement date.
All unvested Awards will vest and may be exercised within 180 days after
death.

In connection with a change of control of the Company, our Board will take such steps as are reasonably necessary or desirable to cause the conversion or exchange or replacement of outstanding Awards into, or for, rights or other securities of substantially equivalent (or greater) value in the continuing entity; provided that our Board may accelerate the vesting of Awards if: (i) the required steps to cause the conversion or exchange or replacement of Awards are impossible or impracticable to take or are not being taken by the parties required to take such steps (other than the Company); or (ii) the Company has entered into an agreement which, if completed, would result in a change of control and the counterparty or counterparties to such agreement require that all outstanding Awards be exercised immediately before the effective time of such transaction or terminated on or after the effective time of such transaction. Subject to the terms of a participant’s employment agreement or grant agreement, if a participant is terminated without cause or resigns for good reason during the 12-month period following a change of control, or after the Company has signed a written agreement to effect a change of control but before the change of control is completed, then any unvested Awards will immediately vest and may be exercised within 30 days of such date.

Our Board may, in its sole discretion, suspend or terminate the LTIP at any time, or from time to time, amend, revise or discontinue the terms and conditions of the LTIP or of any Award granted under the LTIP and any grant agreement relating

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thereto, subject to any required regulatory and TSX approval, provided that such suspension, termination, amendment, or revision will not adversely alter or impair any Award previously granted except as permitted by the terms of the LTIP or as required by applicable laws.

Our Board may amend the LTIP or any Award at any time without the consent of a participant; provided that such amendment shall (i) not adversely alter or impair any Award previously granted, except as permitted by the terms of the LTIP, (ii) be in compliance with applicable law and subject to any regulatory approvals including, where required, the approval of the TSX, and (iii) be subject to shareholder approval, where required by law, the requirements of the TSX or the LTIP; provided, however, that shareholder approval shall not be required for the following amendments and our Board may make any changes which may include but are not limited to:

amendments of a general housekeeping or clerical nature that, among others, clarify, correct or rectify any ambiguity, inconsistency, defective provision, error or omission in the LTIP;
changes that alter, extend or accelerate the terms of exercise, vesting or settlement applicable to any Award;
a change to the eligible participants or assignability provisions under the LTIP,
any amendment regarding the effect of termination of a participant’s employment or engagement;
any amendment to add or amend provisions relating to the granting of cash-settled awards, provision of financial assistance or clawbacks;
any amendment regarding the administration of the LTIP;
any amendment to add an insider participation limit;
any amendment necessary to comply with applicable law or the requirements of the TSX or any other regulatory body; and
any other amendment that does not require the approval of the Shareholders,

provided that the alteration, amendment or variance does not:

increase the maximum number of Common Shares issuable under the LTIP, other than pursuant to the adjustment provisions;
reduce the exercise price of the Awards; or
amend the amendment provisions of the LTIP.

No such amendment to the LTIP shall cause the LTIP in respect of RSUs to cease to be a plan described in section 7 of the Tax Act or any successor to such provision and no such amendment to the LTIP shall cause the LTIP in respect of DSUs to cease to be a plan described in regulation 6801(d) of the Tax Act or any successor to such provision.

Initial Grants

The Company intends to grant RSUs to each of the NEOs under the LTIP in connection with the closing of the Initial Public Offering, which are expected to represent approximately 3% of the issued and outstanding Common Shares at such time, assuming no exercise of the Over-Allotment Option or the Private Placement Option. Grants to each of Messrs. Barua, Ceballos, Motte Sauter, Murphy and Alvarez will represent 50%, 15%, 5%, 15% and 5%, respectively, of the aggregate initial grant of RSUs, with the balance of the outstanding pool available for allocation to other senior executives of the Company.

The RSUs will be granted in three equal tranches on the closing of the Initial Public Offering, the first anniversary of the closing and the second anniversary of the closing. All RSUs will vest over a period of three years from the applicable date of grant.

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The following table shows the expected aggregate number of RSUs to be granted to each NEO based on the Initial Public Offering Price:

Name	RSUs
Ramon Barua Chief Executive Officer Rodrigo Ceballos President and General Manager Francois Motte Sauter Chief Financial Officer Barry Murphy Chief Operating Officer Mauricio Alvarez General Counsel	2,338,895 701,669 233,890 701,669 233,890

Summary Compensation Table

The following table sets out information concerning the expected compensation to be earned by, paid to, or awarded to, the NEOs in respect of the financial year ending December 31, 2021, the Company’s first fiscal year as a public company:

Name and Principal Position	Fiscal Year	Salary (US$)(1)	Share- based Awards (US$)(2)	Option- Based Awards (US$)	Non-equity Incentive Plan Compensation	Non-equity Incentive Plan Compensation	Pension Value (US$)(4)	All Other Compensation (US$)(5)	Total Compensation (US$)
					Annual incentive plan (US$)(3)	Long-term incentive plans (US$)
Ramon Barua Chief Executive Officer Rodrigo Ceballos President and General Manager Barry Murphy Chief Operating Officer Francois Motte Sauter Chief Financial Officer Mauricio Alvarez General Counsel	2021 2021 2021 2021 2021	400,000 320,000 350,000 132,000 195,000	    	- - - - -	400,000 192,000 175,000 19,800 39,000	- - - - -	- - - - -	- - - - -	    

Notes:

(1) Represents the annualized base salary expected to be paid in the financial year ending December 31, 2021. Amounts reported have been converted to U.S. dollars using a rate of CLP$1.00 = US$0.0012.

(2) Represents intended grant date fair value for grants of RSUs to be made under the LTIP on closing of the Initial Public Offering. See “Executive Compensation – Principal Elements of Compensation – Initial Grants”.

(3) Represents annual target bonus for each NEO; actual amounts will depend on performance and may be higher or lower than the amounts currently contemplated.

(4) We do not currently offer a pension plan.

(5) None of NEOs are entitled to perquisites or other personal benefits which, in the aggregate, are worth over $50,000 or over 10% of their base salary.

Employment Agreements, Termination and Change of Control Benefits

We have written employment agreements with each of our NEOs and each executive is entitled to receive compensation established by us as well as other benefits in accordance with plans available to our most senior employees.

In 2021, we entered into an employment agreement with each of Ramon Barua, Rodrigo Ceballos, Barry Murphy, Francois Motte Sauter and Mauricio Alvarez setting forth the terms and conditions of each of their employment as our Chief Executive Officer, President and General Manager, Chief Operating Officer, Chief Financial Officer and General Counsel, respectively. Each employment agreement provides for each of their initial base salary, annualized base salary, bonus payments, expenses, and which includes, among other things, provisions regarding confidentiality, non-competition and non-solicitation, as well as eligibility to participate in our benefit plans. The employment agreements with each of Messrs. Barua and Murphy

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provide that if their employment is terminated by us without cause, they will be entitled to a severance payment based on his annualized base salary (up to a maximum of 12 months) and continuation of benefits for one year following termination. In the event of termination without cause of either Messrs. Ceballos, Motte and Alvarez, the Company will provide severance in accordance with applicable employment or labour standards legislation. In the event that the NEO’s employment is terminated by us with cause, the NEO will be entitled to have his annualized salary and benefits continue until the date on which the NEO ceases to be employed by us. On a change of control of the Company, the NEOs will be entitled to immediate vesting of any equity-based awards.

The table below shows the incremental payments that would be made to each of our NEOs under the terms of their respective employment agreement upon the occurrence of certain events, if such events were to occur immediately following the completion of the Initial Public Offering.

Name and Principal Position	Event	Payments (US$)(1)(2)	Acceleration of Unvested Share Based Awards (US$)	Other Payments (US$)(3)	Total (US$)
Ramon Barua Chief Executive Officer Rodrigo Ceballos President and General Manager Barry Murphy Chief Operating Officer Francois Motte Sauter Chief Financial Officer Mauricio Alvarez General Counsel	Termination other than for cause Change of control Termination other than for cause Change of control Termination other than for cause Change of control Termination other than for cause Change of control Termination other than for cause Change of control	- 400,000 - - - 350,000 - - - -	         	- - - - - - - - - -	- 400,000 - - - 350,000 - - - -

Notes:

(1) Severance payments are calculated based on the base salary we expect to pay our NEOs in the financial year ending December 31, 2021.

(2) Severance payments of each of Messrs. Ceballos, Motte and Alvarez will be determined in accordance with applicable employment or labour standards legislation.

(3) Excludes accrued and prorated annual bonus, as not yet determined and benefit plan payments.

Outstanding Option-Based Awards and Share-Based Awards

Outstanding Option-based and Share-based Awards

The following table indicates, for each of the NEOs, all awards that we expect to be outstanding immediately following the closing of the Initial Public Offering:

Name and Principal Position Ramon Barua Chief Executive Officer Rodrigo Ceballos President and General Manager Barry Murphy Chief Operating Officer Francois Motte Sauter		Option-based awards	Option-based awards	Value of unexercised in-the-money options (US$) - - - -	Share-based awards	Share-based awards	Share-based awards
	Number of securities underlying unexercised options (#) - - - -	Option exercise price (US$) - - - -	Option expiration date - - - -		Number of shares or units of shares that have not vested (#)    	Market or payout value of share- based awards that have not vested (US$)    	Market or payout value of vested share-based awards not paid out or distributed (US$)
							   

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Name and Principal Position Chief Financial Officer Mauricio Alvarez General Counsel		Option-based awards	Option-based awards	Value of unexercised in-the-money options (US$) -	Share-based awards	Share-based awards	Share-based awards
	Number of securities underlying unexercised options (#) -	Option exercise price (US$) -	Option expiration date -		Number of shares or units of shares that have not vested (#) 	Market or payout value of share- based awards that have not vested (US$) 	Market or payout value of vested share-based awards not paid out or distributed (US$)
							

Incentive Plan Awards – Value Vested or Earned During the Year

The following table indicates, for each of the NEOs (assuming the continued employment of each NEO), a summary of the value of option-based and share-based awards vested or of non-equity incentive plan compensation expected to be earned during fiscal 2021.

Name Ramon Barua Chief Executive Officer Rodrigo Ceballos President and General Manager Barry Murphy Chief Operating Officer Francois Motte Sauter Chief Financial Officer Mauricio Alvarez General Counsel	Option-Based Awards – Value Vested During Fiscal 2021 (US$) - - - - -	Share-Based Awards – Value Vested During Fiscal 2021 (US$)     	Non-Equity Incentive Plan Compensation – Value Earned During Fiscal 2021 (US$)
			    

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DIRECTOR COMPENSATION

General

The following discussion describes the significant elements of the expected compensation program for members of the Board and its committees. The compensation of our directors is designed to attract and retain committed and qualified directors and to align their compensation with the long-term interests of our Shareholders. Directors who are employees of the Company will not be entitled to receive any compensation for his or her service as a director of our Board.

Director Compensation

Our director compensation program is designed to attract and retain global talent to serve on our Board, taking into account the risks and responsibilities of being an effective director. Our objective regarding director compensation is to follow best practices with respect to retainers, the format and weighting of the cash and equity components of compensation, and the implementation of share ownership guidelines. We believe that our approach has helped attract, and will continue to help to attract and retain, strong members for our Board who will be able to fulfill their fiduciary responsibilities without competing interests.

Compensation for all non-executive directors is comprised of cash and share-based Awards granted under the LTIP, including RSUs and DSUs. Non-executive directors may elect to take all or a portion of their annual Board retainer in the form of RSUs or DSUs. The number of share-based Awards granted to non-executive directors annually is calculated as the non-executive director’s annual share-based Awards retainer, divided by the Market Value of the Common Shares. The value of the amount paid out will be determined as the fair market value of the accrued amount. For additional detail relating to RSUs and DSUs granted to directors, see “Executive Compensation – Principal Elements of Compensation – LTIP”.

The total non-executive director retainer is deemed to be full payment for the role of director. The exception to this approach would be in the event of a merger or acquisition, or other special circumstance that required more meetings than are typically required, in which case a “special” fee may be granted. Also, a retainer premium is provided to committee chairs to reflect the additional time commitment, level of responsibility and skills required in these roles.

The fee schedule for the Company’s non-executive directors is as follows:

Retainer – Chair Retainer – Board Member Additional Retainer – Audit Committee Chair	Compensation	Share-Based Awards
	$100,000 $50,000 $10,000	$200,000 $100,000 -

Directors who are employees of the Company will not receive any compensation for serving on the Board, and Mr. Bustamante has waived all Board-related fees to which he is entitled as a director. All directors will be reimbursed for any outof-pocket expenses incurred in connection with attending Board or committee meetings.

INDEBTEDNESS OF DIRECTORS AND OFFICERS

None of our directors, executive officers, employees, former directors, former executive officers or former employees or any of our subsidiaries, and none of their respective associates, is or has within 30 days before the date of this prospectus or at any time since the beginning of the most recently completed financial year been indebted to us or any of our subsidiaries or another entity whose indebtedness is the subject of a guarantee, support agreement, letter of credit or other similar agreement or understanding provided by us or any of our subsidiaries.

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PLAN OF DISTRIBUTION

This prospectus is being filed in each of the provinces and territories of Canada (other than Québec) to qualify the distribution of the Demerged Aclara Shares forming the Demerger Dividend. See “The Demerger” for details of the distribution.

We have applied to list the Demerged Aclara Shares on the TSX. Listing is subject to the approval of the TSX in accordance with its original listing requirements. The TSX has not conditionally approved the listing application and there is no assurance that it will do so.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary, as of the date hereof, of the principal Canadian federal income tax considerations under the Income Tax Act (Canada) and the regulations thereunder (the “ Tax Act ”) of the holding and disposition of the Demerged Aclara Shares generally applicable to a Shareholder who acquires Demerged Aclara Shares, as beneficial owner, pursuant to the Demerger and who at all relevant times, for purposes of the Tax Act, (a) holds the Demerged Aclara Shares as capital property, and (b) deals at arm’s length with the Company and the underwriters in the Initial Public Offering and is not affiliated with the Company or the underwriters (a “ Holder ”). Generally, the Demerged Aclara Shares will be considered to be capital property to a Holder unless they are held or acquired in the course of carrying on a business of trading in or dealing in securities or as part of an adventure or concern in the nature of trade.

This summary is based on the facts set out in this prospectus, the current provisions of the Tax Act and the regulations thereunder (“ Regulations ”) in force as of the date hereof, all specific proposals to amend the Tax Act or Regulations publicly announced by or on behalf of the Minister of Finance (Canada) (“ Tax Proposals ”) before the date of this prospectus and the current published administrative practices of the Canada Revenue Agency. No assurance can be made that the Tax Proposals will be enacted in the form proposed or at all. This summary is not exhaustive of all possible Canadian federal income tax considerations and, except as mentioned above, does not take into account or anticipate any changes in law, whether by legislative, regulatory, administrative or judicial decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ significantly from the Canadian federal income tax considerations discussed herein.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Holder of a Demerged Aclara Share, and no representation concerning the tax consequences to any particular Holder or prospective Holder are made. Accordingly, prospective Holders of Demerged Aclara Shares should consult their own tax advisers with respect to an investment in the Demerged Aclara Shares having regard to their particular circumstances.

This summary does not address the Canadian federal income tax consequences of the Demerger. Shareholders who intend to receive Demerged Aclara Shares pursuant to the Demerger should refer to the shareholder circular of Hochschild Mining dated October 19, 2021 and should consult their own tax advisors regarding the Canadian federal income tax consequences, as well as any other tax consequences, of receiving Demerged Aclara Shares pursuant to the Demerger.

Holders Resident in Canada

This section of the summary applies to a Holder who, at all relevant times, is, or is deemed to be, resident in Canada for purposes of the Tax Act (“ Resident Holder ”). This section of the summary is not applicable to a Holder: (a) that is a “financial institution”, as defined in the Tax Act for purposes of the mark-to-market rules, (b) an interest in which would be a “tax shelter investment” as defined in the Tax Act, (c) a Holder that is a “specified financial institution” as defined in the Tax Act, or (d) a Holder which has made an election under the Tax Act to determine its Canadian tax results in a foreign currency. This summary does not apply to a Holder who has entered or will enter into a “derivative forward agreement” or “synthetic disposition arrangement”, as those terms are defined in the Tax Act, with respect to Demerged Aclara Shares. This summary does not address the possible application of the “foreign affiliate dumping” rules that may be applicable to a Holder that is a corporation resident in Canada or that does not deal at arm’s length with a corporation resident in Canada (all within the meaning of the Tax Act) that is, or that becomes as part of a transaction or event or series of transactions or events that includes the acquisition of the Demerged Aclara Shares, controlled by a non-resident person or group of non-resident persons not dealing with each other at arm’s length for purposes of the rules in section 212.3 of the Tax Act. Any such Holder to which this summary does not apply should consult its own tax adviser with respect to the tax consequences of the holding and disposition of the Demerged Aclara Shares.

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A Resident Holder whose Demerged Aclara Shares do not otherwise qualify as capital property may in certain circumstances make an irrevocable election in accordance with subsection 39(4) of the Tax Act to have their Demerged Aclara Shares and every other “Canadian security” (as defined in the Tax Act) owned by such Resident Holder in the taxation year of the election and in all subsequent taxation years deemed to be capital property. Resident Holders should consult their own tax advisors for advice as to whether an election under subsection 39(4) of the Tax Act is available and/or advisable in their particular circumstances.

Dividends on Demerged Aclara Shares

Dividends received or deemed received on the Demerged Aclara Shares will be included in computing a Resident Holder’s income. In the case of a Resident Holder who is an individual, dividends received or deemed to be received on the Demerged Aclara Shares will be included in computing the Resident Holder’s income and will be subject to the gross-up and dividend tax credit rules that apply to taxable dividends received from taxable Canadian corporations. Provided that appropriate designations are made by the Company, such dividend will be treated as an “eligible dividend” for the purposes of the Tax Act and a Resident Holder who is an individual will be entitled to an enhanced dividend tax credit in respect of such dividend. There may be limitations on the Company’s ability to designate dividends and deemed dividends as eligible dividends.

Dividends received or deemed to be received on the Demerged Aclara Shares by a Resident Holder that is a corporation will be required to be included in computing the corporation’s income for the taxation year in which such dividends are received or deemed to be received, but such dividends will generally be deductible in computing the corporation’s taxable income for that taxation year. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received or deemed to be received by a Resident Holder that is a corporation as proceeds of disposition or a capital gain. Resident Holders that are corporations should consult their own tax advisers having regard to their own circumstances.

A Resident Holder that is a “private corporation” or a “subject corporation” (each as defined in the Tax Act) may be liable under Part IV of the Tax Act to pay a refundable tax on dividends received or deemed to be received on the Demerged Aclara Shares to the extent that such dividends are deductible in computing the Resident Holder’s taxable income for the taxation year.

Dividends received by a Resident Holder who is an individual (including certain trusts) may result in such Resident Holder being liable for minimum tax under the Tax Act. Resident Holders who are individuals should consult their own tax advisers in this regard.

Dispositions of Demerged Aclara Shares

Upon a disposition or deemed disposition of Demerged Aclara Shares (other than to the Company unless purchased by the Company in the open market in the manner in which shares are normally purchased by any member of the public), a capital gain (or loss) will generally be realized by a Resident Holder to the extent that the proceeds of disposition are greater (or less) than the aggregate of the adjusted cost base of the Demerged Aclara Shares to the Resident Holder immediately before the disposition or deemed disposition and any reasonable costs of disposition. The adjusted cost base of a Demerged Aclara Share to a Resident Holder will be determined in accordance with certain rules in the Tax Act by averaging the cost to the Resident Holder of a Demerged Aclara Share with the adjusted cost base of all other Demerged Aclara Shares held by the Resident Holder and by making certain other adjustments required under the Tax Act. The tax treatment of capital gains and capital losses is discussed below under the heading “Taxation of Capital Gains and Capital Losses”.

Taxation of Capital Gains and Capital Losses

One-half of a capital gain (a “ taxable capital gain ”) must be included in a Resident Holder’s income. One-half of a capital loss (an “ allowable capital loss ”) will generally be deductible by a Resident Holder against taxable capital gains realized in that year and allowable capital losses in excess of taxable capital gains for the year may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent year (against taxable capital gains realized in such years) to the extent and under the circumstances described in the Tax Act.

If the Resident Holder is a corporation, any such capital loss realized on the sale of Demerged Aclara Shares may in certain circumstances be reduced by the amount of any dividends, including deemed dividends, which have been received on such shares. Analogous rules apply to a partnership or certain trusts of which a corporation is a member or beneficiary. Taxable

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capital gains realized by a Resident Holder who is an individual may give rise to minimum tax depending on the Resident Holder’s circumstances.

A Resident Holder that is throughout the taxation year a “Canadian-controlled private corporation” (as defined in the Tax Act) may be liable to pay a refundable tax on certain investment income, including an amount in respect of a taxable capital gain arising from the disposition of a Demerged Aclara Share.

Holders Not Resident in Canada

This portion of the summary is generally applicable to a Holder who, at all relevant times, for purposes of the Tax Act: (i) is not, and is not deemed to be, resident in Canada; and (ii) does not use or hold the Demerged Aclara Shares in the course of a business carried on or deemed to be carried on in Canada (“ Non-Resident Holder ”). This summary does not apply to a Holder that carries on, or is deemed to carry on, an insurance business in Canada and elsewhere or an “authorized foreign bank” (as defined in the Tax Act) and such Holders should consult their own tax advisors.

Dividends on Demerged Aclara Shares

Dividends paid or credited or deemed under the Tax Act to be paid or credited by the Company to a Non-Resident Holder on the Demerged Aclara Shares will generally be subject to Canadian withholding tax at the rate of 25%, subject to any reduction in the rate of withholding to which the Non-Resident Holder is entitled under any applicable income tax convention between Canada and the country in which the Non-Resident Holder is resident. For example, where a Non-Resident Holder is a resident of the United States, is fully entitled to the benefits under the Canada-United States Tax Convention (1980) and is the beneficial owner of the dividend, the applicable rate of Canadian withholding tax is generally reduced to 15%.

Dispositions of Demerged Aclara Shares

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized on a disposition or deemed disposition of a Demerged Aclara Share unless the Demerged Aclara Share is “taxable Canadian property” (as defined in the Tax Act) of the Non-Resident Holder for the purposes of the Tax Act and the Non-Resident Holder is not entitled to an exemption under an applicable income tax convention between Canada and the country in which the NonResident Holder is resident.

Generally, a Demerged Aclara Share will not constitute taxable Canadian property of a Non-Resident Holder provided that the Demerged Aclara Shares are listed on a “designated stock exchange” for the purposes of the Tax Act (which currently includes the TSX) at the time of disposition of such Demerged Aclara Shares, unless at any time during the 60 month period immediately preceding the disposition, (i) at least 25% of the issued shares of any class or series of the capital stock of the Company were owned by or belonged to any combination of (a) the Non-Resident Holder, (b) persons with whom the NonResident Holder did not deal at arm’s length (for purposes of the Tax Act), and (c) partnerships in which the Non-Resident Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships; and (ii) at such time, more than 50% of the fair market value of such shares was derived, directly or indirectly, from any combination of real or immovable property situated in Canada, “Canadian resource property” (as defined in the Tax Act), “timber resource property” (as defined in the Tax Act), or options in respect of, interests in, or for civil law rights in such properties, whether or not such property exists. A Demerged Aclara Share may be deemed to be “taxable Canadian property” in certain other circumstances.

Taxation of Capital Gains and Capital Losses

In cases where a Non-Resident Holder disposes (or is deemed to have disposed) of a Demerged Aclara Share that is “taxable Canadian property” to that Non-Resident Holder, and the Non-Resident Holder is not entitled to an exemption under an applicable income tax convention, the consequences described above under the headings “ Holders Resident in Canada – Dispositions of Demerged Aclara Shares ” and “ Holders Resident in Canada — Taxation of Capital Gains and Capital Losses ” will generally be applicable to such disposition. Such Non-Resident Holders whose Demerged Aclara Shares are or are deemed to be taxable Canadian property should consult their own tax advisors.

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RISK FACTORS

In addition to all other information set out in this prospectus, the following specific factors could materially adversely affect us and should be considered. Other risks and uncertainties that we do not presently consider to be material, or of which we are not presently aware, may become important factors that affect our future financial condition and results of operations. The occurrence of any of the risks discussed below could materially adversely affect our business, prospects, financial condition, results of operations or cash flow. Readers should carefully consider the following risks.

Risks Related to Our Business and Industry

Prices are volatile and may be lower than expected.

The Company’s business and its ability to sustain operations are dependent on, among other things, the market price of REE. The prices of REE realized by the Company will affect future development decisions, production levels, earnings, cash flows, the financial condition and prospects of the Company. If the world market prices of REE were to drop and the prices realized by the Company on REE sales were to decrease significantly and remain at such levels for any substantial period, the Company’s business, financial condition, results of operations, cash flows and prospects would be negatively affected.

The value and price of the Common Shares and the Company’s financial results may be affected by volatility in the prices of REE and related products. The prices of REE and related products fluctuate and are affected by numerous factors beyond management’s control such as interest rates, exchange rates, inflation or deflation, fluctuation in the relative value of the U.S. dollar against foreign currencies on the world market, global and regional supply and demand for REE and related products, and the political and economic conditions of countries that produce REE and related products, such as quotas on the Chinese production of REE.

Demand for the Company’s intended products is impacted by demand for downstream products incorporating REE, including motors used in hybrid vehicles and EVs, auto catalysts and other clean technology products, as well as demand in the general aerospace and electronics industries. Lack of growth in these markets may adversely affect the demand for its products, which would have a material adverse effect on the business of the Company and its results of operations.

Extended periods of high prices may create economic dislocations that may be destabilizing to the supply of, and demand for, REE and ultimately to the broader markets. Strong REE prices, as well as real or perceived disruptions in the supply of REE, also create economic pressure to identify or create alternate technologies that ultimately could depress future long-term demand for REE and related products, and at the same time may incentivize development of otherwise marginal mining properties.

Mining operations are risky.

The development of mining operations involves various types of risks and hazards typical of companies engaged in the mining industry. Such risks include, but are not limited to: (i) industrial accidents; (ii) unusual or unexpected rock formations; (iii) structural cave-ins or slides and pitfall, ground or slope failures and accidental release of water from surface storage facilities; (iv) fire, flooding and earthquakes; (v) rock bursts; (vi) metal losses in handling and transport; (vii) periodic interruptions due to inclement or hazardous weather conditions; (viii) environmental hazards; (ix) discharge of pollutants or hazardous materials; (x) failure of processing and mechanical equipment and other performance problems; (xi) geotechnical risks, including the potential instability of washed clays deposits and unusual and unexpected geological conditions; (xii) unanticipated variations in grade and other geological problems, water, surface or underground conditions; (xiii) labour disputes or slowdowns; (xiv) social opposition and unrest; and (xv) work force health issues as a result of working conditions; and (xvi) force majeure events, or other unfavourable operating conditions.

These risks, conditions and events could result in, among other things: (i) damage to, or destruction of, the value of, the Penco Module or their respective facilities; (ii) personal injury or death; (iii) environmental damage to the Penco Module, surrounding lands and waters, or the properties of others; (iv) delays or prohibitions on mining or the transportation of minerals; (v) monetary losses; and (vi) potential legal liability and any of the foregoing could have a material adverse effect on the Company’s business, financial condition, results of operation, cash flows or prospects. In particular, underground refurbishment and exploration activities present inherent risks of injury to people and damage to equipment. Significant mine accidents could occur, potentially resulting in a complete shutdown of the Company’s operations at the Penco Module which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

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There are also risks related to: the reliance on the reliability of current and new or developing technology; the reliance on the work performance of outside consultants, contractors, and manufacturers; changes to project parameters over which the Company does not have complete control such as REE prices or labour or material costs; unknown or, unanticipated or underestimated costs or expenses; unknown or unanticipated or underestimated additions to the scope of work due to changing or adverse conditions encountered as a mine is refurbished and redeveloped; unexpected variances in the geometry or quality of ore zones; unexpected reclamation requirements or expenses; permitting time lines; unexpected or unknown ground conditions; unexpected changes to estimated parameters utilized to estimate past timelines, projections, or costs; and liquidity risks. An adverse change in any one of such factors, hazards or risks may have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The Company may fail to comply with the law or may fail to obtain or renew necessary permits and licenses.

The Company’s operations are subject to extensive laws and regulations governing, among other things, such matters as environmental protection, management and use of toxic substances and explosives, health, exploration and development of mines, commercial production and sale of by-products, ongoing and post-closure reclamation, construction and operation of tailings dams, safety and labour, taxation and royalties, maintenance of mineral tenure, expropriation of property, and protection of indigenous property and rights. The activities of the Company require licenses and permits from various governmental authorities.

The costs associated with compliance with these laws and regulations and of obtaining licenses and permits are substantial, and possible future laws and regulations, changes to existing laws and regulations and more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expenses, capital expenditures, restrictions on or suspensions of the Company’s operations and delays in the development of its properties. There is no assurance that future changes in such laws and regulations, if any, will not adversely affect the Company’s operations. Moreover, these laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from the environmental, health and safety practices of the Company’s past and current operations, or possibly even the actions of former property owners, and could lead to the imposition of substantial fines, penalties or other civil or criminal sanctions. The Company may fail to comply with current or future laws and regulations. Such noncompliance can lead to financial restatements, civil or criminal fines, penalties, and other material negative impacts on the Company.

The Company is required to obtain or renew further government permits and licenses for its current and contemplated operations, including the development of the Penco Module. Obtaining, amending or renewing the necessary governmental permits and licenses can be a time-consuming process potentially involving numerous regulatory agencies, involving public hearings and costly undertakings on the Company’s part. The Company is in an advanced stage of the permitting process for the EIA necessary for the Penco Module and expects to receive such permit during the first quarter of 2022. However, there can be no assurance that delays in the permitting process will not occur, that the EIA will be granted or that legal challenges may not be presented by third parties against the EIA once granted, causing delays in the development of the Penco Module. The duration and success of the Company’s efforts to obtain, amend and renew permits and licenses are contingent upon many variables not within its control, including the interpretation of applicable requirements implemented by the relevant permitting or licensing authority, such as the eventual need to conduct an Indigenous Consultation Process before granting of the EIA. The Company may not be able to obtain, amend or renew permits or licenses that are necessary to its operations, or the cost to obtain, amend or renew permits or licenses may exceed what the Company believes it can ultimately recover from a given property once in production. Any unexpected delays or costs associated with the permitting and licensing process could delay the development or impede the operation of the Penco Module. To the extent necessary permits or licenses are not obtained, amended or renewed, or are subsequently suspended or revoked, the Company may be curtailed or prohibited from proceeding with planned development, commercialization, operation and exploration activities. Such curtailment or prohibition may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Mining operations require geologic, metallurgic, engineering, title, environmental, economic and financial assessments that may be materially incorrect and thus the Company may not produce as expected.

The operations of mining properties or mining companies are based in large part on geologic, metallurgic, engineering, title, environmental, economic and financial assessments, which involve uncertainty. Such assessments may differ materially from actual results, which may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. These assessments include a series of assumptions regarding such factors as the ore body geometries, grades, recoverability, regulatory and environmental restrictions, including special protection for native or endangered species such as the Queule and Naranjillo native trees, future prices of metals and operating costs, future capital expenditures and royalties and government levies which will be imposed over the producing life of the mineral resources and

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mineral reserves. There are numerous uncertainties inherent in estimating quantities of mineral resources and mineral reserves and estimates in projecting potential future rates of mineral production, including factors subject to change and beyond the Company’s control. Mineral reserves and mineral resources estimates are based on limited samples and interpretations, which may not be representative of actual mineral reserves and mineral resources. In addition, title and rights of access to the Company’s properties can never be guaranteed. Although select title and environmental reviews were conducted in connection with the Penco Module, this review cannot guarantee that any unforeseen defects in the chain of title will not arise to defeat the Company’s title to certain assets or that environmental defects, liabilities or deficiencies do not exist or are not greater than anticipated.

The Company’s calculations of mineral resources are estimates and depend upon geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be inaccurate. Actual recoveries of REE from mineralized material may be lower than those indicated by test work. Any material change in the quantity of mineralization, grade or stripping ratio, may affect the economic viability of the Company’s properties. In addition, there can be no assurance that metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. Notwithstanding pilot plant tests for metallurgical recovery and other factors, there remains the possibility that the mineralized material may not perform in commercial production in the same manner as it did in testing. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mining and metallurgy are inexact sciences and, accordingly, there always remains an element of risk that a mine may not prove to be commercially viable.

Until a deposit is actually mined and processed, the quantity of mineral resources and mineral reserves and grades must be considered as estimates only. In addition, the quantity of mineral resources and mineral reserves may vary depending on, amongst other things, metal prices, cut-off grades and operating costs. Any material change in quantity of mineral reserves, mineral resources, grade, percent extraction of those mineral reserves recoverable by the relevant mining techniques or the tripping ratio for those mineral reserves recoverable by open pit mining techniques may affect the economic viability of the Company’s mining projects and could have a material adverse effect on its future revenues, cash flows, profitability, results of operations, financial condition and prospects and result in write-downs of the Company’s investment in mining properties and increased amortization charges.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are also considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Due to the uncertainty which may attach to inferred mineral resources, there is no assurance that inferred mineral resources will be upgraded to proven mineral reserves or probable mineral reserves as a result of continued exploration or as a result of economic considerations being applied to them.

In addition, market fluctuations in the price of REE, as well as increased production costs, reduced recovery rates or increased operating and capital costs due to inflation or other factors, may render the exploitation of certain mineral reserves and mineral resources uneconomic and may ultimately result in a restatement of mineral reserves, mineral resources or both. Such a restatement could affect depreciation and amortization rates, and have an adverse effect on the Company’s financial performance.

The Company depends on a single mineral project.

The Penco Module accounts for all of the Company’s mineral resources and reserves and the current potential for the future generation of revenue. Any adverse development affecting the Penco Module will have a material adverse effect on the Company’s business, prospects, profitability, financial performance and results of operations. These developments include, but are not limited to, the inability to obtain necessary permits or financing to develop the Penco Module, changes in technical parameters of project development, changes in costs or anticipated costs which may make it uneconomic to develop and/or operate the Penco Module, unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, property, and which could hinder the development and operation of the Penco Module. Given the Penco Module has a limited life based on mineral resource estimates, as we continue production at the Penco Module we will be required to replace and expand our mineral resources and obtain mineral reserves. In the absence of additional modules, the Company will be solely dependent upon the Penco Module for its revenue and profits, if any. The Company’s ability to maintain or increase its annual production will be dependent in significant part on its ability to bring new modules into production and to complete acquisitions.

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The rare earth mining industry is intensely competitive.

The rare earth mining and processing markets are capital intensive and competitive. Production of rare earth is dominated by our Chinese competitors. These competitors may have greater financial resources, as well as other advantages to operate, maintain, improve and possibly expand their facilities. Additionally, our Chinese competitors have historically been able to produce at relatively low costs due to domestic economic and regulatory factors, including less stringent environmental and governmental regulations and lower labour and benefit costs. Even upon successful completion of the Penco Module, if we are not able to achieve our anticipated costs of production, then any strategic advantages that our competitors may have over us, including, without limitation, lower labour, compliance and production costs, could have a material adverse effect on our business.

Competition in the mining industry is primarily for: (i) properties which can be developed and can produce economically; (ii) the technical expertise to find, develop, and operate such properties; (iii) labour to operate such properties; and (iv) capital to fund such properties. Such competition may result in the Company being unable to recruit or retain qualified employees and consultants or to acquire the capital necessary to fund its operations and develop the Penco Module. The Company’s inability to compete with other mining companies for these resources could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Many competitors not only explore for and mine minerals, but conduct refining and marketing operations on a worldwide basis. In the future, the Company may also compete with such mining companies in refining and marketing its products to international markets. Any inability to compete with established competitors could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

China currently dominates the REE market and may use this market position to prevent future competition.

China’s dominance of the REE market is well documented. According to USGS, China accounts for 58% of REO worldwide production and 90% of separation of REO globally, which has a direct effect on pricing of these materials. In addition, despite the fact that China has made very slight changes to HREE production quotas between 2014 and 2020, and that there is increasing global pressure to limit non-environmentally compliant REE production (that could lower production volumes), there is a risk that China could significantly increase its HREE production, potentially producing a material drop in HREE prices. The inability of the Company to secure independent providers of separation for its product or to secure independent off-takers, or if China uses its market dominance to reduce future competition could have a material adverse effect on our financial condition or results of operations.

The success of our business will depend, in part, on the growth of existing and emerging uses for rare earth products.

The success of our business will depend, in part, on the growth of existing and emerging uses for rare earth products. Our strategy is to develop rare earth products, which are used in critical existing and emerging technologies, such as hybrid vehicles and EVs, wind turbines, aerospace, robotics, drones, medical equipment, military equipment, air conditioners and other high-growth, advanced motion technologies. The success of our business depends on the continued growth of these end markets and successfully commercializing rare earth products in such markets. However, the technology pertaining to hybrid vehicles and EVs, wind turbines, aerospace, robotics, drones, medical equipment, military equipment, air conditioners and other high-growth, advanced motion technologies is changing rapidly, and there has been an increased focus on research and development activities pertaining to both the recycling of rare earth products and potential technical substitutes for rare earth products. Accordingly, there is no assurance rare earth products will continue to be used to the same degree as it is now or as expected to be in the future, or that they will be used at all. If the market for these critical existing and emerging technologies does not grow as we expect, grows more slowly than we expect, or if the demand for our products in these markets decreases (including as a result of the availability of recycled rare earth products, alternative technologies and/or substitutes for rare earth products), then our business, prospects, financial condition and operating results could be harmed. In addition, the market for these technologies, particularly in the automotive industry, tends to be cyclical, which exposes us to increased volatility, and it is uncertain as to how such macroeconomic factors will impact our business. Any unexpected costs or delays in the commercialization of rare earths, or less than expected demand for the critical existing and emerging technologies that use rare earth products, could have a material adverse effect on our financial condition or results of operations.

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Earthquake damage to the Company’s properties and operations could negatively affect the Company’s results.

Chile is located in a seismic area that exposes the Penco Module to the risk of earthquakes. Chile has been adversely affected by powerful earthquakes in the past, including, most recently, (i) in 2015 when an earthquake struck the coast of Chile, (ii) in 2014 when an earthquake struck the north of Chile and (iii) in 2010 when a severe earthquake struck the southern central region of Chile. The 2015 earthquake measured 8.3 on the Richter scale and affected the coast of Chile just north of Santiago, with no significant consequences for the rest of the country. The 2014 earthquake measured 8.2 on the Richter scale and affected mainly the Arica and Tarapacá Regions, with no significant consequences for the rest of the country. The 2010 earthquake - which measured 8.8 on the Richter scale- and its aftershocks, as well as tsunamis from adjacent coastal waters, caused severe damage to Chile’s infrastructure, including roads, bridges, ports and Santiago’s international airport, affecting areas across the country. Any such damages caused by an earthquake that were not covered by insurance could have an adverse effect on the Company’s results of financial condition, results of operations or cash flow.

Geological, hydrological and climatic events could suspend mining operations or increase costs.

All mining operations face geotechnical, hydrological and climate challenges. Unanticipated adverse geotechnical and hydrological conditions, such as landslides, subsidence and uplift, embankment failures and rock fragility may occur in the future and such events may not be detected in advance. Geotechnical instabilities and adverse climatic conditions can be difficult to predict and are often affected by risks and hazards outside of the Company’s control, such as severe weather and seismic activity. Geotechnical failures could result in limited or restricted access to mines, suspension of operations, environmental damage, government investigations, increased monitoring costs, remediation costs, loss of REE and other impacts. The potential impact of climate change on our operations is uncertain and would be specific to the geographic circumstances of our facilities and operations. It may include changes in rainfall patterns, water shortages, rising sea levels, changing storm patterns and intensities and changing temperatures. These effects may materially and adversely impact the cost, production and financial performance of our operations.

Actual production, capital and operating costs may be different than those anticipated.

The Company prepares estimates of future productions, capital costs and operating costs of production for operations at the Penco Module. In addition, as a result of the substantial expenditures involved in the development of a mineral project such as the Penco Module, the need to project years into the future, the need to make assumptions and use models that may not adequately approximate reality, and the fluctuation of costs over time, a development project is prone to material cost overruns. The Technical Report estimates capital costs and cash operating costs based upon, among other things:

anticipated tonnage, grades and metallurgical characteristics of the mineralization to be mined and processed;
anticipated recovery rates of REE and other metals from the mineralized materials;
cash operating costs of comparable facilities and equipment;
anticipated availability of labour and equipment; and
• anticipated foreign exchange rates.

Capital costs, operating costs, production and economic returns, and other estimates may differ significantly from those anticipated by the Technical Report, and there can be no assurance that the Company’s actual capital or operating costs will not be higher than currently anticipated or that returns will not be lower than anticipated. The Company’s actual costs may vary from estimates for a variety of reasons, including: limitations inherent in modelling; changes to assumed third party costs; short term operating factors; operational decisions made by the Company; revisions to mine plans; risks and hazards associated with development and mining described elsewhere in this prospectus; natural phenomena, such as inclement weather conditions, water availability, floods, and earthquakes; and unexpected labour shortages or strikes. Operating costs may also be affected by a variety of factors, including: changing strip ratios, ore metallurgical grade-recovery curves, the availability of processing operations, the availability of storage capacity, the availability of equipment and facilities necessary to complete exploration and development work at the Penco Module, the cost of consumables and mining and processing equipment, labour costs, additional taxes to the mining sector, the availability and productivity of skilled labour, the cost of commodities, general inflationary pressures, currency exchange rates, technological and engineering problems, accidents or acts of sabotage or terrorism, the regulation of the mining industry by various levels of government and quasi-governmental organizations and political factors. Many of these factors are beyond the Company’s control. Furthermore, significant cost overruns could make the Penco Module uneconomical. Failure to achieve estimates or material increases in costs could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

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Furthermore, unforeseen delays in the construction and commissioning of mining projects or other technical difficulties may result in even further capital expenditures being required. Any delay in the development of a project or cost overruns or operational difficulties with regards to the Penco Module may have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

Our mineral exploration efforts are highly speculative in nature and may be unsuccessful.

Mineral exploration is highly speculative in nature, involves many uncertainties and risks and is frequently unsuccessful. It is performed to demonstrate the dimensions, position and mineral characteristics of mineral deposits, estimate mineral resources and mineral reserves, assess amenability of the deposit to mining and processing scenarios and estimate potential deposit value. Therefore, once mineralization is discovered, it may take a number of years from the initial exploration phases before production is possible, during which time the potential feasibility of the Penco Module may change adversely. Substantial expenditures are required to establish proven and probable mineral reserves to determine processes to extract the metals and, if required, to construct mining and processing facilities and obtain the rights on the land and resources required to develop the mining activities. We hold exploration authorizations, mineral concessions, mining applications and exploration applications that cover a vast area in Chile. See “The Penco Module – Project Description and Access”.

Development projects have no operating history upon which to base estimates of proven and probable mineral reserves and estimates of future cash operating costs. Estimates are, to a large extent, based upon the interpretation of geological data and modeling obtained from drill holes and other sampling techniques, and studies that derive estimates of cash operating costs based upon anticipated tonnage and grades of material to be mined and processed, the configuration of the deposit, expected recovery rates of metal from the mill feed material, comparable facility and equipment operating costs, anticipated climatic conditions and other factors. As a result, actual cash operating costs and economic returns based upon development of proven and probable mineral reserves may differ significantly from those originally estimated. Moreover, significant decreases in actual or expected prices may mean mineralization, once found, will be uneconomical to mine.

The construction and start-up of new mines is subject to a number of factors and the Company may not be able to successfully complete new development projects.

The success of the Penco Module is subject to a number of factors including the availability and performance of engineering and construction contractors, mining contractors, suppliers and consultants, the receipt of required governmental approvals and permits in connection with the construction of mining facilities and the conduct of mining operations (including environmental and regulatory permits), the successful completion and operation of mining stopes, processing plants and conveyors to move ore, the supply of key materials, such as ammonium sulphate, among other operational elements. Any delay in the performance of any one or more of the contractors, suppliers, consultants or other persons on which the Company is dependent in connection with its construction activities, a delay in or failure to receive the required governmental approvals and permits in a timely manner or on reasonable terms, or a delay in or failure in connection with the completion and successful operation of the operational elements in connection with new mines could delay or prevent the construction and start-up of new mines as planned. There can be no assurance that current or future construction and start-up plans implemented by the Company will be successful, that the Company will be able to obtain sufficient funds to finance construction and start-up activities, that personnel and equipment will be available in a timely manner or on reasonable terms to successfully complete construction projects, that the Company will be able to obtain all necessary governmental approvals and permits or that the completion of the construction, the start-up costs and the ongoing operating costs associated with the development of new mines will not be significantly higher than anticipated by the Company. Any of the foregoing factors could adversely impact the Company’s business, financial condition, results of operations, cash flows and prospects.

The capital expenditures and time required to develop new mines or other projects are considerable and changes in costs or construction schedules can affect project economics. Thus, it is possible that actual costs may change significantly and economic returns may differ materially from the Company’s estimates.

Commercial viability of a new mine or development project is predicated on many factors. Mineral resources projected by the Technical Report and other technical assessments performed on the Company’s projects may not be realized, and the level of future metal prices needed to ensure commercial viability may not materialize. Consequently, there is a risk that startup of new mine and development projects may be subject to write-down and/or closure as they may not be commercially viable.

Any uncertainty and inability in the estimation, recalculation or replacement of mineral resources could materially affect the Company’s results of operations, cash flows and financial position.

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To ensure the continued operation of the business and realize the Company’s growth strategy, it is essential that the Company continues to realize its existing identified mineral resources, convert mineral resources into mineral reserves, increase the Company’s mineral resource base by adding new mineral resources from areas of identified mineralized potential and otherwise successfully undertaking exploration, and/or acquire new mineral reserves and mineral resources. The life of mine estimates included herein may not be correct.

Currency fluctuations may result in unanticipated losses.

Currency fluctuations may affect the Company’s capital costs and the costs that the Company incurs at its operations. REEs are sold throughout the world based principally on a U.S. dollar price. The appreciation of the Chilean peso relative to the U.S. dollar could increase the cost of production at the Penco Module, which could materially adversely affect the Company’s earnings and financial condition. As at the date of this prospectus, the Company has not hedged its exposure to the Chilean peso exchange rate fluctuations, or any other exchange rate fluctuations applicable to its business, and is therefore exposed to currency fluctuation risks. In the future, we may use foreign exchange forwards in order to reduce the risk associated with currency volatility. However, our hedging activities could cause us to lose the benefit of an increase in the currency price. The cash flows and the mark-to-market values of our production hedges can be affected by factors such as the volatility of currency, which are not under our control.

Our projects are subject to operational risks that may result in increased costs or delays that prevent their successful implementation.

We invest in increasing our mine and metal production capacity and in developing new operations. Our projects are subject to a number of risks that may materially and adversely affect our growth prospects and profitability, including the following:

we may encounter delays or higher than expected costs in obtaining the necessary equipment, machinery, materials, supplies, labour or services and in implementing new technologies to develop and operate a project;
our efforts to develop projects according to schedule may be hampered by a lack of infrastructure, including a reliable power supply;
we may fail to obtain, or experience delays or higher than expected costs in obtaining, the required agreements, authorizations, licenses, approvals and permits to develop a project, including the prior consultation procedure and agreements with local communities;
changes in market conditions or regulations may make a project less profitable than expected at the time we initiated work on it;
accidents, natural disasters, labour disputes and equipment failures;
adverse mining conditions may delay and hamper our ability to produce the expected quantities and qualities of minerals upon which the Penco Module was budgeted; and
conflicts with local communities and/or strikes or other labour disputes may delay the implementation or the development of projects.

The Company’s inability to industrialize the processing and recovery methods in its operations may have a material adverse effect on our financial condition or results of operations.

The metallurgical process to be used by the Company is based on a well-known reaction between ammonium sulphate and ionic clays. However, there are no documented precedents of having industrial scale production of REE concentrates using a recirculated circuit.

The Company has tested this reaction at laboratory level extensively through internationally recognized third parties and have completed batch pilot testing to confirm precipitate REE concentrates and impurities, but continuous pilot testing is still pending and will be performed in the coming months, before the Feasibility Study is completed. The recirculated solution can offer both benefits and complications to the process and can result in increases of capital expenditures and operating

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expenditures, and may produce residues not currently anticipated, which could require additional permits or amendments to existing permits.

An inability to confirm the results achieved to date at the laboratory level or further pilot level on an industrial level may have a material adverse effect on our financial condition or results of operations. In addition, changes in processing and recovery processes may be required with time. Any delay or failure in developing processes to meet changing needs may have a material adverse effect on our financial condition or results of operations.

The successful development and operation of the Penco Module depend on the skills of the Company’s management and workforce.

The Company’s business is dependent on retaining the services of its key management personnel with a variety of skills and experience, including in relation to the development and operation of mineral projects. The success of the Company is, and will continue to be, dependent to a significant extent on the expertise and experience of its directors and senior management. Failure to retain, or loss of, one or more of the Company’s directors and/or senior management could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. The Company’s success will also depend to a significant degree upon the contributions of qualified technical personnel and the Company’s ability to attract and retain a highly skilled workforce. Competition for such personnel is intense, and the Company may not be successful in attracting and retaining qualified personnel. The Company’s inability to attract and retain these people could have a material adverse effect on its business, financial condition, results of operations, cash flows or prospects.

Operations during mining cycle peaks are more expensive.

During times of increased demand for metals and minerals, price increases may encourage expanded mining exploration, development and construction activities across the mining sector. These increased activities may result in escalating demand for and cost of contract exploration, development and construction services and equipment. Increased demand for and cost of services and equipment could cause exploration and project costs to increase materially, resulting in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability, and increased potential for scheduling difficulties and cost increases due to the need to coordinate the availability of services or equipment, any of which could materially increase project development or construction costs, result in project delays, or increase operating costs, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

The Company’s properties may be subject to title challenges or claims in the future.

Although the Company has received title opinions for the Penco Module, there is no guarantee that title to such properties will not be challenged or impugned. The Company’s claims may be subject to prior unregistered agreements or transfers and title may be affected by unidentified or unknown defects. The Company has conducted an investigation on the title of properties that it has acquired to confirm that there are no claims or agreements that could affect its title to its mineral tenure or surface rights. There is no guarantee that such title will not be challenged or impaired. If title to the Company’s properties is disputed, it may result in the Company paying substantial costs to settle the dispute or clear title and could result in the loss of the property, which events may affect the economic viability of the Company. Title insurance generally is not available for mineral tenure or surface rights and the Company’s ability to ensure that it has obtained secure claim to title may be constrained.

The Penco Module’s water supply could be affected by geological changes or environmental regulations.

The Company’s business is dependent on the availability of water for the REE and subject to environmental regulations regarding water usage. In the past, Chile has experienced droughts severe enough to adversely affect the energy sector of the economy in the central and southern regions of Chile. The Company’s access to water may also be impacted by changes in geology or other natural factors that the Company cannot control. If Chile were to experience a drought or the Company was otherwise unable to obtain adequate water supplies, the Company’s ability to conduct its operations could be impaired.

Furthermore, the government of Chile has proposed certain changes to applicable water regulations which, if adopted, could result in increased costs and additional restrictions relating to water consumption (e.g. new order of precedence for certain usages), none of which are expected to have a material impact on the activities relating to the Penco Module, since it currently holds considerably more water rights than those required for its mining operations.

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Compliance with environmental regulations can be costly.

The Company’s development of the Penco Module and the exploration of its other properties are all subject to environmental regulation, including regulations for the special protection for native or endangered species. Regulations cover, among other things, water quality standards, land reclamation, the generation, transportation, storage and disposal of hazardous waste, the construction and operation of tailings dams, and general health and safety matters. Native or endangered species such as the Queule and Naranjillo trees exist within the area comprising the Penco Module. The Company has taken measures to identify and protect those native and endangered species, including specifically the Queule and Naranjillo trees. There is no assurance that the Company has been or will at all times be in full compliance with all environmental laws and regulations or hold, and be in full compliance with, all required environmental and health and safety approvals and permits. The potential costs and delays associated with compliance with such laws, regulations, approvals and permits could prevent the Company from economically operating or proceeding with the further development and exploration of the Penco Module, and any noncompliance with such laws, regulations, approvals and permits at the Penco Module could result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Environmental approvals and permits are currently, and may in the future be, required in connection with the Company’s current and planned operations. Please see “The Penco Module – Infrastructure, Permitting and Compliance Activities – Environmental, Permitting and Social Considerations”. To the extent such environmental approvals and permits are required and not obtained, the Company’s plans and the operation of mines may be curtailed or it may be prohibited from proceeding with planned exploration or development of additional mineral properties. Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.

Future changes to environmental laws and regulations could potentially increase the amount of investment and work required to comply with the applicable environmental obligations, including, but not limited to, those related to the implementation of reclamation and remediation measures. Any increment in future costs could materially impact the amounts charged to operations in this regard. There is no assurance that any future changes in environmental regulation will not adversely affect the Company’s operations. Changes in government regulations have the potential to significantly increase compliance costs and thus reduce the profitability of current or future operations.

Environmental hazards may also exist on the properties on which the Company holds interests that are unknown to the Company at present and that have been caused by previous or existing owners or operators of the properties and for which the Company may be liable for remediation. Parties engaged in mining operations, including the Company, may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable environmental laws or regulations, regardless of whether the Company actually caused the loss or damage. The costs of such compensation, fines or penalties could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Regulatory and industry response to climate change, restrictions, caps, taxes, or other controls on greenhouse gas emissions, including limits on emissions from the combustion of carbon-based fuels, controls on effluents and restrictions on the use of certain substances or materials could significantly increase our operating costs and our customers’ operating costs. A number of authorities are evaluating regulatory changes in response to the potential impacts of climate change. These regulatory initiatives may impact our operations directly or indirectly through our suppliers or customers.

The on-going international efforts to address greenhouse gas emissions by the United Nations and certain international organizations consist of controlling the activities that may increase the atmospheric concentration of greenhouse gases. International agreements, such as the Kyoto Protocol, which set internationally binding emission reduction targets, are at different stages of negotiation and implementation. The measures included in such agreements may result in an increase of costs related to the installation of new controls aimed at reducing greenhouse gas emissions, the purchase of credits or licenses for atmospheric emissions and the monitoring and registration of greenhouse gas emissions generated by our operations. These measures, if adopted in Chile, could adversely affect our business, financial condition and results of operations.

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Social and environmental activism can negatively impact exploration, development and mining activities.

There is an increasing level of public concern relating to the effects of mining on the natural landscape, on communities and on the environment. Certain non-governmental organizations, public interest groups and reporting organizations (“ NGOs ”) who oppose resource development can be vocal critics of the mining industry. In addition, there have been many instances in which local community groups have opposed resource extraction activities, which have resulted in disruption and delays to the relevant operation. While the Company seeks to operate in a socially responsible manner and believes it has good relationships with stakeholders in the districts of Penco and Concepcion in which it operates, NGOs or local community organizations could direct adverse publicity against and/or disrupt the operations of the Company in respect of one or more of its properties, regardless of its compliance with social and environmental best practices. The Company has experienced some local opposition to the development of the Penco Module from certain groups and social organizations and cannot rule out the possibility of local and national opposition increasing in the future in respect of its development prospects or in relation to obtaining the necessary environmental and sectorial permits for the Penco Module. Any such actions and the resulting adverse media coverage could have an adverse effect on the reputation and financial condition of the Company or its relationships with the communities in which it operates, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Industry consolidation may result in increased competition, which could result in a reduction in revenue.

Some of our competitors have made, or may make acquisitions or enter into partnerships or other strategic relationships to achieve competitive advantages. In addition, new entrants not currently considered competitors may enter our market through acquisitions, partnerships or strategic relationships. We expect these trends to continue as demand for rare earth materials increases. Industry consolidation may result in competitors with more compelling product offerings or greater pricing flexibility than we have, or business practices that make it more difficult for us to compete effectively, including on the basis of price, sales, technology or supply. These competitive pressures could have a material adverse effect on our business.

Inadequate infrastructure may constrain mining operations.

Any potential commercial production at the Penco Module will depend on adequate infrastructure. In particular, reliable power sources, water supply, transportation and surface facilities are all necessary to develop and operate mines. Failure to adequately meet these infrastructure requirements or changes in the cost of such requirements could affect the Company’s ability to develop or commence production at the Penco Module and could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Fluctuations in the market prices and availability of commodities and equipment affect the Company’s business.

The cash flows and profitability of the Company’s business will also be affected by the market prices and availability of commodities, supplies and equipment that are consumed or otherwise used in connection with the Company’s operations and development projects. Prices of such commodities and resources are also subject to volatile price movements, which can be material and can occur over short periods of time due to factors beyond the Company’s control.

If there is a significant and sustained increase in the cost of certain commodities, the Company may decide that it is not economically feasible to continue certain or all of the Company’s commercial production, development and exploration activities and this could have an adverse effect on profitability. Higher worldwide demand for critical resources like input commodities, drilling equipment, ammonium sulphite, mobile mining equipment, tires and skilled labour could affect the Company’s ability to acquire them and lead to delays in delivery and unanticipated cost increases, which could have an effect on the Company’s operating costs, capital expenditures and production schedules. The occurrences of one or more of these events may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

A failure to maintain satisfactory labour relations can adversely impact the Company.

The Company’s operations and further development of the Penco Module are dependent upon the efforts of its employees and the Company’s relations with its employees, and the Company’s operations would be adversely affected if it failed to maintain satisfactory labour relations. As a result of these activities, we may be subject to unfair labour practice charges, complaints and other legal, administrative and arbitral proceedings initiated against us employees, which could divert management attention from our operations, resulting in an adverse impact on our operating results.

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Because of the dangers involved in our operations, there is a risk that we may incur liability or damages as we conduct our business.

Our operations are subject to risks normally inherent in the mining industry, including potential liability which could result from, among other circumstances, personal injury, environmental claims or property damage. We maintain insurance policies for automobile, general, employers, environmental, directors’ and officers’ and fiduciary liability and property insurance. The availability of, and ability to collect on, insurance coverage is subject to factors beyond our control. In addition, we may become subject to liability hazards in circumstances where we cannot or may elect not to insure (due to high premium costs or other reasons), or for occurrences which exceed maximum coverage under our policies. We also provide group employee health and dental benefits insurance coverage to our employees. We have no control over changing conditions and pricing in the insurance marketplace and the cost or availability of various types of insurance may change dramatically in the future. In addition, our costs of providing group health coverage may increase based on our claims experience. Furthermore, the inability to obtain insurance in the future for certain types of losses may require us to limit the services we provide or the areas in which we operate, thereby reducing our revenue. Furthermore, the occurrence of a significant uninsured loss could have a material adverse effect on us. Due to the variable condition of the insurance market, we may experience future increases in self-insurance levels as a result of increased retention levels and increased premiums. If we elect to assume more risk for self-insurance through higher retention levels, we may experience more variability in our self-insurance reserves and expense.

The courts of the jurisdictions in which the Company operates or might operate in the future may offer less certainty as to the judicial outcome or less effective forms of redress or a more protracted judicial process than in Canada.

The courts and legal systems in the jurisdictions in which the Company operates or might operate in the future may offer less certainty as to judicial outcome and less effective forms of redress than is the case in Canada. Accordingly, the Company could, inter alia, face risks from (i) a higher degree of discretion on the part of governmental authorities; (ii) the lack of judicial or administrative guidance on interpreting applicable rules and regulations; (iii) inconsistencies or conflicts between and with various laws, regulations, decrees, orders and resolutions; (iv) relative inexperience of the judiciary and courts in such matters; or (v) a more protracted judicial process resulting in delays in reaching a judicial outcome. Similarly, there may be less certainty that government officials and agencies will abide by legal requirements, licences, permits and negotiated agreements. There can be no assurance that the foregoing would not have an adverse effect on the validity or enforceability of the joint ventures, licences, permits or other legal arrangements entered into by the Company or the application or enforcement of laws and regulations to which the Company is subject.

As we are a holding company, all of our subsidiaries and the majority of our assets are located outside of Canada. Accordingly, it may be difficult for investors to enforce within Canada any judgments obtained against the Company, including judgments predicated upon the civil liability provisions of applicable Canadian securities laws. Consequently, investors may be effectively prevented from pursuing remedies against the Company under Canadian securities laws or otherwise.

Some of the directors and officers of the Company reside outside of Canada. Some or all of the assets of those persons may be located outside of Canada. Therefore, it may not be possible for investors to collect or to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible for investors to effect service of process within Canada upon such persons.

The Company has subsidiaries incorporated in Chile. It may be difficult for an investor, or any other person or entity, to assert Canadian securities law claims or otherwise in original actions instituted in Chile. Courts in these jurisdictions may refuse to hear a claim based on a violation of Canadian securities laws or otherwise on the grounds that such jurisdiction is not the most appropriate forum to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that the local law, and not Canadian law, is applicable to the claim. If Canadian law is found to be applicable, the content of applicable Canadian law must be proven as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by foreign law.

It may be difficult to enforce judgments and effect service of process on directors and officers.

Some of the directors and officers of the Company reside outside of Canada. Some or all of the assets of those persons may be located outside of Canada. Therefore, it may not be possible for Shareholders to collect or to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible for Shareholders to effect service of process within Canada upon such persons.

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The directors and officers may have conflicts of interest with the Company.

Certain directors and officers of the Company are or may become associated with other mining and/or mineral exploration and development companies which may give rise to conflicts of interest. Directors who have a material interest in any person who is a party to a material contract or a proposed material contract with the Company are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve such a contract. In addition, directors and officers are required to act honestly and in good faith with a view to the best interests of the Company. Some of the directors of the Company have either other full-time employment or other business or time restrictions placed on them and accordingly, the Company will not be the only business enterprise of these directors. Further, any failure of the directors or officers of the Company to address these conflicts in an appropriate manner or to allocate opportunities that they become aware of to the Company could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The Company’s directors who are nominees of the Principal Shareholders may have conflicts of interests with respect to matters involving the Company.

Certain directors of the Company are affiliated with the Principal Shareholders. These persons have fiduciary duties to the Company and, in addition, will have duties to the Principal Shareholders. As a result, such circumstances may entail real or apparent conflicts of interest with respect to matters affecting both the Company and the Principal Shareholder, whose interests, in some circumstances, may be averse to those of the Company. In addition, as a result of the Principal Shareholders’ ownership interest, conflicts of interest could arise with respect to transactions involving business dealings between the Company and the Principal Shareholders or their respective affiliates, including potential business transactions, potential acquisitions of businesses or properties, the issuance of additional securities, the payment of dividends by the Company and other matters.

Future acquisitions may require significant expenditures and may result in inadequate returns.

The Company may seek to expand through future acquisitions; however, there can be no assurance that the Company will locate attractive acquisition candidates, or that the Company will be able to acquire such candidates on economically acceptable terms, if at all, or that the Company will not be restricted from completing acquisitions pursuant to the terms and conditions from time to time of arrangements with third parties, such as the Company’s creditors. Future acquisitions may require the Company to expend significant amounts of cash, resulting in the Company’s inability to use these funds for other business or may involve significant issuances of equity or debt. Future acquisitions may also require substantial management time commitments, and the negotiation of potential acquisitions and the integration of acquired operations could disrupt the Company’s business by diverting management and employees’ attention away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically diverse organizations, integrating personnel with disparate backgrounds and combining different corporate cultures.

Any future acquisition involves potential risks, including, among other things: (i) mistaken assumptions and incorrect expectations about mineral properties, mineral resources, mineral reserves and costs; (ii) an inability to successfully integrate any operation the Company acquired or acquires, as applicable; (iii) an inability to recruit, hire, train or retain qualified personnel to manage and operate the operations acquired; (iv) the assumption of unknown liabilities; (v) mistaken assumptions about the overall cost of equity or debt; (vi) unforeseen difficulties operating acquired projects, which may be in geographic areas new to the Company; and (vii) the loss of key employees and/or key relationships at the acquired project.

Failures of information systems or information security threats can be costly.

The Company has entered into agreements with third parties for hardware, software, telecommunications and other IT services in connection with its operations. Such operations depend, in part, on how well the Company and its suppliers protect networks, equipment, IT systems and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, terrorism, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation, results of operations, cash flows and financial condition.

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Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that it will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

Any of these factors could have a material adverse effect on the Company’s results of operations, cash flows and financial position.

The Company may be subject to costly legal proceedings.

The Company may be subject to regulatory investigations, civil claims, lawsuits and other proceedings in the ordinary course of its business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in regulatory actions and litigation, the difficulty of predicting decisions of regulators, judges and juries and the possibility that decisions may be reversed on appeal. However, the defense and settlement costs of legal disputes can be substantial, even with claims that have no merit. Management is committed to conducting business in an ethical and responsible manner, which it believes will reduce the risk of legal disputes. However, if the Company is subject to legal disputes, there can be no assurances that these matters will not have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Additionally, the legal system in Chile has inherent uncertainties that could limit the legal protections available to the Company, which include: (i) inconsistencies between and within laws; (ii) limited judicial and administrative guidance on interpreting Chilean legislation, particularly that relating to business, corporate and securities laws; (iii) the ongoing process to amend the Chilean Constitution; (iv) substantial gaps in the regulatory structure due to a delay or absence of enabling regulations; (v) a lack of judicial independence from political, social and commercial forces; (vi) corruption; and (vii) bankruptcy procedures that are subject to abuse, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. Furthermore, it may be difficult to obtain swift and equitable enforcement of a Chilean judgement, or to obtain enforcement of a judgement by a court of another jurisdiction, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The main litigation currently affecting the Penco Module is an arbitration proceeding initiated by Madesal SpA (“ Madesal ”) before the Arbitration Center of the Santiago Chamber of Commerce. The grounds for this claim are an alleged violation of preparatory agreements executed between the parties in 2014 and 2015 (the “ MOU and its Addendum ”) by way of which Madesal would grant the former owner of the Penco Module, a mining easement over its property called “Fundo El Cabrito” for the future development of the Project in Madesal’s El Cabrito property. As consideration for the easement, and recognizing the strategic value of the El Cabrito property, Madesal was granted a royalty over the future production of rare earth mined in the Fundo el Cabrito. Nevertheless, it was subsequently decided for technical and environmental reasons that the Penco Module would be developed in a different location and that, therefore, no mining would take place on Madesal’s property. Madesal is seeking specific performance of the obligations allegedly derived from the MOU and its Addendum, plus damages. Requested damages amount to approximately US$28 million.

The Company is currently defending the case and maintains that the MOU and its Addendum were merely preparatory contracts for the execution of two legal mining easements: one for exploration and the other for exploitation in Fundo El Cabrito and that these activities were always subject to the results of the respective economic, technical and environmental studies, which eventually led to the decision to continue the development of the Penco Module elsewhere. No other contractual relationship or joint venture is considered to have arisen from these agreements and since they and the respective mining easements have terminated, Madesal has no right or expectation over any future development of the Penco Module. In the event of an adverse outcome, damages would be monetary. These proceedings do not have an impact on the development of the Penco Module given the nature of the MOU and its Addendum and the location of the Penco Module.

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The Company will incur increased expenses as a result of being a public company and our current resources may not be sufficient to fulfill our public company obligations.

We expect to incur significant legal, accounting, insurance and other expenses as a result of being a public company, which may negatively impact our performance and could cause our results of operations and financial condition to suffer. Compliance with applicable Canadian securities legislation and the rules of the TSX substantially increases our expenses, including our legal and accounting costs, and makes some activities more time-consuming and costly. Reporting obligations as a public company and our anticipated growth may place a strain on our financial and management systems, processes and controls, as well as on our personnel.

We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially adversely effected, which could also cause Shareholders to lose confidence in our reported financial information, which in turn could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Product alternatives may reduce demand for the Company’s products.

REE have a number of different applications, including their use as components in the manufacture of permanent magnets for electric vehicles, wind turbines, electronics, drones, catalysts, and a wide variety of metal alloys. REE are also important for the defense and glass polishing activities, among others. If competitive technologies emerge that use other materials in place of REE, demand and price for REE might fall, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Changes in climate conditions may affect the Company’s operations.

A number of governments have introduced or are moving to introduce climate change legislation and treaties at the international, national, state/provincial and local levels. Regulation relating to emission levels (such as carbon taxes) and energy efficiency is becoming more stringent. If the current regulatory trend continues, this may result in increased costs at the Company’s operations. In addition, the physical risks of climate change may also have an adverse effect on the Company’s operations. These risks include the following:

changes in sea levels could affect ocean transportation and shipping facilities that are used to transport supplies, equipment and workforce and products from the Company’s operations to world markets;
extreme weather events (such as prolonged drought) have the potential to disrupt operations at the Company’s mines and may require the Company to make additional expenditures to mitigate the impact of such events; and
the Company’s facilities depend on regular supplies of consumables (diesel, tires, reagents, etc.) to operate efficiently. In the event that the effects of climate change or extreme weather events cause prolonged disruption to the delivery of essential commodities, production levels at the Company’s operations may be reduced.

There can be no assurance that efforts to mitigate the risks of climate change will be effective and that the physical risks of climate change will not have an adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Our level of indebtedness may increase and reduce our financial flexibility.

The Company may incur additional indebtedness in the future. We are exposed to changes in interest rates on our cash and cash equivalents, bank indebtedness and long-term debt. Debt issued at variable rates exposes us to cash flow interest rate risk. Debt issued at fixed rates exposes us to fair value interest rate risk. Our borrowings, current and future, will require interest payments and need to be repaid or refinanced, could require us to divert funds identified for other purposes to debt service and

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could create additional cash demands or impair our liquidity position and add financial risk for us. Diverting funds identified for other purposes for debt service may adversely affect our business and growth prospects. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets, reduce or delay expenditures or issue equity to obtain necessary funds. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all.

Our level of indebtedness could affect our operations in several ways, including the following:

significant portion of our cash flows could be used to service our indebtedness;
the covenants contained in the agreements governing our outstanding indebtedness may limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments;
our debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry;
a high level of debt would increase our vulnerability to general adverse economic and industry conditions;
a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and therefore may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; and
a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions or other purposes.

In addition to our debt service obligations, our operations require material expenditures on a continuing basis. Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non-capital expenditures necessary to maintain the condition of our operating assets and properties, as well as to provide capacity for the growth of our business, depends on our financial and operating performance. General economic conditions and financial, business and other factors affect our operations and our future performance. Many of these factors are beyond our control. We may not be able to generate sufficient cash flows to pay the interest on our debt, and future working capital, borrowings or equity financing may not be available to pay or refinance such debt.

Dependence on outside parties.

The Company has relied upon third parties, including consultants, engineers, suppliers and others, and intends to rely on these parties for development, construction and operating expertise. The Company may need to engage additional third parties for new development projects, to establish mineral reserves through drilling, to carry out environmental and social impact assessments, to develop metallurgical processes to extract the REE from the ionic clays and, continue to develop the Penco Module. In addition, prior to closing of the Initial Public Offering, we intend to enter into the Transitional Services Agreement with Hochschild Mining or a subsidiary thereof, pursuant to which Hochschild Mining will agree to provide certain transitional services, including services relating to human resources, accounting, legal, investor relations and technical functions, to the Company for a period of 12 months. If such parties’ work is deficient or negligent or is not completed in a timely manner, it could have a material adverse effect on the Company. See “Agreements with Principal Shareholders – Transitional Services Agreement”.

Our business requires substantial capital expenditures and is subject to financing risks.

Our business is capital intensive. Specifically, the exploration for and exploitation of REE, the mining costs, the maintenance of machinery and equipment and compliance with applicable laws and regulations all require substantial capital expenditures. We will need to continue to invest capital to establish mineral reserves and production. In 2020, we invested $8.6 million in capital expenditures. We depend partially on our cash flows for maintenance capital expenditures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Capital Expenditures”.

No assurance can be given that we will be able to maintain our production levels or generate sufficient cash flow, capitalize on a sufficient amount of our profit or have access to sufficient investments, loans or other financing alternatives to finance our capital expenditure program at a level necessary to continue our exploration and exploitation activities at the levels

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we feel appropriate. Any equity or debt financing, if available, may not be on terms that are favorable to us, and the issuance of additional equity may be subject to approval by our shareholders or our Board. If our access to external financing is limited, we may not be able to execute our strategy, which could adversely affect our business, financial condition and results of operations. In addition, there are no assurances that any of the existing projects or future projects will be approved or, if approved and executed, that such execution will be completed on schedule, within budget or achieve an adequate return on investment.

Our operating expenses could increase significantly if the price of electrical power, fuel or other energy sources increases.

Our planned operations require significant use of energy. Our operating expenses are therefore sensitive to changes in electricity prices and fuel prices, including diesel fuel, propane and natural gas prices. Prices for electricity, diesel fuel, propane, natural gas and fuel oils can fluctuate widely with availability and demand levels from other users. During periods of peak usage, supplies of energy may be curtailed and we may not be able to purchase them at historical rates. A disruption in the transmission of energy, inadequate energy transmission infrastructure, or the termination of any of our energy supply contracts could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The Company is exposed to the possibility that applicable taxing authorities could take actions that result in increased tax or other costs that might reduce the Company’s cash flow.

The Company pays a variety of taxes, fees and other governmental charges in connection with the operation of the Company’s business, including federal, provincial and local income taxes, ad valorem property taxes, sales and use taxes, inventory taxes, social security contributions and various assessments in Canada and in foreign jurisdictions. These taxes, fees and other governmental charges are assessed by the Canadian Revenue Agency and other taxing authorities pursuant to applicable laws, regulations and rules. Although the Company believes, subject to ongoing compliance with existing laws, that it has made appropriate provisions for such taxes, fees and other governmental charges in the jurisdictions in which it operates, our position could be impacted as a result of changes in the applicable tax laws and principles, including increased tax rates, new tax laws, changes in taxing jurisdictions’ administrative interpretations, decisions, and policies, and changes in accounting principles. Any of the foregoing changes could have an adverse impact on our results of operations, cash flows, and financial condition.

The Chilean tax regime is complex and subject to a variety of interpretations by government authorities. Such complexity may expose the Company to unpredicted challenges to day-to-day practices in bookkeeping, accounting and payment of taxes, including, without limitation, liability for any indirect capital gain taxes. From time to time, the Company may enter into specific agreements with such taxing authorities that provide for the reduction, abatement or deferral of such taxes, fees or charges in exchange for certain payments or undertakings on the Company’s part. If the Company enters into any such arrangements, the Company can give no assurance that any such reduction, abatement or deferral arrangements will be honored or that the applicable taxing authorities will not take actions that materially increase the amount of such taxes, fees or other governmental charges that the Company is required to pay. In addition, the Company may incur additional and unanticipated costs and expenses in connection with the Company’s efforts to resist any proposed increases in such taxes, fees or other charges or in connection with the Company’s efforts to enforce any reduction, abatement or deferral arrangements that the Company has previously put in place. The Chilean congress is currently discussing a bill that, if approved, will implement changes to the Chilean tax regime applicable to mining companies, that may affect the Company. These changes could include changes in prevailing tax rates and the imposition of new or temporary taxes, including mining royalties on REE, which do not currently exist in Chile, the proceeds of which are earmarked for designated government purposes. Some of these changes may result in increases in the Company’s tax payments, which could have an adverse effect on the Company’s operations or profitability. The Company cannot provide assurance that it will be able to be profitable following any increases in Chilean taxes applicable to the Company and the Company’s operations.

The mining business is subject to inherent risks, some of which are not insurable.

The Company’s business is subject to a number of risks and hazards (as further described in this prospectus). Hazards associated with mining operations include fires and explosions, including those caused by flammable gas, gas and coal outbursts, cave-ins or falls of ground, rock falls, openings collapse, lack of oxygen, air pollution, discharges of tailings, hazardous substances and materials, gases and toxic chemicals, water ingress and flooding, sinkhole formation, ground subsidence, and other accidents and conditions resulting from mining activities, such as drilling, removing and processing material.

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Such occurrences could result in damage to, or destruction of, our properties or production facilities, third-party property, human exposure to pollution, personal injury or death, environmental and natural resource damage or contamination, delays in mining, monetary losses and legal liability. In addition, any such occurrences could adversely affect our reputation. Damages to our reputation could result in additional environmental and health and safety legal oversight, and authorities could impose more stringent conditions in connection with the licensing process of our projects and operations. In addition, our customers may be less willing to buy metals from us if we have been subject to significant adverse publicity.

We maintain insurance typical in the mining industry, and in amounts that we believe to be adequate, but which may not provide complete coverage in certain circumstances. Insurance against certain risks (including certain liabilities for environmental contamination and other hazards as a result of exploration and production) is not generally available or is uneconomical to afford. The Company may also be unable to obtain or maintain insurance to cover its risks at economically feasible premiums, or at all. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration, development or production may not be available to the Company on acceptable terms. The Company might also become subject to liability for pollution or other hazards which it is not currently insured against and/or in the future may not insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

We may be subject to misconduct by our employees or third-party contractors.

We may be subject to misconduct by our employees or third-party contractors, such as theft, bribery, sabotage, fraud, insider trading, violation of laws, slander or other illegal actions. Any such misconduct may lead to fines or other penalties, slow-downs in production, increased costs, lost revenues, increased liabilities to third parties, impairment of assets or harmed reputation, any of which may have a material adverse effect on our business, results of operations or financial condition.

We do not have any sales or off-take agreements and deliveries under our future sales agreements may be suspended or cancelled by our customers in certain cases.

We do not have any sales or off-take agreements in place for our future product. Currently, the majority of the downstream processing capacity for REE is in China and, as such, there may be limited options of off-takers for our future products. The Technical Report assumes a separation fee of $5.00 dollars per kilogram for our future product, but that assumption may vary depending on availability of off-takers and future market conditions. In addition, under our future sales agreements, our customers may suspend or cancel delivery of our products in some cases, such as force majeure. Events of force majeure under these agreements generally include, among others, acts of God, strikes, fires, floods, wars, government actions or other events that are beyond the control of the parties involved. Any suspension or cancellation by our customers of deliveries under our sales contracts that are not replaced by deliveries under new contracts would reduce our cash flow and could materially and adversely affect our financial condition and results of operations.

Risks Related to the Company’s Foreign Operations

The Company’s Chilean operations are subject to political and other risks associated with operating in a foreign jurisdiction.

The Penco Module is located in Chile and our operations depend upon the performance of the Chilean economy, exposing the Company to the socioeconomic conditions as well as the laws governing the mining industry in the country. There are inherent risks associated with conducting foreign operations, over which we have no control. Such risks include, but are not limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labour unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification of existing concessions, licenses, approvals, permits and contracts; illegal mining; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political norms, currency controls and governmental regulations that favour or require the Company to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.

Our results of operations and general financial condition depend in part on Chilean markets for labour and certain services, materials, supplies, machinery and equipment, and on factors relating to Chilean economic, social and political stability generally, and may be materially and adversely affected by economic downturns, currency depreciation, inflation, interest rate fluctuation, government policies, regulation, taxation, social instability, political unrest, terrorism and other

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developments in or affecting the country. In the past, Chile has experienced periods of weak economic activity and deterioration in economic conditions. We cannot assure you that such deterioration will not occur, nor that such a recurrence would not have a material and adverse effect on our business, financial condition or results of operations.

Changes, if any, in the Constitution, mining or investment policies or shifts in political attitude in Chile may adversely affect the Company’s operations or profitability. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, importation of parts and supplies, income and other taxes, royalties, the repatriation of profits, expropriation of property, foreign investment, maintenance of concessions, licenses, approvals and permits, aboriginal rights, environmental matters, regulation of national parks and protected areas, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.

A deterioration of the global economy or a sharp decrease in prices may adversely affect Chile’s economy. In addition, uncertainty over the results of the upcoming national elections in November 2021 and whether the elected Chilean government and congress will implement changes in policy or regulation may contribute to economic uncertainty in Chile. Global economic crises could negatively affect investor confidence in emerging markets or the economies of the principal countries in Latin America, including Chile. Such events could materially and adversely affect the Company’s business, financial condition, results of operations, cash flows or prospects.

Chile has recently experienced political unrest. Beginning on October 18, 2019, waves of protests and riots were sparked by an increase in the subway fare of the Santiago Metro, which then evolved into demonstrations over living costs and inequality. Additionally, on October 25, 2020, Chile held a nationwide plebiscite which resulted in the approval of a plan to constitute a Constitutional Convention, comprised of elected members, tasked with drafting a new constitution. In June 2022, a second nationwide plebiscite will take place, in which the new constitution will be submitted for approval of voters. There can be no assurance that future developments in or affecting the Chilean political situation, including economic or political instability in other emerging markets, will not result in material and adverse effects on the Company’s business, financial condition or results of operations. The Company could also be adversely affected by legal or regulatory changes over which it has no control.

The Company continues to monitor developments and policies in Chile and the impact thereof to its operations. Our financial condition and results of operations may be adversely affected by changes in Chile’s political, regulatory and economic climate to the extent that such changes affect the nation’s economic policies, growth, stability, outlook or regulatory environment.

Our mineral rights may be terminated or not renewed by governmental authorities and we may be negatively impacted by changes to mining laws and regulations.

Our business is subject to extensive regulation in Chile, including, among others, regulations relating to tax, environmental, labour, health and safety and mining matters. Under Chilean law, we require authorizations, permits, concessions and/or licenses from the relevant governmental regulatory bodies (including environmental and mining agencies). We have obtained, or are in the process of obtaining, all material authorizations, permits, concessions and licenses required to conduct our mining and mining-related operations. In the future, additional requirements for authorizations, permits, concessions and licenses (including environmental ones) could be implemented. These authorizations, permits, concessions and environmental licenses are subject to our compliance with conditions imposed and regulations promulgated by the relevant governmental authorities. While we anticipate that all required authorizations, permits, concessions and environmental licenses or their renewals will be granted as and when sought, there is no assurance that these items will be granted as a matter of course, and there is no assurance that new conditions will not be imposed in connection with such renewals.

If we were to violate any of the foregoing laws and regulations or the conditions of our concessions, authorizations and environmental licenses, we may be subjected to substantial fines or criminal sanctions, revocations of operating permits or licenses and possible closings of certain of our facilities. In addition, any changes in the interpretation of any of the foregoing laws and regulations may increase our compliance, operational or other costs and could potentially require us to materially alter our operations.

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The implementation of proposed amendments to the Metropolitan Land-Use Plan of Concepción could adversely affect the Penco Module.

Chilean governmental authorities have adopted regulations to regulate the physical development of urban and rural areas and the private and public interests that apply to land use. As such, in order to undertake certain specified activities in connection with any industrial project, a party with a vested interest must comply with the regulations that apply to a project based on its location and must request, in advance of undertaking such activities, confirmation from the applicable governmental authority that such activities are compatible with the permitted land-use regulations. The Penco Module is located in the Concepción area of Chile, which is regulated by the Plan Regulador Metropolitano de Concepción (Metropolitan Land-Use Plan of Concepción) that has been in force since 2003 (“ 2003 PRMC ”).

The 2003 PRMC is in the process of being amended. The proposed amendments, if implemented, would impose a number of restrictions on industrial activities within the area in which the Penco Module is located, impacting in particular the facilities located in zoning areas ZEU-8, ZEU-3 and AR-4. As a result, a number of the Penco Module’s facilities (primarily the processing plant) would be rendered territorially incompatible under the amended 2003 PRMC.

While the amendments to the 2003 PRMC have been approved by the local Chilean authorities, its implementation remains subject to the completion of a series of administrative steps, including a review as to the legality of the amendments by the Office of the National Controller, which could take up to twelve months.

An application for a project’s construction permit stipulates the specific regulations that apply for the purposes of the granting of a permit as well as the activities envisaged to be undertaken at the project and is subject to the regulations in force at the time of the application regardless of any regulatory changes that may subsequently take effect.

The Company intends to apply for the required construction permits relating to the Penco Module no later than when it secures the environmental license relating to the project (which is expected to be issued during the first quarter of 2022) and, in any event, prior to the implementation of the amendments to the 2003 PRMC.

If the Company fails to apply for the aforementioned construction permits prior to the implementation of the amendments to the 2003 PRMC or to be issued the construction permits pursuant to the current 2003 PRMC, the activities to be undertaken by the Company at the Penco Module may be subject to the amendments to the 2003 PRMC, which could require us to materially alter our operations and incur additional expenses and time delays, including without limitation, the relocation of the Penco Module’s processing plant, the design of a new layout for the operations of the Penco Module, and the commencement of a new permitting process.

Our operations depend on our relations and agreements with local communities, and new projects may require carrying out a prior consultation procedure.

There are several local communities that surround our operations in Chile. We also interact with regional and local governments and depend on our close relations with local communities and regional and local governments to carry out our operations. In the event that our relationships with the local communities or regional or local governments were to deteriorate in the future, or the local communities do not comply with agreements that may be in place with such communities or renew them upon expiration, it could have a material adverse effect on our business, properties, operating results, financial condition or prospects. Furthermore, in order to develop new projects on land owned by, or in the possession of, third parties, we need to reach an agreement with such third parties in order to use that land. Our failure to reach such agreements or obtain governmental approvals for our new projects could result in a material adverse effect on our business, properties, operating results, financial condition or prospects. Social protests relating to the environmental impact of mining projects, could also result in a material adverse effect on our business, financial condition and results of operations if they were to impede our existing operations or expansion projects.

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The perception of higher risk in other emerging economies may materially and adversely affect the Chilean economy and our business.

Financial turmoil in any emerging market country may materially and adversely affect prices in stock markets and prices for debt securities of issuers in other emerging market countries as investors move their money to more stable, developed markets. An increase in the perceived risks associated with investing in emerging markets could dampen capital flows to Chile and materially and adversely affect the Chilean economy in general. We cannot assure you that investors’ interest in Chile will not be materially and adversely affected by events in other emerging markets or the global economy in general.

The Company may be responsible for corruption and anti-bribery law violations.

The Company’s business is subject to the United States Foreign Corrupt Practices Act of 1977 (the “ FCPA ”) and the Corruption of Foreign Public Officials Act (Canada) (“ CFPOA ”), which generally prohibit companies and company employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. The FCPA also requires companies to maintain accurate books and records and internal controls, including at foreigncontrolled subsidiaries. Since all of the Company’s presently held interests are located in Chile, there is a risk of potential FCPA violations. In addition, the Company is subject to the anti-bribery laws of Chile and of any other countries in which it conducts business in the future. The Company’s employees or other agents may, without its knowledge and despite its efforts, engage in prohibited conduct under the Company’s policies and procedures and the FCPA, the CFPOA or other anti-bribery laws for which the Company may be held responsible. The Code and the Anti-Corruption Policy mandate compliance with these anti-corruption and anti-bribery laws and the Company has implemented training programs, internal monitoring and controls, and reviews and audits to ensure compliance with such laws. However, there can be no assurance that the Company’s internal control policies and procedures will always protect it from recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by its affiliates, employees, contractors or agents. If the Company’s employees or other agents are found to have engaged in such practices, the Company could suffer severe penalties and other consequences that may have a material adverse effect on its business, financial condition and results of operations.

Risks Related to COVID-19

The ongoing COVID-19 pandemic, including the resulting global economic uncertainty and measures taken in response to the pandemic, could materially impact our business and future results of operations and financial condition.

The World Health Organization declared the outbreak of COVID-19 to be a global health emergency on January 30, 2020 and then characterized it as a pandemic on March 11, 2020. The COVID-19 pandemic has disrupted the global economy and put unprecedented strains on governments, health care systems, businesses and individuals around the world. The impact and duration of the COVID-19 pandemic are difficult to assess or predict. It is even more difficult to predict the impact on the global economic market, which will depend upon the actions taken by governments, businesses and other enterprises in response to the pandemic. The COVID-19 pandemic has already caused, and is likely to result in further, significant disruption of global financial markets and economic uncertainty.

The COVID-19 pandemic has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or total lock-down orders, and business limitations and shutdowns. Such measures have significantly contributed to unemployment and negatively affected consumer and business spending. The extent to which the COVID-19 pandemic affects our financial results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken by governments to curtail or treat its impact, including shelter-in-place directives, business limitations and shutdowns, travel bans and restrictions, loan payment deferrals (whether government-mandated or voluntary), moratoriums on debt collection activities and other actions, which, if imposed or extended, may impact the economies in which the Company now, or may in the future, operate. Adverse market conditions resulting from the spread of COVID-19 could materially adversely affect our business results of operations and financial condition. To the extent that the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

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Risks Related to the Demerger and Ownership of Common Shares

The Demerger is subject to the Conditions and we cannot assure you that the Demerger will be completed on a timely basis or at all.

The Demerger may not be completed, or may not be completed in the time frame, on the terms or in the manner currently anticipated, as a result of a number of factors. There can be no assurance that the Conditions will be satisfied or that other events will not intervene to delay or result in the failure to complete the Demerger. Notwithstanding that Hochschild Mining received the necessary Hochschild Mining Shareholder approval for the Demerger, there can be no guarantee that the Demerger will be completed and that the Demerger Dividend will occur. As at the date of this prospectus, the process relating to the Initial Public Offering and Listing is at an early stage and so the Initial Public Offering may or may not be completed, the TSX has not conditionally approved the listing application of Aclara and there is no assurance that it will do so. As the Demerger is conditional on (among other things) the Initial Public Offering being completed on terms that are satisfactory to the Company and Aclara and the Listing, and as the board of Hochschild Mining does not intend to declare the Demerger Dividend until it is clear that the Conditions will be satisfied, the Demerger and the Demerger Dividend, therefore, may or may not occur after Hochschild Mining Shareholder approval has been obtained. In particular, Hochschild Mining is entitled to decide not to proceed with the Demerger at any time prior to completion of the Demerger if circumstances change such that the board of directors of Hochschild Mining considers it would be inadvisable to effect the Demerger. In the event that the Demerger does not occur, Aclara will remain a wholly-owned subsidiary of Hochschild Mining and continue to be operated as a subsidiary.

An active, liquid and orderly trading market for our Common Shares may not develop, and you may not be able to resell your shares.

There is currently no existing public market for the Common Shares. The Common Shares are not currently listed or quoted on any stock exchange or market in Canada or elsewhere. If an active trading market does not develop, the trading price of the Common Shares may decline, and Shareholders may have difficulty selling any of the Demerged Aclara Shares that they acquire by way of the Demerger Dividend.

Prior to the Initial Public Offering and the Demerger, there has been no public trading market for the Common Shares, and the Company cannot offer assurances that one will develop or be sustained after the Initial Public Offering and the Demerger. The Company cannot predict the prices at which the Common Shares will trade.

Dilution from equity financing could negatively impact holders of Common Shares.

The Company may from time to time raise funds through the issuance of Common Shares or the issuance of debt instruments or other securities convertible into Common Shares. The Company cannot predict the size or price of future issuances of Common Shares or the size or terms of future issuances of debt instruments or other securities convertible into Common Shares, or the effect, if any, that future issuances and sales of the Company’s securities will have on the market price of the Common Shares. Sales or issuances of substantial numbers of Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares, or securities convertible into Common Shares, Shareholders will suffer dilution to their voting power and the Company may experience dilution in its earnings per share.

The stock exchange on which the Company proposes to be listed may delist the Company’s securities from its exchange, which could limit Shareholders’ ability to make transactions in the Company’s securities and subject the Company to additional trading restrictions.

The Company proposes to list the Demerged Aclara Shares distributed under this prospectus as well as its existing issued and outstanding Common Shares on the TSX. Such listing will be subject to the Company fulfilling all the listing requirements of the TSX. If the Company fails to list the Common Shares on the TSX, the liquidity for its Common Shares would be significantly impaired, which may substantially decrease the trading price of the Common Shares.

In addition, in the future, the Company’s securities may fail to meet the continued listing requirements to be listed on the TSX. If the TSX delists the Common Shares from trading on its exchange, the Company could face significant material adverse consequences, including:

a limited availability of market quotations for the Common Shares;

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a determination that the Common Shares is a “penny stock” which will require brokers trading in the Common Shares to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for the Common Shares;
a limited amount of news and analyst coverage for the Company; and
a decreased ability to issue additional securities or obtain additional financing in the future.

Equity securities are subject to trading and volatility risks.

The securities of publicly traded companies can experience a high level of price and volume volatility and the value of the Company’s securities can be expected to fluctuate depending on various factors, not all of which are directly related to the success of the Company and its operating performance, underlying asset values or prospects. These include the risks described elsewhere in this prospectus. Factors which may influence the price of the Company’s securities, including the Common Shares, include, but are not limited to:

worldwide economic conditions;
changes in government policies;
investor perceptions;
movements in global interest rates and global stock markets;
variations in operating costs;
the cost of capital that the Company may require in the future;
metals prices;
the price of commodities necessary for the Company’s operations;
recommendations by securities research analysts;
issuances of equity securities or debt securities by the Company;
operating performance and, if applicable, the share price performance of the Company’s competitors;
the addition or departure of key management and other personnel;
the expiration of lock-up or other transfer restrictions on outstanding Common Shares;
significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or its competitors;
news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related industry and market issues affecting the mining sector;
litigation;
publicity about the Company, the Company’s personnel or others operating in the industry;
loss of a major funding source; and
all market conditions that are specific to the mining industry.

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There can be no assurance that such fluctuations will not affect the price of the Company’s securities, and consequently holders of Common Shares may not be able to sell Common Shares at prices equal to or greater than the price or value at which they purchased the Common Shares or acquired them by way of the secondary market.

Sales by existing shareholders can reduce share prices.

Sales of a substantial number of Common Shares in the public market could occur at any time. These sales, or the market perception that the holders of a large number of Common Shares intend to sell Common Shares, could reduce the market price of the Common Shares. If this occurs and continues, it could impair the Company’s ability to raise additional capital through the sale of securities.

A significant portion of our total outstanding Common Shares may be sold into the public market in the near future, which could cause the market price of our Common Shares to drop significantly.

Sales or issuances of a substantial number of our Common Shares in the public market could occur at any time after the expiration of the applicable contractual lock-up period (or earlier if such lock-up period is waived by the underwriters in the Initial Public Offering) described in the “Concurrent Initial Public Offering” and “Agreements with Principal Shareholders – Investor Rights Agreement” sections of this prospectus. These sales, or the market perception that the holders of a large number of Common Shares intend to sell Common Shares, could significantly reduce the market price of our Common Shares. We cannot predict the effect, if any, that future public sales of these Common Shares or the availability of our Common Shares for sale will have on the market price of such Common Shares. If the market price of our Common Shares was to drop as a result, this might impede our ability to raise additional capital and might cause remaining Shareholders to lose all or part of their investment.

There may be adverse tax consequences associated with the Demerger Dividend.

Adverse tax consequences may arise with respect to the acquisition, holding or disposing of the Demerged Aclara Shares distributed through the Demerger Dividend in addition to those discussed in “ Certain Canadian Federal Income Tax Considerations ”. Hochschild Mining Shareholders who receive Demerged Aclara Shares should consult their own tax advisors regarding the application of Canadian federal income tax laws, as well as any other tax laws, regarding the tax consequences of such acquisition.

Future sales of Common Shares by the Principal Shareholders.

No prediction can be made as to the effect, if any, of future sales of Common Shares by either of the Principal Shareholders on the market price of the Common Shares. However, the future sale of a substantial number of Common Shares by either of the Principal Shareholders, or the perception that such sales could occur, could adversely affect prevailing market prices for the Common Shares. Pursuant to the Investor Rights Agreement, each of the Principal Shareholders will have certain demand registration rights which can be exercised any time following the 12-month contractual lock-up period described in the “Agreements with Principal Shareholders – Investor Rights Agreement” section of this prospectus. See “Agreements with Principal Shareholders — Investor Rights Agreement — Registration Rights”.

The Principal Shareholders will have significant influence over the Company.

After giving effect to the Initial Public Offering and based on the midpoint of the estimated prices of the Initial Public Offering Price, the Principal Shareholders will, directly or indirectly, own or control approximately 50.7 % of the issued and outstanding Common Shares. Accordingly, the Principal Shareholders will have significant influence with respect to all matters submitted to the Company’s shareholders for approval, including without limitation the election and removal of directors, amendments to the Company’s constating documents and the approval of certain business combinations. In addition, the Company and the Principal Shareholders will, on closing of the Initial Public Offering, be party to the Investor Rights Agreement, which, among other things, will provide the Principal Shareholders the ability to cause the Company and the other shareholders to initiate a sale process or sell all of its Common Shares to an arm’s length third party bidder pursuant to a takeover bid for all or substantially all of the Common Shares of the Company, subject to specified timing and other considerations. If the Principal Shareholders exercises such rights, a change of control may occur and the Company will be required to comply with the change of control offer obligations under the Investor Rights Agreement. See “Principal Shareholders” and “Agreements with Principal Shareholders”. Other Shareholders may have a limited role in the Company’s affairs. This concentration of holdings may cause the market price of the Commons Shares to decline, delay or prevent any acquisition or

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delay or discourage take-over attempts that shareholders may consider to be favourable, or make it more difficult or impossible for a third party to acquire control of the Company or effect a change in the Board and management. Any delay or prevention of a change of control transaction could deter potential acquirors or prevent the completion of a transaction in which the Company’s shareholders could receive a substantial premium over the then current market price for their Common Shares.

Future offerings of debt securities, which would rank senior to our Common Shares upon our bankruptcy or liquidation, and future offerings of equity securities that may be senior to our Common Shares for the purposes of dividend and liquidating distributions, may adversely affect the market price of our Common Shares.

In the future, the Company may attempt to increase our capital resources by making offerings of debt instruments or other securities convertible into Common Shares. Upon bankruptcy or liquidation, holders of our debt securities and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our Common Shares. Additional equity offerings may dilute the holdings of our existing Shareholders or reduce the market price of our Common Shares, or both. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control. As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and holders of our Common Shares bear the risk of our future offerings reducing the market price of our Common Shares and diluting their ownership interest in the Company.

Any issuance of preferred shares could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Common Shares, which could depress the market price of our Common Shares.

Upon completion of the Initial Public Offering, our Board will have the authority to issue preferred shares and to determine the preferences, limitations and relative rights of preferred shares and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our Shareholders. Our preferred shares could be issued with liquidation, dividend and other rights superior to the rights of our Common Shares. The potential issuance of preferred shares may delay or prevent a change in control of us, discourage bids for our Common Shares at a premium over the market price and adversely affect the market price and other rights of the holders of our Common Shares. Any preferred shares issued are expected to rank in preference to the Common Shares in certain circumstances, including in respect of asset distribution rights on a liquidation or winding-up of the Company.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third party claims against us and may reduce the amount of money available to us.

Our Articles provide that we will indemnify our directors and officers. In addition, we expect to enter into agreements prior to closing of the Initial Public Offering to indemnify our directors, executive officers and other employees as determined by our Board. Under the terms of the indemnification agreements with our director nominees and each of our directors and officers, we are required to indemnify each of our directors and officers, to the fullest extent permitted by the laws of British Columbia, Canada, if the basis of the indemnitee’s involvement was by reason of the fact that the indemnitee is or was a director or officer of the Company or any of its subsidiaries. We must indemnify our officers and directors against all reasonable fees, expenses, charges and other costs of any type or nature whatsoever, including any and all expenses and obligations paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing to defend, be a witness or participate in any completed, actual, pending or threatened action, suit, claim or proceeding, whether civil, criminal, administrative or investigative, or establishing or enforcing a right to indemnification under the indemnification agreement. The indemnification agreements also require us, if so requested, to advance within 10 days of such request all reasonable fees, expenses, charges and other costs that such director or officer incurred, provided that such person will return any such advance if it is ultimately determined that such person is not entitled to indemnification by us. Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third party claims against us and may reduce the amount of money available to us.

Our Articles will provide that any derivative actions, actions relating to breach of fiduciary duties and other matters relating to our internal affairs will be required to be litigated in Canada, which could limit your ability to obtain a favorable judicial forum for disputes with us.

Our Articles, to be effective upon completion of the Initial Public Offering, will provide that, unless we consent in writing to the selection of an alternative forum, the Supreme Court of British Columbia, Canada and the appellate courts therefrom, will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us;

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(iii) any action or proceeding asserting a claim arising pursuant to any provision of the BCBCA or our Articles; or (iv) any action or proceeding asserting a claim otherwise related to the relationships among us, our affiliates and their respective Shareholders, directors and/or officers, but excluding claims related to our business or the business of such affiliates. The forum selection provision also provides that our securityholders are deemed to have consented to personal jurisdiction in the Province of British Columbia and to service of process on their counsel in any foreign action initiated in violation of the foregoing provisions. See “Description of Share Capital - Forum Selection”.

Our forum selection provision seeks to reduce litigation costs and increase outcome predictability by requiring derivative actions and other matters relating to our affairs to be litigated in a single forum. While forum selection clauses in corporate charters and by-laws/articles are becoming more commonplace for public companies, a recent decision of the Supreme Court of Canada has cast some uncertainty as to whether forum selection clauses would be upheld in Canada. Accordingly, it is possible that the validity of our forum selection provision could be challenged and that a court could rule that such provision is inapplicable or unenforceable. If a court were to find our forum selection provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions and we may not obtain the benefits of limiting jurisdiction to the courts selected.

The Company does not intend to pay dividends.

The Company currently expects to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board, subject to compliance with applicable law and any contractual provisions, including under any agreements for indebtedness we may incur, that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements and other factors that our Board deems relevant.

If securities or industry analysts do not publish research or publish unfavourable research about our business, our Common Share price and trading volume could decline.

The trading market for the Common Shares will depend on the research and reports that securities or industry analysts publish about the Company and its business. The Company does not have any control over these analysts. The Company cannot assure that analysts will cover it or provide favourable coverage. If one or more of the analysts who cover the Company downgrade its stock or change their opinion of the Common Shares, the price of our Common Shares would likely decline. If one or more of these analysts cease coverage of the Company or fail to regularly publish reports, the Company could lose visibility in the financial markets, which could cause the price and trading volume of the Common Shares to decline.

The forward-looking statements contained in this prospectus may prove to be incorrect.

The forward-looking statements in this prospectus are based on opinions, assumptions and estimates made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Actual results of the Company in the future may vary significantly from the historical and estimated results and those variations may be material. There is no representation by us that actual results achieved by the Company in the future will be the same, in whole or in part, as those included in this prospectus. See “Forward-Looking Information”.

Shareholders will have limited control over our operations.

Shareholders will have limited control over changes in our policies and operations. The Board will determine major policies, including policies regarding financing, growth, debt capitalization and any future dividends to Shareholders. Generally, the Board may amend or revise these and other policies without a vote of the Shareholders. Shareholders will only have a right to vote in the limited circumstances described elsewhere in this prospectus. The Board’s broad discretion in setting policies and the limited ability of Shareholders to exert control over those policies increases the uncertainty and risk of an investment in the Company. Furthermore, the Principal Shareholders may have significant influence over the nomination of directors to our Board. See “Agreements with Principal Shareholders – Investor Rights Agreement”.

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Public companies are subject to securities class action litigation risk.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If the Company faces such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could materially harm its business.

Global financial conditions can reduce the price of the Common Shares.

Following the onset of the credit crisis in 2008, global financial conditions were characterized by extreme volatility and several major financial institutions either went into bankruptcy or were rescued by governmental authorities. While global financial conditions subsequently stabilized, there remains considerable risk in the system given the extraordinary measures adopted by government authorities to achieve that stability. Global financial conditions could suddenly and rapidly destabilize in response to future economic shocks, as government authorities may have limited resources to respond to future crises. Future economic shocks may be precipitated by a number of causes, including a rise in the price of oil, geopolitical instability and natural disasters. Any sudden or rapid destabilization of global economic conditions could impact the Company’s ability to obtain equity or debt financing in the future on terms favourable to the Company. Additionally, any such occurrence could cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. Further, in such an event, the Company’s operations and financial condition could be adversely impacted.

Furthermore, general market, political and economic conditions, including, for example, inflation, interest and currency exchange rates, structural changes in the global mining industry, global supply and demand for commodities, political developments, legislative or regulatory changes, social or labour unrest and stock market trends will affect the Company’s operating environment and its operating costs, profit margins and share price. Any negative events in the global economy could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The Company is a holding company and, as such, it depends on its subsidiaries for cash to fund its operations and expenses.

The Company is a holding company and essentially all of its assets are the capital stock of its subsidiaries. As a result, Shareholders are subject to the risks attributable to its subsidiaries. As a holding company, the Company conducts all of its business through its subsidiaries. Therefore, our ability to fund and conduct our business, service our debt and pay dividends, if any, in the future will principally depend on the ability of our subsidiaries to generate sufficient cash flow to make upstream cash distributions to us. Our subsidiaries are separate legal entities, and although they are wholly-owned and controlled by us, they have no obligation to make any funds available to us, whether in the form of loans, dividends or otherwise. The ability of these entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable laws and regulations which require that solvency and capital standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt. In the event of a bankruptcy, liquidation or reorganization of any of the Company’s material subsidiaries, holders of indebtedness and trade creditors may be entitled to payment of their claims from the assets of those subsidiaries before the Company.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

We are, from time to time, involved in legal proceedings of a nature considered normal to our business. Except as disclosed below, we believe that none of the litigation in which we are currently involved, or have been involved since the beginning of the most recently completed financial year, individually or in the aggregate, is material to our financial condition or results of operations.

The Company is currently in an arbitration with Madesal in respect of Madesal’s claim of an alleged violation of the MOU and its Addendum. Requested damages amount to approximately US$28 million. The Company is currently defending the case and maintains that the MOU and its Addendum were merely preparatory contracts for the execution of two legal mining easements: one for exploration and the other for exploitation in Fundo El Cabrito and that these activities were always subject to the results of the respective economic, technical and environmental studies, which eventually led to the decision to continue the development of the Penco Module elsewhere. In the event of an adverse outcome, damages would be monetary. The outcome of the arbitration is expected to be received during the first or second quarter of 2022. These proceedings do not have an impact on the development of the Penco Module given the nature of the MOU and its Addendum and the location of the Penco Module. See “Risk Factor – Risks Related to Our Business and Industry – The Company may be subject to costly legal proceedings.”

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PROMOTER

Hochschild Mining took the initiative in founding and organizing the Company and may therefore be considered to be the promoter of the Company within the meaning of applicable securities legislation. As at the date of this prospectus, Hochschild Mining beneficially holds, controls or directs, directly or indirectly through certain subsidiaries, 100% of the issued and outstanding Common Shares. Upon completion of the Demerger Transactions and the Initial Public Offering, Hochschild Mining will own 20% of the issued and outstanding Common Shares. Other than in connection with the Concurrent Private Placement, Hochschild Mining has not and will not receive anything of value, including money, property, contracts, options or rights of any kind from the Company or from a subsidiary of the Company in connection with the Initial Public Offering.

INTERESTS OF QUALIFIED PERSONS

Certain information in this prospectus relating to the Penco Module is summarized or extracted from the Technical Report, which was prepared for the Company by Francisco Castillo, Alejandro Solar, Manuel Hernandez, Luis Oviedo, Scott Weston, Scott Elfen, and Gavin Beer, each of whom is a “qualified person” and “independent” within the meanings of NI 43101. To the best of the knowledge of the Company, as at the date hereof, the aforementioned persons beneficially own, directly or indirectly, less than 1% of any outstanding securities of any class of the Company or any associate of the Company.

INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as described elsewhere in this prospectus, there are no material interests, direct or indirect, of any of our directors or executive officers, any Shareholder that beneficially owns, or controls or directs (directly or indirectly), more than 10% of the aggregate votes attached to the Common Shares, or any associate or affiliate of any of the foregoing persons, in any transaction within the three years before the date hereof that has materially affected or is reasonably expected to materially affect us or any of our subsidiaries. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Related Party Transactions”.

AUDITOR, TRANSFER AGENT AND REGISTRAR

EY Servicios Profesionales de Auditoria y Asesorías SpA Chartered Professional Accountants, located at Santiago, Chile, is our auditor and has confirmed that it is independent of the Company and REE Uno in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to the audit of the financial statements in Canada, and has further confirmed that it has fulfilled its other ethical responsibilities in accordance with these requirements.

The transfer agent and registrar for the Common Shares will be Computershare Investor Services Inc. at its principal office in Toronto, Ontario.

ENFORCEMENT OF JUDGMENTS AGAINST FOREIGN PERSONS

Hochschild Mining and certain of our directors and officers, including Eduardo Hochschild, Ignacio Bustamante, Sanjay Sarma, Ramon Barua, Rodrigo Ceballos, Francois Motte Sauter and Mauricio Alvarez, are organized or reside outside of Canada. Hochschild Mining and our aforementioned directors and officers who reside outside of Canada have each appointed 152928 Canada Inc., c/o Stikeman Elliott LLP, 5300 Commerce Court West, 199 Bay Street, Toronto, Ontario, Canada, as their agent for service of process in Canada.

In addition, EY Servicios Profesionales de Auditoría y Asesorías SpA, and Francisco Castillo, Alejandro Solar, Manuel Hernandez, Luis Oviedo, and Gavin Beer, each of whom are “qualified persons” referred to under the heading “Scientific and Technical Disclosure”, are also organized or reside outside of Canada.

Holders of Demerged Aclara Shares are advised that it may not be possible for them to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the person has appointed an agent for service of process.

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MATERIAL CONTRACTS

This prospectus includes a summary description of certain of our material agreements. The summary description discloses all attributes material to a reader but is not complete and is qualified by reference to the terms of the material agreements, which will be filed with the Canadian securities regulatory authorities and available on SEDAR at www.sedar.com, under our profile. Readers are encouraged to read the full text of such material agreements.

The following are our only material contracts that will be in effect on closing of the Initial Public Offering (other than certain agreements entered into in the ordinary course of business):

(a) the Investor Rights Agreement;
(b) the Underwriting Agreement; and
(c) the Transitional Services Agreement.

Copies of the foregoing documents will be available following closing of the Initial Public Offering on SEDAR at www.sedar.com.

PURCHASERS’ STATUTORY RIGHTS

Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces and territories, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for the particulars of these rights or consult with a legal advisor.

However, in light of the fact that the Demerged Aclara Shares are being distributed pursuant to the Demerger, we believe that these remedies are not available in the circumstances of this distribution.

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GLOSSARY OF CERTAIN TERMS

The following is a glossary of certain technical terms that appear in this prospectus.

“ mineral reserve ” means the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study, which studies must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined. The following are different types of mineral reserves:

“ probable mineral reserve ” means the economically mineable part of an indicated and, in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.

“ proven mineral reserve ” means the economically mineable part of a measured mineral resource. A proven mineral reserve implies a high degree of confidence in the modifying factors.

“ mineral resource ” means a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. The following are different types of mineral resources:

“ indicated mineral resource ” means that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and test information gathered through appropriate techniques from location such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

“ inferred mineral resource ” means that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

“ measured mineral resource ” means that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

“ qualified person ” means an individual who: (a) is an engineer or geoscientist with a university degree, or equivalent accreditation, in an area of geoscience or engineering, relating to mineral exploration or mining; (b) has at least five years of experience in mineral exploration, mine development or operation, or mineral project assessment, or any combination of these, that is relevant to his or her professional degree or area of practice; (c) has experience relevant to the subject matter of the mineral project and technical report; (d) is in good standing with a professional association; and (e) in the case of a professional association in a foreign jurisdiction, has a membership designation that (i) requires attainment of a position of responsibility in his or her profession that requires the exercise of independent judgment; and (ii) requires (A) a favourable confidential peer evaluation of the individual’s character, professional judgement, experience, and ethical fitness; or (B) a recommendation for membership by at least two peers, and demonstrated prominence or expertise in the field of mineral exploration or mining.

“ REYT ” means total rare earth elements and Yttrium.

“ TREO ” means total rare earth oxides.

148

INDEX TO FINANCIAL STATEMENTS

Aclara Resources Inc. Audited financial statements of Aclara Resources Inc. for the period May 5, 2021 (date of incorporation) to September 30, 2021 REE UNO SpA Interim financial statements of REE UNO SpA as of September 30, 2021 and 2020 Audited financial statements of REE UNO SpA as of December 31, 2020, 2019 and 2018	Page F-2 F-13 F-37

F-1

Financial Statements

Aclara Resources Inc.

As of September 30, 2021

F-2

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Independent Auditor’s Report

To the directors of Aclara Resources Inc. (formerly 1303714 B.C. Ltd.)

Opinion

We have audited the financial statements of Aclara Resources Inc. (formerly 1303714 B.C. Ltd.) (the “Company”), which comprise the statement of financial position as at September 30, 2021, and the income statement, statement of changes in equity and statement of cash flows for the period between May 5 (inception date) and September 30, 2021, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at September 30, 2021, and its financial performance and its cash flows for the period between May 5 (inception date) and September 30, 2021 in accordance with International Financial Reporting Standards [“IFRSs”].

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of management and those charge with governance for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

F-3

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Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

F-4

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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Santiago, Chile

F-5

Income Statement

	Notes	The period between May 5 (inception date) and September 30, 2021 US$
Continuingoperations
Foreign exchange loss		(562)
Loss for theperiod from continuingoperations		(562)
Basic and diluted lossper share	3	(5.62)

F-6

Aclara Resources Inc.

Statement of financial position

ASSETS Current assets Cash and cash equivalents Related-partyaccounts receivable Total Total assets EQUITY AND LIABILITIES Capital and reserves attributable to shareholders Equityshare capital Retained earnings Total equity	Notes 4 5	As at 30 September 2021 US$


		78
		12,317
		12,395
		12,395


		12,957
		(562)
		12,395

These financial statements were approved on 17 November 2021 and signed on its behalf by:

Ramon Barua

Representative

17 November 2021

F-7

Aclara Resources Inc.

Statement of cash flows

	The period between May 5 (inception date)and September 30,2021
	US$
Cash flows from operatingactivities Cashgenerated from/(used in)operations Interests received Interestspaid Income taxpaid Net cashgenerated from/(used in)operatingactivities Cash flows from investingactivities Net cash used in investingactivities Cash flows from financingactivities Capital contributions Cash flowsgenerated from financingactivities Net increase in cash and cash equivalents duringtheperiod Impact of foreign exchange Cash and cash equivalents at beginningof theperiod Cash and cash equivalents at end of theperiod
	–
	–
	–
	–
	–

	–

	81
	81
	81
	(3)
	–
	78

F-8

Aclara Resources Inc..

Statement of changes in equity

Balance at 5 May2021 Loss for theperiod Total comprehensive expense for theperiod Capital contribution Balance at 30 September 2021	Notes 5 5	Issued share capital US$ 81 – – – 81	Additional capital US$ – – 12,876 12,876	Retained earnings US$000 – (562) (562) – (562)	Total equity US$000
					81
					(562)
					(562)
					12,876
					12,395

F-9

Aclara Resources Inc.

Financial Statements

1 Corporate information

Aclara Resources Inc., formerly1303714 B.C. Ltd. (hereinafter the ‘Company’) is a limited Company incorporated under the Business Corporations Act (British Columbia) on May 5, 2021. The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver BC V6C 2X8, Canada.

The ultimate controlling party of the Company is Mr Eduardo Hochschild whose beneficial interest in the Company and its subsidiaries (together ‘Hochschild Mining Group’) is held through Pelham Investment Corporation, a Cayman Islands Company.

These financial statements were approved for issue on 17 November 2021 by Ramon Barua, representative of the Company.

2 Basis of preparation and significant accounting policies

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB).

These financial statements are presented in US$ dollars, which is the Company’s functional currency.

3 Basic and diluted earnings per share

Earnings per share (‘EPS’) is calculated by dividing profit for the period attributable to equity shareholders by the weighted average number of ordinary shares issued during the period.

The Company does not have dilutive potential ordinary shares.

EPS has been calculated as follows:

Basic lossper share from continuingoperations Total for theperiod and from continuingoperations(US$) Diluted lossper share from continuingoperations Total for theperiod and from continuingoperations(US$)	The period between May 5 (inception date) and September 30, 2021 US$000

	(5.62)

	(5.62)

Loss from continuing operations and attributable to equity holders is as follows:

The period between May 5 (inception date) and September 30, 2021 US$000 Loss attributable to equity holders – continuing operations (US$000) (562)

F-10

Aclara Resources Inc.

Financial Statements

Notes to the financial statements

The following reflects the share data used in the basic and diluted earnings per share computations:

The following reflects the share data used in the basic and diluted earnings per share computations:
Basic weighted average number of ordinaryshares in issue(thousands) Effect of dilutivepotential ordinaryshares related to contingentlyissuable shares(thousands) Weighted average number of ordinary shares in issue for the purpose of diluted earnings per share (thousands)	30 September 2021
	100
	–
	100

The calculation of the weighted average number of ordinary shares is as follows:

Balance as at 5 May2021 Balance as at 30 September 2021 Weighted average number of ordinaryshares as at 30 September 2021	Number of shares
	100
	100
	100

4 Related-party accounts receivable

The Company had the following related-party balances and transactions during the period ended 30 September 2021. The related parties are companies owned or controlled by the main shareholder of the parent Company.

Hochschild MiningHoldings Ltd. Total	As at 30 September 2021 US$ 12,317 12,317

Account receivable of 10,000,000 Chilean pesos that will be deposited in Aclara Resources Inc. branch in Chile.

Aclara Resources Inc.

F-11

Financial Statements

5 Equity

(a) Share capital

Issued share capital and additional capital

The changes in share capital are as follows:

Balance as at 5 May2021 Additional capital 5 August 2021 Balance as at 30 September 2021	Number of shares 100 100	Share Capital US$	Additional capital US$ – 12,876 12,876	Total US$
		81		81
		–		12,876
		81		12,957

On 5 May 2021 the Company issued 100 shares for a total consideration of 100 Canadian dollars equivalent to US$81.

On 5 August 2021 Hochschild Mining Holdings made a capital contribution of US$12,876. As at 30 September 2021 it is pending to be collected.

6 Subsequent events

On October 4, 2021, the Company changed its name to “Aclara Resources Inc.” The Company is involved in an initial public offering (IPO) process that is expected to be completed before year end. Hochschild Mining Holdings Ltd. decided to list Aclara Resources Inc. in the Toronto Stock Exchange (TSX) through an IPO. For this, the following steps have been completed on October 15th, 2021:

a) HM Holdings has contributed all its shares in REE UNO SpA to Aclara Resources Inc. in exchange of shares of Aclara Resources Inc. Aclara Resources Inc. received 27,967,059,967 shares of REE Uno SpA amounting $ 58,877,074,295 Chilean pesos, which corresponds to the tax basis of the shares held by HM Holdings for Chilean tax purposes, comprising the whole of the allotted and issued share capital of REE UNO SpA. In exchange, Aclara Resources Inc. issued 88,262,106 common shares amounting $ 88,262,106 Canadian dollars equivalent to US$ 71,340,209, to HM Holdings.

b) Immediately thereafter, Aclara Resources Inc. has allocated all of its shares in REE Uno SpA in its Branch in Chile.

Aclara Resources Inc., a subsidiary of Hochschild Mining Holdings Ltd., is now the sole owner of REE UNO SpA shares The intention of Hochschild Group is to demerge 80% of the entire issued share capital of Aclara Resources Inc. Concurrently with the demerger, Aclara Resources Inc. will conduct an IPO to raise additional funds to advance the exploration and development of the Penco Module, as well as other activities related to exploration, permitting processes and engineering in connection with potential new modules. If the IPO is successful, the entire issued share capital of Aclara Resources Inc. will be listed on the TSX.

Aclara Resources Inc.

F-12

Financial Statements

REE UNO SPA

As of September 30, 2021 and 2020

F-13

Financial Statements

Income statement per function

	Notes	Three months ended 30 September	Nine mont	hs ended 30 September
		2021 US$000 2020 US$000 (31) (371) (139) (89) (170) (460) – – (2) – (172) (460) – – (172) (460) (0.00001) (0.00004) (0.00001) (0.00004)	2021 US$000	2020 US$000 (398) (89) (487) 2 (1) (486) – (486) (0.00004) (0.00004)
Continuingoperations
Administrative expenses	3		(88)
Exploration expenses	4		17
Loss from continuing operations before net finance income/(cost) and income tax			(71)
Finance income			–
Finance costs	5		(4)
Loss from continuing operations before income tax			(75)
Income tax(expense)/credit			–
Loss for the period from continuing operations			(75)
Basic loss per share US$	6		(0.000004)
Diluted loss per share US$	6		(0.000004)

Statement of comprehensive income

	Three months ended	30 September	Nine months	ended 30 September
	2021 US$000	2020 US$000 (460) (1,835) (1,835) (2,295)	2021 US$000	2020 US$000 (486) (2,663) (2,663) (3,149)
Loss for theperiod	(172)		(75)
Other comprehensive income to be reclassified to profit or loss in subsequentperiods:
Exchange differences on translatingforeign operations	(3,877)		(4,608)
Other comprehensive loss for theperiod, net of tax	(3,877)		(4,608)
Total comprehensive loss for theperiod	(4,049)		(4,683)

F-14

REE UNO SpA Report

Financial Statements

Statement of financial position

	Notes	As at 30 September 2021 US$000	As at 31 December 2020 US$000
ASSETS
Non-current assets
Property,plant and equipment	7	513	536
Evaluation and exploration assets	8	32,517	27,831
Trade and other receivables	9	2,536	2,193
Total		35,566	30,560
Current assets
Trade and other receivables	9	182	247
Cash and cash equivalents	10	1,510	1,265
Total		1,692	1,512
Total assets		37,258	32,072
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equityshare capital	12	40,518	26,768
Other reserves		(3,187)	1,421
Retained earnings		(2,224)	(2,149)
Total equity		35,107	26,040

Current liabilities
Trade and otherpayables	11	663	2,222
Accountspayable from related entities	13	1,488	3,810
Total		2,151	6,032
Total liabilities		2,151	6,032
Total equityand liabilities		37,258	32,072

These financial statements were approved on 17 November 2021 and signed on its behalf by:

Francois Motte Sauter

Representative

17 November 2021

F-15

REE UNO SpA Report

Financial Statements

Statement of cash flows

	Nine months ende	d 30 September
	2021 US$000 (675) – – – (675) (109) (9,070) (9,179) 10,250 10,250 396 (151) 1,265 1,510	2020 US$000
Cash flows from operatingactivities Cash used in operations Interests received Interestspaid Income taxpaid Net cash used in operatingactivities Cash flows from investingactivities Purchase ofproperty, plant and equipment Purchase of evaluation and exploration assets Net cash used in investingactivities Cash flows from financingactivities Capital contributions Cash flowsgenerated from financingactivities Net increase in cash and cash equivalents duringtheperiod Exchange difference Cash and cash equivalents at beginningof theperiod Cash and cash equivalents at end of theperiod
		(715)
		2
		–
		–
		(713)

		(121)
		(4,438)
		(4,559)

		6,000
		6,000
		728
		(954)
		1,220
		994

F-16

REE UNO SpA Report

Financial Statements

Statement of changes in equity

	Notes	Equity share capital US$000	Cumulative translation adjustment US$000	Total other reserves US$000	Retained earnings US$000	Total equity US$000
Balance at 1 January2021	12	26,768	1,421	1,421	(2,149)	26,040
Other comprehensive expense		–	(4,608)	(4,608)	–	(4,608)
Loss for the period		–	–	–	(75)	(75)
Total comprehensive expense for the period		–	(4,608)	(4,608)	(75)	(4,683)
Capital contribution		13,750	–	–	–	13,750
Balance at 30 September 2021	12	40,518	(3,187)	(3,187)	(2,224)	35,107

Balance at 1 January2020	12	19,768	597	597	(1,358)	19,007
Other comprehensive expense		–	(2,663)	(2,663)	–	(2,663)
Loss for the period		–	–	–	(486)	(486)
Total comprehensive expense for theperiod		–	(2,663)	(2,663)	(486)	(3,149)
Capital contribution		6,000	–	–	–	6,000
Balance 30 September 2020		25,768	(2,066)	(2,066)	(1,844)	21,858

F-17

REE UNO SpA Report

Financial Statements

Notes to the financial statements

1 Corporate information

The Company’s principal business is the development of the Penco Module, which is is located in Chile.

The Company has one segment, which is the development of their project in Chile.

The Company made further good progress with the focus on delivering a first module (the Penco Module) that proves the business case by producing a profitable product. The work in the first stage includes engineering focused on resource estimation for the first 600 hectares (out of a package of 451,581 hectares), developing the corresponding mine plan and improving metallurgical recoveries. Subsequent developmental stages are expected to include optimisation of the metallurgical process, more production modules and vertical integration opportunities. Penco Module, results from a Preliminary Economic Assessment were issued on October 15[th] 2021 whilst the environmental permitting process has also continued into its final stages.

These financial statements were approved for issue on 17 November 2021 by Francois Motte Sauter, representative of the Company.

2 Significant accounting policies

(a) Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB). They have been prepared in accordance with the adopted International Accounting Standard 34, “Interim Financial Reporting”.

The basis of preparation and accounting policies used in preparing the financial statements for the periods ended 30 September 2021, 31 December 2020 and 30 September 2020 have been consistently applied and are set out below. The financial statements have been prepared on a historical cost basis.

The financial statements are presented in US dollars (US$) and all monetary amounts are rounded to the nearest thousand ($000) except when otherwise indicated.

The Company is a development stage company and has not generated any revenue. The economic analysis contained in the Technical Report is based, in part, on inferred mineral resources, and is preliminary in nature. Inferred mineral resources are considered too geologically speculative to have mining and economic considerations applied to them and to be categorized as mineral reserves. There is no certainty that economic forecasts on which the preliminary economic assessment contained in the Technical Report is based will be realized.

The Company is involved in an initial public offering (IPO) process that is expected to be completed before the end of the year (see note 17). The Company is executing the Offering to raise sufficient funds to keep developing the Penco Module, as well as other activities related to exploration, permitting processes and engineering in connection with potential new modules for the following twelve months and beyond. If the Offering is not completed, the Company has the support of Hochschild Mining, which may provide the necessary funds for continued operations for as long as REE UNO SpA remains a wholly-owned subsidiary (which financial support would terminate effective upon completion of the Offering). Accordingly, the financial statements have been prepared on the going concern basis.

COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. The Company has been closely monitoring the impact of COVID-19 on all aspects of its business. The COVID-19 pandemic has resulted in governments worldwide enacting measures to combat the spread of the virus, including the implementation of travel bans, quarantine requirements, social distancing, stay at home orders and the closure of non-essential businesses. The future impacts of the pandemic and any resulting economic impact continue to be unknown and evolving. It is not possible to reliably estimate the length and severity of these developments and the impact it may have on the Company and the development of the Penco Module. Management will continue to monitor and assess the impact of the pandemic.

Changes in accounting policy and disclosures

Amendments to standards and interpretations which came into force during the year 2021 do not have a significant impact on the Company's financial statements

F-18

REE UNO SpA Report

Financial Statements

Standards, interpretations and amendments to existing standards that are not yet effective and have not been previously adopted by the Company

Certain new standards, amendments and interpretations to existing standards have been published and are mandatory for the Company’s accounting periods beginning on or after 1 January 2021 or later periods but which the Company has not previously adopted. These have not been listed as they are not expected to impact the Company.

(b) Judgements in applying accounting policies and key sources of estimation uncertainty

Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimates is contained in the accounting policies and/or the notes to the financial statements.

Significant areas of estimation uncertainty and critical judgements made by management in preparing the financial statements include:

Significant estimates:

Ore reserves and resources – 2(e)

There are numerous uncertainties inherent in estimating ore reserves and resources. Assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and resources and may, ultimately, result in the reserves and resources being restated.

• Recoverable values of mining asset The value of the Company’s mining assets is sensitive to a range of characteristics unique to each mine project. Key sources of estimation for all assets include uncertainty around ore resource estimates. In performing impairment reviews, the Company assesses the recoverable amount of its operating assets principally with reference to fair value less costs of disposal, assessed using an in-situ valuation to estimate the amount that would be paid by a willing third party in an arm’s length transaction.. There is judgement involved in determining the assumptions that are considered to be reasonable and consistent with those that would be applied by market participants. Key judgments include the estimation of future rare earths prices, future capital requirements, and exploration potential. Changes in these assumptions will affect the recoverable amount of the evaluation and exploration assets, and intangibles. The first resources and reserves report was issued on October 15th 2021.

• Income tax Judgement is required in determining whether deferred tax assets are recognised on the statement of financial position. Deferred tax assets, including those arising from un-utilised tax losses require management to assess the likelihood that the Company will generate taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realise the net deferred tax assets recorded at the balance sheet date could be impacted.

Critical judgements:

Determination of functional currencies – 2(c)

The determination of functional currency requires management judgement, particularly where there may be several currencies in which transactions are undertaken and which impact the economic environment in which the entity operates.

• Recognition of evaluation and exploration assets– notes 2(d) and 7. Judgement is required in determining when the future economic benefit of a project can reasonably be regarded as assured, at which point evaluation and exploration expenses are capitalised. This includes the assessment of whether there is sufficient evidence of the probability of the existence of economically recoverable minerals to justify the commencement of capitalisation of costs; the timing of the end of the exploration phase, the start of the development phase; and the commencement of the production phase. For this purpose, the future economic benefit of the project can reasonably be regarded as assured when the Board authorises management to conduct a feasibility study, mine-site exploration is being conducted to convert resources to reserves, or mine-site exploration is being conducted to confirm resources, all of which are based on supporting geological information.

(c) Currency translation

The functional currency for the Company is the Chilean Peso and is determined by the currency of the primary economic environment in which it operates.

Financial statements expressed in their corresponding functional currencies are translated into US dollars by applying the exchange rate at periodend for assets and liabilities and the transaction date exchange rate for income statement items. The resulting difference is included as cumulative translation adjustment in equity.

The financial statements are presented in US dollars (US$).

F-19

REE UNO SpA Report

Financial Statements

Notes to the financial statements

(d) Evaluation and exploration assets

Based on IFRS 6 “Exploration for and evaluation of mineral resources” costs of mineral properties are capitalized as exploration and evaluation assets on a project-by-project basis capitalized when the future economic benefit of the project can reasonably be regarded as assured.

Costs related to the project that could be capitalized among others are; acquisition of rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling; trenching; sampling; and activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource.

Evaluation and exploration assets are transferred to mine development costs within property, plant and equipment once the work completed to date supports the future development of the property and such development receives appropriate approval.

(e) Determination of ore reserves and resources

The Company estimates its ore reserves and mineral resources based on information compiled by internal competent persons. Reports to support these estimates are prepared each year and are stated in conformity with the law NI 43-101, a Canadian standard.

It is the Company’s policy to have the report audited by a Competent Person.

Reserves and resources are used in the units of production calculation for depreciation as well as the determination of the timing of mine closure cost and impairment analysis. As at 30 September 2021 and 31 December 2020 there is no provision of mine closure costs.

(f) Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation. Cost comprises its purchase price and directly attributable costs of acquisition or construction required to bring the asset to the condition necessary for the asset to be capable of operating in the manner intended by management. Economical and physical conditions of assets have not changed substantially over this period.

The cost less residual value of each item of property, plant and equipment is depreciated over its useful life. Each item’s estimated useful life has been assessed with regard to both its own physical life limitations and the present assessment of economically recoverable reserves and resources of the mine property at which the item is located Estimates of remaining useful lives are made on a regular basis for all mine buildings, machinery and equipment, with annual reassessments for major items. Depreciation is charged to cost of production on a units of production basis for mine buildings and installations and plant and equipment used in the mining production process, or charged directly to the income statement over the estimated useful life of the individual asset on a straight-line basis when not related to the mining production process. Changes in estimates, which mainly affect units of production calculations, are accounted for prospectively. Depreciation commences when assets are available for use. Land is not depreciated.

An asset’s carrying amount is written-down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the net proceeds with the carrying amount and are recognised within other income/expenses, in the income statement.

The expected useful lives under the straight-line method are as follows:

ected useful lives under the	straight-line m
	Years
Buildings	3 to 33
Plant and equipment	5 to 10
Vehicles	5

Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to be ready for its intended use are capitalised as part of the cost of the asset. All other borrowing costs are expensed where incurred. For borrowings associated with a specific asset, the actual rate on that borrowing is used. Otherwise, a weighted average cost of borrowing is used. The Company capitalises the borrowing costs related to qualifying assets with a value of US$1,000,000 or more, considering that the substantial period of time to be ready is six or more months. The Company has not capitalized interest because as it is in the stage previous to construction and consequently does not meet IAS 23 requirements.

Mining properties and development costs

Purchased mining properties are recognised as assets at their cost of acquisition or at fair value if purchased as part of a business combination. Costs associated with developments of mining properties are capitalised when incurred.

Mine development costs are, upon commencement of commercial production, depreciated using the units of production method based on the estimated economically recoverable reserves and resources to which they relate.

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Financial Statements

When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs ceases and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to mining asset additions or improvements, underground mine development or mineable reserve development. In addition, the revenue generated from the sale of the inventory produced during the pre-operating stage is recognised as a deduction of the costs capitalised for this project.

Construction in progress and capital advances

Assets in the course of construction are capitalised as a separate component of property, plant and equipment when incurred. Once the asset moves into the production phase, the cost of construction is transferred to the appropriate category. Construction in progress is not depreciated.

Subsequent expenditure

Expenditure incurred to replace a component of an item of property, plant and equipment is capitalised separately with the carrying amount of the component being written-off. Other subsequent expenditure is capitalised if future economic benefits will arise from the expenditure. All other expenditure including repairs and maintenance expenditures are recognised in the income statement as incurred.

(g) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. The Company does not have assets with an indefinite useful life.

The carrying amounts of evaluation and exploration assets are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. If there are indicators of impairment, an exercise is undertaken to determine whether the carrying values are in excess of their recoverable amount. Such review is undertaken on an asset by asset basis, except where such assets do not generate cash flows independent of other assets, and then the review is undertaken at the cash-generating unit level.

The assessment requires the use of estimates and assumptions such as long-term commodity prices, future capital requirements, and exploration potential. Changes in these assumptions will affect the recoverable amount of the evaluation and exploration assets.

If the carrying amount of an asset or its cash-generating unit (CGU) exceeds the recoverable amount, an impairment provision is recorded to reflect the asset at the lower amount. Impairment losses are recognised in the income statement.

Calculation of recoverable amount

The recoverable amount of assets is the greater of their value in use (VIU) and fair value less costs of disposal (FVLCD) to sell. FVLCD is based on an estimate of the amount that the Company may obtain in a sale transaction on an arm’s length basis. VIU is based on estimated future cash flows discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

The recoverable values of the CGU are determined using a FVLCD methodology. FVLCD was determined using a combination of level 2 and level 3 inputs to estimate the amount that would be paid by a willing third party in an arm's length transaction.

Reversal of impairment

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(h) Trade and other receivables

Current trade receivables are carried at the original invoice amount less provision made for impairment of these receivables. Non current receivables are stated at amortised cost.

Impairment of financial assets – The Company recognizes a value adjustment on expected credit losses (“ECL”) related to financial assets measured at amortized cost or at FVTOCI, lease accounts receivable, amounts owed by customers under construction contracts, as well as loan commitment and financial guarantee contracts. The amount of the expected credit losses is restated at each reporting date to reflect changes in the credit risk since the initial recognition of the corresponding financial asset.

The company always recognizes ECL over the life of the asset for trade accounts receivable. The expected credit losses of these financial assets are estimated using provisions matrix based on the historical experience of the Company’s credit losses, adjusted for factors that are specific to the debtors, general economic conditions and an evaluation both of the real and budgeted direction of the conditions on the reporting date, including the time value of money when appropriate.

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Notes to the financial statements

For all other financial instruments, the Company recognizes ECL over the life of the asset when there has been a significant increase in the credit risk since initial recognition. If, on the other hand, the credit risk of the financial instrument has not significantly increased since initial recognition, the Company measures the value restatement for losses for this financial instrument at an amount equal to the expected credit losses in the next twelve months. The evaluation as to whether ECL should be recognized over the life of the asset is based on a significant increase in the probability or risk of non-compliance occurring since initial recognition instead of on evidence of a credit-impaired financial asset as of the reporting date or the existence of a non-compliance event.

ECL over the life of the asset represents the expected credit losses that will result from all possible non-compliance events during the expected life of a financial instrument. In contrast, the ECL in the next twelve months represents the portion of the s ECL during the life of the asset that are expected to result from a non-compliance event on a financial instrument that is possible within 12 months after the reporting date.

The Company applied a simplified focus to recognize expected credit losses over the life of the asset for its trade and other accounts receivable, as required by IFRS 9. In relation to related parties, management believes that there has not been a significant increase in the credit risk of loans with related parties from initial recognition to 30 September 2021 (31 December 2020). Consequently, management does not expect to recognize expected credit losses in the next 12 months for loans with related companies. The amount of the provision is the difference between the carrying amount and the recoverable amount and this difference is recognised in the income statement.

(i) Income tax

Income tax for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items charged or credited directly to equity, in which case it is recognised in equity.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous years. The tax rates and applicable Chilean tax regimes are as follows: 2020 27%, General semi integrated 14A

2021 27%, General semi integrated 14A

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, with the following exceptions:

where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based on the tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

The Company has not recognised deferred taxes as they are not recoverable in a short period of time. Deferred taxes not recognised for the periods 30 September 2021 and 31 December 2020 are US$96,831, and US$16,957 respectively.

Accumulated tax losses as at 30 September 2021 are US$2,596,605 (31 December 2020 US$2,307,244).

(j) Financial instruments

Financial instruments — initial recognition and subsequent measurement

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

(a) Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through OCI, or fair value through profit or loss.

The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant

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Financial Statements

financing component or for which the Company has applied the practical expedient for contracts that have a maturity of one year or less, are measured at the transaction price.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

The Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

Financial assets at amortised cost (debt instruments)
Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
Financial assets at fair value through profit or loss

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Interest received is recognised as part of finance income in the statement of profit or loss and other comprehensive income. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Company’s financial assets at amortised cost include trade receivables (not subject to provisional pricing) and other receivables.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e., removed from the Company’s consolidated statement of financial position) when:

The rights to receive cash flows from the asset have expired

Or

• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

Impairment of financial assets

The Company recognises an allowance for ECLs for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

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Notes to the financial statements

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Company applies the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Company does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. For any other financial assets carried at amortised cost (which are due in more than 12 months), the ECL is based on the 12-month ECL. The 12-month ECL is the proportion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment including forward-looking information.

The Company consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity.

At each reporting date, the Company assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is creditimpaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

(b) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables and loans..

Subsequent measurement

For purposes of subsequent measurement, financial liabilities are classified in two categories:

Financial liabilities at fair value through profit or loss
Financial liabilities at amortised cost (loans and trade and other payables)

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities at amortised cost (loans and trade and other payables)

After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income.

This category generally applies to interest-bearing loans and borrowings and trade and other payables.

Derecognition

A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income.

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Financial Statements

(c) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

(k) Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at cost. For the purposes of the statement of financial position, cash and cash equivalents comprise cash on hand and deposits held with banks that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. For the purposes of the cash flow statement, cash and cash equivalents, as defined above, are shown net of outstanding bank overdrafts.

Liquidity funds are classified as cash equivalents if the amount of cash that will be received is known at the time of the initial investment and the risk of changes in value is considered insignificant.

(l) Fair value measurement

The Company measures financial instruments, such as, derivatives, and non-financial assets at fair value at each statement of financial position date. Also, fair values of financial instruments are measured at amortised cost.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy.

For assets and liabilities that are recognised in the financial statements on a recurring basis at fair value, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Company determines the policies and procedures for both recurring fair value measurement and unquoted AFS financial assets, and for non-recurring measurement.

At each reporting date, the Company analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Company’s accounting policies. For this analysis, the Company verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

The Company, in conjunction with its external valuers, where applicable, also compares each the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

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Notes to the financial statements

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. The Company does not have financial assets fair valued with these valuation techniques.

3 Administrative expense

	Three months	ended 30 September	Nine months end	ed 30 September
	2021 US$000 – 9 – – 22 – 31	2020 US$000	2021 US$000	2020 US$000
Personnel expenses		9	–	9
Professional fees		114	29	114
Travel expenses		5	–	5
Thirdpartyservices		217	–	217
Depreciation and amortisation		15	59	42
Other expenses		11	–	11
Total		371	88	398

4 Exploration expense

	Three months	ended 30 September	Nine months end	ed 30 September
	2021 US$000	2020 US$000	2021 US$000	2020 US$000
Personnel expenses	45	31 – 2 9 – – 9 – 8 – – 16 13 1 89	46	31
Freights	2		3	–
Travel expenses	3		5	2
Rentals	9		2	9
Contractors	5		15	–
Security	–		3	–
Analysis	31		(200)	9
Technologyand systems	–		12	–
Studies	11		25	8
Thirdpartyservices	16		37	–
Supplies	12		23	–
Repair and maintenance	–		–	16
Advertising	–		–	13
Other	5		12	1
Total	139		(17)	89

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Financial Statements

5 Finance income and costs

	Three months	Nine months end	ed 30 September
	2021 US$000 – – (2) (2)	2021 US$000	2020 US$000
Finance income
Interests on deposits		–	2
Total		–	2
Finance costs
Bank commissions		(4)	(1)
Total		(4)	(1)

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Financial Statements

Notes to the financial statements

6 Basic and diluted earnings per share

Earnings per share (‘EPS’) is calculated by dividing profit for the period attributable to equity shareholders by the weighted average number of ordinary shares issued during the period.

The Company does not have dilutive potential ordinary shares.

EPS has been calculated as follows:

EPS has been calculated as follows:
	Three months	ended 30 September 2020 US$000 (0.00004) (0.00004)	Nine months end	ed 30 September
	2021 US$000		2021 US$000	2020 US$000
Basic lossper share from continuingoperations
Total for theperiod and from continuingoperations(US$)	(0.00001)		(0.000004)	(0.00004)
Diluted lossper share from continuingoperations
Total for theperiod and from continuingoperations(US$)	(0.00001)		(0.000004)	(0.00004)

Loss from continuing operations and attributable to equity holders is as follows:

	Three months	ended 30 September 2020 US$000 (460)	Nine months end	ed 30 September
	2021 US$000		2021 US$000	2020 US$000
Loss attributable to equity holders – continuing operations (US$000)	(172)		(75)	(486)

The following reflects the share data used in the basic and diluted earnings per share computations:

	Three months	Nine months end	ed 30 September
	2021	2021	2020
Basic weighted average number of ordinary shares in issue (thousands)	17,778,740	17,778,740	12,374,371
Effect of dilutive potential ordinary shares related to contingentlyissuable shares(thousands)	–	–	–
Weighted average number of ordinary shares in issue for the purpose of diluted earningsper share(thousands)	17,778,740	17,778,740	12,374,371

The calculation of the weighted average number of ordinary shares is as follows:

Balance as at 1 January2020 Balance as at 30 September 2020 Weighted average number of ordinaryshares as at 30 September 2020 Shares issued as at 1 January2021 Shares issued 8 September 2021 Balance as at 30 September 2021 Weighted average number of ordinaryshares as at 30 September 2021	Number of shares
	12,374,370,670
	12,374,370,670
	12,374,370,670

	16,986,750,670
	9,827,861,500
	26,814,612,170
	17,778,739,509

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Financial Statements

7 Property, plant and equipment

Land US$000 Plant and equipment US$000 Cost Balance at 1January2020 – 455 Additions 237 57 Foreign exchange effect – 119 Balance at 31 December 2020 237 631 Additions – 109 Foreign exchange effect (30) (88) Balance at 30 September 2021 207 652 Accumulated depreciationplant and equipment Balance at 1 January2020 – 255 Depreciation of theperiod – 58 Foreign exchange effect – 19 Balance at 31 December 2020 – 332 Depreciation of theperiod – 59 Foreign exchange effect – (45) Balance at 30 September 2021 – 346 Net book value as at 31 December 2020 237 299 Net book value as at 30 September 2021 207 306 There were no borrowing costs capitalised in property, plant and equipment as there are no qualifying assets. There are no restrictions on ownership of property, plant and equipment. There are no capital commitments for property, plant and equipment. As of 30 September 2021 and 31 December 2020, the Company has not recognised any impairment.	Total US$000

	455
	294
	119
	868
	109
	(118)
	859

	255
	58
	19
	332
	59
	(45)
	346
	536
	513

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Financial Statements

Notes to the financial statements

8 Evaluation and exploration assets

Cost Balance at 1 January2020 Additions Foreign exchange effect Balance at 31 December 2020 Additions Subsidy Foreign exchange effect Balance at 30 September 2021 Accumulated amortisation and impairment Balance at 1 January2020 Balance at 31 December 2020 Foreign exchange effect Balance at 30 September 2021 Net book value as at 31 December 2020 Net book value as at 30 September 2021	Aclara US$000

	17,943
	8,297
	1,599
	27,839
	9,070
	(121)
	(4,264)
	32,524

	8
	8
	(1)
	7
	27,831
	32,517

The Company is currently focused on the development of the Penco Module, which will aim to produce a rare earth concentrate through a processing plant that will be fed by clays from nearby deposits. The Company is currently focused on developing a pre-feasibility and feasibility study, which include activities such as engineering of the different deposits and the production process, as well as brownfield exploration and resources and reserves estimation. In addition, the Company continues working on the environmental permit, which is planned to be approved in Q1 2022. There were no borrowing costs capitalised in evaluation and exploration assets as there are no qualifying assets.

There are no restrictions on ownership of evaluation and exploration assets.

There are no capital commitments for evaluation and exploration assets.

As of 30 September 2021 and 31 December 2020, the Company has not recognised any impairment as no indicators of impairment were identified in the project.

The classification of evaluation and exploration assets is as follows:

The classification of evaluation and exploration assets is as follows:
Cost Rare earthproject1 Cost ofproductionplant(Corfo) Cost of biodegradable desorbents(Innova Corfo) Research and development studycosts Protection costs rustprocedures(Committee Bío-bio) Total Accumulated amortisation and impairment Amortisation for theperiod Total Net book value	30 September 2021 S$000 32,072 404 – 39 9 32,524 7 7 32,517	31 December 2020 US$000

		27,200
		461
		123
		45
		10
		27,839

		8
		8
		27,831

1 According the policy of capitalization of evaluation and exploration expenses, costs of mineral properties are capitalized as exploration and evaluation assets on a project by-project basis. As at 30 September 2021 and 31 December 2020 the Company only have one project named Aclara. The Company capitalizes expenses related to researching and analysing historical exploration data, gathering exploration data through geophysical studies, exploratory drilling and sampling, determining and examining the volume and grade of the resource, surveying transportation and infrastructure requirements, and conducting market and finance studies.

After the company was bought by the Hochschild Mining Group, investment in the project increased. The total capitalized in the nine months ended 30 September 2021 and the year ended 31 December 2020 is detailed below:

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Financial Statements

30 September 2021 US$000 Personnel expenses 1,643 Professional fees 1,003 Environmental impact study 472 Geochemical study 163 Diamond drilling 807 Engineeringservices 795 Miningrights 341 Feasibilitystudy 1,520 Other 2,326 Total 9,070	31 December 2020 US$000
	1,527
	1,034
	446
	209
	1,195
	1,244
	180
	93
	2,369
	8,297

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Financial Statements

Notes to the financial statements

9 Trade and other receivables

	As at 30 September 2021 US$000	As at 31 December 2020 US$000
Current
Advances to suppliers	125	234
Loans to employees	–	13
Others	20	–
Assets classified as receivables	145	247
Prepaid expenses	37	–
Total	182	247
Non-current
Value added tax	2,509	2,166
Others	27	27
Total	2,536	2,193

The fair values of trade and other receivables approximate their book value.

As at 30 September 2021 and 31 December 2020, none of the financial assets classified as receivables (net of impairment) were past due.

10 Cash and cash equivalents

	As at 30 September 2021 US$000 1,510 1,510	As at 31 December 2020 US$000
Current demand deposit accounts		1,265
Cash and cash equivalents considered for the statement of cash flows		1,265

The fair value of cash and cash equivalents approximates their book value. The Company does not have undrawn borrowing facilities available in the future for operating activities or capital commitments.

The composition of the item as of 30 September 2021 and 31 December 2020 is as follows:

	As at 30 September 2021 US$000 447 1,063 1,510	As at 31 December 2020 US$000
Chileanpesos 000(equivalent US$000)		384
US$ dollars 000		881
US$ dollars 000		1,265

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Financial Statements

11 Trade and other payables

	As at 30 September 2021 US$000	As at 31 December 2020 US$000
Tradepayables1	247	1,608
Taxes and contributions	49	47
Salaries and wagespayable2	285	341
Others	82	226
Total	663	2,222

The fair value of trade and other payables approximate their book values.

1 Trade payables relate mainly to the acquisition of materials, supplies and contractors’ services. These payables do not accrue interest and no guarantees have been granted. The Company does not have significant suppliers whose liabilities exceed 10% of this item.
2 Salaries and wages payable relates to remuneration payable.

12 Equity

(a) Share capital

Issued share capital and additional capital

The changes in share capital are as follows:

Number of shares type A Balance as at 1 January2020 12,374,370,670 Shares issued 4,612,380,000 Additional capital – Balance as at 31 December 2020 16,986,750,670 Additional capital – Shares issued1 9,827,861,500 Balance as at 30 September 2021 26,814,612,170	Share Capital US$000	Additional capitall US$000 Total US$000
	19,768	– 19,768
	6,000	– 6,000
	–	1,000 1,000
	25,768	1,000 26,768
	–	10,250 10,250
	13,250	(9,750) 3,500
	39,018	1,500 40,518

On 8 September 2021 the Company capitalized the loan payable to Hochschild Mining Holdings Ltd amounting to US$3,500,000, and issued 2,712,990,000 shares. With the same date, the Company also capitalized additional capital of US$ 9,750,000 contributed by Hochschild Mining Holdings Ltd. and issued 7,114,871,500 shares.

Dividends will be paid exclusively from the net earnings for the year, or from the retained earnings from balance sheets approved by the general shareholders' meeting. If the Company has accumulated losses, the profits for the year will first be used to absorb them. If there are losses for a year, these will be absorbed with retained earnings, if any. The Chairman of the Board of Directors may, under his personal responsibility, distribute provisional dividends during the fiscal year charged to the profits thereof, provided there are no accumulated losses.

(b) Other reserves

Cumulative translation adjustment

The cumulative translation adjustment account is used to record exchange differences arising from the translation of the financial with a functional currency different to the reporting currency of the Company.

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Notes to the financial statements

13 Related-party balances and transactions

(a) Related-party accounts receivable and payable

The Company had the following related-party balances and transactions during the periods ended 30 September 2021, 31 December 2020 and 30 September 2020. The related parties are companies owned or controlled by the main shareholder of the parent Company or associates.

Current relatedpartybalances Hochschild MiningHoldings Ltd Compañia Minera Ares S.A.C. Minera Hochschild Chile SCM Total	Accountpayables	Accountpayables
	As at 30 September	As at 31 December
	2021 US$000 – 1,226 262 1,488	2020 US$000 2,500 875 435 3,810

On January 27, 2021, HM Holdings made an additional loan to the Company of US$ 1.0m. On September 8, 2021, the Company converted the loan payable to HM Holdings that amounted US$3.5 million into a capital contribution.

As at 30 September 2021 and 31 December 2020 all accounts are, or were, non-interest bearing and are payable on demand.

No security has been granted or guarantees given by the Company in respect of these related party balances.

Principal transactions between affiliates are as follows:

Principal transactions between affiliates are as follows:
Expense recognised and capitalized for the servicesperformed byCompañia Minera Ares S.A.C.	Nine months ended 2021 US$000 351	30 September
		2020 US$000
		–

Related parties are as follows:

Minera Hochschild Chile SCM Hochschild MiningHoldings Ltd Compañía Minera Ares S.A.C.	Relationship Common owners Parent Common owners	Country Chile Perú Perú	Type of transaction
			Loans
			Loans
			Intercompany administrative services

(b) Compensation of key management personnel of the Company

(b) Compensation of key management personnel of the Company
Compensation of keymanagementpersonnel Short-term employee benefits Total compensationpaid to keymanagementpersonnel	As at 30 September 2021 US$000 452 452	As at 30 September 2020 US$000
		189
		189

Number of key management of the Company was four at 30 September 2021 and two at 30 September 2020.

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Financial Statements

14 Notes to the statement of cash flows

Reconciliation of loss for theperiod to net cashgenerated from operatingactivities Loss for theperiod Adjustments to reconcile Companyloss to net cash inflows from operatingactivities Depreciation Finance income Finance costs Income tax expense Increase/(decrease)of cash flows from operations due to changes in assets and liabilities Trade and other receivables Trade and otherpayables Cash used in operations	Nine monthsperiod as	at 30 September
	2021 US$000 (75) 59 – 4 – (278) (385) (675)	2020 US$000

		(486)

		42
		(2)
		1
		–

		(397)
		127
		(715)

15 Contingencies

(a) Taxation:

As at 30 September 2021 and 31 December 2020 the Company is not subject to any contingencies.

(b) Guarantees:

The Company does not have any guarantee in respect of exploration activities.

(c) Litigations

The main litigation currently affecting the Penco Module is an arbitration proceeding initiated by Madesal SpA ("Madesal") before the arbitrator Mr. Roberto Guerrero del Rio. The grounds for this claim are an alleged violation of an agreement executed between the parties in 2014 and 2015 (the "MOU and its Addendum") by way of which Madesal would have been granted by the former owner of the Penco Module the status of "strategic partner" in the future development of the project in the Madesal's property called "Fundo El Cabrito". Nevertheless, it was subsequently decided for technical and environmental reasons that the Penco Module would be developed in a different location and that, therefore, no mining easement on Madesal's property was necessary. Madesal is seeking specific performance of the obligations allegedly derived from the MOU and its Addendum, plus damages. Requested damages amount to approximately US$28 million.The Company is currently defending the case and maintains that the MOU and its Addendum were merely preparatory contracts for the execution of two legal mining easements: one for exploration and the other for exploitation in Fundo El Cabrito and that these activities were always subject to the results of the respective economic, technical and environmental studies, which eventually led to the decision to continue the development of the project elsewhere. No other contractual relationship or joint venture is considered to have arisen from these agreements and since they and the respective mining easements have terminated, Madesal has no right or expectation over any future development of the Penco Module. No provision has been booked because an unfavourable outcome is not considered probable.

16 Financial risk management

The Company is exposed to a variety of risks and uncertainties which may have a financial impact on the Company.

The Company identify and, where appropriate, implement the controls to mitigate the impact of significant risks.

(a) Foreign currency risk

The Company is in the pre-operational stage, no income or operating costs have been recorded. The main disbursements are in Chilean pesos.

As at 30 September 2021, the Company has deposits, trade and other payables and account payables to related parties stated in US$ dollars. The sensitivity of financial assets and liabilities, at 30 September 2021 to a +/- 10% change in the US dollar exchange rate, with all other variables held constant, is -/+US$49,000.

(b) Credit risk

Credit risk arises from debtors’ inability to make payment of their obligations to the Company as they become due (without taking into account the fair value of any guarantee or pledged assets). The Company is not exposed to credit risk as it does not have commercial activities.

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Notes to the financial statements

(c) Liquidity risk

Liquidity risk arises from the Company’s inability to obtain the funds it requires to comply with its commitments, including the inability to sell a financial asset quickly enough and at a price close to its fair value. Management constantly monitors the Company’s level of short- and medium-term liquidity, and their access to credit lines, in order to ensure appropriate financing is available for its operations.

The table below categorises the undiscounted cash flows of Company’s financial liabilities into relevant maturity groupings based on the remaining period as at the statement of financial position to the contractual maturity date.

	Less than 1 year US$000	Between 1 and 2 years US$000	Between 2 and 5 years US$000	Over 5 years US$000	Total US$000
At 30 September 2021
Trade and otherpayables	663	–	–	–	663
Trade and otherpayables relatedparties	1,488	–	–	–	1,488
Total	2,151	–	–	–	2,151
At 31 December 2020
Trade and otherpayables	2,222	–	–	–	2,222
Trade and otherpayables relatedparties	3,810	–	–	–	3,810
Total	6,032	–	–	–	6,032

(d) Capital risk management

The Compan’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. Management considers as part of its capital, the financial sources of funding from shareholders and third parties.

(e) Environmental risk

One of the main concerns of the Company is caring for the environment as its policy is zero impact. The environmental impact study has already been carried out and submitted to the authority in 2018. The Company is complying with all requests from the authorities, and expects to finish the second addendum by October 31st, 2021. The environmental impact study approval is expected by the end of December 2021.

17 Subsequent events

The Company is involved in an initial public offering (IPO) process that is expected to be completed before the end of the year. Hochschild Mining Holdings Ltd. decided to list the Company in the Toronto Stock Exchange (TSX) through an IPO of a new Canadian company. For this, the following steps have been completed on October 15th, 2021:

a) HM Holdings has incorporated a new Canadian company, Aclara Resources Inc., and also a branch of this company in Chile (the Aclara Resources Inc., Agencia en Chile).

b) HM Holdings has contributed all its shares in REE UNO SpA to Aclara Inc. in exchange of shares of Aclara Inc.

c) Immediately thereafter, Aclara Inc. has allocated all of its shares in REE Uno SpA in its Branch in Chile.

Aclara Resources Inc, a subsidiary of Hochschild Mining Holdings Ltd., is now the sole owner of the Company shares The intention of Hochschild Group is to demerge 80% of the entire issued share capital of Aclara Resources Inc.. Concurrently with the demerger, Aclara Resources Inc. will conduct an IPO to raise additional funds to advance the exploration and development of the Penco Module, as well as other activities related to exploration, permitting processes and engineering in connection with potential new modules. If the IPO is successful, the entire issued share capital of Aclara will be listed on the TSX.

On October 15[th] , the Company capitalized the additional capital contributed by Hochschild Mining Holdings Ltd. amounting US$ 1,500,000, and issued 1,152,447,797. As of October 15[th] , the new total amount of shares of the Company is 27,967,059,967.
On October 26[th] , the Company received a related party loan of US$ 1,500,000 from Hochschild Mining Holdings Ltd.. The loan has a duration of 3 months and an annual interest rate of 5.0%. The purpose of this loan is to fund the Company´s activities until the completion of the IPO process.

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Financial Statements

REE UNO SPA

As of December 31, 2020, 2019 and 2018

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Independent Auditor’s Report

To the Shareholders of Ree Uno SpA.

Opinion

We have audited the financial statements of Ree Uno SpA. (the “Company”), which comprise the statements of financial position as at December 31, 2020 and 2019, and the income statements per function, statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the years in the three-year period ended December 31, 2020, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for each of the years in the three-year period ended December 31, 2020 in accordance with International Financial Reporting Standards [“IFRSs”].

Basis for opinion

Responsibilities of management and those charge with governance for the financial statements

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

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Auditor’s responsibilities for the audit of the financial statements

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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Santiago, Chile

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Financial Statements

Income statement per function

	Notes	Year ended 31 December 2020	Year ended 31 December 2019	Year ended 31 December 2018
		Total US$000	Total US$000	Total US$000

Continuingoperations
Administrative expenses	3	(237)	(75)	(90)
Exploration expenses	4	(554)	(223)	(85)
Loss from continuing operations before net finance income/(cost) and income tax		(791)	(298)	(175)
Finance income		2	43	22
Finance costs	5	(2)	(54)	(108)
Loss from continuing operations before income tax		(791)	(309)	(261)
Income tax(expense)/Income	6	–	(3)	13
Loss for theyear from continuing operations		(791)	(312)	(248)
Basic loss per share US$	7	(0.00006)	(0.00003)	(0.00002)
Diluted loss per share US$	7	(0.00006)	(0.00003)	(0.00002)

Statement of comprehensive income

	Yea	r ended 31 Decem	ber
	2020 US$000	2019 US$000	2018 US$000
Loss for theyear	(791)	(312)	(248)
Other comprehensive income to be reclassified toprofit or loss in subsequentperiods:
Exchange differences on translatingforeign operations	824	(457)	(2,113)
Other comprehensiveprofit/(loss)for theyear, net of tax	824	(457)	(2,113)
Total comprehensiveprofit/(loss)for theyear	33	(769)	(2,361)

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Financial Statements

Statement of financial position

	Notes	As at 31 December 2020 US$000	As at 31 December 2019 US$000
ASSETS
Non-current assets
Property,plant and equipment	8	536	200
Evaluation and exploration assets	9	27,831	17,935
Trade and other receivables	10	2,193	27
Total		30,560	18,162
Current assets
Trade and other receivables	10	247	1,435
Cash and cash equivalents	11	1,265	1,220
Total		1,512	2,655
Total assets		32,072	20,817
EQUITY AND LIABILITIES
Capital and reserves attributable to shareholders of the Parent
Equityshare capital	13	26,768	19,768
Other reserves		1,421	597
Retained earnings		(2,149)	(1,358)
Total equity		26,040	19,007

Current liabilities
Trade and otherpayables	12	2,222	295
Accountspayable from related entities	14	3,810	1,515
Total		6,032	1,810
Total liabilities		6,032	1,810
Total equityand liabilities		32,072	20,817

These financial statements were approved on November 17[th] 2021 and signed on its behalf by:

Rodrigo Ceballos

Representative

November 17[th] 2021

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Financial Statements

Statement of cash flows

	Year ended 31 December	2018 US$000
2020 US$000 2,509 2 – – 2,511 (294) (8,297) (8,591) 7,000 7,000 920 (875) 1,220 1,265	2019 US$000 208 43 (44) (3) 204 – (717) (717) 492 492 (21) (1,317) 2,558 1,220

		(613)
		22
		(98)
		13
		(676)

		(39)
		(305)
		(344)

		4,032
		4,032
		3,012
		(3,360)
		2,906
		2,558

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Financial Statements

Statement of changes in equity

	Notes	Equity share capital US$000	Cumulative translation adjustment US$000	Total other reserves US$000	Retained earnings US$000	Total equity US$000
Balance at 1 January2018		15,244	3,167	3,167	(798)	17,613
Other comprehensive expense		–	(2,113)	(2,113)	–	(2,113)
Loss for the year		–	–	–	(248)	(248)
Total comprehensive expense for the year		–	(2,113)	(2,113)	(248)	(2,361)
Capital contribution		4,032	–	–	–	4,032
Balance at 31 December 2018	13	19,276	1,054	1,054	(1,046)	19,284
Other comprehensive expense		–	(457)	(457)	–	(457)
Loss for the year		–	–	–	(312)	(312)
Total comprehensive expense for the year		–	(457)	(457)	(312)	(769)
Capital contribution		492	–	–	–	492
Balance at 31 December 2019	13	19,768	597	597	(1,358)	19,007
Other comprehensive expense		–	824	824	–	824
Loss for theyear		–	–	–	(791)	(791)
Total comprehensive expense for theyear		–	824	824	(791)	(33)
Capital contribution		7,000	–	–	–	7,000
Balance at 31 December 2020	13	26,768	1,421	1,421	(2,149)	26,040

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Financial Statements

Notes to the financial statements

1 Corporate information

REE UNO SpA (hereinafter ‘the Company’) is a limited Company incorporated on 28 October 2011 registered in Chile. The Company’s registered office is located at Cerro el Plomo 5630, floor 9, Las Condes, Santiago de Chile, Chile. On 2 October 2019, Minera Hochschild Chile S.C.M., a Chilean subsidiary of the Hochschild Mining Group, acquired 100% interest over the Company and on 27 November 2020 Minera Hochschild Chile S.C.M. sold 100% of the Company´s stake to Hochschild Mining Holdings Ltd, a UK-based subsidiary of the Hochschild Group. The ultimate controlling party of the Company is Mr Eduardo Hochschild whose beneficial interest in the Company and its subsidiaries (together ‘Hochschild Mining Group’) is held through Pelham Investment Corporation, a Cayman Islands Company.

The Company’s principal business is the development of the Penco Module, which is located in Chile.

The Company has one segment, which is the development of their project in Chile. The Company made further good progress with the focus on delivering a first module (the Penco Module) that proves the business case by producing a profitable product. The work in the first stage includes engineering focused on resource estimation for the first 600 hectares (out of a package of 451,581 hectares), developing the corresponding mine plan and improving metallurgical recoveries. Subsequent developmental stages are expected to include optimisation of the metallurgical process, more production modules and vertical integration opportunities. Penco Module results from a Preliminary Economic Assessment were issued on October 15[th] , 2021 whilst the environmental permitting process has also continued into its final stages.

These financial statements were approved for issue on November 17[th] 2021 by Rodrigo Ceballos, representative of the Company.

2 Significant accounting policies

(a) Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB).

The basis of preparation and accounting policies used in preparing the financial statements for the years ended 31 December 2020 and 2019 have been consistently applied and are set out below. The financial statements have been prepared on a historical cost basis.

The financial statements are presented in US dollars (US$) and all monetary amounts are rounded to the nearest thousand ($000) except when otherwise indicated.

The Company is involved in an initial public offering (IPO) process that should be completed before the end of the year (see note 17). The Company is executing the Offering to raise sufficient funds to keep developing the Penco Module, as well as other activities related to exploration, permitting processes and engineering in connection with potential new modules for the following twelve months and beyond. If the Offering is not completed, the Company has the support of Hochschild Mining, which may provide the necessary funds for continued operations (which financial support would terminate effective upon completion of the Offering).

Accordingly, the financial statements have been prepared on the going concern basis.

COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. The Company has been closely monitoring the impact of COVID-19 on all aspects of its business. The COVID-19 pandemic has resulted in governments worldwide enacting measures to combat the spread of the virus, including the implementation of travel bans, quarantine requirements, social distancing, stay at home orders and the closure of non-essential businesses. The future impacts of the pandemic and any resulting economic impact continue to be unknown and evolving. It is not possible to reliably estimate the length and severity of these developments and the impact it may have on the Company and the development of the Penco module. Management will continue to monitor and assess the impact of the pandemic.

Changes in accounting policy and disclosures

Amendments to standards and interpretations which came into force during the years 2019 and 2020 do not have a significant impact on the Company's financial statements and are as follows:

IFRS 16 Leases, applicable for annual periods beginning on or after 1 January 2019.
IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, including the exemptions to recognise assets and liabilities for all leases unless the lease term is twelve months or less or when the underlying asset has a low value. Lease costs will be recognised in the income statement over the lease term in the form of depreciation on the right of use asset and finance charges representing the unwinding of the discount on the lease liability. Lessors continue to

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Financial Statements

classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17 Leases.

The Company has adopted IFRS 16, Leases from 1 January 2019 with no impacts in the financial statements.

• IFRIC 23 Uncertainty over income tax treatments, applicable for annual periods beginning on or after 1 January 2019.

IFRIC 23 clarifies the accounting for uncertainties in income taxes. This interpretation is applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. The Interpretation specifically addresses the following:

Whether an entity considers uncertain tax treatments separately;
The assumptions an entity makes about the examination of tax treatments by taxation authorities;
How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and
How an entity considers changes in facts and circumstances

Upon adoption of the Interpretation, the Company considered whether it has any uncertain tax positions; the taxation authorities may challenge those tax treatments. The Company determined, based on its tax compliance, that it is probable that its tax treatments will be accepted by the taxation authorities. Therefore, the Interpretation does not have a material impact on the financial statements of the Company.

• Conceptual framework, applicable for annual periods beginning on or after 1 January 2020.

The IASB issued the Conceptual Framework (revised) in March 2018. It incorporates new concepts, provides updated definitions and recognition criteria for assets and liabilities, and clarifies some important concepts. The new pronouncement does not have impact on the financial statements of the Company.

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Financial Statements

Notes to the financial statements

• IFRS 3 Definition of a business, applicable for annual periods beginning on or after 1 January 2020.

The IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities determine whether or not an acquired set of activities and assets is a business. The IASB clarifies the minimum requirements to define a business; eliminates assessment of whether market participants are able to replace any missing elements; includes guidance to assist entities in assessing whether an acquired project is substantive; narrows the definition of a business and of products; and introduces an optional fair value concentration test. There is no impact in the Company´s financial statements as the Company does not have any business combination transactions.

• IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Material, applicable for annual periods beginning on or after 1 January 2020.

In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, to align the definition of “material” in all standards and clarify certain aspects of the definition. The new definition establishes that information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The amendment has no impact on the Company’s financial statements.

• IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform, applicable for annual periods beginning on or after 1 January 2020.

The IASB issued these amendments to address the effects of the reform to interbank offered rates (IBORs) in financial reporting. The amendments provide temporary exceptions that allow hedge accounting to continue over the period of uncertainty before existing interest rate benchmarks are replaced by alternative interest risk free rates. The amendments have no impact on the Company’s financial statements.

IFRS 16 COVID-19-Related Rent Concessions, applicable for annual periods beginning on or after 1 June 2020.

In May 2020, the IASB issued an amendment to IFRS 16 Leases to provide relief to lessees applying IFRS 16 guidance in connection with lease modifications and rent concessions that occur as a direct consequence of COVID-19 pandemic. The amendment does not apply to lessors. The amendment has no impact on the Company’s financial statements.

Standards, interpretations and amendments to existing standards that are not yet effective and have not been previously adopted by the Company

(b) Judgements in applying accounting policies and key sources of estimation uncertainty

Significant areas of estimation uncertainty and critical judgements made by management in preparing the financial statements include:

Significant estimates:

Ore reserves and resources – 2(e)

Recoverable values of mining asset

The value of the Company’s mining assets are sensitive to a range of characteristics unique to each mine project. Key sources of estimation for all assets include uncertainty around ore resource estimates. In performing impairment reviews, the Company assesses the recoverable amount of its operating assets principally with reference to fair value less costs of disposal, assessed using an in-situ valuation to estimate the amount that would be paid by a willing third party in an arm’s length transaction. There is judgement involved in determining the assumptions that are considered to be reasonable and consistent with those that would be applied by market participants. Key judgments include the estimation of future rare earths prices, future capital requirements, and exploration potential. Changes in these assumptions will affect the recoverable amount of the evaluation and exploration assets, and intangibles. The first resources report will be ready by the mid October 2021.

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Financial Statements

• Income tax

Judgement is required in determining whether deferred tax assets are recognised on the statement of financial position. Deferred tax assets, including those arising from un-utilised tax losses require management to assess the likelihood that the Company will generate taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realise the net deferred tax assets recorded at the balance sheet date could be impacted.

Critical judgements:

• Determination of functional currencies – 2(c)

• Recognition of evaluation and exploration assets– notes 2(d) and 5.

Judgement is required in determining when the future economic benefit of a project can reasonably be regarded as assured, at which point evaluation and exploration expenses are capitalized. This includes the assessment of whether there is sufficient evidence of the probability of the existence of economically recoverable minerals to justify the commencement of capitalization of costs; the timing of the end of the exploration phase, the start of the development phase; and the commencement of the production phase. For this purpose, the future economic benefit of the project can reasonably be regarded as assured when the Board authorises management to conduct a feasibility study, mine-site exploration is being conducted to convert resources to reserves, or mine-site exploration is being conducted to confirm resources, all of which are based on supporting geological information.

(c) Currency translation

The functional currency for the Company is the Chilean Peso and is determined by the currency of the primary economic environment in which it operates.

The financial statements are presented in US dollars (US$).

(d) Evaluation and exploration assets

(e) Determination of ore reserves and resources

It is the Company’s policy to have the report audited by a Competent Person.

Reserves and resources are used in the units of production calculation for depreciation as well as the determination of the timing of mine closure cost and impairment analysis. As at 31 December 2020 there is no provision of mine closure costs.

(f) Property, plant and equipment

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Notes to the financial statements

of the mine property at which the item is located Estimates of remaining useful lives are made on a regular basis for all mine buildings, machinery and equipment, with annual reassessments for major items. Depreciation is charged to cost of production on a units of production basis for mine buildings and installations and plant and equipment used in the mining production process, or charged directly to the income statement over the estimated useful life of the individual asset on a straight-line basis when not related to the mining production process. Changes in estimates, which mainly affect units of production calculations, are accounted for prospectively. Depreciation commences when assets are available for use. Land is not depreciated.

An asset’s carrying amount is written-down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the net proceeds with the carrying amount and are recognised within other income/expenses, in the income statement.

The expected useful lives under the straight-line method are as follows:

ected useful lives under the	straight-line m
	Years
Buildings	3 to 33
Plant and equipment	5 to 10
Vehicles	5

Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to be ready for its intended use are capitalized as part of the cost of the asset. All other borrowing costs are expensed where incurred. For borrowings associated with a specific asset, the actual rate on that borrowing is used. Otherwise, a weighted average cost of borrowing is used. The Company capitalises the borrowing costs related to qualifying assets with a value of US$1,000,000 or more, considering that the substantial period of time to be ready is six or more months. The Company has not capitalized interest because as it is in the stage previous to construction and consequently does not meet IAS 23 requirements

Mining properties and development costs

When a mine construction project moves into the production stage, the capitalization of certain mine construction costs ceases and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalization relating to mining asset additions or improvements, underground mine development or mineable reserve development. In addition, the revenue generated from the sale of the inventory produced during the pre-operating stage is recognised as a deduction of the costs capitalized for this project.

Construction in progress and capital advances

Assets in the course of construction are capitalized as a separate component of property, plant and equipment when incurred. Once the asset moves into the production phase, the cost of construction is transferred to the appropriate category. Construction in progress is not depreciated.

Subsequent expenditure

Expenditure incurred to replace a component of an item of property, plant and equipment is capitalized separately with the carrying amount of the component being written-off. Other subsequent expenditure is capitalized if future economic benefits will arise from the expenditure. All other expenditure including repairs and maintenance expenditures are recognised in the income statement as incurred.

As at 31 December 2020 the Company does not have any balance of mining properties and development costs and construction in progress and capital advances.

(g) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. The Company does not have assets with an indefinite useful life.

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Calculation of recoverable amount

Reversal of impairment

(h) Trade and other receivables

Current trade receivables are carried at the original invoice amount less provision made for impairment of these receivables. Non-current receivables are stated at amortised cost.

Impairment of financial assets – The company recognizes a value adjustment on expected credit losses (“ECL”) related to financial assets measured at amortized cost or at FVTOCI, lease accounts receivable, amounts owed by customers under construction contracts, as well as loan commitment and financial guarantee contracts. The amount of the expected credit losses is restated at each reporting date to reflect changes in the credit risk since the initial recognition of the corresponding financial asset.

ECL over the life of the asset represent the expected credit losses that will result from all possible non-compliance events during the expected life of a financial instrument. In contrast, the ECL in the next twelve months represents the portion of the s ECL during the life of the asset that are expected to result from a non-compliance event on a financial instrument that is possible within 12 months after the reporting date.

The Company applied a simplified focus to recognize expected credit losses over the life of the asset for its trade and other accounts receivable, as required by IFRS 9. In relation to related parties, management believes that there has not been a significant increase in the credit risk of loans with related parties from initial recognition to December 31, 2020. Consequently, management does not expect to recognize expected credit losses in the next 12 months for loans with related companies. The amount of the provision is the difference between the carrying amount and the recoverable amount and this difference is recognised in the income statement.

(i) Income tax

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Notes to the financial statements

where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

The Company has not recognised deferred taxes as they are not recoverable in a short period of time. Deferred taxes not recognised for the periods 2018, 2019 and 2020 are ThUS$16, ThUS$12 and ThUS$17 respectively.

Accumulated tax losses as at 31 December 2020 are ThUS$2,307

(j) Financial instruments

Financial instruments — initial recognition and subsequent measurement

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

(a) Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through OCI, or fair value through profit or loss.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

Financial assets at amortised cost (debt instruments)
Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
Financial assets at fair value through profit or loss

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Financial Statements

Financial assets at amortised cost (debt instruments)

The Company’s financial assets at amortised cost include trade receivables (not subject to provisional pricing) and other receivables.

Derecognition

The rights to receive cash flows from the asset have expired

Or

Impairment of financial assets

(b) Financial liabilities

Initial recognition and measurement

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Notes to the financial statements

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables and loans..

Subsequent measurement

For purposes of subsequent measurement, financial liabilities are classified in two categories:

Financial liabilities at fair value through profit or loss
Financial liabilities at amortised cost (loans and trade and other payables)

Financial liabilities at fair value through profit or loss

Financial liabilities at amortised cost (loans and trade and other payables)

This category generally applies to interest-bearing loans and borrowings and trade and other payables.

Derecognition

A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.

(c) Offsetting of financial instruments

(k) Cash and cash equivalents

(l) Fair value measurement

In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability

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Financial Statements

The principal or the most advantageous market must be accessible by the Company.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy.

The Company determines the policies and procedures for both recurring fair value measurement and unquoted financial assets, and for nonrecurring measurement.

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

As at 31 December 2020 the Company does not have financial assets fair valued with these valuation techniques, while as of 31 December 2019: there were mutual funds categorized as level 1).

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Financial Statements

Notes to the financial statements

3 Administrative expense

		Year ended 31 December
	2020 US$000 – 179 – 58 237	2019 US$000	2018 US$000
Personnel expenses.1		14	23
Professional fees		–	4
VAT not recoverable		4	–
Depreciation and amortisation		57	63
Total		75	90

1 Personnel expenses were capitalized during the year 2020.

4 Exploration expenses

	Y	ear ended 31 Decemb	er
	2020 US$000	2019 US$000	2018 US$000
Personnel expenses	117	–	–
Professional fees	14	181	66
Miningrights	90	17	–
Rentals	18	19	18
Subscriptions	13	–	–
Repair and maintenance	16	–	–
Analysis	268	–	–
Studies	8	–	–
Others	10	6	1
Total	554	223	85

5 Finance costs

	Year ended 31 December
	2019 US$000 44 1 9 54	2018 US$000
Interests		98
Bank commissions		2
Others		8
Total		108

6 Income tax

		Year ended 31 December
	2020 US$000 – –	2019 US$000	2018 US$000
Current income tax(expense)/credit		(3)	13
Total		(3)	13

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Financial Statements

7 Basic and diluted earnings per share

Earnings per share (‘EPS’) is calculated by dividing profit for the year attributable to equity shareholders by the weighted average number of ordinary shares issued during the year.

The Company does not have dilutive potential ordinary shares.

As at 31 December 2020 and 2019, EPS has been calculated as follows:

As at 31 December 2020 and 2019, EPS has been calculated as follows:
		As at 31 December
	2020	2019	2018
Basic lossper share from continuingoperations
Total for theyear and from continuingoperations(US$)	(0.00006)	(0.00003)	(0.00002)
Diluted lossper share from continuingoperations
Total for theyear and from continuingoperations(US$)	(0.00006)	(0.00003)	(0.00002)

Loss from continuing operations attributable to equity holders is derived as follows:

Loss from continuing operations attributable to equity holders is derived as follows:
		As at	31 December
	2020	2019	2018
Loss attributable to equityholders – continuingoperations(US$000)	(791)	(312)	(248)
The following reflects the share data used in the basic and diluted earnings per share computations:		As at	31 December
	2020	2019	2018
Basic weighted average number of ordinaryshares in issue(thousands)	12,687,274	12,336,704	12,102,715
Effect of dilutivepotential ordinaryshares related to contingentlyissuable shares(thousands)	–	–	–
Weighted average number of ordinaryshares in issue for thepurpose of diluted earningsper share(thousands)	12,687,274	12,336,704	12,102,715

The calculation of the weighted average number of ordinary shares is as follows:

Balance as at 1 January2018 Shares issued 23 October 2018 Balance as at 31 December 2018 Weighted average number of ordinaryshares as at 31 December 2018 Shares issued 4 April 2019 Balance as at 31 December 2019 Weighted average number of ordinaryshares as at 31 December 2019 Shares issued 30 October 2020 Shares issued 31 December 2020 Balance as at 31 December 2020 Weighted average number of ordinaryshares as at 31 December 2020	Number of shares
	12,073,333,334
	153,205,599
	12,226,538,933
	12,102,715,230
	147,831,737
	12,374,370,670
	12,336,703,953
	1,543,220,000
	3,069,160,000
	16,986,750,670
	12,687,273,713

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Financial Statements

Notes to the financial statements

8 Property, plant and equipment

Costplant and equipment Balance at 1 January2019 Foreign exchange effect Balance at 31 December 2019 Additions Foreign exchange effect Balance at 31 December 2020 Accumulated depreciationplant and equipment Balance at 1 January2019 Depreciation of theperiod Foreign exchange effect Balance at 31 December 2019 Depreciation of theperiod Foreign exchange effect Balance at 31 December 2020 Net book value as at 31 December 2019 Net book value as at 31 December 2020 There were no borrowing costs capitalized in property, plant and equipment as there are n There are no restrictions on ownership of property, plant and equipment. There are no capital commitments for property, plant and equipment. As of 31 December 2019 and 2020, the Company has not recognised any impairment.	Land US$000 Plant and equipment US$000 – 489 – (34) – 455 237 57 – 119 237 631 – 220 – 55 – (20) – 255 – 58 – 19 – 332 – 200 237 299 o qualifying assets.	Total US$000

		489
		(34)
		455
		294
		119
		868

		220
		55
		(20)
		255
		58
		19
		332
		200
		536

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Financial Statements

9 Evaluation and exploration assets

Cost Balance at 1 January2019 Additions Foreign exchange effect Balance at 31 December 2019 Additions Foreign exchange effect Balance at 31 December 2020 Accumulated amortisation and impairment Balance at 1 January2019 Amortisation of theperiod Balance at 31 December 2019 Balance at 31 December 2020 Net book value as at 31 December 2019 Net book value as at 31 December 2020	Aclara US$000

	16,352
	717
	874
	17,943
	8,297
	1,599
	27,839

	6
	2
	8
	8
	17,935
	27,831

There were no borrowing costs capitalized in evaluation and exploration assets as there are no qualifying assets.

There are no restrictions on ownership of evaluation and exploration assets.

There are no capital commitments for evaluation and exploration assets.

As of 31 December 2019 and 2020, the Company has not recognised any impairment as no indicators of impairment were identified in the project.

The classification of evaluation and exploration assets is as follows:

The classification of evaluation and exploration assets is as follows:
Cost Rare earthproject.1 Cost ofproductionplant(Corfo) Cost of biodegradable desorbents(Innova Corfo) Research and development studycosts Protection costs rustprocedures(Committee Bío-bio) Total Accumulated amortisation and impairment Amortisation for theyear Total Net book value	31 December 2020 US$000 27,200 461 123 45 10 27,839 8 8 27,831	31 December 2019 US$000

		17,336
		438
		117
		42
		10
		17,943

		8
		8
		17,935

1 According the policy of capitalization of evaluation and exploration expenses, costs of mineral properties are capitalized as exploration and evaluation assets on a project-by-project basis. As at 31 December 2020 the Company only have one project named Aclara. The Company capitalizes expenses related to researching and analysing historical exploration data, gathering exploration data through geophysical studies, exploratory drilling and sampling, determining and examining the volume and grade of the resource, surveying transportation and infrastructure requirements, and conducting market and finance studies.

After the company was bought by the Hochschild Mining Group, investment in the project increased. The total capitalized in the 2020 period amounting to US$ 8,297 is detailed below:

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Financial Statements

Notes to the financial statements

Personnel expenses Professional fees Environmental impact study Geochemical study Diamond drilling Engineeringservices Miningrights Feasibilitystudies Other Total	Aclara US$000
	1,527
	1,034
	446
	209
	1,195
	1,244
	180
	93
	2,369
	8,297

10 Trade and other receivables

Current Advances to suppliers Loans to employees Others Assets classified as receivables Prepaid expenses Value added tax Total Non-current Value added tax Others Total	As at 31 December 2020 US$000	As at 31 December 2019 US$000

	234	4
	13	–
	–	4
	247	8
	–	3
	–	1,424
	247	1,435

	2,166	–
	27	27
	2,193	27

The fair values of trade and other receivables approximate their book value.

As at 31 December 2020 and 2019, none of the financial assets classified as receivables (net of impairment) were past due.

11 Cash and cash equivalents

Current demand deposit accounts Time deposits Mutual funds Cash and cash equivalents considered for the statement of cash flows	As at 31 December 2020 US$000 1,265 – – 1,265	As at 31 December 2019 US$000
		403
		801
		16
		1,220

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Financial Statements

The composition of the item as of 31 December 2019 and 2020 is as follows:

Chileanpesos 000(equivalent US$000) US$ dollars 000 US$ dollars 000	As at 31 December 2020 US$000 384 881 1,265	As at 31 December 2019 US$000
		179
		1,041
		1,220

12 Trade and other payables

Tradepayables1 Taxes and contributions Salaries and wagespayable2 Others Total	As at 31 December 2020 US$000 1,608 47 341 226 2,222	As at 31 December 2019 US$000
		137
		12
		17
		129
		295

The fair value of trade and other payables approximate their book values.

1 Trade payables relate mainly to the acquisition of materials, supplies and contractors’ services. These payables do not accrue interest and no guarantees have been granted. The Company does not have significant suppliers whose liabilities exceed 10% of this item.

2 Salaries and wages payable relates to remuneration payable.

13 Equity

(a) Share capital

Issued share capital and additional capital

The changes in share capital are as follows:

Number of shares type A Balance as at 1 January2019 11,826,538,933 Shares issued 547,831,737 Balance as at 31 December 2019 12,374,370,670 Shares issued 4,612,380,000 Additional capital – Balance as at 31 December 2020 16,986,750,670	Number of shares type B Share capital US$000 Additional Capital US$000 Total US$000
	400,000,000 19,276 – 19,276
	(400,000,000) 492 – 492
	– 19,768 – 19,768
	– 6,000 – 6,000
	– – 1,000 1,000
	– 25,768 1,000 26,768

(b) Other reserves

Cumulative translation adjustment

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Financial Statements

Notes to the financial statements

14 Related-party balances and transactions

(a) Related-party accounts receivable and payable

The Company had the following related-party balances and transactions during the years ended 31 December 2020 and 2019. The related parties are companies owned or controlled by the main shareholder of the parent Company or associates.

Current relatedpartybalances Hochschild MiningHoldings Ltd Compañia Minera Ares S.A.C. Minera Hochschild Chile SCM Total		Accountspayable As at 31 December As at 31 December	Accountspayable As at 31 December As at 31 December
		As at 31 December
		2020 US$000 2,500 875 435 3,810	2019 US$000

			–
			502
			1,013
			1,515

As at 31 December 2020 and 2019, all accounts are, or were, non-interest bearing and payable on demand.

No security has been granted or guarantees given by the Company in respect of these related party balances. Principal transactions between affiliates are as follows:

Principal transactions between affiliates are as follows:
Expense recognized for the servicesperformed byCompañia Minera Ares S.A.C. Loan from Hochschild MiningHoldings Ltd	2020 US$000 – (549) 2,500	2019 US$000
		–
		(326)
		–

Related parties are as follows:

Minera Hochschild Chile SCM Hochschild MiningHoldings Ltd. Compañía Minera Ares S.A.C.	Relationship Common owners Parent Common owners	Country Chile Perú Perú	Type of transaction
			Loans
			Loans
			Intercompanyadministrative services

(b) Compensation of key management personnel of the Company

(b) Compensation of key management personnel of the Company
Compensation of keymanagementpersonnel Short-term employee benefits Total compensationpaid to keymanagementpersonnel		Year ended 31 December
	2020 US$000 192 192	2019 US$000 – –	2018 US$000
			–
			–

Number of key management of the Company was nil at 31 December 2018 and 2019, and two at 31 December 2020.

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Financial Statements

15 Notes to the statement of cash flows

		As at 31 December
	2020 US$000 (791) 58 (2) 2 – (978) 4,220 2,509	2019 US$000 (312) 57 (43) 54 3 37 412 208	2018 US$000
Reconciliation of loss for theyear to net cashgenerated from operatingactivities
Loss for theyear			(248)
Adjustments to reconcile Companyloss to net cash inflows from operatingactivities
Depreciation			63
Finance income			(22)
Finance costs			108
Income tax expense			(13)
Increase/(decrease)of cash flows from operations due to changes in assets and liabilities
Trade and other receivables			(33)
Trade and otherpayables			(468)
Cashgenerated from operations			(613)

16 Contingencies

a) Taxation:

As at 31 December 2020 and 2019, the Company is not subject to any contingencies.

b) Guarantees:

The Company does not have any guarantee in respect of exploration activities.

c) Litigations:

The main litigation currently affecting the Penco Module is an arbitration proceeding initiated by Madesal SpA ("Madesal") before the arbitrator Mr. Roberto Guerrero del Rio. The grounds for this claim are an alleged violation of an agreement executed between the parties in 2014 and 2015 (the "MOU and its Addendum") by way of which Madesal would have been granted by the former owner of the Penco Module the status of "strategic partner" in the future development of the project in the Madesal's property called "Fundo El Cabrito". Nevertheless, it was subsequently decided for technical and environmental reasons that the Penco Module would be developed in a different location and that, therefore, no mining easement on Madesal's property was necessary. Madesal is seeking specific performance of the obligations allegedly derived from the MOU and its Addendum, plus damages. Requested damages amount to approximately US$28 million. The Company is currently defending the case and maintains that the MOU and its Addendum were merely preparatory contracts for the execution of two legal mining easements: one for exploration and the other for exploitation in Fundo El Cabrito and that these activities were always subject to the results of the respective economic, technical and environmental studies, which eventually led to the decision to continue the development of the project elsewhere. No other contractual relationship or joint venture is considered to have arisen from these agreements and since they and the respective mining easements have terminated, Madesal has no right or expectation over any future development of the Penco Module. No provision has been booked because an unfavourable outcome is not considered probable.

17 Financial risk management

The Company is exposed to a variety of risks and uncertainties which may have a financial impact on the Company.

The Company identify and, where appropriate, implement the controls to mitigate the impact of significant risks.

(a) Foreign currency risk

The Company is in the pre-operational stage, no income or operating costs have been recorded. The main disbursements are in Chilean pesos.

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Financial Statements

Notes to the financial statements

As at 31 December 2020, the Company has deposits, trade and other payables and account payables to related parties stated in US$ dollars. The sensitivity of financial assets and liabilities, at 31 December 2020 to a +/- 10% change in the US dollar exchange rate, with all other variables held constant, is -/+US$300,000.

(b) Credit risk

(c) Liquidity risk

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Financial Statements

	Less than 1 year US$000	Between 1 and 2 years US$000	Between 2 and 5 years US$000	Over 5 years US$000	Total US$000
At 31 December 2020
Trade and otherpayables	2,222	–	–	–	2,222
Trade and otherpayables relatedparties	3,810	–	–	–	3,810
Total	6,032	–	–	–	6,032
At 31 December 2019
Trade and otherpayables	295	–	–	–	295
Trade and otherpayables relatedparties	1,515	–	–	–	1,515
Total	1,810	–	–	–	1,810

(d) Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. Management considers as part of its capital, the financial sources of funding from shareholders and third parties.

(e) Environmental risk

18 Subsequent events

The Company is involved in an initial public offering (IPO) process that should be completed before the end of the year. Hochschild Mining Holdings Ltd. decided to list the Company in the Toronto Stock Exchange (TSX) through an IPO of a new Canadian company. For this, the following steps have been completed on October 15th, 2021:
a) HM Holdings has incorporated a new Canadian company, Aclara Resources Inc., and also a branch of this company in Chile (the Aclara Resources Inc., Agencia en Chile).
b) HM Holdings has contributed all its shares in REE UNO SpA to Aclara Resources Inc. in exchange of shares of Aclara Resources Inc.
c) Immediately thereafter, Aclara Resources Inc. has allocated all of its shares in REE Uno SpA in its Branch in Chile.

On September 8[th] 2021 the Company capitalized the loan payable to Hochschild Mining Holdings Ltd. amounting to US$2,500,000 plus the additional loan made in 2021 amounting to US$1,000,000, and issued 2,712,990,000 shares. With the same date, the Company also capitalized additional capital of US$ 1,000,000 plus the additional capital contributed by Hochschild Mining Holdings Ltd. amounting US$ 8,750,000, and issued 7,114,871,500 shares. On October 15[th] , the Company capitalized the additional capital contributed by Hochschild Mining Holdings Ltd. amounting US$ 1,500,000, and issued 1,152,447,797. As of October 15[th] , the new total amount of shares of the Company is 27,967,059,967.
On October 26[th] , the Company received a related party loan of US$ 1,500,000 from Hochschild Mining Holdings Ltd.. The loan has a duration of 3 months and an annual interest rate of 5.0%. The purpose of this loan is to fund the Company´s activities until the completion of the IPO process.

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APPENDIX A – MANDATE OF THE BOARD OF DIRECTORS

MANDATE OF THE BOARD OF DIRECTORS

1. Introduction

The members of the board of directors (respectively, the “ Directors ” and the “ Board ”) of Aclara Resources Inc. (the “ Company ”) are elected by the shareholders of the Company and are responsible for the stewardship of the Company. The purpose of this mandate (the “ Board Mandate ”) is to describe the principal duties and responsibilities of the Board, as well as some of the policies and procedures that apply to the Board in discharging its duties and responsibilities.

Certain aspects of the composition and organization of the Board are prescribed and/or governed by the Business Corporations Act (British Columbia) and the constating documents of the Company, and applicable agreements, including the investor rights agreement between the Company and  (the “ Investor Rights Agreement ”). Certain of the provisions of the Board Mandate may be modified or superseded by the provisions of the Investor Rights Agreement. In the event of a conflict between this Board Mandate and the Investor Rights Agreement, the Investor Rights Agreement shall prevail.

2. Chairman

The chair of the Board (the “ Chairman ”) shall be appointed by the Board.

3. Board Size

The constating documents of the Company provide that the Board shall be comprised of a minimum of three (3) Directors and a maximum of fifteen (15) Directors. The Board shall periodically review its size in light of its duties and responsibilities from time to time.

4. Independence

(a) The Board shall be comprised of a minimum of 3 (three) independent Directors. A Director shall be considered independent if he or she would be considered independent for the purposes of National Instrument 58-101 – Disclosure of Corporate Governance Practices .
(b) A majority of the Board’s independent Directors shall appoint an independent lead Director (the “ Lead Independent Director ”) from among the Directors, who shall serve for such term as the Board may determine. If the Company has a non-executive Chairman, then the role of the Lead Independent Director shall be filled by the non-executive Chairman. The Lead Independent Director shall chair any meetings of the independent Directors and assume such other responsibilities as the independent Directors may designate in accordance with any applicable position descriptions or other applicable guidelines that may be adopted by the Board from time to time. The Lead Independent Director may be removed at any time at the discretion of the Board.

5. Role and Responsibilities of the Board

The Board is responsible for supervising the management of the business and affairs of the Company and is expected to focus on guidance and strategic oversight with a view to increasing shareholder value.

In accordance with the Business Corporations Act (British Columbia), in discharging his or her duties, each Director must act honestly and in good faith, with a view to the best interests of the Company. Each Director must also exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

A-1

(a) The Chairman shall be responsible for establishing or causing to be established the agenda for each Board meeting, and for ensuring that regular minutes of Board proceedings are kept and circulated on a timely basis for review and approval.
(b) The Board may invite, at its discretion, any other individuals to attend its meetings. Senior executives of the Company shall attend a meeting if invited by the Board.

6. Delegations and Approval Authorities

(a) The Board shall appoint the chief executive officer of the Company (the “ CEO ”) and delegate to the CEO and other senior executives the authority over the day to day management of the business and affairs of the Company.
(b) The Board may delegate certain matters it is responsible for to the committees of the Board, currently consisting of the Audit Committee, and the Corporate Governance, Nominating and Compensation Committee (the “ Corporate Governance, Nominating and Compensation Committee ”), and the Sustainability Committee (the “ Sustainability Committee ”). The Board may appoint other committees, as it deems appropriate, subject to compliance with the Investor Rights Agreement and to the extent permissible under applicable law. The Board will, however, retain its oversight function and ultimate responsibility for such matters and associated delegated responsibilities.

7. Strategic Planning Process and Risk Management

(a) The Board shall adopt a strategic planning process to establish objectives and goals for the Company’s business and shall review, approve and modify as appropriate the strategies proposed by senior executives to achieve such objectives and goals. The Board shall review and approve, at least on an annual basis, a strategic plan which takes into account, among other things, the opportunities and risks of the Company’s business and affairs.
(b) The Board, in conjunction with management, shall be responsible to identify the principal risks of the Company’s business and oversee management’s implementation of appropriate systems to seek to effectively monitor, manage and mitigate the impact of such risks. Pursuant to its duty to oversee the implementation of effective risk management policies and procedures, the Board may delegate to applicable Board committees the responsibility for assessing and implementing appropriate policies and procedures to address specified risks, including delegation of financial and related risk management to the Audit Committee and delegation of risks associated with compensation policies and practices to the Corporate Governance, Nominating and Compensation Committee.

8. Succession Planning, Appointment and Supervision of Senior Executives

(a) The Board shall approve the corporate goals and objectives of the CEO and review the performance of the CEO against such corporate goals and objectives. The Board shall take steps to satisfy itself as to the integrity of the CEO and other senior executives of the Company and that the CEO and other senior executives create a culture of integrity throughout the organization.
(b) The Board shall approve the succession plan for the Company, including the selection, appointment, supervision and evaluation of the senior executives of the Company, and shall also approve the compensation of the senior executives of the Company upon recommendation of the Corporate Governance, Nominating and Compensation Committee.

9. Financial Reporting and Internal Controls

The Board shall review and monitor, with the assistance of the Audit Committee, the adequacy and effectiveness of the Company’s system of internal control over financial reporting, including any significant deficiencies or changes in internal control and the quality and integrity of the Company’s external financial reporting processes.

A-2

10. Regulatory Filings

The Board shall approve applicable regulatory filings that require or are advisable for the Board to approve, which the Board may delegate in accordance with Section 7(b) of this mandate. These include, but are not limited to, the annual audited financial statements, interim financial statements and related management’s discussion and analysis accompanying such financial statements, management proxy circulars, annual information forms, offering documents and other applicable disclosure.

11. Corporate Disclosure and Communications

The Board will seek to ensure that corporate disclosure of the Company complies with all applicable laws, rules and regulations and the rules and regulations of the stock exchanges upon which the Company’s securities are listed. In addition, the Board shall adopt appropriate procedures designed to permit the Board to receive feedback from shareholders on material issues.

12. Corporate Policies

The Board shall adopt and periodically review policies and procedures designed to ensure that the Company and its Directors, officers and employees comply with all applicable laws, rules and regulations and conduct the Company’s business ethically and with honesty and integrity.

13. Review of Mandate

The Board may, from time to time, permit departures from the terms of this Board Mandate, either prospectively or retrospectively. This Board Mandate is not intended to give rise to civil liability on the part of the Company or its Directors or officers to shareholders, security holders, customers, suppliers, competitors, employees or other persons, or to any other liability whatsoever on their part.

The Board may review and recommend changes to the Board Mandate from time to time and the Corporate Governance, Nominating and Compensation Committee may periodically review and assess the adequacy of this mandate and recommend any proposed changes to the Board for consideration.

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APPENDIX B – AUDIT COMMITTEE CHARTER

AUDIT COMMITTEE CHARTER

This charter (the “ Charter ”) sets forth the purpose, composition, responsibilities and authority of the Audit Committee (the “ Committee ”) of the board of directors (the “ Board ”) of Aclara Resources Inc. (the “ Company ”).

1. Statement of Purpose

The purpose of the Committee is to assist the Board in fulfilling its oversight responsibilities with respect to:

financial reporting and related financial disclosure;
the implementation of risk management and internal control over financial reporting and disclosure controls and procedures;
external and internal audit processes;
financial risk exposures; and
risk management policies.

2. Committee Membership

The Committee shall consist of as many directors of the Board as the Board may determine (the “ Members ”), but in any event, not less than three (3) Members. Each Member shall meet the criteria for independence and financial literacy established by applicable laws and the rules of any stock exchanges upon which the Company’s securities are listed, including National Instrument 52-110 – Audit Committees (“ NI 52-110 ”) subject to any exceptions permitted under NI 52-110.

Members shall be appointed by the Board, taking into account any recommendation that may be made by the Compensation, Nominating and Corporate Governance Committee of the Board (the “ CNCG Committee ”). Any Member may be removed and replaced at any time by the Board, and will automatically cease to be a Member if he or she ceases to meet the qualifications required of Members. The Board will fill vacancies on the Committee by appointment from among qualified directors of the Board, taking into account any recommendation that may be made by the CNCG Committee. If a vacancy exists on the Committee, the remaining Members may exercise all of its powers so long as there is a quorum in accordance with Section 3 below.

Chair

The Board will designate one of the independent directors of the Board to be the chair of the Committee (the “ Chair ”), taking into account any recommendation that may be made by the Nominating and Compensation Committee.

Qualifications

At least three (3) Members shall be independent and financially literate as described above. Members must have suitable experience and must be familiar with auditing and financial matters.

Attendance of Ex Officio Members, Management and other Persons

The Committee may invite, at its discretion, senior executives of the Company or such persons as it sees fit to attend meetings of the Committee and to take part in the discussion and consideration of the affairs of the Committee. The Committee may also require senior executives or other employees of the Company to produce such information and reports as the Committee may deem appropriate in the proper exercise of its duties. Senior executives and other employees of the Company shall attend a Committee meeting if invited by the Committee. The Committee may meet without senior executives in attendance for a portion of any meeting of the Committee.

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Delegation

Subject to applicable law, the Committee may delegate any or all of its functions to any of its Members or any subset thereof, or other persons, from time to time as it sees fit.

3. Committee Operations

Meetings

The Chair, in consultation with the other Members, shall determine the schedule and frequency of meetings of the Committee. Meetings of the Committee shall be held at such times and places as the Chair may determine. To the extent possible, advance notice of each meeting will be given to each Member unless all Members are present and waive notice, or if those absent waive notice before or after a meeting. Members may attend all meetings of the Committee either in person or by telephone, video or other electronic means. Powers of the Committee may also be exercised by written resolutions signed by all Members.

At the request of the external auditors of the Company, the Chief Executive Officer or the Chief Financial Officer of the Company or any Member, the Chair shall convene a meeting of the Committee. Any such request shall set out in reasonable detail the business proposed to be conducted at the meeting so requested.

Agenda and Reporting

To the extent possible, in advance of every regular meeting of the Committee, the Chair shall prepare and distribute, or cause to be prepared and distributed, to the Members and others as deemed appropriate by the Chair, an agenda of matters to be addressed at the meeting together with appropriate briefing materials. The Committee may require senior executives and other employees of the Company to produce such information and reports as the Committee may deem appropriate in order for it to fulfill its duties.

The Chair shall report to the Board on the Committee’s activities since the last Board meeting. However, the Chair may report orally to the Board on any matter in his or her view requiring the immediate attention of the Board. The Committee shall oversee the preparation of, review and approve the applicable disclosure relating to the Committee for inclusion in the Company’s annual information form (the “ AIF ”).

Secretary and Minutes

The secretary of the Company may act as secretary of the Committee unless an alternative secretary is appointed by the Committee. The secretary of the Committee shall keep regular minutes of Committee proceedings and shall circulate such minutes to all Members and to the chair of the Board (and to any other director of the Board that requests that they be sent to him or her) on a timely basis.

Quorum and Procedure

A quorum for any meeting of the Committee will be a simple majority. The procedure at meetings will be determined by the Committee. The powers of the Committee may be exercised by a simple majority of Members at a meeting where a quorum is present or by resolution in writing signed by all Members. In the absence of the Chair, the Committee may appoint one of its other Members to act as Chair of any meeting.

Exercise of Power between Meetings

Between meetings, the Chair, or any Member designated for such purpose by the Committee, may, if required in the circumstance, exercise any power delegated by the Committee on an interim basis. The Chair or other designated Member will promptly report to the other Members in any case in which this interim power is exercised.

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4. Duties and Responsibilities

The Committee is responsible for performing the duties set out below and any other duties that may be assigned to it by the Board as well as any other functions that may be necessary or appropriate for the performance of its duties.

Financial Reporting and Disclosure

Review and recommend to the Board for approval, the audited annual financial statements, including the auditors’ report thereon, the quarterly financial statements, annual and quarterly management’s discussion and analysis, financial reports, and other applicable financial disclosure, prior to the public disclosure of such information.

Review and recommend to the Board for approval, where appropriate, financial information contained in any prospectuses, AIFs, annual reports to shareholders, management proxy circulars, material change disclosures of a financial nature and similar disclosure documents prior to the public disclosure of such documents or information.

Review with senior executives of the Company, and with external auditors, significant accounting principles and disclosure issues and alternative treatments under International Financial Reporting Standards (“IFRS”), with a view to gaining reasonable assurance that financial statements are accurate, complete and present fairly the Company’s financial position and the results of its operations in accordance with IFRS, as applicable.

Seek to ensure that adequate procedures are in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements, other than the public disclosure in financial statements, the annual and interim earnings press releases and the AIF, and periodically assess the adequacy of those procedures.

Internal Controls and Internal Audit

Review the adequacy and effectiveness of the Company’s internal control and management information systems through discussions with senior executives of the Company and the external auditor relating to the maintenance of (i) necessary books, records and accounts in sufficient detail to accurately and fairly reflect the Company’s transactions; (ii) effective internal control over financial reporting; and (iii) adequate processes for assessing the risk of material misstatements in the financial statements and for detecting control weaknesses or fraud. From time to time the Committee shall assess any requirements or changes with respect to the establishment or operations of the internal audit function having regard to the size and stage of development of the Company at any particular time.

Satisfy itself, through discussions with senior executives of the Company that the adequacy of internal controls, systems and procedures has been periodically assessed in accordance with regulatory requirements and recommendations.

Review and discuss the Company’s major financial risk exposures and the steps taken to monitor and control such exposures, including the use of any financial derivatives and hedging activities.

Review and make recommendations to the Board regarding, the adequacy of the Company’s risk management policies and procedures with regard to identification of the Company’s principal risks and implementation of appropriate systems and controls to manage such risks including an assessment of the adequacy of insurance coverage maintained by the Company.

Periodically review the Company’s policies and procedures for reviewing and approving or ratifying related party transactions.

External Audit

Recommend to the Board a firm of external auditors to be nominated for appointment as the external auditor of the Company.

Ensure the external auditors report directly to the Committee on a regular basis.

Review the independence of the external auditors.

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Review and recommend to the Board the fee, scope and timing of the audit and other related services rendered by the external auditors.

Review the audit plan of the external auditors prior to the commencement of any audit.

Establish and maintain a direct line of communication with the Company’s external auditors.

Meet in camera with (i) only the auditors, (ii) only senior executives of the Company (without the auditors present), or (iii) only the Members (without the auditors or senior executives of the Company present), where and to the extent that such parties are present, at any meeting of the Committee.

Oversee the work of the external auditors of the Company with respect to preparing and issuing an audit report or performing other audit or review services for the Company, including the resolution of issues between senior executives of the Company and the external auditors.

Review the results of the external audit and the external auditor’s report thereon, including discussions with the external auditors as to the quality of accounting principles used and any alternative treatments of financial information that have been discussed with senior executives of the Company and any other matters.

Review any material written communications between senior executives of the Company and the external auditors and any significant disagreements between the senior executives and the external auditors.

Discuss with the external auditors their perception of the Company’s financial and accounting personnel, records and systems, the cooperation which the external auditors received during their course of their review and availability of records, data and other requested information and any recommendations with respect thereto.

Discuss with the external auditors their perception of the Company’s identification and management of risks, including the adequacy or effectiveness of policies and procedures implemented to mitigate such risks.

Review the reasons for any proposed change in the external auditors which is not initiated by the Committee or Board and any other significant issues related to the change, including the response of the incumbent auditors, and enquire as to the qualifications of the proposed auditors before making its recommendations to the Board.

Review annually a report from the external auditors in respect of their internal quality control procedures, any material issues raised by the most recent internal quality control review, or peer review of the external auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditors, and any steps taken to address any such issues.

Associated Responsibilities

Monitor and periodically review the Whistleblower Policy of the Company and associated procedures for:

the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters;
the confidential, anonymous submission by directors, officers and employees of the Company of concerns regarding questionable accounting or auditing matters; and
if applicable, any violations of applicable law, rules or regulations that relates to corporate reporting and disclosure, or violations of the Company’s Code of Ethics.

Review and approve the Company’s hiring policies regarding employees and partners, and former employees and partners, of the present and former external auditors of the Company.

Non Audit Services

Pre approve all non-audit services to be provided to the Company or any subsidiary entities by its external auditors or by the external auditors of such subsidiary entities. The Committee may delegate to one or more of its Members the authority

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to pre approve non audit services but pre approval by such Member or Members so delegated shall be presented to the full Committee at its first scheduled meeting following such pre approval.

Other Duties

Direct and supervise the investigation into any matter brought to its attention within the scope of the Committee’s duties. Perform such other duties as may be assigned to it by the Board from time to time or as may be required by applicable law.

5. The Committee Chair

In addition to the responsibilities of the Chair described above, the Chair has the primary responsibility for overseeing and reporting on the evaluations to be conducted by the Committee, as well as monitoring developments with respect to accounting and auditing matters in general and reporting to the Committee on any related significant developments.

6. Committee Evaluation

The performance of the Committee shall be evaluated by the Board as part of its regular evaluation of the Board committees.

7. Access to Information and Authority to Retain Independent Advisors

The Committee shall be granted unrestricted access to all information regarding the Company that is necessary or desirable to fulfill its duties and all directors of the Company, officers and employees will be directed to cooperate as requested by Members. The Committee has the authority to retain, at the Company’s expense, independent legal, financial, and other advisors, consultants and experts to assist the Committee in fulfilling its duties and responsibilities, including sole authority to retain and to approve their fees. The Committee shall select such advisors, consultants and experts after taking into consideration factors relevant to their independence from management and other relevant considerations.

The Committee shall discharge its responsibilities, and shall assess the information provided by the Company’s management and the external advisors, in accordance with its business judgment. Members are entitled to rely, absent knowledge to the contrary, on the integrity of the persons and organizations from whom they receive information, and on the accuracy and completeness of the information provided. Nothing in this Charter is intended or may be construed as imposing on any member of the Committee or the Board a standard of care or diligence that is in any way more onerous or extensive than the standard to which members of the Board are subject under applicable law.

The Committee also has the authority to communicate directly with internal and external auditors. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate or comply with IFRS and other applicable requirements. These are the responsibilities of the senior executives of the Company responsible for such matters and the external auditors. The Committee, the Chair and any Members identified as having accounting or related financial expertise are members of the Board, appointed to the Committee to provide broad oversight of the financial, risk and control related activities of the Company, and are specifically not accountable or responsible for the day to day operation or performance of such activities. Although the designation of a Member as having accounting or related financial expertise for disclosure purposes is based on that individual’s education and experience, which that individual will bring to bear in carrying out his or her duties on the Committee, such designation does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Committee and the Board in the absence of such designation. Rather, the role of a Member who is identified as having accounting or related financial expertise, like the role of all Members, is to oversee the process, not to certify or guarantee the internal or external audit of the Company’s financial information or public disclosure. This Charter is not intended to change or interpret the constating documents of the Company or applicable law or stock exchange rule to which the Company is subject, and this Charter should be interpreted in a manner consistent with the constating documents of the Company and all applicable laws and rules. Certain of the provisions of this Charter may be modified or superseded by the provisions of the investor rights agreement between the Company and certain of its shareholders (the “ Investor Rights Agreement ”). In the event of a conflict between this Charter and the Investor Rights Agreement, the Investor Rights Agreement shall prevail.

The Board may, from time to time, permit departures from the terms of this Charter, either prospectively or retrospectively. This Charter is not intended to give rise to civil liability on the part of the Company or its directors or officers

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to shareholders, security holders, customers, suppliers, competitors, employees or other persons, or to any other liability whatsoever on their part.

8. Review of Charter

The Committee shall periodically review and assess the adequacy of this Charter and recommend any proposed changes to the Board for consideration.

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CERTIFICATE OF THE COMPANY

Dated: November 19, 2021

This amended and restated prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this amended and restated prospectus as required by the securities legislation of each of the provinces and territories of Canada, other than Québec.

(Signed) Ramon Barua Chief Executive Officer

(Signed) Francois Motte Sauter Chief Financial Officer

On behalf of the Board of Directors

(Signed) Ignacio Bustamante (Signed) Sanjay Sarma Director Director

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CERTIFICATE OF THE PROMOTER

Dated: November 19, 2021

HOCHSCHILD MINING PLC

(Signed) Ignacio Bustamante Chief Executive Officer

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AI assistant

Aclara Resources Inc. — Capital/Financing Update 2021

48255_rns_2021-11-19_9dbb95ac-ae46-42d2-8228-0af5cbb6abb1.pdf

New Issue Prospectus

ACLARA RESOURCES INC.

Distribution in specie by Hochschild Mining PLC of

 Common Shares of Aclara Resources Inc.

The Common Shares are not available for purchase pursuant to this prospectus, and no funds are to be received by the Company or Hochschild Mining from the distribution of the Common Shares.

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

CURRENCY AND EXCHANGE RATE DATA

FORWARD-LOOKING INFORMATION

SCIENTIFIC AND TECHNICAL DISCLOSURE

MARKET AND INDUSTRY DATA

ELIGIBILITY FOR INVESTMENT

PROSPECTUS SUMMARY

THE DEMERGER SUMMARY

Conditions to the Demerger Dividend

Value and Ratio of the Demerger Dividend

Record Time of the Demerger Dividend

Qualification of the Demerged Aclara Shares

Depositary Interests

Certificated UK Shareholders

BUSINESS OF ACLARA

PRINCIPAL FEATURES OF ACLARA’S BUSINESS

Our Product: Heavy Rare Earth Elements (“HREE”) are critical to the global clean energy transition

Penco Module’s Estimated Basket Economics (% Value by REE)

Comparable Peers Rare Earth Element Basket Values

Our Deposit: Aclara offers a superior source of HREE outside of China

Our Sustainable Operations: We believe that our environmental, social and governance (“ESG”) advantage ideally positions Aclara to become the sustainable REE supplier of choice for the world’s leading clean-tech companies

Our End-Market: Compelling market backdrop for REE underpinned by exponential demand growth and constrained supply

Forecast Global Sales of Electric Vehicles (Millions of Vehicles)

Forecast Global Offshore Wind Demand (GW)

Permanent Magnets Demand 2020-2030

Our Growth Objectives:

Robust Starter Project

Penco Module EBITDA Forecast (US$M)

Multi-Pronged Organic Growth Strategy

SUMMARY OF CONCURRENT INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT

RISK FACTORS

SELECTED FINANCIAL INFORMATION

Income statement data:

CORPORATE STRUCTURE

Name and Incorporation

BUSINESS OF THE COMPANY

Our Business

Principal Features of our Business

Our Product: HREE are critical to the global clean energy transition

Penco Module’s Estimated Basket Economics (% Value by REE)

Comparable Peers Rare Earth Element Basket Values

Our Deposit: Aclara offers a superior source of HREE outside of China

Our Sustainable Operations: We believe that our ESG advantage ideally positions Aclara to become the sustainable REE supplier of choice for the world’s leading clean-tech companies

Our End-Market: Compelling market backdrop for REE underpinned by exponential demand growth and constrained supply

Forecast Global Sales of Electric Vehicles (Millions of Vehicles)

Forecast Global Offshore Wind Demand (GW)

Our Growth Objectives:

Robust Starter Project

Penco Module EBITDA Forecast (US$M)

Multi-Pronged Organic Growth Strategy

Our Team: Highly qualified management team with extensive expertise in developing and operating projects within the extractive industry in Latin America, who benefit from an established relationship with our Principal Shareholders

Competitive Conditions

Price of Rare Earth Elements

Specialized Skills and Knowledge

Employees

Foreign Operations

Corporate Structure Controls

Management Experience in Chile

Operations in Chile

Business Language in Chile

Internal Control Over Financial Reporting

Regulatory Framework

Environmental, Health and Safety Matters

Social and Environmental Policies

INDUSTRY OVERVIEW

The Role of REE

2020 Estimated REE Production by Country

REE are a Rapidly Growing Market

Permanent Magnets in a Green Economy

Dy Supply vs. Demand (tonnes)

Source: CRU

Aclara Resources Inc. Capital/Financing Update 2021