ASTRON LIMITED — Capital/Financing Update 2012

Apr 30, 2012

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Open Briefing CEO on Donald Project and Company Update

Open Briefing interview with CEO Hayden Stockdale

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Astron Limited Level 2 88 Collins St Street Melbourne Vic 3000

In this Open Briefing[®] , CEO Hayden Stockdale discusses

• Donald Mineral Sands Project

• Funding and development plan

• Company redomicile to Hong Kong

Record of interview:

openbriefing.com

Astron Limited (ASX: ATR) recently received shareholder approval for its proposed change of domicile to Hong Kong, and pending court approval today, the redomicile will take effect around mid May. What is the rationale for the move and what will it mean for your Australian shareholders?

CEO Hayden Stockdale

We have a long and successful history of operating in China, having built from scratch a business that dominated the downstream processing and marketing of zirconia materials in that country. Quite a feat for a western company! We sold our zirconia materials business in 2008 and continue to operate very effectively in China and believe having our corporate base in Hong Kong more accurately reflects our company’s profile – which is both Australian and Chinese.

But let me make one thing very clear – at present we have no intention of listing in Hong Kong. We believe the ASX gives us all we want in a listing venue: access to capital; access to sophisticated, active investors both institutional and retail; access to experienced research analysts; and a well respected regulatory regime.

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Astron is currently developing the Donald Mineral Sands Project (ATR 100%) in western Victoria. A feasibility study is currently underway and in December the heavy minerals (HM) resource of the project was upgraded to 194 million tonnes[i] , based on a recalculated HM sand resource of 4,040 million tonnes[i] grading at an average of 4.8% HM[i] . How is the Donald Project positioned in the global mineral sands sector?

CEO Hayden Stockdale

Our Donald Project will completely change the face of the global mineral sands industry. It will be to mineral sands what the Pilbara region is to iron ore.

ASX Announcement: 1 May 2012/Open Briefing®/Astron Limited

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One of the features of mineral sands is that you get coarse grain strand lines formed by pre-historic wave action that created very long but also very narrow deposits along a beach, and these by definition provide for only very limited mine lives, generally six to 12 years depending on mining rates. Donald on the other hand is a fine grain deposit. Geologically fine grains didn’t tend to settle on beaches, as they would have been a suspended solid in the turbulent water close to shore. Instead the fine grains settled on the sea floor further offshore where conditions were less turbulent, and formed a separate deposit. In this scenario the deposit is not just long but also very wide – in the case of Donald around 50 km by 10 km. And this means we can sustain a multi-generational mine life.

To give you an idea of its size, we estimate the Donald orebody contains approximately 37 million tonnes[i] of zircon. Global demand for zircon in 2011 was around 1.3 million tonnes. In addition we believe Donald contains approximately 70 million tonnes[i] of titanium dioxide units in the deposit, which compares with an annual market size of around 7 million tonnes.

The size of the deposit and our long mine life mean we won’t have to continually invest in exploration and suffer its inherent risks, nor invest in a whole lot of plant and equipment for only a short life mine. We know with certainty what ore we’ve got in the ground and once our plant is up and running it will be there for decades to come, not just a single resources cycle.

So it really is a Tier-1 asset. In fact it was originally owned by CRA and is the type of asset you’d expect to find in the stable of a major mining house. We were fortunate that it was dropped by Rio Tinto after it merged with CRA. As I understand it, at the time Rio Tinto had a number of existing mineral sands operations with titanium-skewed brownfields expansion opportunities and the zircon-skewed greenfields Donald Project would no doubt have been a lower priority back then.

The project is also close to infrastructure (3 km to water channels, 70 km to power, 70 km to the rail hub), provides access to a skilled workforce (around 30 minutes drive to Horsham, Warracknabeal and Stawell) and has all its major environmental and other approvals in place.

In addition Astron has an extensive 25 year history in the mineral sands sector, having dominated the Chinese market in the processing and marketing of zirconia materials until we sold that business in 2008. So we understand the sector very well, we have deep connections into the Chinese customer market, which we maintain through our trading business there and we know how to build and operate mineral sands processing plants.

openbriefing.com

Previously, issues such as water access, high levels of uranium and the difficulty of processing finer grain ore have been obstacles to the development of the Donald resource. What evidence can you provide that these issues have been resolved?

CEO Hayden Stockdale

Yes, there have been a few issues associated with the project historically but we’re confident these are now resolved.

ASX Announcement: 1 May 2012/Open Briefing®/Astron Limited

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We’ll need a significant amount of water to run the mining and processing operations, but with the decade long drought securing access to water was a serious hurdle for us. However with the Wimmera-Mallee pipeline completed there is now a much larger quantity of available water in the system. As a result we’ve been able to secure access to all our foreseeable water needs. This involved spending around $18 million buying 7 gigalitres of high security annual water entitlements for 25 years, with an option for a further 25 years. That’s obviously a significant amount of money – money we wouldn’t have spent if we didn’t have confidence in the project proceeding.

The fineness of the ore is one of the reasons for the project’s massive size but has also historically presented a processing obstacle. When run through a traditional separation spiral, the fine grain ore behaved differently to its typical coarse grain cousins – with water turbulence forces partly neutralising gravitational forces – meaning separation levels were poor. However with spirals now designed specifically for fine grain ore and run at a slower speed (to minimise the water turbulence) we’ve been able to achieve attractive recoveries. The technique has been proved up with tests conducted by external processors and consultants. With the slower operating speeds we need a larger number of spirals to process a given quantity of ore but the additional capital and operating cost of this are modest.

All zircon sand deposits have a small amount of uranium and thorium content. These are not at levels that are radioactively harmful but their presence can give either a yellow or bluish tinge to a final ceramic product and so there’s a commonly accepted limit of 500 parts per million (ppm) of contained uranium and thorium for zircon sand sold to customers. That being said we know that sand has been readily accepted recently by customers at levels above 700 ppm.

The zircon sand from Donald averages around 1,000 ppm of contained uranium and thorium, hence we’ve been investigating economical ways to reduce this to around the 500 ppm level. Using our technical R&D facility in Yingkou, China we believe we’ve developed a way to do just this. The process involved is a very simple hot acid wash, and doesn’t entail any complexities such as high pressure. We’ve proven it up on both a lab scale (where we conducted around 1,000 tests) and on a pilot scale using 100 kg batches of zircon sand. We’re in the process of obtaining an independent review of the process and finalising the associated engineering aspects. Once done, we’ll look to establish a “zircon wash” demonstration plant.

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You plan to develop the Donald Project in two stages. What is your proposed development timeline?

CEO Hayden Stockdale

It’s a very large deposit so it makes sense to develop it in stages. At Stage 1 we’re expecting to produce a heavy mineral concentrate (HMC) of around 950 ktpa[ii] . Over our forecast initial 30+ year life of the mine we estimate this will contain on average approximately 120 ktpa[ii] of zircon, 90 ktpa[ii] of HiTi90 (rutile), 35 ktpa of HiTi70 (leucoxene) and 220 ktpa of ilmenite from a feedstock of 15 mtpa of ore. This equates to around 9% and 3% of the world’s current zircon and titanium demand respectively.

ASX Announcement: 1 May 2012/Open Briefing®/Astron Limited

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As the operation is very modular and in order to bring it to market as quickly as possible, we’re looking to have the first half of Stage 1 (Stage 1a) operational within two years of commencing construction, with the second half (Stage 1b) operational within a similar period thereafter. Although our Feasibility Study isn’t complete, we anticipate each of Stage 1a and 1b will cost around $300 million to $350 million to build.

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What funding options are being considered for the Donald Project?

CEO Hayden Stockdale

We have around $125 million of cash on our balance sheet right now, which leaves $200 million to $250 million of capital to be funded. This will shrink somewhat as our Niafarang Project will be extremely cash generative. We’re quite agnostic as to how we raise finance, whether it be at the corporate or project level, via equity, debt or something in between. That being said we have a definite preference to raise equity at the corporate level to provide shareholders with full participation in our upside and create more liquidity in our stock. But, as you’d expect, we’ve seen significant interest in our project from strategic investors, who have a very detailed knowledge of our sector, and we remain very open to funding via this avenue too.

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What are the next significant steps to progress the Donald project?

CEO Hayden Stockdale

At the moment it’s very much all hands on deck to complete our feasibility study, while we are also progressing a series of minor approvals (our major approval, the Environmental Effects Statement, has already been received). Once the feasibility study is done we’ll also look to enhance it in a couple of areas where we know there are some efficiencies we can achieve. In parallel with this we should hopefully obtain independent sign-off on the zircon washing process. Once that’s in place, we can complete our zircon wash demonstration plant and confirm our anticipated engineering design for the final zircon wash process. Additionally we’ll be seeking to arrange our necessary financing.

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The Niafarang Project in Senegal is a smaller scale project that you expect will come into production before Donald, and provide the company with early cash flow. What has been the progress in developing Niafarang and when do you expect the project to be commissioned?

CEO Hayden Stockdale

While Niafarang is a much smaller project than Donald, its grades, at 12.4%[iii] heavy minerals, are very attractive, with no overburden and low slimes content. In the next few months we expect to upgrade the ore reserve and publish a feasibility study for Niafarang, with required capital expenditure likely to come in around $15 million. Depending on the length of time it takes for the new Senegalese government to settle in, we hope to be operational after about a year, with the early cash flow being very helpful as we develop Donald. The Niafarang Project itself covers only the northernmost 6 kms of our 75 kms of coastal exploration ground in Senegal, so we anticipate expanding the project in due course and extending the initial five-year mine life.

ASX Announcement: 1 May 2012/Open Briefing®/Astron Limited

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openbriefing.com

Given the increased global demand for zircon and rutile in recent years what are the key opportunities for Astron?

CEO Hayden Stockdale

As I’ve noted we expect to publish ore reserve statements and feasibility studies on both Donald and Niafarang in the coming few months. As such our focus remains strictly on these two projects and this will remain so as we move them into production.

Now we’re also very fortunate to be benefiting from a favourable industry backdrop with the recent rapid increase in zircon demand driven by China’s large-scale urbanisation and its love affair with ceramics. So, coupled with a lack of supply, it’s not too difficult to see why long term forecasts show a widening shortage of both zircon and titanium feedstocks, and our aim is to take advantage of that.

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Thank you Hayden.

For more information about Astron Ltd, visit www.astronlimited.com or call Hayden Stockdale on +61 (0) 435 461 630 or hayden.stockdale@astronlimited.com

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DISCLAIMER: Orient Capital Pty Ltd has taken all reasonable care in publishing the information contained in this Open Briefing®; furthermore, the entirety of this Open Briefing® has been approved for release to the market by the participating company. It is information given in a summary form and does not purport to be complete. The information contained is not intended to be used as the basis for making any investment decision and you are solely responsible for any use you choose to make of the information. We strongly advise that you seek independent professional advice before making any investment decisions. Orient Capital Pty Ltd is not responsible for any consequences of the use you make of the information, including any loss or damage you or a third party might suffer as a result of that use.

i From ASX announcement “Donald Project Resource Upgrade” 1.12.12

ii From Mines Money HK presentation 23.03.12

iii From ASX announcement “The Gambia and Senegal Update” 7.5.07

ASX Announcement: 1 May 2012/Open Briefing®/Astron Limited

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