FRONTIER ENERGY LIMITED — Capital/Financing Update 2018

Oct 9, 2018

ASX Announcement ASX: SUP 10 October 2018 superiorlake.com.au

Outstanding study confirms Superior Lake as low-cost zinc project

Highlights

• Superior Lake Project Restart Study confirms robust forecast economics

• Project mine life of 6.5 years, producing high-value, high-grade zinc and copper concentrates based on greater than 95% indicated resource

• Restart Study shows potential for Superior Lake Project to be in lowest-cost quartile of zinc producers globally

• Low initial estimated capital cost – leverage historical mine development and infrastructure

• Fully funded Definitive Feasibility Study commenced, expected to be completed by mid-2019

• Tribeca Investment Partners Pty Ltd, a cornerstone investor in the Company’s recent $5 million placement, has been appointed to arrange up to US$60 million in Project Financing

Cautionary Statements

As the Restart Study uses a portion of Inferred Resources (5%) over the life of mine, the ASX Listing Rules require a cautionary statement is included in this announcement.

The Restart Study referred to in this announcement has been undertaken to determine the potential viability of restarting mining at the Superior Lake Project and is a preliminary technical and economic study of the potential viability of the Superior Lake Project.

Superior Lake Resources (“Superior Lake” or the “Company”) has concluded that it has a reasonable basis for providing the forward-looking statements and production targets discussed in this announcement. The detailed reasons for that conclusion are outlined throughout this announcement and in Appendix 1 and all material assumptions are disclosed in this document.

The Restart Study is based partly on low level technical and economic assessments (+/- 35% accuracy) that are not sufficient to support the estimation of ore reserves. Further exploration and evaluation work and appropriate studies are required before the Company will be in a position to estimate any ore reserves or to provide any assurance of an economic development case. The outcomes of the Restart Study however provide a reasonable basis for Superior to release the results whilst not providing an assurance of economic development at this stage. This is based on the current mining inventory indicating that for approximately 95% of production from all of the material can be sourced from the Indicated Resources and 5% from Inferred Resources. The use of Inferred Resources is therefore not a determining factor to the Superior Lake Project’s viability. There is a low level of geological confidence associated with Inferred Resources and there is no certainty that further exploration or evaluation work will result in the determination of Indicated Resources.

The Restart Study is based on the material assumptions outlined below and in Appendix 1. These include assumptions about the availability of funding. While the Company considers all of the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Restart Study will be achieved.

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Superior Lake Resources Limited Suite 23, 513 Hay Street T: +61 8 6143 6740
ACN 139 522 553 Subiaco WA 6008 F: +61 8 9388 8824
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To achieve the range of outcomes indicated in the Restart Study, funding of in the order of US$75 million will likely be required. Investors should note that there is no certainty that the Company will be able to raise that amount of funding when needed. It is also possible that such funding may only be available on terms that may be dilutive to or otherwise affect the value of Company’s existing shares. It is also possible that the Company could pursue other ‘value realisation’ strategies such as a sale, partial sale or joint venture of the Superior Lake Project. If it does, this could materially reduce the Company’s proportionate ownership of the Superior Lake Project.

This announcement contains forward looking statements, which, for the reasons set out in this announcement the Company has concluded it has a reasonable basis for providing. However, a number of factors could cause actual results or expectations to differ materially from the results expressed or implied in the forward-looking statements. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Restart Study.

Superior Lake Resources Limited (ASX: SUP) (“Superior Lake” or the “Company”) is pleased to announce that a Restart Study for its Superior Lake Project in Ontario, Canada, has confirmed the Superior Lake Project has the potential to be one of the lowest cost zinc producers globally.

Key Restart Study Results

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Table 1 – Restart Study Summary
Description Units Value (Approx.)
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Mining tonnage	tonnes	2,000,000
Plant throughput	tpd	1,000
Plant head grade	% Zn	14.10%
Plant head grade	% Cu	0.66%
Zn Conc production (steady state)	tpa	88,000
Cu Conc production (steady state)	tpa	6,700
Life of Mine	years	6.5
Start-up capital	US$	75M
LOM Opex	US$/lb Zn	0.51
NPV at 10% - pre-tax	USD $164.8 M	AUD $219.7 M1
NPV at 10% - post tax	USD $118.9 M	AUD $158.5 M1
IRR at 10% - pre-tax	56%
IRR at 10% - post tax	48%

Note:[1] exchange rate USD: AUD $0.75

Superior Lake CEO David Woodall said:

“The Restart Study clearly demonstrates the Superior Lake Project is one of the leading zinc development assets globally today.

“The standout features of the study were the exceptional low estimated operating costs which is driven by the high-grad e ore, as well as the low estimated initial capital cost.

“The study gives the board confidence to advance the project towards a Definitive Feasibility Study, which we aim to complete by mid-2019.

“Whilst the existing resource provides an excellent platform for the company to join the ranks of zinc producers in the coming years, we believe the exploration potential, untested in more than 20 years, holds significant value for shareholders”

Superior Lake has also appointed Tribeca Investment Partners Pty Ltd (“Tribeca”), a cornerstone investor in the Company’s recent $5 million placement, to arrange up to US$60 million in Project Financing, as the Company announced on 24 August 2018.

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Superior Lake Restart Study Summary

Superior Lake completed the first phase of project redevelopment with a Restart Study (“Study”) scope that included the following key programs:

• Maiden JORC-compliant Mineral Resource Estimate based on historical information

• A mining scoping study

• A preliminary engineering study consisting of:

• A dewatering strategy for the mines including cost and schedule estimates

• A high-level cost estimate to re-equip the mine in preparation for start-up

• A high-level cost estimate for the installation of a new mill / concentrator and associated infrastructure

• A review of the permitting and licensing requirements for the development and start-up of the mines

Mineral Resources

The maiden JORC (2012) mineral resource used in the production schedules in the Restart Study is shown in Table 2.

Table 2 : Superior Lake Mineral Resource – Comparison at 3% cut-off grade

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Classification Tonnage Zn% Cu% Au g/t Ag g/t
Indicated 1,992,000 17.8 % 0.9 % 0.4 g/t 33.7 g/t
Inferred 152,000 15.4 % 0.9 % 0.4 g/t 31.2 g/t
Total 2,145,000 17.7 % 0.9 % 0.4 g/t 33.5 g/t
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The Company has confidence in the model as the mineralisation of the deposits essentially occurred as a single massive sulphide seam distributed along the VMS horizon. The mineralisation and the host rock stratigraphy can be delineated between the drill holes. The geological interpretation and the resource model are based on the drill holes data (approximately 1787 drill holes) and digitised underground drive maps and cross sections. The interpretation of the mineralisation was confirmed by plans and sections showing the mapping and sampling of the underground development that resulted in more than 90% of the resource classified as an indicated resource.

Mine Scoping Study

Superior Lake engaged mining consultant, Mining Plus, to complete a mining scoping study (+/- 35% accuracy) of the JORC (2012) mineral resource. The historical stoping methods used during mining operations at the Project provided a framework to select a preferred mining method. With the previous use of mechanised cut and fill, AVOCA, and Alimak stoping methods and the impact on dilution, Superior has selected longhole open stoping (LHOS) with introduced cemented paste fill as the preferred mining method. Mining Plus calculated a cut-off grade using the Net Smelter Return (NSR) method to determine the Net Value per Tonne (NVpt). This was calculated for each base metal present based on treatment and recovery data based on historical production data. The breakeven cut-off grade (COG) used is USD$112.44.

The mining strategy planned for the Superior Lake Project has leveraged off the following opportunities:

• The historical sunk capital

• Use proven modern mechanised mining methods and equipment

• Adopt cemented paste fill, a proven more reliable and efficient fill technology

• Take advantage of higher metal prices and the impact of cut-off grade (CoG)

• Take advantage of historical development that enables quick access to the resource

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Figure 1 – Schematic of the Extensive Underground Infrastructure and Project Potential

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The scope of work that Mining Plus was engaged to complete included:

– Complete conceptual development and stoping layouts using sublevel longhole stoping with introduced cemented paste fill;

– Produce an ore production schedule at approximately 1,000 tonne per day operation;

– Estimate operating and capital mining cost integrated with underground development in place;

– Achieve a development profile that allows for a sustained production profile of 1–2 years;

– Produce a level of study accuracy within 30–35%.

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Mining Method

The maiden JORC compliant resource block model was used as the basis for the mine scoping study. The geotechnical conditions are seen as competent and stable based on the test stope work carried out by Inmet in 1999 which indicated that longhole stoping will be an effective extraction method for the ore and that the stope stability as measured by two ground movement monitors had no appreciable movement.

Stope design is based on the following parameters:

• Stope level spacing – 15m

• Minimum mining width – 1m

• Fixed hanging wall dilution – 0.5m

• Fixed foot wall dilution – 0.5m

• Minimum foot wall angle – 50 degrees

• Mining recovery factor – 95%

The stope design divides the ore body into multiple panels of five sublevels per panel, which is designed to optimise production and efficiency (refer Figure 2). This methodology of creating multiple panels accessed by the decline to each level creates more stoping fronts and a more flexible schedule.

Figure 2 – Stope Panel Layout at US$ 112 COG

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The stopes are then planned to be mined retreating on each level towards the centre to the stope level accesses (Figure 3). Once the level is complete and paste fill has cured mining on the level above can begin, during this curing time stopes can be mined several levels above in a different panel.

Figure 3 – Planned Stoping Sequence

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At the Winston Lake resource, there are several small stopes that have been identified above the chosen cut-off grade (COG), and they have not been included in this study but are planned to be mined using the same methods and equipment as Pick Lake. The Winston Lake stopes have been simply added into the schedule, but are planned to be included in the more detailed scheduling work as part of the planned DFS to target these tonnes as the early development of Pick Lake progresses.

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Mine Development Design

All development headings are planned to be developed using twin boom jumbos, which will also complete the ground support installation. To accommodate the equipment, all accesses and drives will be developing using a 4.5mH x 4.5mW profile. All ore and waste headings will be designed at a minimum of 1 in 50 (2%) gradient to ensure drainage from the heading. The maximum gradient of declines is planned at 1 in 7 (14%). In the narrower ore areas, drives will be developed using resue firing to decrease the dilution and maximise the recovery of the development ore.

Figure 4 – General Layout of Ore Development

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Mining Schedule

The mining schedule incorporates predominately the indicated resource with only 5% of the inferred resource used in the production scheduling. Initial production has been focused in the mid Pick area (below the 615m) and the upper Pick resource. Production is then scheduled from the Pick Lake resource as the development the decline ramp is advanced ahead of the production areas. The key benefit is that the refurbishment of the Pick Lake shaft can be deferred reducing the initial capital costs. The preliminary mining schedule developed is shown below in Table 3.

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Table 3 – Mine Production Profile

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Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Total Ore (kt) 122 266 367 374 383 347 159
Stope Ore (kt) 104 215 287 315 353 341 159
Development (kt) 18 51 80 59 30 6 0
Total Lateral Dev (m) 7,000 8,600 7,200 3,000 2,200 2,100 900
Drill metres (m) 8,300 34,600 51,700 41,700 42,000 39,100 1,900
Paste Volume (‘000 m3) 13 59 116 121 134 130 70
Zn Grade (%) 11.6 13.7 13.3 14.9 14.6 14.8 13.4
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Preliminary Engineering Study

Superior Lake selected Nordmin Engineering Ltd as the consultant for the engineering work. Nordmin’s head office is located in Thunder Bay and it has a number of personnel who have had previous experience at Winston Lake.

The purpose of the preliminary engineering study was to investigate the following concepts as part of the overall re-start study:

• Mine Dewatering: options to dewater the mine in its entirety or partial dewatering such that either Pick Lake or Winston Lake can be dewatered independently in a staged manner if required.

• Mine Re-equipping: after establishing a preferred mining methodology review options to re-establish the infrastructure using the previously installed design as a basis

• Mill: cost estimates were generated based on the previous mill design and throughput (1000tpd). Costs associated with the required infrastructure to operate asset were also developed.

• Licensing: the permitting and licencing requirements from the Ontario provincial and Canadian federal regulator to re-start the operation were investigated with a schedule and cost estimate developed.

Dewatering

The first major effort in bringing the Winston Lake and Pick Lake Mines back into production is the completion of the mine dewatering effort. The input data used to determine historical working volumes was in the form of the depletion mesh model. Calculations indicate dewatering volumes are 890,000m3 for Winston Lake and 200,000m3 for Pick Lake.

As a notional design point an average dewatering rate is 200m3/hr. This equates to a duration slightly greater than six months to dewater the Winston workings. After the Winston Lake shaft is drawn down, water would report to the established Winston Lake system from the Pick Lake shaft. An additional two months would be required to draw down and transfer the water from the Pick Lake workings up to surface via the established Winston Shaft dewatering system.

Initial mine dewatering for the Superior Lake property is planned to consist of a combination of submersible and horizontal centrifugal pumps located off the existing working levels of the Winston Shaft. The submersible will be capable of a 183m maximum vertical lift, which will be lowered down shaft to expose previous workings levels chosen to house the horizontal centrifugal pumps. Access to exposed levels chosen for permanent pumping systems will be accomplished via a combination of the sinking set-up as well as manway access in the proximity of working levels.

Horizontal centrifugal pumps located off the existing working levels of the Winston Shaft will be located at the 150m, 275m, 435m and 615m levels. Dewatering of the Pick Shaft will be accomplished in similar fashion, with horizontal centrifugal pumping stations established at the 750m, 890m, and 1045m elevations.

A total of seven (7) horizontal centrifugal water pump stations will be required. Each station will be placed at similar vertical intervals to maintain commonality of pumps. As a notional allowance, the pump station will consist of a 19m3 bolted holding tank (knocked down for slinging down shaft), an agitator, and twin pumps.

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Table 4 – Dewatering Cost Estimates

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Item Cost (US$)
Pumping equipment 2,320,000
Water Treatment Plant Use existing facility
Operating Costs 290,000
TOTAL 2,610,000
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Mine Underground Refurbishment

Shafts:

The initial underground refurbishment will be focused on the Winston shaft, with Pick Shaft being differed as access to the deposit will be done via a 1 in 7 (14%) 4.5m x 4.5m decline ramp, developed in the hangingwall of the deposit. Work in the DFS will also include the development of a decline ramp from the surface in the hangingwall of the Winston deposit with potential benefits in capital and project timing to be confirmed.

The process of recovering the shaft will begin as the dewatering progresses below collar allowing access to the shaft sets and rehabilitation of the shaft envelope. Requirements for this will include:

• Erecting a temporary hoisting plant/headframe to support the shaft recovery effort.

• The shaft will be cleaned/rehabilitated as the water level is lowered, with guides/sets being redressed/replaced as needed and tightlining and utilities being repaired and replaced.

• Stations will be rehabilitated and dewatering system installed on the levels as needed.

• As shaft bottom is reached, the loading pocket will be recovered and upgrades to the muck handling system will commence.

• Once the 615 level is rehabilitated, the workings above the 615 level and below will provide the initial production areas for the operation.

The completion of recovery operations will be followed by the installation of final equipment to move the new system into full operation.

Mine Materials Handling:

The system philosophy for the materials handling system is:

• The muck will move from the stopes via truck to a central pass system to a new crushing station located at the 615 level of the Winston Shaft. Muck from the Pick Lake shaft would report to the same crushing station prior to hoisting to surface.

• The muck would be sized to match the intake requirements of the SAG mill that is included the grinding circuit within the Mill.

• Storage underground would consist of a 1000 tonne bin for both shafts with a pass for handling waste

• The headframe will have a 1000 tonne bin installed for handling muck from underground, with a covered bunker to handle waste.

Process Control:

This facility would be designed such that the entire plant can be monitored and controlled from a central control facility, which would be located at the existing concentrator control room location.

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Shaft System Design:

The re-commissioned Winston and Pick Lake shafts will be a combined production and service hoisting operation, with an additional role as an airway for the ventilation system. The installation will utilize one double-drum, double-clutch hoisting plant that utilizes two skip/cages in balance to allow for multi-level hoisting.

Based on the use of a rectangular shaft wherein both shafts are 3-compartment rectangular designs with approximate outer dimensions of 8’– 0” x 21’– 0”, the optimal potential ventilation volume at 7.5m/s would be 90m3/s. At 1000 tonnes per day, the anticipated need is 120m3/s using a standard diesel fleet. A fresh air raise is an anticipated and the two ventilation raises designed as part of the Pick Lake project, can be used.

Being restricted to a 3-compartment shaft, the hosting plant must be a skip-cage system. This facility will utilize a 3metre diameter hoist equipped with two 5.4 tonne capacity skip/cages that will also handle personnel and material hoisting.

Hoisting System Design:

The hoisting system has been designed to meet the production and servicing requirements. The system has been designed to utilize standard hoisting approaches per the Ontario Mine Safety Regulations. The hoisting speed has been set at a rate of 12.2m/s (2400 fpm), which provides a production rate of over 1500 tonnes in 10 hours. This allows for a full day’s ore and waste haulage in little more than a single shift, providing for a full shift of service hoisting.

Table 5 – Underground Refurbishment Cost Estimate

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Item Cost (US$)
Shafts 3,140,000
Rockwork 710,000
Loading Pockets 1,550,000
Shaft Services 1,940,000
TOTAL 7,340,000
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Mine Surface Infrastructure

The headframe will be a simple structural steel-framed system, founded on bedrock or on piles, as the geo-technical conditions merit. The basement and foundation of the system will be constructed as a jump-formed system, with the steel structure starting at collar. The bin house facility will be built as a steel platform supporting the two steel bins of 1000 tonne capacity, with a cladded/insulated structural steel enclosure around the bin itself. The system has been designed for conveyor loadout. A separate fully-enclosed bunker will be in place for waste handling.

The main power distribution underground will be provided at 4160 V, with the primary switchgear at the headframe. The sub redirects power to two shaft feeders (one plus a standby) that are 3 conductor 500 MCM cables. Each of the main levels within Shaft is equipped with a 1.5 Mva mobile transformer to handle loads on the level. Power is transformed from 4160V to 600V.

The communications cables to be installed in the shaft are:

• A fibreoptic data line for data transfer (fibre to thernet), CCTV transmission and other data.

• A leaky feeder cable to support mine communications.

• A hoisting hardwire for interlocking the loading pockets and limits with the hoist controller.

• A telephone cable for voice communications to the levels.

• A hoist signals cable.

Table 6 – Mine Surface Infrastructure Cost Estimate

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Item Cost (US$)
Headframe 6,020,000
Hoist house 5,185,000
Production / Service Hoist 2,680,000
Services (ventilation etc) 2,700,000
TOTAL 16,585,000
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Plant

Superior Lake has adopted the operating criteria that was used in the original Winston Lake Mine 1000 tonne per day concentrator. The processing facility will consist of a comminution circuit and two stage flotation circuit, one for copper and one for zinc, both concentrates will be shipped for smelting by a third party. Historical metallurgical recoveries are shown in Table 7.

Table 7 – Historical Metallurgical Recoveries (Inmet 1999)

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Metal Average Recovery
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Zinc	93.7 %
Copper	78.3 %
Gold (reporting to Cu Conc)	38 %
Silver (reporting to Cu Conc)	37 %

In this revised circuit, a SAG mill replaces the rod mill. Pulp is sent from the SAG to a cyclone for classification, with coarse underflow fraction reporting to the ball mill for regrind, and overflow to the copper conditioning system. The copper tails report to the zinc circuit. Both the copper and zinc circuits include multiple stages of cleaning with regrind of the rougher concentrate.

The key process design parameter used are:

• Variable Bond Work Indices (Bwi) of the ore, ranging from 11.0 to 18.4kWh/tonne, but more consistently between 11.0–14.0kWh/tonne

• Primary grinding circuit target grind size is p80 74 microns (200 mesh)

• Copper regrind product size is p80 20–30 microns

• Zinc regrind product size is p80 35–50 microns

The revised flowsheet, taking advantage of newer equipment, proposed for the processing operations is shown in Figure 5.

Figure 5 – Superior Lake Project Flowsheet

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Historical zinc concentrate grades range between 52 and 53.5%. Historical copper concentrates range from 22 to 25% Cu. The majority of the recovered gold and silver report to the copper concentrate where they add the most value as part of the concentrate payables. Historical gold average around 11g/t and silver around 310g/t.

The past production was successful and has clearly demonstrated that the mineralisation is amenable for processing using conventional flotation technologies and that the valuable metals are effectively recovered as either a copper or zinc sulphide concentrate.

Table 8 – Plant Cost Estimate

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Item Cost (US$)
Mechanical Equipment 8,325,000
Civils & Buildings 3,456,000
Structural 4,205,000
Electrical & Automation 2,337,000
TOTAL 18,323,000
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Services and Infrastructure

Figure 6 – Superior Lake Project infrastructure location

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Tailings:

The existing tailings management facility (TMF) has sufficient capacity to store all tailings material from the processing the current Pick and Winston resource estimate. The following activities will however need to be undertaken to reestablish the facility:

• A new discharge pipeline along west perimeter of TMF to the upstream (south) end of the TMF valley.

• Adoption of a thicken tailings system to optimise water recovery and mitigate environmental risks.

• Engineering assessment, dam safety inspection, updated hydrologic analysis to determine operating water levels and minimum freeboard requirements to manage Environmental Design Flood and pass the Inflow Design Flood.

• – Geotechnical evaluation (test pits, boreholes, geophysics techniques) to confirm adequate bedrock elevation around TMF perimeter.

Power:

The powerline installation will be renewed and brought to the site for both construction and final operational use. The anticipate loads will require a 10 MW substation, which will cover all mine, mill and service requirements. The substation will house primary transformers (2 x 8 Mva) and switchgear, with secondary switchgear being located in the hoist house electrical room.

Water:

With regard to the water balance the following assumptions have been made

• Mill will operate on reclaim water from TMF, with freshwater for reagent mixing only.

• Mine water will discharge to sedimentation pond, then be pumped to polishing pond. Pump station in polishing pond will deliver water to the mine for re-use in process.

• Wastewater from new 50m3/day potable water plant and wastewater from effluent treatment plant pumped to tailings pump box.

• Install a new 40m3/day sewage treatment plant.

• Install a new 2500m3/day effluent treatment plant to treat surplus water from TMF. Discontinue of sedimentation

• and polishing ponds for water treatment, this is inefficient and old technology.

Access:

An existing all-weather road connects site to the Trans-Canada Highway (Highway 17 in Ontario). Schreiber is the closest town to site (approximately 20 km South-Southeast of the mine site). Schreiber has rail access and is a major switchyard point for rail. Air access is available through Terrace Bay, Ontario and Thunder Bay, Ontario.

Other:

Provision has been made in the cost estimate for some minor bulk earthworks onsite along with miscellaneous mechanical equipment (fixed cranes etc) and the backbone of the communication and automation architecture.

Table 9 – Infrastructure Cost Estimate

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Item Cost (US$)
Tailings re-establishment 375,000
Power 1,050,000
Water infrastructure 465,000
Other 1,410,000
TOTAL 3,300,000
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Capital Cost Estimates

The basic assumptions for the purposes of the estimate are as follows:

• The estimate is considered to have an accuracy of +/-35%.

• All equipment has been assumed to be purchased new, as OEM systems.

• The cost estimates have been developed using past Project experience, the Nordmin project capital cost database and manufacture/supplier budget pricing for major plant and equipment.

• The cost estimates were determined in Canadian Dollars and converted into US dollars at an exchange rate of 1CAD:0.75USD.

Table 10 – Capital Cost Estimate (+/- 35%)

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Item Cost (US$)
Mine Dewatering 2,610,000
Mine Surface Infrastructure 16,585,000
Underground Refurbishment 7,340,000
Plant 18,323,000
Infrastructure 3,300,000
Sub-total 48,158,000
Indirects 6,638,000
Pre-production (mine pre-development) 5,325,000
Sub-total 11,963,000
TOTAL 60,121,000
Contingency 15,030,000
GRAND TOTAL 75,151,000
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Deferred capital amounts related to the delayed installation of the paste plant and the additional electrical transformer amount to a total of US$6.2 million. These costs would be expected to be incurred in the first or second year of operation.

Operating costs are based on benchmarking completed by Mining Plus recently on mining costs in Canada and validated against Nordmin and Mining Plus’s databases. Costs are presented in United States Dollars. No contingency has been incorporated in to the opex estimate in this phase.

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Table 11 – Operating Cost Estimate

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Item Costs (US$/tonne ore) Costs (US$/tonne Conc)
Mining 64.50 0.26
Plant 23.36 0.09
General & Administration 10.60 0.04
Sub-total 98.47 0.39
Sustaining Capital (mine and plant) 0.05
Sub-total 0.05
Product Transport 0.05
Treatment charges 0.13
Vendor Royalty 0.03
Sub-total 0.21
By-product Credits (0.14)
TOTAL 0.51
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The Restart Study shows potential for the Superior Lake Project to be in the lowest all in sustaining-cost quartile of zinc producers globally.

Logistic and Marketing

The current proposal is for separate zinc and copper concentrates to be produced onsite as a wet filter cakes which will be trucked to the railhead in Schreiber for transportation to the selected smelters. International options e.g. China may also be considered as part of the overall marketing strategy.

As mentioned in the processing section the high quality of the concentrates produced, with low impurities of critical elements such as arsenic, antimony and mercury are anticipated to produce high demand for the products.

The concentrate payables and treatment charges assumed in the financial modelling are shown below in Table 12.

Table 12 – Marketing Input Assumptions

Item Unit	Item Unit	Value	Value
Payables		Zn Conc	Cu Conc
Zinc	%	85%	0%
Copper	%	0%	96%
Gold	%	0%	98%
Silver	%	0%	90%
Smelter Charges		Zn Conc	Cu Conc
TC	US$/t Conc	120	95
RC	US$/lb	0	0.10
	US$/oz Au		6.00
	US$/oz Ag		0.35

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Financial Analysis

The input assumptions used in the development of the financial model are described below in Table 13.

Table 13 – Financial Model Input Assumptions

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Item Unit Value
Exchange rate (CAD:USD) # 1.00:0.75
Metal Prices
Zinc US$/tonne $2,820
Copper US$/tonne $6,600
Gold US$/oz $1,200
Silver US$/oz $17
Plant Feed Grades (LOM ave)
Zinc % 14.1%
Copper % 0.66%
Gold g/t 0.3
Silver g/t 28
Plant Recoveries
Zinc % 93.7 %
Copper % 78.3 %
Gold (reporting to Cu conc) % 38.0 %
Silver (reporting to Cu conc) % 37.0 %
Concentrate Grades
Zinc % 53%
Copper % 26%
Taxes & Royalties
Net Federal Tax % 15.0%
Provincial Tax % 10%
Vendor NSR % 2.0%
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Financial sensitivities

The Restart Study outcome was tested for key financial inputs including: price, operating costs, capital costs and grade. All these inputs were tested for variations of +/- 10% and +/- 20%, with the outcomes shown in Figure 7.

Figure 7 – Financial sensitivities

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Marketing

During the Definitive Feasibility Study, Superior Lake will commence discussions with various groups for its clean concentrate. The concentrate deficit as a result of mine closures and production cuts in 2015 and 2016 along with the increasingly stringent environmental oversight in China is forecast by the Industrial and Commercial Bank of China to be balanced by 2020. This recovery is reliant to the four major projects (Dugald River, New Century, Gamsberg, and Glencore’s Australian assets) that are forecast to ramp up over the next 1 to 2 years.

This predicted replenishment of the zinc concentrate supply has analysts’ forecasting a consensus zinc metal price of US$2,446 /t, and a long-term price forecast towards US$3,000/t[1] . Superior Lake has accepted a long-term zinc price of US$2,820 /t in the financial modelling.

1 CBC Base Metal Outlook – August 2018, Woodmac Consensus Pricing – June 2018

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Funding

To achieve the range of outcomes indicated in the Restart Study, funding in the order of US$75 million will likely be required for capital works, pre-production capital costs and contingency. It is anticipated that the finance will be sourced from a combination of equity and debt instruments from existing shareholders, new equity investment and debt providers from Australia and overseas.

Superior Lake has sufficient cash on hand at the date of this announcement to undertake and complete a Definitive Feasibility Study. The Board believes that there is a reasonable basis to assume that funding will be available to complete all feasibility studies and finance the pre-production activities necessary to commence production on the following basis:

• the Board and executive team have a strong financing track record in developing resource projects;

• the Company believes this Restart Study demonstrates the Superior Lake Project’s strong potential to deliver a favourable economic return;

• the Company has a proven ability to attract new capital and successfully completed a placement of 142,857,143 new ordinary shares to raise $5 million at $0.035 per share in August 2018 (“Placement”). The Company will use the funds from the Placement to complete a Definitive Feasibility Study at the Superior Lake Project and for general working capital;

• as part of the Placement, Superior Lake appointed of Tribeca to arrange Project Finance of up to US$60 million to assist in funding the development and restart of the Superior Lake Project. Total capital costs estimate of the Restart Study at US$75 million including a US$15 million contingency (+/- 35%);

• Tribeca also acted as cornerstone investor subscribing for the Placement and is supportive of the Company’s strategy. As at the date of this announcement, Tribeca holds a 6.72% interest in the Company;

• the Company is confident its brownfield exploration program will add additional resources beyond what is currently included in the Restart Study;

• the positive financial metrics of the Superior Lake Project and the underlying demand growth for zinc; and

• other companies at a similar stage in development have been able to raise similar amounts of capital in recent capital raisings.

The Board believes that there is a reasonable basis to assume funding will be available to construct the operation once the Definitive Feasibility Study is completed.

Permitting, Licencing and Environmental

Superior has commenced the permitting process required in Ontario the permitting for the development of a mineral project. The permitting of the Project has the benefit of the Winston Lake Mine having permits in place inclusive of an environmental certificate of approval (ECA) and a Closure Plan, both will revert to Superior once the option agreement with FQML is exercised.

As the project progresses to the potential activities for mine operations a Notice of Project Status will be required from Ministry of Energy, Northern Development and Mines (ENDM). Prior to the commencement of production ENDM will require a project to have a Closure Plan with Financial assurance be submitted and approved. The permitting requirements for the Project at this stage include:

• Conversion of the Pick Mining Claims to Mining Lease

• Transfer of Winston Permits and Ownership (after exercise of the FQML Option)

• Notice of Project – Permit to take water (mine dewatering)

• Notice of Project – Development to Production

• Commencement of Commercial Production

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Next Steps

The next steps proposed for the Project include:

• Exploration Activities

• Complete drilling program on the mid-Pick area by Q1 2019;

• Commence a surface geophysics program on the near surface areas of both Pick and Winston Lake deposits in Q1 2019; and

• Complete a lithogeochemical and structural survey in Q4 2018.

• Studies

• Select service providers for completion of a Definitive Feasibility Study targeting completion by end of Q2 2019.

• Environmental & Permitting

• Commence the permitting process for the Superior Lake Project in Q4 2018.

Brownfields Exploration Program

Superior Lake will commence a focused brownfield exploration program designed to add additional resources and to target several near surface targets adjacent to the Winston and Pick deposits as shown in Figure 8 below:

Figure 8 – Near Term Brownfields Exploration Targets

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The work planned to be completed in Q4 2018 to achieve these objectives, is set out below:

1. Complete a GIS database of all geological, geochemical and geophysical data, inclusive of all raw data from previous exploration activities;

2. Complete a structural and lithogeochemistry review of the VMS system at site;

3. Complete a surface, high powered, high resolution geophysics (TEM) survey;

4. In conjunction with the mid-Pick drilling program complete a DHTEM to calibrate the technology to the known mineralised zone, to assist in the 3D geometrical mapping of the mineralisation, and to assist in search for additional hole conductive mineralisation; and

5. Drill the mid-Pick area to add to the resource at an inferred category.

About the Company

Superior Lake Resources Limited

Superior Lake Resources Limited (ASX: SUP) is an ASX-listed company focused on the redevelopment of the Superior Lake Project, which incorporates the Winston and Pick Lake Mines in North Western Ontario, Canada. The Project is one of the highest-grade zinc deposits globally with a combined JORC resource of 2.15 Mt at 17.7% Zn, 0.9% Cu, 0.4 g/t Au and 33.5 g/t Ag. The Superior Lake Project is rated one of the best mining jurisdictions in the world and has significant infrastructure in place which includes power, road, rail and underground mine development.

To learn more about the Company, please visit www.superiorlake.com.au, or contact:

David Woodall, Chief Executive Officer +61 8 6143 6740

Competent Person Statement

Exploration Results and Mineral Resources

The information in this announcement that relates to Exploration Results was first reported by the Company to ASX on May 1st, 2018. The information in this announcement that relates to the Mineral Resources on the Superior Lake Project was first reported by the Company to ASX on July 3rd, 2018. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements, and in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the relevant original market announcement.

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Appendix 1 – Material Assumptions

Material assumptions used in estimation of the production target and associated financial information are set out in the following table.

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Study status The Restart Study referred to in this announcement is based partly on low-level
technical and economic assessments and is insufficient to support the estimation
of Ore Reserves or to provide assurance of an economic development case at this
stage. It has been prepared with accuracy of +/- 35%. There is no certainty that the
conclusions of the Restart Study will be realised.
Mineral Resources underpinning the The Mineral Resource estimate that underpins the Study was released to ASX
Study on 3 July 2018 and was prepared by a competent person in accordance with the
JORC Code 2012.
Mining factors or assumptions Mining is proposed to be completed by conventional underground mining practices
adopting the Longhole Open Stoping (LHOS) method using cemented paste fill.
The mining parameters used are:
– Minimum Mining Width, 1m
– Fixed HW dilution, 0.5m
– Fixed FW dilution, 0.5m
– Minimum FW angle 50, degrees
– Mining recovery factor, 95%
– Mining dilution factor, 10%
All development headings are proposed to be developed using twin boom Jumbos
which will also be used for ground support installation. There are two existing mine
shafts, the Winston Lake shaft and the Pick Lake shaft. The Winston Lake shaft
accesses Winston Lake zone from the surface, and Pick Lake shaft accesses Pick
Lake Lower from the drift on the 615 level. Material from Pick Lake is proposed to
be hauled using trucks to the 615 level and then to the Winston Lake shaft via rail
or truck. Material is then hoisted to the surface via the Winston shaft.
Metallurgical factors or assumptions Based on 11 years of historical operations at Winston Lake. During the review of
the metallurgical reports and the original system design descriptions, Nordmin
have developed a slightly revised flowsheet, taking advantage of newer equipment
available. Historical metallurgical recoveries used in the Restart Study are
summarised below:
Metal Average Recovery
Zinc 93.7 %
Copper 78.3 %
Gold (reporting to Cu Conc) 38 %
Silver (reporting to Cu Conc) 37 %
Environmental Superior Lake has commenced the permitting process required in Ontario the
permitting for the development of a mineral project. The permitting of the Superior
Lake Project has the benefit of the Winston Lake Mine having permits in place
inclusive of an environmental certificate of approval (ECA) and a Closure Plan,
both will revert to Superior once the option agreement with FQML is exercised.
Superior Lake is progressing the environmental and permitting requirements with
a multi-departmental review planned in November 2018. To date all environmental
permits and approvals are in good standing.
Infrastructure Superior Lake and independent engineering company Nordmin Engineering
have reviewed the infrastructure on site. The Superior Lake Project has an all
weather road, a live 115kV powerline, a tailings dam facility with capacity for the
present resource storage, freshwater dam, two vertical shafts and underground
development adjacent to the resource proposed to be mined.
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Capital Costs The capital estimate is considered to have an accuracy of +/-35%. However, a
25% contingency has been added to the total of the direct and indirect costs for the
estimate summary to account for any potential shortcoming in the preliminary data
and information that was collected during the execution of this study.
All equipment has been assumed to be purchased new, as OEM systems,
rather than used. As such, opportunities may exist to reduce capital by sourcing
reconditioned gear. The cost estimates have been developed using past project
experience, the Nordmin project capital cost database and manufacture/supplier
budget pricing for major plant and equipment. The lateral development, apart from
those areas directly related to shaft stations or equipment installations (loading
pockets, bins, etc.), have not been included in the estimates.
Operating Costs Operating costs include all costs associated with mining, processing, general site
administration, and treatment charges and transport of concentrate. These costs
were calculated and where applicable referenced against similar size and types
operations. Mining costs were estimated at USD$ 66/t, processing at USD$26.4 /t,
and G&A costs at USD $13.5/t. The treatment charge was $120 / t concentrate for
zinc and USD$ 95/ t concentrate for copper. Concentrate transport was USD $50/t.
Revenue Factors Revenue used the June 2018 Woodmac consensus long term zinc price of USD$
2,820 /t, USD$ 6600 for copper, USD$ 1200 / oz gold and USD$ 17/oz silver.
Payables for the zinc were 85%, copper 96%, gold 98%, and silver 90%.
Schedule and Project Timeline The project development commences with a definitive feasibility study planned to
be complete at the end of Q2 2019. Construction is planned to commence in Q4
2019, with first ore occurring in Q4 2020. Commercial production is estimated to be
complete in Q1 2022 following a 12 month ramp up.
Market Assessment The concentrate deficit as a result of mine closures and production cuts in 2015
and 2016 along with the increasingly stringent environmental oversight in China is
forecast to be balanced by 2020. This recovery is reliant to the four major projects
(Dugald River, New Century, Gamsberg, and Glencore’s Australian assets) that are
forecast to ramp up over the next 1 to 2 years. The underlying metal prices reflect
the supply and demand conditions and the market sentiment. Superior has used
consensus price forecasts when estimating revenue generated by the Superior
Lake Project.
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Funding

To achieve the range of outcomes indicated in the Restart Study, funding in the order of US$75 million will likely be required for capital works, pre-production capital costs and contingency. It is anticipated that the finance will be sourced from a combination of equity and debt instruments from existing shareholders, new equity investment and debt providers from Australia and overseas.

Superior lake has sufficient cash on hand at the date of this announcement to undertake and complete a Definitive Feasibility Study. The Board believes that there is a reasonable basis to assume that funding will be available to complete all feasibility studies and finance the pre-production activities necessary to commence production on the following basis:

• the Board and executive team have a strong financing track record in developing resource projects;

• the Company believes this Restart Study demonstrates the Superior Lake Project’s strong potential to deliver a favourable economic return;

• the Company has a proven ability to attract new capital and successfully completed a Placement of 142,857,143 new ordinary shares to raise $5 million at $0.035 per share in August 2018. The Company will use the funds from the Placement to complete a Definitive Feasibility Study at the Superior Lake Project and for general working capital;

• as part of the August 2018 placement, Superior Lake appointed of Tribeca to arrange Project Finance of up to US$60 million to assist in funding the development and restart of the Superior Lake Project. Total capital costs estimate of the Restart Study at US$75 million including a US$15 million contingency (+/- 35%);

• Tribeca also acted as cornerstone investor subscribing for the Placement and is supportive of the Company’s strategy. As at the date of this announcement, Tribeca holds a 6.72% interest in the Company’s issued capital;

• the Company is confident its brownfield exploration program will add additional resources beyond what is currently included in the Restart Study;

• the positive financial metrics of the Superior Lake Project and the underlying demand growth for zinc; and

• other companies at a similar stage in development have been able to raise similar amounts of capital in recent capital raisings.

• The Board believes that there is a reasonable basis to assume funding will be available to construct the operation once the definitive feasibility is completed.

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Economic Parameters The Restart Study has been completed with a +/- 35% accuracy. Further
evaluation work is required to estimate ore reserves. A discount rate of 10% has
been used for financial modelling. This number was selected as a generic cost
of capital and is considered as a prudent and suitable discount rate for project
funding and economic forecasts in Canada. The model has been run as a life of
mine model and includes sustaining capital costs and closure costs. The Restart
Study outcome was tested for key financial inputs including: price, operating costs,
capital costs and grade. All these inputs were tested for variations of +/- 10% and
+/- 20%, with the outcomes shown below:
Financial sensitivity analysis
Exchange Rate Estimates in this announcement are presented in USD unless otherwise stated.
Community and Social Responsibility In Ontario the permitting required for a mineral development project generally
occurs in three phases, Development, Operations, and Closure, Reclamation
and Monitoring. The permitting of the Project has the benefit of the Winston Lake
Mine having permits in place inclusive of an environmental certificate of approval
(ECA) and a Closure Plan, both of which will revert to Superior once the option
agreement with FQML is exercised.
Any mineral development project must include consultation with Aboriginal
communities, the general public and private interests (e.g. tourism, environmental
organizations, local taxpayer’s organization, etc.). Superior Lake has commenced
the consultation process in conjunction with the ministry of Energy, Northern
Development and Mines (ENDM).
Other Other risks to the project relate to metal prices, social licence, and other similar
risks of resource projects.
Audit and Reviews The studies were internally reviewed by Superior with no material issues identified.
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