LOTUS RESOURCES LIMITED — Capital/Financing Update 2020

Apr 7, 2020

7 April 2020

ASX Announcement

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Lotus identifies high-grade rare earths and rutile at Kayelekera

Highlights

• Rock samples up to 38% total REO and 5% TiO2 as rutile identified 2km from Kayelekera

• Up to 8.5% critical REO (Pr, Nd ,Tb, Dy, and Y oxides), averaging 2.9% across all samples collected - Results hosted in allanite-rich pegmatites and granitoids

• Sampling undertaken at Milenje Hills prospect as part of broader exploration strategy

• Lotus is planning further soil sampling, surface mapping and trenching at Milenje Prospect

Lotus Resources Limited ( LOT, Lotus or the Company ) is pleased to announce early-stage field work on Mining Licenses at its newly acquired Kayelekera uranium mine has identified high-grade Rare Earth Elements (REE) and rutile-bearing granitoids at the Milenje Hills Prospect, approximately 2km north of the Kayelekera resource area ( Figure 1 and 2 ). Lotus completed the acquisition of the Kayelekera uranium project in March.

The Milenje Hills prospect was discovered through ground surveys and mapping in 2014 during exploration for uranium mineralisation adjacent to the Kayelekera uranium resource. Preliminary (and never released) surface and trench grab samples have returned significant REE and TiO2 (predominantly from rutile) results from granitoid gneiss float material and sub crop ( refer Table 1 ). Significant, hand samples returned grades up to 38% total rare earth oxides (REO)( Tables 2 and 3 ).

The mineralisation is interpreted to be associated with allanite-rich pegmatite dykes and associated fluid alteration within associated granitoids, which have been emplaced into the host Ubendian gneisses and granites. Both the pegmatite material and granitoids exhibit high REE and TiO2 grades (up to 38% total REO) – as summarised in Table 2.

Importantly, the rare-earth assemblage identified includes significant portions of the high-value critical rare earth oxides of Neodymium (Nd), Europium (Eu), Terbium (Tb), Dysprosium (Dy), Yttrium (Y), and Praseodymium (Pr): averaging 2.9% across all samples and up to 8.5% (Table 1). Of this, Neodymium oxide makes up on average 73% of the endowment: averaging 2.1% across the samples, and up to 6.3% (sample KYA573 – Table2).

Lotus believes the Milenje Hills prospect contains potential for significant REE mineralisation and aims to test the prospect through systematic exploration including soil sampling, surface mapping and trenching in the upcoming dry season.

The Kayelekera uranium mine produced 10.9Mlb U3O8 from 2009 to 2014. More than $200M has been invested into its modern plant and infrastructure. Lotus announced a 31% increase in the project’s uranium Mineral Resource in late March to 37.5Mlb of contained U3O8, up from 28.7Mlb U3O8 it previously reported (see ASX announcement dated 26 March 2020). Lotus is working to expand Kayelekera’s resource inventory of uranium as well as other minerals.

For more information visit us at www.lotusresources.com.au or contact

Simon Andrew - Managing Director 08 9278 2441, email: info@lotusresources.com.au

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Location and Geology

The Milenje Hills prospect is located 2km to the north of the Kayelekera uranium mine in northern Malawi. The prospect is located on Mining Lease ML152 and Exploration Lease EPL225, both of which are held by Lotus (100%) and are in good standing (Figure 1a).

The local geology is dominated by basement Ubendian gneisses and biotite-rich granitoids dipping at a shallow angle of around 50 degrees to the southwest, against which Karoo beds which host the Kayelekera deposit have been juxtaposed by shearing along the Eastern Boundary Fault of the local basin (Figure 2). Geology mapping in the area indicates the presence of multiple granitoid lenses (0.5 to 4.5m wide) which are believed to be the host rock for REE mineralisation.

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Figure 1: Kayelekera Tenements and Milenje Project

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Preliminary mineralogical taskwork by ANSTO indicates that the REE mineralisation is associated with the mineral allanite, commonly found in felsic igneous rocks (granitoids and carbonatites). The test work undertaken also indicated that allanite is well liberated by a 1mm and upgrading of allanite content through beneficiation would be potentially feasible and positively impact on REE extraction. Initial analysis also indicates that the uranium mineralisation would not impact on a potential REE or rutile concentration; further work is required to clarify this.

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Figure 2: Mapped Geology at the Milenje Prospect: Showing locations of REE grab samples

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A total of 14 trenches targeting uranium mineralisation were completed over the region in 2014 targeting surface uranium anomalies. Selected hand samples were taken for multi-element analysis, which led to the identification of the REE mineralisation (Figure 2).

Hand specimens collected during trenching identified two lithologies which host REE mineralisation; a dark grey, fine-grained pegmatitic granitoid (dominated by allanite crystals – potentially part of an intrusive pegmatite) and a reddish, medium grained granitoid – interpreted as part of a broader alteration suit (Figure 3). All samples were present as float or sub-crop.

Selected hand specimens were analysed for whole rock geochemistry (Table 1) by ANSSTO Laboratories (Australia) and found to contain around 43% allanite in the reddish granitoid samples (#2 in Figure 3) and 87% allanite in the dark grey sample (#1 in Figure 3). Elemental test work of additional samples by ANSTO Laboratories returned assays of 6-32% total REE (Table 2); with follow up test work on samples at ALS (Australia) producing assays in the range of 8-38% total REE (Table 2).

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Figure 3: Showing allanite-dominated rock sample (LHS - 1) and Allanite-rich reddish granitoid (RHS - 2)

Table 1. Whole rock analysis of Milenje Hills hand specimens

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Black (dark) rock Reddish Brown
Mineral Chemical Formula (MLJ 150) (MTR 07)
% Composition % Composition
Allanite-(Ce) (Ca,Ce)2(Al,Fe)3(SiO4)(Si2O7)O(OH) 87.1 43.2
Rutile TiO2 5.0 4.1
Quartz SiO2 2.3 14.4
K-Feldspar KAlSi3O8 0.01 29.4
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Table 2: Sample locations and summary REO analysis (%)

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Sample ID Easting Northing TiO2 LREO HREO Critical REO (+Y) TREO (+Y) Type
Allanite-rich float
MLJ 150A 576112 8898195 2.46 19.1 0.24 4.20 19.3 with minor granitic
xenoliths
reddish-brown
granitoid with
MTR 7 576964 8897498 3.43 8.8 0.11 2.03 8.9
disseminated
allanite
reddish-brown
granitoid with
MLJ 322 576288 8898084 2.66 6.6 0.07 1.39 6.6
disseminated
allanite
reddish-brown
granitoid with
MTR5A 576678 8897667 2.39 6.5 0.06 1.34 6.5
disseminated
allanite
reddish-brown
granitoid with
MTR 2A 574665 8899421 2.23 5.3 0.05 1.05 5.3
disseminated
allanite
MTR 3B 575648 8898488 6.07 14.6 0.23 3.14 14.8 Allanite-rich float
Black, Allanite-rich
KYA573 576891 8897587 1.05 37.6 0.40 8.46 38.0
sub-crop
Black, dense ,
KYA635 575990 8898275 0.14 15.3 0.18 3.03 15.5 sub-metallic
granitoid float
Pink feldspar rich
KYA637 576033 8898328 0.26 7.8 0.09 1.84 7.9
granitic float
Pink feldspar rich
PQ41 575683 8898413 0.84 13.0 0.32 2.89 13.4
granitic subcrop
Average 2.3 13.5 0.2 2.9 13.7
Note: Coordinates are in ARC1950 36S. ‘Critical’ REE have been defined here as Neodymium (Nd),
Europium (Eu), Terbium (Tb), Dysprosium (Dy) and Yttrium (Y), and Praseodymium (Pr)
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Global Hard Rock Rutile Example

The Engebo Deposit in Norway is considered a high-level analogy for how a hard-rock rutile project could be viable and has provided the impetus for Lotus to investigate the potential for both economic REE and rutile mineralisation at Milenje Hills. Engebo contains a JORC 2012 resource of 254Mt at 3.2% TiO2 and 41% garnet, hosted in hard-rock eclogite facies gabbroic protolith. The 2020 DFS study (refer Nordic Mining Announcement 28 January 2020) of the deposit indicated that rutile can be economically extracted from the parent rock.

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Exploration Program

Lotus is currently planning a staged exploration program to identify the source of the mineralised float material at Milenje Hills through detailed mapping, soils and additional trenching of the prospect area. Further regional ground surveys are also planned to broaden the target area. Following the mapping and trenching programs, and appropriate targeting vectors being identified, Lotus intends to undertake maiden reconnaissance drilling at the prospect later in the next dry season. Lotus looks forward to keeping the market informed of further results from Milenje Hills as it progresses the development of the project.

Competent Persons’ Statements

The information in this document that relates to Exploration Data is based on information compiled by Mr. Neil Inwood, who is a Fellow of the AUSIMM. Mr Inwood is a consulting geologist and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as Competent Persons as defined in the 2012 edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”. Mr. Inwood has consented to the inclusion of this information in this document in the form and context in which it appears. An entity associated with Mr Inwood has shares in Lotus Resources Ltd.

About Lotus Resources

Lotus Resources Limited (LOT:ASX) is a minerals exploration and development company. The Company recently acquired a 65% interest in the Kayelekera Uranium Project in Malawi. The project is held via a 76.5% holding in Lily resources Pty Ltd. Kayelekera hosts a high-grade resource with an existing open pit mine and demonstrated excellent metallurgical recoveries (87.5%) having historically produced over 10.9MIb of uranium between 2009 and 2014. Lotus’s owned asset is the Hylea Cobalt Project in the Fifield District of NSW. The Project represents a significant cobalt, platinum, nickel and scandium exploration target in both scale and grade potential, as demonstrated by the Company’s 2018 drilling program.

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Appendix 1: JORC Code, 2012 Edition – Kayelekera Deposit 2019

Section 1 Sampling Techniques and Data

(Criteria in this section apply to all succeeding sections.)

Criteria	JORC Code explanation	Commentary	Commentary
Sampling techniques	 Nature and quality of sampling (eg cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc). These examples should not be taken as limiting the broad meaning of sampling.  Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.  Aspects of the determination of mineralisation that are Material to the Public Report.  In cases where ‘industry standard’ work has been done this would be relatively simple (eg ‘reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (eg submarine nodules) may warrant disclosure of detailed information.	    	The Milenje Hills Prospect has been sampled by ground scintillometer and follow-up with mechanised trenching and grab sampling by Paladin Africa in 2017. All sampling was carried out under PDN’s sampling protocols and QA/QC procedures as per industry best practice. Ground scintillometer readings of trench samples were collected every 1m across the length of trenches and averaged to determine an overall counts per second (CPS) Hand specimens from the trench samples were analysed with handheld XRF to determine which samples would be sent for further analysis – these XRF results are not reported. Handheld XRF and scintillometer instruments were regularly calibrated during sample programs.
Drilling techniques	 Drill type (eg core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (eg core diameter, triple or standard tube, depth of diamond tails, face- sampling bit or other type, whether core is oriented and if so, by what method, etc).		No drilling activities undertaken
Drill sample	 Method of recording and assessing core and chip		No drilling activities undertaken
recovery	sample recoveries and results assessed.
	 Measures taken to maximise sample recovery and
	ensure representative nature of the samples.
	 Whether a relationship exists between sample
	recovery and grade and whether sample bias may
	have occurred due to preferential loss/gain of
	fine/coarse material.

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Criteria JORC Code explanation Commentary
Logging  Whether core and chip samples have been  Trenches are logged for lithology on 1m
geologically and geotechnically logged to a level of sample lengths.
detail to support appropriate Mineral Resource
estimation, mining studies and metallurgical
studies.
 Whether logging is qualitative or quantitative in
nature. Core (or costean, channel, etc)
photography.
 The total length and percentage of the relevant
intersections logged.
Sub-  If core, whether cut or sawn and whether quarter,  All sampling was carried out using PDN’s
sampling half or all core taken. sampling protocols and QA/QC
techniques  If non-core, whether riffled, tube sampled, rotary procedures as per industry best practice.
split, etc and whether sampled wet or dry.  Representative samples of lithologies
and sample
 For all sample types, the nature, quality and were analysed by handheld XRF to
preparation
appropriateness of the sample preparation determine which samples would receive
technique. follow-up elemental analysis.
 Quality control procedures adopted for all sub-
sampling stages to maximise representivity of
samples.
 Measures taken to ensure that the sampling is
representative of the in situ material collected,
including for instance results for field
duplicate/second-half sampling.
 Whether sample sizes are appropriate to the grain
size of the material being sampled.
Quality of  The nature, quality and appropriateness of the  Whole rock and elemental analysis of
assay data assaying and laboratory procedures used and samples was completed by ASNTO
and whether the technique is considered partial or Minerals, NSW Australia by several
total. methods; and ALS Brisbane (ore grade
laboratory
 For geophysical tools, spectrometers, handheld methods using fusion and ICP-MS/ICP-
tests
XRF instruments, etc, the parameters used in AES and XRF determinations.)
determining the analysis including instrument  Modal mineralogy of two hand
make and model, reading times, calibrations specimens MJ150 and MTS7 was
factors applied and their derivation, etc. determined by X-ray diffraction
 Nature of quality control procedures adopted (eg  Elemental analysis of REE (La, Ce, Pr,
standards, blanks, duplicates, external laboratory Nd, Sm, Eu, Gd, Tb, Dy, Ho, Er, Tm, Yb,
checks) and whether acceptable levels of Lu, Y) and U, Th was determined by
accuracy (ie lack of bias) and precision have been fusion/ICP-MS
established.  Elemental analysis of Al, Ba, Ca, Cr, Cu,
Fe, K, Mg, Mn, Mo, Na, Nb, Ni, P, Pb, S,
Si, Sr, Ti was determined by fusion/XRF

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Criteria JORC Code explanation Commentary
Verification of  The verification of significant intersections by either  Significant results were verified by
sampling and independent or alternative company personnel. company and consultant geologists.
assaying  The use of twinned holes.  Primary laboratory documents were
 Documentation of primary data, data entry review to confirm reporting accuracy
procedures, data verification, data storage
(physical and electronic) protocols.
 Discuss any adjustment to assay data.
Location of  Accuracy and quality of surveys used to locate drill  Trench sample locations are surveyed
data points holes (collar and down-hole surveys), trenches, with a handheld GPS in WGS84 36N
mine workings and other locations used in Mineral coordinate system using a handheld gps,
Resource estimation. with sub 10m location accuracy
 Specification of the grid system used.  Trench Sample Locations (WGS82 36N
 Quality and adequacy of topographic control. coordinate system)
Data spacing  Data spacing for reporting of Exploration Results.  Data spacing is broad and results can
and  Whether the data spacing and distribution is only be considered as a preliminary
distribution sufficient to establish the degree of geological and identification of mineralisation in the
grade continuity appropriate for the Mineral region
Resource and Ore Reserve estimation  Samples should be considered as
procedure(s) and classifications applied. character samples.
 Whether sample compositing has been applied.  No sample compositing has been
applied.
Orientation of  Whether the orientation of sampling achieves  Trench samples are orientated
data in unbiased sampling of possible structures and the perpendicular to the strike of
relation to extent to which this is known, considering the stratigraphy. Mineralised zones dip
deposit type. around 50 degrees to the southwest and
geological
 If the relationship between the drilling orientation trenches are completed across the full
structure
and the orientation of key mineralised structures is width of the mineralised zones and
considered to have introduced a sampling bias, extended into the unmineralized zones
this should be assessed and reported if material.  Rock samples are character samples
Sample  The measures taken to ensure sample security.  Chain of custody was managed by PDN.
security  Samples were driven by PDN personnel
to Kamuzu International Airport, Malawi
and air freighted by South African
Airways/Qantas to ANSTO Minerals,
NSW Australia; and to ALS Brisbane
Audits or  The results of any audits or reviews of sampling  Data was validated by PDN whilst
reviews techniques and data. loading into database.
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Section 2 Reporting of Exploration Results

(Criteria listed in the preceding section also apply to this section.)

Criteria	JORC Code explanation	Commentary	Commentary
Mineral tenement and land tenure status	 Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.  The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.	   	The Milenje Hills REE Prospect t is located in Malawi, in East Africa. The project site is located within the Kyungu Chieftainship, in the Karonga District of Northern Malawi about 35km from the local centre of Karonga and 650km north of the national capital of Lilongwe. A formal and detailed Development Agreement for the neighbouring Kayelekera Uranium Project was approved by the Government of Malawi and executed on 22nd February 2007. The Development Agreement provides a stable fiscal regime for at least 10 years from the commencement of production. The prospect is covered by a single licence, Mining Licence (ML) 152, of 55.5 square kilometres granted on 9th April 2007 for an initial term of fifteen years renewable for further 10 year periods. The current term expires on 9th April 2022. The tenement is in good standing and no known impediments exist.
Exploration done by other parties	 Acknowledgment and appraisal of exploration by other parties.	 	No previous exploration activities for REE mineralisation have been undertaken at Milenje Hills prior to the previous operators of the project (Paladin). Trench samples referred to in this announcement represent the first exploration activities undertaken in relation to REE mineralisation at Milenje Hills by Paladin in 2014 and no follow-up exploration activities were completed at Milenje Hills due to the Kayelekera mine being places under care and maintenance by Paladin.
Geology	 Deposit type, geological setting		The local geology is dominated by basement Ubendian
	and style of mineralisation.		gneisses and biotite-rich granitoids dipping at a shallow
			angle of around 50 degrees to the southwest, against
			which Karoo beds which host the Kayelekera deposit have
			been juxtaposed by shearing along the Eastern Boundary
			Fault of the local basin (Figure 2). Geology mapping in the
			area indicates the presence of multiple granitoid lenses
			(0.5 to 4.5m wide) which are believed to be the host rock
			for REE mineralisation

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Criteria JORC Code explanation Commentary
Drill hole  A summary of all information
Information material to the understanding of the  No drill holes reported in this announcement.
exploration results including a
tabulation of the following
information for all Material drill
holes:
o easting and northing of the drill
hole collar
o elevation or RL (Reduced Level
– elevation above sea level in
metres) of the drill hole collar
o dip and azimuth of the hole
o down hole length and
interception depth
o hole length.
 If the exclusion of this information is
justified on the basis that the
information is not Material and this
exclusion does not detract from the
understanding of the report, the
Competent Person should clearly
explain why this is the case.
Data  In reporting Exploration Results,  Metal equivalent values have not been used.
aggregation weighting averaging techniques,
methods maximum and/or minimum grade
truncations (eg cutting of high
grades) and cut-off grades are
usually Material and should be
stated.
 Where aggregate intercepts
incorporate short lengths of high
grade results and longer lengths of
low grade results, the procedure
used for such aggregation should
be stated and some typical
examples of such aggregations
should be shown in detail.
 The assumptions used for any
reporting of metal equivalent
values should be clearly stated.
Relationship  These relationships are particularly  Channel samples were reported as horizontal widths.
between important in the reporting of True widths of mineralised zones can be determined
mineralisatio Exploration Results. from trenches but have not been reported in this
n widths and  If the geometry of the announcement.
mineralisation with respect to the
drill hole angle is known, its nature
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Criteria	JORC Code explanation	Commentary	Commentary
intercept lengths	should be reported.  If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (eg ‘down hole length, true width not known’).
Diagrams	 Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.		See included plans and section.
Balanced reporting	 Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results.		All available historical exploration results have been included in this announcement.
Other substantive exploration data	 Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples – size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.		N/A
Further work	 The nature and scale of planned		Additional exploration work is being planned and will be
	further work (eg tests for lateral		announced when appropriate. Work including mapping,
	extensions or depth extensions or		soil sampling, trenching and drilling is envisaged.
	large-scale step-out drilling).
	 Diagrams clearly highlighting the
	areas of possible extensions,
	including the main geological
	interpretations and future drilling
	areas, provided this information is
	not commercially sensitive.

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