Shareholder Update 30 September Message from the CEO

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1 DIRECT NICKEL PROJECTS PTY LIMITED ACN A SUBSIDIARY OF DIRECT NICKEL LIMITED LEVEL TEN YOUNG STREET SYDNEY NSW 2000 AUSTRALIA T +61 (0) F +61 (0) DIRECTNICKEL.COM Shareholder Update 30 September 2013 Message from the CEO The 2013 year was always going to be a pivotal one in the development of Direct Nickel and it is certainly turning out that way. The core of the Company, the DNi Process, is now within a couple of months of delivering comprehensive validation through the Test Plant program in Perth nearly completed. Our team on the ground which includes CSIRO, Teck, RMDSTEM and more recently Antam personnel has put in a very professional effort to successfully complete 16 of the 19 planned campaigns. This is discussed in more detail elsewhere in this update, but the message is that we are very pleased with the results so far. We can confidently predict that we shall have achieved the objective of proving the Process to the point where it is ready for commercial use. On the corporate front, our efforts have been focussed on establishing the necessary foundations for a first commercial plant and in the course of this, fund raising remains the top priority. An emphasis on assessing the requirements of end users and developing a customer product focus has resulted in initial high-level connections with a number of major international stainless steel manufacturers where it is hoped mutually beneficial partnerships can be established to help us achieve our growth targets. The financial markets continue to be tough for a venture such as ours. Courtesy of the strong support from all of our shareholders, we have managed to keep the Perth program on track, whilst some other company development activities, principally in the resources area, have had to be deferred. Work is, however, underway in preparation for being re-quoted on the ASX. While a date has not been set, advice from a number of brokers is that market sentiment is improving and that early next year, hopefully with Test Plant reports in hand and the project for our first plant underway, this step can be taken. So now, with the Company having achieved most of its initial targets, we are very much focused on the task of monetising the investment for our shareholders. Structuring our joint ventures for commercial plants so that project funding is off balance sheet as much as possible while the capital markets are not offering full enterprise value, is one way that we intend to preserve and enhance shareholder value while still proceeding with the ultimate test of new technology building and operating a commercial plant to design specification. Russell Debney, CEO

2 Perth Test Plant A combined Campaign 15 &16 was completed on the 22 nd September successfully running the Plant for a continuous 21 days. As with each of the campaigns run to date, a lot has been learned on all aspects of the Process and the plant. To recap the year s performance so far, during Campaigns 1 to 6 (January 14 th to April 9 th ) commissioning of Stage 1, the abridged flowsheet was completed. Campaigns 7 to 10 (April 15 th to June 16 th ) allowed integrated operation of Stage 1 including a campaign on Teck s Brazilian Santa Fe sample. During this period the recirculation of both recovered acid and MgO was successfully demonstrated. Stage 2 construction of the iron and aluminium removal steps was completed during Campaign 11 allowing commissioning of Stage 2 over Campaigns 12 to 14 (July 6 th to Aug 25 th ). The hot oil heater upgrade was completed on August 13 th, which allowed thermal iron hydrolysis to be successfully commissioned during Campaign 14. From a process perspective 93.9% Ni extraction of a Buli 75% saprolite and 25% limonite blend and 89% Ni on a 50:50 blend has been achieved. Leach extractions closely match bench scale batch tests. Solid liquid separation has proved very effective with 98% wash efficiencies and +30% solids thickener underflow densities. These are near commercial grade results that future optimization will improve further. Barren evaporation and thermal decomposition of barren solutions are operating to design and in excess of 99% of the NOx is being converted to 55% strong nitric acid, suitable for reuse in the process. The performance of thermal iron hydrolysis during Campaign 14 was as required and shows the desired improvement over chemical hydrolysis. This leaves finetuning aluminium removal to achieve good quality MHP for market or for going to metal. Campaign 15/16 over 21 days allowed a more consistent operation to fine-tune these two circuits. Iron product assayed 60%Fe with low levels of nickel, aluminium and magnesium, which makes this an attractive product. MHP produced was consistently between 20 and 25%Ni. This product still had excess amounts of aluminium and magnesia but a circuit modification to provide two stages to the MHP circuit will be ready to address this issue in the next Campaign. In a two-stage process a high quality MHP with around 80% nickel recovery would be made and then a lower grade Ni product that would scavenge the rest of the nickel (another 15-18%) when it is recycled into the process. Campaigns 17 and 18 will be combined into a 24 day continuous run during which time we will be looking to achieve two 72 hour demonstration runs which will provide a great deal of steady state data for the next stage of engineering activity. 02

3 Direct Nickel s Dr Fiona McCarthy and Geoff Woodbridge in the Test Plant RMDSTEM s Bennson Tanda putting data into the ipad & adding MgO to the circuit Teck s Scott Varley and Robert Bruce discussing options for the Plant 03

4 Indonesia The previously announced 22 July signing of the Agreement with PT Antam to develop laterite deposits and processing plants in Indonesia has consolidated a year of strong activity in Indonesia. Since the signing there has been a very successful visit to the Perth Plant by Hendra Santika, Development Director. As a consequence of fruitful meetings during the visit, DNi has, at Hendra s request, submitted a proposal to Antam for funding for the estimated cost of the balance of the test program. Russell Debney has also had regular meetings with Antam's President-Director, Tato Miraza, to develop the commercial aspects of the relationship. Our Project Development Manager, Ian Warden, has been actively involved in site selection for a first commercial DNi plant and Russell, along with Graham Brock, visited Jakarta at the end of September to pursue this and to meet with Antam's senior technical executive Ajab Taofik, who is custodian of the conditions precedent for the DNi/Antam joint venture. To strengthen their technical understanding of the DNi Process, chemical engineer Panji Wibowo was seconded into the Perth plant operations team during September and has fitted in very well. PT Antam is a 65% state owned company with diversified mining interests. Antam is Indonesia s largest nickel miner and is a professional and experienced partner with strong strategic reasons for joint venturing with DNi. We are pleased to be making such good progress towards a first commercial plant while we are delivering the Process in the demonstration plant in Perth, thus ensuring a smooth transition to our next stage of development and shareholder value. Direct Nickel s Dr Fiona McCarthy explaining the Test Plant operation to PTDNi s Director Edy Sanwani and PT Antam s Development Director Hendra Santika 04

5 Papua New Guinea In April this year a care and maintenance budget was developed and adopted. This is to keep the tenements in good standing with a minimal field program, which will include some baseline environmental data gathering. In a move to better contain costs, an in-country Project Manager is to be appointed replacing either of the JV parties sending head office based personnel to PNG on a frequent basis. Initial enquiries of large companies as to their interest in getting involved to take the exploration of the potentially large resource forward, sees a Japanese company scheduled to visit the Mambare project during October. Marketing DNi is shifting focus to product and customers with the engagement of Fritz Teroerde, the former chairman of one of the world s largest stainless scrap raw materials companies - ELG Haniel, and our foray into Taiwan, Korea, China and Japan. Fritz joins the DNi team as Vice President Marketing and Strategy for an initial three-month period on a part time basis. Fritz started his professional career in 1969 during the first Nickel crisis, providing Ni units for the stainless steel industry. He grew up within the industry learning the business of recycling nickel containing alloys, stainless steel, and nickel metals, and was asked 1987 to be Chairman of the ELG. ELG, a supplier of nickel and chrome units for the global stainless steel industry, became the leading global recycler of nickel units in stainless steel during his tenure of 20 years. With his connections and expertise he helped to create the Hernic Ferrochrome production in Brits, SA and directed it's marketing. He also chaired the Market Development Committee of International Chrome Development Association ICDA Paris for 20 years, and acted as their consultant after his retirement from ELG. Earlier he co-founded TEAM STAINLESS with the International Stainless Steel Forum ISSF, to improve cooperation between stainless steel producers and the nickel, chrome and molybdenum associations. He served on the boards of Hernic Ferrochrome and EDMC (private Universities) Through his extensive experience and connections in the global Stainless Steel Industries, he is able to build top-level relationships for Direct Nickel and spearhead our efforts to co-operate with stainless steel producers to use the DNI process as integral part of their production. 05

6 Fritz passed through Sydney following the Taiwan, Korea and Perth meetings During the last two months, largely thorough introductions made by Fritz, meetings have been held at the most senior level with Yusco in Taiwan and Posco in Korea, the latter building on an earlier connection made by DNi to the technical team within Posco. Both Russell and Graham, along with Fritz attended these meetings, which stimulated a lot of interest from these major companies. China s largest privately owned stainless steel manufacturer, Tsingshan, also made a visit to the Perth Plant after arrangements made by Fritz. After a full day of discussions with Tsingshan s chairman, there has been strong interest expressed by Tsingshan to work together with DNi. The usual caution relating to IP was discussed and acknowledged and will be a key consideration ahead of agreeing any basis of partnership. Maintaining control of the development of the first commercial plant is a crucial part of the successful rollout schedule. In The Media In parallel with the good progress being made in Perth in the program where Fortbridge is assisting DNi with promotion, there have been several visits arranged at the Plant and media reports picking up on the story. These are on our website News section Want to know more? Shareholder inquiries and questions are always welcome. We can be reached at: russell@directnickel.com Phone: