Dear Errawarra Shareholders

Errawarra has continued its research into manufacturing commercial grade sulphate of potassium (SOP) fertiliser for the Australian market. We have continued validation and purification testing and recently produced a lab product with chemical grades that provide sufficient encouragement to continue funding this particular project.

The demand for SOP remains strong as the urbanisation of China (and other high population zones) has increased the demand for value adding fertiliser that can provide the nutrients to ‘leafy green’ high value crops farmed intensively for human consumption. Supply of SOP has also been somewhat constrained as the main manufacturers of SOP in Europe have difficulty disposing of the waste product (hydrochloric acid) from the process in accordance with strict environmental legislation.

Interest in SOP development projects also remains strong as can be seen by the number of ASX listed companies seeking to develop large brine deposits located in remote regions in Australia to satisfy local and international demand. Shareholders should be aware that Australia imports 100% of the SOP it uses and an opportunity exists for Errawarra to supply product into the local market in the future.

A recent positive development is that Errawarra has entered into a technology agreement that may enable the Company to extract potassium from sources of hard rock. If this can be achieved economically we may be able to decrease the costs of the inputs required to produce SOP and thereby improve the financial returns of the SOP fertiliser project.

Importantly the Board has now resolved to proceed to a pre-feasibility study (+/- 25% accuracy) (PFS) on the overall SOP fertiliser project that is expected to incorporate further metallurgical test work and a scoping study (+/- 35% accuracy) on the potassium extraction process. The PFS is expected to be delivered in April 2018. The Company will need to complete a capital raising of not less than $500,000 this financial year to fund these activities and subject to a positive PFS raise additional capital (not less than $1,000,000) to fund a Feasibility Study (+/-15% accuracy).

Activities this year have once again been funded by borrowings which need to be repaid. We will therefore continue to sell down of listed shares owned by Errawarra and also seek to complete a capital raising to fund project development and working capital. We remain committed to commercialising the fertiliser project (using ammonium sulphate produced via the Reid ProcessTM) subject to the project satisfying our internal financial metrics.

Kind regards,

Damian Hicks
Chairman