Chatham Rock Phosphate Summarizes Recent Events and Milestones

Chatham Rock Phosphate Ltd. has provided a further

shareholder briefing. It has been particularly eventful recently and it is timely to provide a quick

summary to shareholders. In this issue the company will cover:

Commencing the marine consent reapplication process; Share purchase plan importance of this succeeding in order to maintain momentum; Marine phosphate permitting progress overseas; Key messages from Chatham presentation at the Minerals Forum; Report on attendance at National Fieldays; NIWA disturber experiment; Boskalis to dredge Lyttleton Harbour; Rare earths financing; Namibia.

• Commencing the marine consent reapplication process;
• Share purchase plan importance of this succeeding in order to maintain momentum;
• Marine phosphate permitting progress overseas;
• Key messages from Chatham presentation at the Minerals Forum;
• Report on attendance at National Fieldays;
• NIWA disturber experiment;
• Boskalis to dredge Lyttleton Harbour;
• Rare earths financing;
• Namibia.

Permit reapplication process back on track

Following the success of two recent private placements, the company now has the resources to commence the

first step in the reapplication process. This will involve the preparation of an environmental scoping

document, to be undertaken by independent advisers and the company’s project director, Renee Grogan, and which

is expected to be completed by November, 2018. This will be reviewed by independent experts retained

by the Environmental Protection Agency and the feedback from that review (a significant milestone) will guide Chatham toward the

delivery of a marine consent application that is consistent with the expectations of regulators, other

government agencies, and Maori and community stakeholders.

Preparing that application is expected to take at least a year, involving updates to a large number of

supporting scientific reports and the need to gather more environmental data from the permit area.

Announcement of share purchase plan (SPP)

This financing approach is in contrast to the recent financing initiatives targeting habitual investors. It is

an offer to all shareholders, regardless of their existing holdings, of up to 20,000 units. Each unit

comprises a share and half a two-year 45-cent warrant (called an option in New Zealand). The offer will

open on July 2 and close three weeks later.

The company hopes this offer will be supported by a healthy proportion of its 1,950 shareholders. Chatham certainly

will need that support to maintain the permit reapplication momentum it has regained. Continuing

shareholder support will provide the lifeblood to get to the finish line (being fully permitted). The company will

also continue to raise funds from a variety of other sources, including targeting the farming sector.

Marine phosphate permitting overseas

In April, the company quoted from a public release relating to the offshore Mexico Don Diego marine phosphate

deposit. The release stated “on March 21, 2018, the Superior Court of the Federal Court of

Administrative Justice in Mexico had ruled unanimously nullifying the earlier denial of the

environmental permit application for the extraction of phosphate sand from the Don Diego project.” The company

awaits further developments with optimism.

In a parallel situation in Namibia, a very recent court decision overruled the 2016 withdrawal of a

granted consent for a dredging licence to Namibian Phosphate Ltd., the operator of the Sandpiper

project. While this consent has not been formally reinstated, the company is similarly optimistic. Given its five

prospecting permit applications in the same area of offshore Namibia, this development is far more directly

relevant to Chatham.

Messages from the Minerals Forum

The company’s key messages

A key purpose of this conference held in Queenstown in May was to attract international investors, so

local investment opportunities were a focal point of the gathering. Chatham’s key messages were

strongly focused and included the following familiar points:

Based on current fertilizer prices and project costs, the project will be highly profitable ($75-million (New Zealand dollar)

pretax per annum).

No capital investment is required as the rock will be contract mined and sold unprocessed. It is a strategic commodity (phosphate is scarce, low cadmium phosphate even more so). The project has many associated environmental benefits (food safety, carbon emissions, soil

profile and water quality). It is an ethical source of phosphate. As the directors and management own 35 per cent the company is walking the walk. The company has more skin in the

game than any other shareholder.

• Based on current fertilizer prices and project costs, the project will be highly profitable ($75-million (New Zealand dollar)

pretax per annum).

• No capital investment is required as the rock will be contract mined and sold unprocessed.
• It is a strategic commodity (phosphate is scarce, low cadmium phosphate even more so).
• The project has many associated environmental benefits (food safety, carbon emissions, soil

profile and water quality).

• It is an ethical source of phosphate.
• As the directors and management own 35 per cent the company is walking the walk. The company has more skin in the

game than any other shareholder.

The presentation was well received and is on the Chatham website.

Messages from the honourable Megan Woods, Minister of Energy and Resources

Minister Woods’s keynote address included some helpful reassurances relating to offshore minerals

permitting. Because these are so relevant to its project, it repeats the relevant sections verbatim.

“Other than for oil and gas, we have not changed the rules or regulations around offshore

mineral exploration at all.

“Our system assesses each application for offshore minerals exploration against a variety of

factors including environmental impact under the Resource Management Act, or under the

Exclusive Economic Zone legislation where the application is for an area more than 12 nautical

miles offshore.

“We see this system continuing — each permit application will continue to be assessed on its

merits.

“For example, just a couple of weeks ago NZ Petroleum & Minerals, a foundation partner of this

event, granted two such permits for iron sands.

“We know there are other minerals other than iron sands offshore and we want to see exploration

for these minerals continue.

“There are known deposits of phosphate, polymetallic nodules, cobalt-rich ferromanganese crusts

and sea-floor massive sulphides that all hold the potential for economic benefit.”

• “Other than for oil and gas, we have not changed the rules or regulations around offshore

mineral exploration at all.

• “Our system assesses each application for offshore minerals exploration against a variety of

factors including environmental impact under the Resource Management Act, or under the

Exclusive Economic Zone legislation where the application is for an area more than 12 nautical

miles offshore.

• “We see this system continuing — each permit application will continue to be assessed on its

merits.

• “For example, just a couple of weeks ago NZ Petroleum & Minerals, a foundation partner of this

event, granted two such permits for iron sands.

• “We know there are other minerals other than iron sands offshore and we want to see exploration

for these minerals continue.

• “There are known deposits of phosphate, polymetallic nodules, cobalt-rich ferromanganese crusts

and sea-floor massive sulphides that all hold the potential for economic benefit.”

Given Chatham already has a granted mining permit which included negotiating a significant royalty

payable to the government, the economic benefits have already been well established.

National Field Days

Chatham attended the National Field Days at Mystery Creek in Hamilton, held annually in June. The

Fieldays event, the largest agribusiness show in the Southern Hemisphere, attracts more than 130,000

people over four days and attendance in previous years has proven successful for Chatham. This was the

case again as the company had a steady stream of people coming to its stall, wanting to know about the project,

its phosphate product and the investment opportunity. It was again visited by farmers who have

followed the company’s project over the past several years in the media, by companies involved in the industry, by

people who are simply curious to learn more about the project’s technical innovations and by loyal

shareholders.

Interestingly many of the company’s visitors knew what reactive phosphate rock was, understand its properties and

benefits and many welcomed the demise of manufactured phosphate fertilizers.

Niwa disturber experiment

Also a few weeks ago, the company advised shareholders an ocean study by NIWA (National Institute of Water and

Atmospheric Research) to be undertaken in May would be particularly relevant to its proposed marine

phosphate recovery operation on the Chatham Rise.

NIWA had advised that one of the most challenging scientific underwater experiments it has ever

attempted is taking place on the Chatham Rise.

The aim of the voyage was to disturb a small area of the seabed and create a sediment plume using a

benthic disturber. The dispersal of the plume would then be monitored, and surveys before and after

the disturbance would measure the effects on the seabed animals. The data collected will be used to

build a picture of how the biological communities on the seabed may be affected by the sediment

stirred up by mining or bottom trawl fishing.

Uncertainty about the effects of sediment plumes has contributed to applications for seabed mining

being declined and the plumes are also an environmental concern for sustainable fisheries certification.

“These activities create plumes of sediment but we don’t know how the sediment affects seabed life as

it settles again on the sea floor, and how much deep-sea animals can withstand. We are doing this

experiment on a small scale on the Chatham Rise but it will give us a much better idea of how

environmental managers and industry can work to mitigate larger-scale disturbance effects,” NIWA

scientist Dr. Malcolm Clark noted at the time.

At the time, the company said: “Clearly the outcomes of the disturbance research are incredibly relevant to our

project in that they will provide real data on the behaviour and effect of plumes generated when the

sea floor is disturbed (by any activity including dredging, mining and bottom trawling).

“We have already spent very considerable sums modelling how the plumes will behave so we expect

that this real data will further strengthen our ability to quantify these effects.”

The experiment was completed in early June and Chatham looks forward to the results.

Boskalis dredge “Fairway” to be in NZ waters

Shareholders will be aware the company has worked closely with Royal Boskalis Westminster (Boskalis) since

2011. Its proposed phosphate recovery operation has been conceived and designed by Boskalis and

the company is also a shareholder in Chatham.

Boskalis recently won the contract to dredge the Lyttleton harbour and as a result, Fairway, a 230-metre

trailing-suction hopper dredger, will be undertaking that contract in the next few months. As is routine

in dredging contracts worldwide, the dredging operation will operate within extremely fine

environmental tolerances and will be very closely monitored. It is a fortuitous opportunity for Boskalis to

demonstrate to New Zealand stakeholders that it really is world-class at what it does.

Rare earths research

Chatham previously confirmed it was about to commission a research project aimed at separating

valuable byproducts (including rare earths) within the sandy sea-floor matrix that contains the rock

phosphate deposit. As its phosphate recovery process is already bringing these sands up to the vessel,

there is no mining cost involved, merely the costs of separating these byproducts from the sand before

it is returned to the sea floor. Successful recovery of even a small proportion of these byproducts could

add significantly to its revenue and profitability, and also establish a strategic ocean-floor asset for New

Zealand. Delays in securing expected research grants resulted in this project being put on hold but there

are changes on the landscape here (partially due to the change of government) and the company is, again,

optimistic it can get this project up and running.

Namibia Chatham moving away from being a one-trick pony

Shareholders will be aware Chatham applied for marine phosphate prospecting permits offshore

Namibia years ago. More recently the company has focused on securing strategic alliances in Namibia

which will help facilitate its plans to become more active in Namibia. It considers this initiative, which

leverages its in-house expertise, to be very much in the interests of its shareholders. As and when

they arise, future commitments will be structured in a manner where they will not divert financing from

its principal objective; gaining the Chatham Rise marine consent on its second try.

A reminder about the company’s environmental and other benefits

You can be Chatham’s advocates whenever its project is raised in conversation. To remind you why the

Chatham Rise project remains hugely important for New Zealand, here are the key reasons:

Chatham’s rock is a proven reactive phosphate rock. Using it results in much less runoff into waterways

and an improved soil profile compared with the effects of manufactured fertilizers.

As such it is an organic fertilizer.

It also contains ultralow levels of cadmium, a cancer-causing heavy metal with much greater

concentrations in other rock phosphate deposits.Being locally sourced and needing to be applied less frequently results in much lower carbon

emissions (in effect increasing the NZ electric vehicle fleet from 5,000 to 24,000 vehicles). The environmental footprint of seabed extraction is much smaller than the impact of onshore

phosphate on local communities overseas.

The rock is within one day’s sailing distance and supply is far more secure than phosphate rock

coming from unstable regions on the other side of the world. The project economics are attractive and Chatham will pay significant royalties and income taxes. The project will generate new jobs in environmental monitoring, on the mining ship, in the home

port, and in the science and agricultural sectors.

• Chatham’s rock is a proven reactive phosphate rock. Using it results in much less runoff into waterways

and an improved soil profile compared with the effects of manufactured fertilizers.

• As such it is an organic fertilizer.
• It also contains ultralow levels of cadmium, a cancer-causing heavy metal with much greater

concentrations in other rock phosphate deposits.

• Being locally sourced and needing to be applied less frequently results in much lower carbon

emissions (in effect increasing the NZ electric vehicle fleet from 5,000 to 24,000 vehicles).

• The environmental footprint of seabed extraction is much smaller than the impact of onshore

phosphate on local communities overseas.

• The rock is within one day’s sailing distance and supply is far more secure than phosphate rock

coming from unstable regions on the other side of the world.

• The project economics are attractive and Chatham will pay significant royalties and income taxes.
• The project will generate new jobs in environmental monitoring, on the mining ship, in the home

port, and in the science and agricultural sectors.