LKY just started drilling for this critical military metal... in the USA.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 4,890,278 LKY Shares at the time of publishing this article. The Company has been engaged by LKY to share our commentary on the progress of our Investment in LKY over time. This information is general in nature about a speculative investment and does not constitute personal advice. It does not consider your objectives, financial situation, or needs. Any forward-looking statements are uncertain and not a guaranteed outcome.

Over the coming years, whichever country wins the race in artificial intelligence, autonomous robotics and military might will be the global superpower.

About 12 months ago the USA realised that the supply of critical minerals they need for building autonomous robots and important military uses is controlled by China.

And China has started withholding supply...

The USA has almost zero domestic production and is now rapidly deploying funds to bring online domestic supply of these critical minerals...

and also create strategic stockpiles.

(more on this in a second).

Antimony is a critical metal used in ammunition (kinda important for the military, right?), tanks and missiles.

Rare earths are a set of niche minerals used in the production of magnets for various military applications, AI and most importantly - autonomous robotics.

China controls almost all supply and the USA has almost zero domestic production - which the USA is now rapidly trying to change at levels of urgency not seen since the Manhattan project during WW2.

(we think USA critical minerals is going to be a major investment thematic over the coming years, attracting lots of attention and capital)

Our Investment Locksley Resources (ASX:LKY) has an antimony AND rare earths project in California, right next door to the ONLY rare earths mine in the USA:

(source)

And LKY’s strategy is to move into production as quickly as possible.

Today LKY announced drilling had started at its Desert Antimony Mine.

(source: read the announcement here)

Basically, LKY’s drilling is going to test the theory that the patterns of antimony mineralisation mined during WW1 and WW2 (shown in blue) extend further (shown in pink):

(source)

We will find out in the coming weeks...

Then comes the drilling on the rare earths targets.

(more on the drilling in a second)

Back to ‘moving into production as quickly as possible’...

LKY owns the multi-levelled historic Desert Antimony Mine in California.

This mine supplied antimony to the US during both WW1 and WW2.

LKY has already produced the USA’s first domestically mined and processed antimony ingot in decades.

(we wrote about it here on 8th December 2025)

AND has attracted US$191M in potential funding support from the US Export-Import Bank.

The US EXIM is the same bank funding the majority of the USA’s $12BN critical minerals stockpile (Project Vault):

(source)

LKY also has an application for up to US$43M in funding under the US Defense Production Act Title III:

(source)

LKY is currently capped at ~$61M and had $19.5M cash in the bank at Dec 31.

So a grant funding announcement could end up being a big catalyst for LKY in the short term.

LKY is basically working backwards to get its multi-levelled antimony mine back into production.

Develop downstream processing tech > produce a downstream end product > get funding support for a restart > then do the drilling needed to prove scale for a final investment decision.

Here is a nice video summary of LKY's mine restart plan - including the processing facility design and downstream strategy:

Watch: LKY Desert Antimony Mine Restart Plan

Typically for mining companies everything works in reverse, but because LKY’s ground holds a previously producing antimony mine we think LKY has the right asset to go after a fast to market strategy.

Over the last few months, leading up to drilling LKY has:

• High grade batch sampling results averaging 18.7% antimony across 287kg of samples (with individual batches hitting 25.7% Sb).
• Mapping of potential extensions to the old Desert Antimony Mine ~60m to the north-east.
• Mapping of a new target area (a potential DAM repeat?) - the "Beefeater Shear" a 10-15 metre wide structure that could significantly expand the project.
• Starting engineering partner selection for the pilot processing plant design.
  
• Product qualification work - basically the precursor to discussions with potential customers/offtakers.

(source)

What we don't know at the moment is the scale potential of LKY’s assets...

Basically, how much antimony is still sitting inside the Desert Antimony Mine and whether or not the new targets are repeats/extensions to the old workings.

We are hoping this next round of drilling answers those questions.

Again, here was our working theory based on all of the mapping/sampling/surveys LKY had done to date:

(source)

And here is where LKY will be targeting with its first batch of holes:

(source)

We note the holes are all extensional to the old workings - so we should get a fairly good sense of how much bigger LKY can make that old mine.

Now we wait to see if drilling results deliver big extensions (or repeats) to the old workings...

IF drilling comes in we think it could bring with it a lot of corporate/government interest to LKY’s project.

We think corporates (companies) and the US government will be watching LKY’s drilling program

As mentioned earlier LKY’s already got potential support from the US Export Import Bank.

We think that any other potential financier for LKY’s project will be watching to see the outcome of the drill program.

We also think US corporates who are looking for antimony feedstock may all of a sudden look at LKY as a potential supply source.

(assuming the drilling results come in, which they may not - exploration drilling carries risk of failure).

In a previous note, we wrote about potential interest from US Antimony Corp (here):

1. The Pentagon set aside US$245M to buy antimony from US Antimony Corp), and
2. US Antimony Corp immediately went out looking for assets to backfill that (and potential future demand) by buying ASX listed Larvotto.

(Source)(Source)(Source)

(That takeover bid was rejected, but it shows how “motivated” US Antimony Corp is to secure “friendly” antimony feedstock to fulfil their Pentagon contract).

Now here's why we think LKY could be of interest.

LKY already has one of the highest grade known occurrences of antimony in the USA.

LKY has already proven its Mojave Project can produce high-grade antimony concentrates at 68.1% antimony

(remember that photo above of LKY’s CEO holding the antimony ingot at the White House).

LKY has already proven that those concentrates can be turned into antimony ingots suitable for US military specifications.

LKY has already received potential funding support from the US Export Import Bank (up to US$191M).

Whilst it's early days in LKY determining how much antimony it can mine, surely now, LKY's domestic USA project is in the conversation as a potential feedstock option for US Antimony Corp - or any other buyer of locally-produced antimony concentrates.

LKY is also working on critical minerals processing tech

LKY also has a processing “X factor” too.

LKY is working on processing tech via three different avenues, with Rice University, Hazen Research and Columbia University.

Aside from digging up rocks, processing the minerals is also something the US market is thinking about deeply.

(and another critical area where China currently has almost total dominance)

We listened to an All-in podcast episode a few months ago where the whole topic of why the US stopped processing things like rare earths was discussed.

The main discussion point was about the potential environmental shortfalls and how it was just too hard for the US to even try to solve those problems.

(Listen to that part starting at ~33:16 here)

LKY is trying to solve that environmental problem, especially with respect to antimony...

LKY is working on tech with Rice University using Deep Eutectic Solvents (green, biodegradable, non-toxic solvents) to process its antimony concentrates and turn them into a final product.

LKY could potentially have this tech developed with Rice, that is not only applicable to its own project but also other antimony projects across the US (which would be valuable on its own).

NEXT, for the Rice University partnership, LKY will start testing ore samples from its own Desert Antimony Mine to form the basis for the design of a pilot plant.

With Hazen Research - LKY has produced >99% purity metallic antimony” - approaching defence specification thresholds...

And NEXT LKY is testing its ore to produce Antimony Trioxide and Antimony Trisulphide for customer qualification.

This is basically producing a product so it can be presented to potential customers where they will then run their own testing to confirm that the product is suitable and up to their standards.

IF the product qualification works are successful, it could open the door to potential offtake/supply agreements with end users.

Here is a picture of LKY’s COO Danny George on the left at Hazen with some of the antimony metal samples produced:

(source)

The kicker here is that the processing tech could open the door for different types of funding that is being made available from the US government...

Such as the US$355M that has been allocated by the US Department of Energy with the goal to “expand domestic production of critical metals”:

(source)

4x major catalysts that could play out for LKY over the next 6-9 months

Between now and the end of the year, we think that LKY could re-rate higher off one of the four catalysts:

1. Drilling results from the antimony prospects show the potential for an economic mining operation.
2. A rare earths discovery right next door to MP Materials, the only rare earths mine in America.
3. A tech breakthrough with Rice University to develop US-based, environmentally friendly antimony processing tech.
4. A surprise funding announcement where LKY receives non-dilutive funding to advance either exploration on its projects or its downstream business.

No guarantees of course, this is speculative small cap investing and success is no guarantee.

Ultimately, our Big Bet for LKY is as follows:

Our LKY Big Bet

“LKY to re-rate to $200M market cap on the back of strong drill results and maiden resource, plus continued interest and capital flows into the USA critical metals thematic”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is no guarantee that our Big Bet will ever come true. There is a lot of work to be done, many risks involved, including development risk, country risk and commodity price risk - just some of which we list in our LKY Investment Memo.

Success will require a significant amount of luck. Past performance is not an indicator of future performance.

What’s next for LKY?

Drilling at DAM for antimony 🔄

LKY has today started drilling at the Desert Antimony Mine (DAM).

LKY will be targeting to confirm extensions to the known antimony mineralisation to the north and south plus test for any east/west shear zones.

(source)

We are especially looking forward to seeing if LKY can prove whether or not its Desert Antimony Mine extends over the entire 1.2km of strike mapped earlier in the year...

(Source)

Drilling at rare earths at El Campo target 🔄

Following the drilling for antimony LKY will move to its rare earths targets (that sit within MP Material’s ground package).

There, LKY will be testing areas where previous rock chip sampling returned grades as high as ~6.87% TREO (rare earths) - here is where those targets sit.

(source)

Updates on LKY’s processing tech partnerships 🔄

Now LKY has signed partnership agreements with Rice University, Columbia University and Hazen Research.

Broadly, we want to see LKY progress the following across the three partnerships:

• Pilot plant design and metallurgical test work (Hazen and Rice)
• Production of representative samples for US industrial and defence qualification (Hazen)
• Commercial analysis and process optimisation (Hazen and Rice)
• Rare earth processing tech development (being done with (Columbia University)

What could go wrong?

LKY has now started drilling, so the main risk in the short term is around “Exploration / Drilling Risk”.

LKY has conducted sampling and mapping at and near the historic mine which appears to show extensions to the antimony mineralisation.

If LKY is not able to prove that the mineralisation continues and/or that it is of uneconomical grade/tonnage, then it could have a negative impact on the share price.

Exploration / Drilling risk

There is no guarantee that LKY’s extensional drilling programs at the historic mine and on the sampled areas which indicate that mineralisation continues will be successful resulting in LKY failing to uncover enough economic mineralisation.

Source: “What could go wrong” - LKY Investment Memo 01-Aug-2025

LKY’s valuation is also where it is today because of the interest in US critical minerals stocks, so there is also “Market Risk”.

Any drops in market sentiment toward the macro thematic could impact LKY’s valuation negatively.

Market risk

Broader market sentiment could deteriorate, and shares as an investment class trade lower, taking LKY’s share price with it. Alternatively, there could be further sector specific pain ahead where junior explorers suffer a lot more than the broader market.

Source: “What could go wrong” - LKY Investment Memo 01-Aug-2025

Other risks

Like any small cap exploration company, LKY carries significant risk, here we aim to identify a few more risks.

The company has just commenced its first drilling program at its Desert Antimony Mine.

There is no guarantee that drilling will replicate the high grades seen in recent sampling or define a resource with sufficient scale to justify a commercial mining operation. If drill results are underwhelming or fail to prove extensions to the historic mine, the market could re-rate the stock lower.

LKY is relying on developing novel processing technology (Deep Eutectic Solvents) in partnership with universities to process its antimony in an environmentally friendly way.

There is a risk that this technology does not work effectively at a commercial scale, or that the costs to implement it are prohibitive, potentially leaving the company without a viable environmentally friendly processing pathway.

While LKY has applied for substantial US government funding (US Ex-Im Bank, Defense Production Act Title III), there is no guarantee these applications will be successful.

If LKY fails to secure these non-dilutive grants, it may need to fund development through equity raises, which could result in significant dilution for existing shareholders.

The project is located in California, a jurisdiction known for strict environmental regulations. Even though the Desert Antimony Mine is a historic site, restarting mining operations and permitting a new processing facility could face significant regulatory hurdles, delays, or opposition.

Finally, LKY’s valuation is currently benefiting from the strong "US critical minerals" macro theme and high antimony prices due to geopolitical tensions. If US government policy shifts, or if supply chains normalize and antimony prices fall, the strategic premium currently attached to LKY’s assets could diminish.

Investors should consider these risks carefully and seek professional advice tailored to their personal circumstances before investing.

Our LKY Investment Memo

You can read our LKY Investment Memo in the link below.

We use this memo to track the progress of all our Investments over time.

Our LKY Investment Memo covers:

• What does LKY do?
• The macro theme for LKY
• Our LKY Big Bet
• What we want to see LKY achieve
• Why we are Invested in LKY
• The key risks to our Investment Thesis
• Our Investment Plan