Lotus Resources: Appendix 5B and Quarterly Activity Report

CONNECTION TO THE NATIONAL ELECTRICAL NETWORK – ESCOM

During historical operations, electricity for the project was generated on-site using several diesel generator sets. For the restart, this is not only expensive, but also inconsistent with the company’s desire to minimize CO emissions.2 emissions.

The Company has met and is negotiating with ESCOM, the electricity company of Malawi, a permanent connection to the national grid.

ESCOM has indicated that approximately 4 MW of electricity will be available at the Karonga substation, which when combined with the 2.5 MW available from the steam turbine which is proposed to be installed on the on-site acid plant, and a possible solar/battery energy storage system to cover the site power demand. Diesel generation will only be needed for emergency power and when the grid, turbine or solar power is offline.

It is important to note that approximately 90% of the electricity in the national grid comes from hydroelectric power generation and biofuels. This high percentage of “green” energy should significantly reduce our CO emissions2 footprint and aligns with our ESG commitments.

MEETINGS WITH LOCAL ACTORS

Meetings were held with local village chiefs and community leaders and local businesses, including schools, to talk about the project and listen to community concerns. In addition, meetings were held with the District Commissioner (DC) of Karonga and the CEO and management of FOCUS, a key local NGO (https://www.facebook.com/Foundation-for- Community-Support-Services-FOCUS-165181670300221/).

These discussions focused on the Community Development Agreement (CDA). Under the new mining law, which came into force since the project last went into production, a company holding a large-scale mining license must contribute zero point four five (0.45)% of its income to projects in local communities and the CDA is the means to administer this. The CDA will be signed with the surrounding eligible communities that will benefit from the system.

FOCUS and the DC have worked with the various communities involved in the CDA to ensure a consistent understanding of the potential benefits of the agreement and how the processes associated with the agreement work. A final version of the agreement is nearing completion and a signed agreement is expected shortly.

While on site, the management team was also able to visit the local Kayelekera Primary School (see Figure 3) and the local Kayelekera Clinic, both of which are financially supported by Lotus. In both cases, the need for additional support was expressed by staff. Lotus will look to provide additional support for these comparable community facilities as we get closer to restarting and operating Kayelekera.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

In addition to meetings held with government, suppliers and local communities, the company is actively pursuing the various objectives set out in the 2021 sustainability report. Work during the quarter focused primarily on the completion of a comprehensive stakeholder survey where more than 80 stakeholders were contacted for their input on topics important to them. The level of response was very high and provided excellent insight into the topics of concern to our stakeholders. Our material sections have been updated to reflect these

Sara H. Byrd