HIGHLIGHTS

• Rig procured for Daydream-2 well – due to spud in October
• Federal funding obtained for Daydream-2 well
• Nomgon CBM appraisal and exploration wells encounter gassy coals
• Nomgon Pilot Project extended
• Gobi H2’s bankable wind/solar capacity factor considered world class

MANGAGING DIRECTOR’S REPORT TO SHAREHOLDERS FOR THE QUARTER

The last quarter saw a number of global developments which in our view reinforced a growing recognition that the demand for gas will endure for the very long term. Indeed it can be increasingly seen that gas is a vital under-pinning tool – not an opponent – of the desired clean energy transition.

These developments included:

• Various gas buyers – particularly but not exclusively Chinese companies - entering into new LNG purchase contracts for periods in excess of twenty years.
• The European oil and gas majors Shell and BP publicly stating that cutting oil and gas production prematurely would be dangerous and counter-productive, particularly for the World’s poor.
• The world’s two largest mining companies, BHP and Rio, noting that hydrogen would likely have specific not widespread roles to play in the energy transition.
• Japanese calls for a global collective to meet gas storage and security of supply needs, similar to the OECD’s long term framework for petroleum strategic reserves.

And last but very far from least for Elixir, the Australian Government issuing a final Code of Conduct for the East Coast gas industry that represented a major retreat from the market intervention originally announced in late 2022.

In December last year Canberra issued an unexpected policy change – that gas prices in the East Coast would be capped for one year at $12/GJ and thereafter would be regulated to be “reasonable”.

This announcement caused considerable consternation for Australian domestic and international players alike.

However, the recently issued final Code of Conduct retreated from the “reasonable” pricing mechanism and instead had only a $12/GJ cap on what would be only limited transactions. Elixir’s Grandis Gas Project in Queensland for example would generally not be subject to the cap if gas was sold domestically – and no pricing restrictions apply to gas exports.

In our view sovereign risks are relative not absolute and many Governments around the world rushed to make very short term market interventions following the energy market turmoils of the last few years. Australia is still one of the top three global LNG exporters and its reputation as a reliable supplier and investment destination will shine through short term Government errors such as this Code.

In this context, the strong progress made in Elixir’s Grandis Gas Project in Queensland during the quarter was very timely. We secured a rig contract from major global services company SLB (previously Schlumberger) and now aim to drill the Daydream-2 appraisal well in late October.

A large part of the total funding for the well was also secured in recent months – from the Federal Government. This was achieved through the obtaining of an Advanced Finding that Daydream-2 would qualify for R&D tax credits. These will pay for 43.5% of the costs of this well.

In addition, we are pursuing a number of other promising funding sources and for instance we were pleased to see that in its recent budget the Queensland Government announced a Frontier Gas Exploration grants program to drive exploration for gas reserves in the Bowen and Galilee Basins. As an active Bowen Basin explorer, Elixir is engaging with the relevant Government Department over access to the $21 million in grant funding to be allocated under this new program (although any positive outcome cannot be guaranteed at this stage).

A key objective of the Daydream-2 well is to seek to secure a material increase in booked contingent resources (which are already 395 Bcf) in the Grandis Gas Project. Given the strong location and rapidly

growing gas supply shortfalls both domestically and via the increasing spare capacity in the Gladstone LNG plants, such resources should have considerable value.

Notwithstanding the great progress in Queensland, Elixir is in parallel still vigorously progressing its Mongolian CBM and hydrogen ventures.

The Nomgon Pilot Project has been expanded – with a longer testing period and the addition of another well in the coming months. The gas output from the pilot started strongly then tailed off – which is not uncommon in CBM pilots – particularly in a frontier area. At Nomgon we know the gas is there and ongoing steady water production indicates that that gas should flow in due course.

Our CBM exploration and appraisal drilling commenced in the quarter and the early results look encouraging. Elixir plans 9 wells in the Nomgon CBM PSC this year and has aimed to drill these as much as possible in the more benign weather conditions in the middle of the year.

As noted above, BHP recently stated that hydrogen “could be champagne or could be tap water. There are certainly opportunities in the global energy transition where it will be needed, but there are a variety of decarbonization technologies where it is not necessarily the foremost technology”.

Also highly relevant to Elixir, Rio also recently noted that various factors would “drive the production of hydrogen close to its point of use.”

In Elixir’s view, both of these statements serve to emphasise the strategic soundness of Elixir’s Gobi H2 project – whose key strength is its immediate proximity to Chinese markets in areas like steel making. Additionally, the Gobi H2 project benefits from a world class combined capacity factor of wind and sun.

The remaining second half of 2023 will be a time of significant highly productive activity for Elixir, with the drilling of the very impactful Daydream-2 well progressing side by side with ongoing drilling in Mongolia and the development of the Gobi H2 project.

MONGOLIAN GAS – NOMGON CBM PSC PROJECT

Elixir Energy Limited (“Elixir”) has a 100% interest in the Nomgon IX Coal Bed Methane (CBM) Profit Sharing Contract (PSC), located proximate to the Chinese border in Mongolia’s South Gobi region. The 30,000 square kilometre PSC was executed with the Mongolian Government in September 2018 and formally commenced in 2019.

The PSC has a minimum ten year exploration period and a thirty year (extendable) production period. Elixir is substantially ahead of its exploration expenditure commitments under the PSC, even notwithstanding the force majeure event caused by COVID-19 in recent years.

During the quarter the main focus areas were as follows:

• Ongoing production testing at the Nomgon Pilot Project.
• The Pilot is being expanded with an extended testing period and another well planned. Regulatory and contracting processes in connection with the latter were advanced in the quarter.
• The exploration and appraisal drilling program for 2023 got under way in the quarter, with early encounters of coal whilst drilling reported in July.

All work was undertaken safely, in accordance with local community expectations and without environmental incident.

AUSTRALIAN GAS – GRANDIS GAS PROJECT (ATP 2044)

Elixir has a 100% interest in petroleum exploration licence ATP 2044 located in Queensland (the Grandis Gas Project). This 1,000 square kilometre tenement is located proximate to the Wallumbilla gas hub and can access domestic and international gas markets.

During the quarter the Company plans announced it had secured a rig to drill an appraisal well (Daydream-2) in ATP 2044, commencing around late October. The drilling of this well will meet the key work commitment of this exploration licence.

An Advanced Finding from the Department of Industry, Science and Resources was received in May, confirming that the costs of the planned Daydream-2 well would quality for the Federal Government’s 43.5% R&D cash rebate scheme.

A peer reviewed paper on the Permian Gas Potential of the Taroom Trough was presented by Elixir at the annual APPEA Conference.

MONGOLIAN GREEN HYDROGEN - GOBI H2 PROJECT

The Gobi H2 green hydrogen project is located in Southern Mongolia and is being progressed by Elixir and Japanese company Terras Energy (re-named from SB Energy Corp.).

Following a sell down by SoftBank Group Corp., Terras Energy is now 85% owned by Toyota Tsusho Corp., a member of the Toyota Group.

In May, Elixir was invited by the Asian Development Bank (ADB) to make a presentation on the Gobi H2 project at an annual clean energy conference held at its Manila Headquarters.

The combined wind and solar capacity factor – a major driver of green H2 economics – for Gobi H2 was updated by Elixir in the quarter, using bankable quality data. This factor, as estimated by Elixir, is as good as or superior to other prominent global green hydrogen projects that the Company is aware of.

ENVIRONMENT, SOCIAL & GOVERNANCE (ESG)

Elixir considers stakeholder engagement – particularly with local people in the areas of operations - to be critical for all of its projects, no matter where they are located.

In the quarter Elixir was pleased to partner with a number of its ASX peers to support the Mongolian efforts of Australian charity Sight for All. This was done through a collective donation of an Ocular and Orbit Ultrasound device to the Mongolian National University of Medical Sciences. This ultrasound will be used to train medical professionals across the country and will give rise to material benefits in reducing eye related health conditions in Mongolia.

The tree planting operation in the Nomgon region that Elixir commenced in 2022 was expanded in 2023. This project fits well with an official “One Billion Tree” campaign initiated by the President of Mongolia in recent years and makes a small contribution to reducing the negative impacts of growing desertification in Mongolia.

In Queensland, Elixir is in various stages of discussions with a number of companies whose operations can or might impinge upon the development of the Taroom Trough. Further news on this will be provided as and when the discussions mature.

CORPORATE AND FINANCIAL

Capital raising

There was no capital raising during the quarter.

Changes in Issued Capital

There were no changes in issued ordinary share capital in the quarter.

The fully diluted equity structure of Elixir as at 30 June 2023 was as follows:

On 3 July 2023, 19,400,000 Performance Rights were converted into fully paid ordinary shares for no consideration.

The fully diluted equity structure of Elixir as at the date of this report was as follows:

Financial

Elixir’s cash reserves as at 30 June 2023 were $9.6 million. The Company has no debt.

During the quarter, the Company spent $1.9 million on exploration activities, primarily on drilling, Nomgon pilot production facilities costs, technical preparation for the upcoming Mongolian and Australian drilling campaigns and other ancillary costs.

Board and Management

No changes to Board and Management occurred in the quarter.

Annual and other General Meetings

There were no General Meetings held during the quarter.

SUMMARY OF PETROLEUM TENEMENTS HELD AS AT 30 JUNE 2022