Communicators

Formation Metals In. - President´s Letter to Shareholders

February 23, 2015

Dear Shareholders,

As we approach our February 28, 2015 fiscal year end, we would like to take this opportunity to provide an overview of the positive developments that have taken place at Formation Metals Inc.

Our Principal Focus

Most importantly, advancement continues on the Company’s flagship project, the Idaho Cobalt Project (ICP). With a restructured and refocused management team, the decision was made to look at other potential opportunities at the ICP to maximize shareholder value.  In addition to the ICP’s known potential to produce high purity cobalt metal suitable for applications in the super alloy sector, what quickly became apparent was the project’s potential to produce a cobalt chemical suitable for the rapidly growing battery market.

Diversified Strategic Plan to Optimize ICP Product Potential

The projected increase in the near and long term demand for cobalt is being driven in large part by tremendous growth in the global use of portable electronics and electric vehicles where cobalt is a key component used in rechargeable batteries.  To better position ourselves to meet this growing demand, we have commissioned Samuel Engineering, Inc to manage the preparation of a Preliminary Economic Assessment (PEA) and feasibility level metallurgical test work on the project to explore the viability of producing battery grade cobalt chemicals.  We are pleased to report that we are expecting the results of the PEA to be released in a matter of weeks and it is our expectation that this report will demonstrate that the ICP has the potential to produce battery grade cobalt chemicals. The PEA is intended to demonstrate and further optimize the ICP’s diversified product potential. In addition, we continue to maintain an extensive database on the production of high purity cobalt metal suitable for the super alloy sector.

The completion of our PEA and the completion of feasibility level metallurgical test work are two key steps towards achieving our goal of securing financing for the remainder of construction required to commence production.

Rechargeable Lithium Ion Battery Demand Steadily Increasing

An interesting fact about lithium ion batteries is that cobalt is a key component of these batteries, and in many, it is the primary component.  A lithium ion battery, typically used in the several billion portable devices in use worldwide, such as mobile phones, contains many more times the amount of cobalt than lithium by weight.  Electric vehicles (EV’s) also use cobalt in their batteries where cobalt content ranges from 9% to 20%.

The use of cobalt in batteries has grown at a rate of 7.6% per year over the five years prior to 2013 and batteries currently account for 42% of total world cobalt consumption.  Some analysts have forecast that by 2020 cobalt's use in battery applications alone will be greater than the entire world market for refined cobalt in 2013.  (Source: Darton Commodities Limited, 2014). According to market research firm CRU, the cobalt market is expected to be tight due to a robust demand and absence of a definitive project pipeline. CRU also believes the market will be in a deficit position by 2017.  Our ICP is the only near term, primary cobalt deposit in the United States with all the necessary approvals required for construction and with an approved Plan of Operations.

Worldwide Cobalt Demand Increasing

One of the more exciting developments in the cobalt sector was the announcement in September 2014 by a large California based electric vehicle manufacturer regarding its intention to build the world’s largest rechargeable battery factory (the Gigafactory) in Nevada.  While this development spurred renewed interest in the cobalt market, it also acted as a catalyst for other vehicle manufacturers to announce plans for their own new electric vehicle production. 

The US $5 billion Gigafactory is estimated to produce the equivalent of all the electric vehicle and grid storage batteries currently produced worldwide.  The manufacturer has indicated its intention to source raw materials for the factory as locally as possible and the ICP, being located in the western United States and proximal to the Gigafactory, offers a unique potential supply of ethically sourced, environmentally sound, conflict free cobalt for US consumers.

Cobalt Price on an Upward Trend

Cobalt continues to be in the news. We believe that the supply demand fundamentals are becoming more favourable exhibiting an overall upward trend in price. The chronic political unrest in the Democratic Republic of Congo (DRC), the largest global supplier of cobalt is also affecting this trend. Any disruption or decline in copper mining in the DRC could lead to a corresponding decline in world cobalt supply.  Our ICP, unlike the DRC, lies in a politically stable environment and is not affected by disruptions in mining operations that produce cobalt as a by-product of either copper or nickel mining.

Fiscal Prudence

Early last year the Company took proactive, preemptive measures to preserve the Company’s strong cash position, streamline operations and significantly reduce general and administrative expenses.  With a healthy cash position ($4.9 million as at November 30, 2014) and no debt, we have sufficient working capital to fund planned operations based on our current budget. In addition, the ICP’s mine and mill site have been diligently maintained to ensure that the requirements of all the permitting agencies have been met and all necessary permits remain in good standing.

The Company Moving Forward

We believe our company is in an excellent position to capitalize on the growing demand for cobalt, in particular battery grade cobalt chemicals. Our ICP offers unique potential for North American consumers to secure an ethically sourced, environmentally sound, conflict free supply of battery grade cobalt chemicals, mined safely and responsibly in the United States.

We will be attending the Prospectors, & Developers Association of Canada Conference (PDAC), which is held in Toronto from March 1 to March 5. If you are in the Toronto area, please stop by and visit us at booth 2416A to meet management and discuss our plans moving forward.

If you would like further information or to sign up for email updates please contact us at 604-682-6229 ext. 228, or please email us at dmann@formationmetals.com.

This will be an exciting year ahead and on behalf of the management team at Formation Metals Inc., I want to thank you, our shareholders, for your continued support.

J. Paul Farquharson

President & C.E.O.

Formation Metals Inc.

Suite 1810, 999 West Hastings Street, Vancouver, BC

V6C 2W2 Canada

P 604.682.6229

F 604.682.6205

E info@formationmetals.com

TSX:FCO

formationmetals.com

This letter contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward-looking terminology.  Forward-looking statements are based on assumptions and address future events and conditions and are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements.  Assumptions include that the Company will be able to file a new NI 43-101 compliant technical report before the end of February 2015 and the risks and uncertainties include that such a new technical report will not be filed by the end of February 2015 or at all.  Assumptions on the future growth in demand for cobalt are based on independent sources whose assumptions and risks are unknown and actual results may be materially different from those expressed or implied by such forward-looking statements.  Further information regarding risks and uncertainties which may cause results to differ from those contained in forward-looking statements are included in filings by the Company with securities regulatory authorities and are available at www.sedar.com.  Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended.  There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.  Accordingly, readers should not place undue reliance on forward-looking statements.  The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws. The statements contained in this letter in regard to Formation Metals Inc. that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including Formation Metals Inc.'s beliefs, expectations, hopes or intentions regarding the future. All forward-looking statements are made as of the date hereof and are based on information available to Formation Metals Inc. as of such date.  It is important to note that actual outcome and the actual results could differ from those in such forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as technological, legislative, corporate, commodity price and marketplace changes.