Kinetic Development Group Limited — Capital/Financing Update 2024

Sep 13, 2024

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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Kinetic Development Group Limited 力 量 發 展 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1277)

SUPPLEMENTAL ANNOUNCEMENT DISCLOSEABLE TRANSACTION SUBSCRIPTION OF SHARES IN MC MINING

Reference is made to the announcement of the Company dated 26 August 2024 in relation to the acquisition of shares in MC Mining (the “ Announcement ”). Unless otherwise stated, terms defined in the Announcement shall have the same meanings when used in this supplemental announcement.

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The Board would like to provide further information relating to the Valuation as contained in the Announcement, as follows:

SUMMARY OF VALUATION

Based on the detailed investigation, analysis, and valuation methods utilized, considering the information reviewed and assumptions made, the fair value of 100% equity interest in the Target Group as of 30 June 2024, was reasonably estimated at US$217.1 million as shown below:

84% equity interest in the Uitkomst Colliery 67.3% equity interest in the Makhado Project 100% equity interest in the Vele Colliery 74% equity interest in the Greater Soutpansberg Projects Fair value of the Mining Assets (in attributable ownership) Other Adjustments Unallocated G&A expenses (not attributable to the Mining Assets) Net non-operating liabilities of the Target Group Net operating assets of the other companies Cash and cash equivalents of the other companies Fair value of the Target Group

Fair Value US$ million 21.5 80.2 Nil 179.3 281.0 (56.8) (8.4) 1.1 0.2 217.1

INTRODUCTION

MC Mining and its subsidiaries (collectively, the “ Target Group ”) are principally engaged in the acquisition, exploration, development, and operation of coking and thermal coal projects in the South Africa. Its principal mining assets (collectively the “ Mining Assets ”) include (i) the Uitkomst Colliery located in the Utrecht Coalfield, KwaZulu-Natal; (ii) the Makhado Project located in the Soutpansberg Coalfield, Limpopo Province (the “ Makhado Project ”); (iii) the Vele Colliery located in the Tuli Coalfield, Limpopo Province; and (iv) the Greater Soutpansberg Projects, comprising three sub-projects, namely, Chapudi, Generaal, and Mopane Projects located in the Soutpansberg Coalfield, Limpopo Province. The holding structures of the Mining Assets are tabulated below.

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					Equity Interest
	Mining Asset		Stage of		owned by the
Mining Assets	Location	Commodities	Development	Holding Entities	Target Group
Uitkomst Colliery	Utrecht Coalfield,	Hard coking and	In production	Uitkomst Colliery Proprietary	84%
	KwaZulu-Natal	thermal coal		Limited
Makhado Project	Soutpansberg	Hard coking and	Development	Baobab Mining and	67.3%
	Coalfield,	thermal coal		Exploration Proprietary
	Limpopo Province			Limited
Vele Colliery	Tuli Coalfield,	Semi-soft coking	In production	Limpopo Coal Company	100%
	Limpopo Province	and thermal coal		Proprietary Limited
Greater	Soutpansberg	Coking and thermal	Exploration	MC Mining, MbeuYashu	74%
Soutpansberg	Coalfield,	coal		Proprietary Limited and its
Projects	Limpopo Province			subsidiaries

VALUATION METHODOLOGY

Among the three valuation approaches, namely, the market approach, income approach and cost approach, the selection of the valuation approaches in valuing the Mining Assets are based on, among other criteria, quantity and quality of the information provided, accessibility to available data, availability of relevant market transactions, uniqueness of the Mining Assets’ operations, nature of the industry in which the Mining Assets are participating, professional judgment and technical expertise.

Given that the Uitkomst Colliery and Vele Colliery are in production while the Makhado Project is in development and that details of the production schedule, mine planning and production costs adopted in the Competent Persons’ Reports (“ CPR ”) are made available for Win Bailey’s review, the income approach is commonly considered to be the most appropriate valuation approach by the mining industry for this type of mining assets. The income approach takes the future growth potential and the specific issues of these Mining Assets into consideration. Under the income approach, the Discounted Cash Flow (“ DCF ”) method has been adopted.

T h e C P R p r e p a r e d f o r e a c h o f U i t k o m s t C o l l i e r y , M a k h a d o P r o j e c t a n d V e l e C o l l i e r y i s a v a i l a b l e o n t h e w e b s i t e o f t h e T a r g e t G r o u p (https://www.mcmining.co.za/investors-and-media/technical-reports).

In addition, the Greater Soutpansberg Projects are in exploration stage. As such, a number of technical metrics and parameters such as production schedule, production costs, recovery and cashflow projection are currently absent. In comparing to the cost approach, the market approach is more likely to reflect the current market expectations over the mining industry since the price multiples of the comparable companies are available from market consensus and capture the future growth potentials. It also reflects the key value driver for earlystage coal mining companies. Under the market approach, enterprise value to resource (EV/ Resource) method has been adopted.

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Win Bailey has adopted two valuation approaches for the Mining Assets of the Target Group as tabulated below:

Mining Assets	Preferred Valuation Approach
Uitkomst Colliery	Income Approach
Makhado Project	Income Approach
Vele Colliery	Income Approach
Greater Soutpansberg Projects	Market Approach

Uitkomst Colliery

The profit forecast for the Uitkomst Colliery is determined in accordance with (i) the production scheduling, mine planning, Capital Expenditure (“ CAPEX ”), Operating Expenditure (“ OPEX ”) and other various technical metrics adopted in the CPR prepared for the Uitkomst Colliery; (ii) the historical performance of the Target Group and Uitkomst Colliery; and (iii) the best estimation by the Target Group’s management (the “ Management ”).

Quantitative Assumptions and Key Inputs

The annual production capacity adopted in the valuation of the Uitkomst Colliery was conformable with its permitted production capacity and designed production schedule with reference to the CPR. Annual revenue was determined by applying coal products prices to the estimated tonnage of annual payable products for each operating year. Coal products prices have been applied to all production without hedging. The revenue was the gross value of the payable products sold before transportation charges. The forecasted coal products prices adopted were sourced from the historical selling prices of the relevant coal products sold by the Uitkomst Colliery provided by the Management.

Below are the key assumptions and inputs adopted throughout the Life-Of-Mine (“ LOM ”) for the valuation of the Uitkomst Colliery:

	July to
	December
	2024	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034
Coal production_(Million Tons)_	0.54	0.54	0.54	0.54	0.54	0.54	0.54	0.54	0.54	0.54	0.54
Revenue_(in US$ million)_	8.33	16.65	16.65	16.65	16.65	16.65	16.65	16.65	16.65	16.65	16.65
Annual revenue growth rate	N/A	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Gross profit margin	N/A	56.60%	56.60%	56.60%	56.60%	56.60%	56.60%	56.60%	56.60%	56.60%	56.60%
EBITDA margin	N/A	48.35%	48.35%	48.35%	48.35%	48.35%	48.35%	48.35%	48.35%	48.35%	48.35%
CAPEX_(in US$ million)_	0.80	1.60	1.60	1.60	1.60	1.60	1.60	1.60	1.60	1.60	1.60
OPEX_(in US$ million)_	5.06	9.48	9.57	9.66	9.76	9.85	9.95	10.04	10.14	10.23	10.32

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OPEX comprises of production cost, Selling, General and Administrative expenses (SG&A) and depreciation. Production cost generally include the cost of labour, consumables, equipment, processing, transportation and underground development. The projection of the production cost provided by the Management was estimated with consideration of various geological, geotechnical and mining conditions. EBITDA is the excess of revenue after deducting production costs and SG&A. Based on the revenue and production cost projection estimated by the Management, the gross profit margin throughout the LOM was therefore expected to maintain at 56.60%. The principal coal product at the Uitkomst Colliery is hard coking coal whose gross profit margin of 60% is commonly expected for this kind of coal mining operation as shown on the website of CSIMarket, which is an independent digital financial media company focused on the financial research. (https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=601).

SG&A was estimated by the Management based on the historical performance and their best estimation. The SG&A projection provided by the Management was adopted in the valuation of the Uitkomst Colliery.

CAPEX includes the costs of mine development, infrastructures, equipment and support facilities for the Uitkomst Colliery. CAPEX was projected with reference to the CPR. The projected depreciation was calculated based on the forecasted CAPEX and the existing carrying amounts of the fixed assets of the Uitkomst Colliery.

Discount Rate

The abovementioned key quantitative inputs were applied to the financial projections by discounting the expected free cashflow using an appropriate discount rate. For the discount rate, Win Bailey has adopted real Weighted Average Cost of Capital (“ WACC ”) as the discount rate for the Uitkomst Colliery. WACC represents the weighted average return attributable to all of the operating assets of the Uitkomst Colliery.

Risk free rate	11.46%
Market risk premium	9.00%
Adopted beta	0.61
Size premium	3.05%
Company specific risk premium	1.00%
Cost of equity	20.97%
Cost of debt (after-tax)	8.58%
Weight of equity	81.90%
Weight of debt	18.10%
Corporate tax rate	27.00%
Nominal WACC	18.73%
Inflation rate	5.20%
Real WACC (adopted discount rate)	12.86%

Notes:

• (a) The risk-free rate adopted was the 10-year yield rate of the South Africa government debt as at the date of valuation as extracted from S&P Capital IQ;

• (b) The market risk premium adopted was determined with reference to “2024 Country Default Spreads and Risk Premiums” published by Aswath Damodaran;

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• (c) The relevered beta coefficient adopted was the median of adjusted beta of the comparable companies as extracted from S&P Capital IQ;

• (d) The size premium adopted was with reference to the 2022 CRSP Deciles Size Study by Kroll;

• (e) The company specific risk premium adopted was determined based on the production stage and business conditions of the Uitkomst Colliery;

• (f) The cost of equity adopted was determined based on the capital asset pricing model. It is calculated with the following formula: risk-free rate + (beta coefficient ✕ market risk premium) + size premium + company specific risk premium;

• (g) The cost of debt adopted was the South Africa’s long-term borrowing rate sourced from Trading Economics as at the date of valuation;

• (h) The weight of equity value to enterprise value adopted was derived from the median debt-to-equity ratio of the comparable companies as at the date of valuation;

• (i) The weight of debt value to enterprise value adopted was derived from the median debt-to-equity ratio of the comparable companies as at the date of valuation;

• (j) The corporate tax rate adopted was the corporate tax rate in the South Africa sourced from Trading Economics;

• (k) Accounting for the above items, nominal WACC was derived by averaging the rate of the debt and equity, weighted by the proportion of each component;

• (l) The inflation rate adopted was the South Africa’s inflation rate sourced from Trading Economics;

• (m) The real WACC is derived after adjusting by the South Africa’s inflation rate.

The discount rate is a key input for this valuation, but its impact on the overall fair value of MC Mining is considered to be insignificant, hence sensitivity analysis is not presented.

Makhado Project

The profit forecast for the Makhado Project was determined in accordance with (i) the production scheduling, mine planning, CAPEX, OPEX and other various technical metrics adopted in the CPR prepared for the Makhado Project; (ii) the historical performance of the Target Group; and (iii) the best estimation by the Management.

Quantitative Assumptions and Key Inputs

The annual production capacity adopted in the valuation of the Makhado Project was conformable with its permitted production capacity and designed production schedule with reference to the CPR. Annual revenue was determined by applying coal products prices to the estimated tonnage of annual payable products for each operating year. Coal products prices were applied to all production without hedging. The revenue was the gross value of the payable products sold before transportation charges. The forecasted coal products prices adopted were sourced from the CPR.

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Below are the key assumptions and inputs adopted throughout the LOM for the valuation of the Makhado Project:

	July to
December
	2024	2025	2026	2027	2028	2029	2030	2031	2032	2033
Coal production
(Million Tons)	Nil	1.00	4.00	4.00	4.00	4.00	4.00	4.00	4.00	4.00
Revenue_(in US$_
million)	Nil	47.12	196.06	178.60	175.40	175.80	173.25	171.80	169.75	169.05
Annual revenue
growth rate	N/A	N/A	316.04%	-8.90%	-1.79%	0.23%	-1.45%	-0.84%	-1.19%	-0.41%
Gross profit margin	N/A	39.29%	41.63%	35.93%	34.75%	34.90%	33.95%	33.39%	32.58%	32.30%
EBITDA margin	N/A	31.73%	38.41%	27.71%	25.54%	25.37%	24.17%	24.14%	23.32%	23.10%
CAPEX_(in US$_
million)	69.3	24.7	0.00	0.00	0.17	0.55	0.50	0.50	0.50	0.50
OPEX_(in US$ million)_	2.82	35.75	124.33	132.35	133.85	134.47	134.65	133.62	133.48	133.33
	2034	2035	2036	2037	2038	2039	2040	2041	2042	2043
Coal production
(Million Tons)	4.00	4.00	4.00	4.00	4.00	4.10	4.00	4.00	4.00	4.00
Revenue_(in US$_
million)	168.35	178.06	195.90	195.20	196.10	192.30	175.40	174.70	194.00	212.60
Annual revenue
growth rate	-0.41%	5.77%	10.02%	-0.36%	0.46%	-1.94%	-8.79%	-0.40%	11.05%	9.59%
Gross profit margin	32.02%	35.73%	41.58%	41.37%	41.64%	39.00%	34.76%	34.49%	41.01%	46.17%
EBITDA margin	22.82%	27.09%	32.35%	31.88%	32.22%	27.11%	23.69%	22.38%	29.82%	34.92%
CAPEX_(in US$_
million)	0.50	0.50	0.50	0.50	0.50	0.50	0.50	0.50	0.50	0.50
OPEX_(in US$ million)_	133.29	133.20	135.91	136.37	136.33	143.61	137.30	139.08	139.64	141.86
		2044	2045	2046	2047	2048	2049	2050	2051	2052
Coal production_(Million_	Tons)	4.00	3.90	4.10	4.10	4.10	4.10	4.10	4.00	0.80
Revenue_(in US$ million)_		192.60	155.90	152.60	152.60	173.60	172.80	150.50	167.00	29.82
Annual revenue growth rate		-9.41%	-19.06%	-2.12%	0.00%	13.76%	-0.46%	-12.91%	10.96%	-82.14%
Gross profit margin		40.58%	28.43%	23.13%	23.13%	32.43%	32.12%	22.06%	31.47%	23.25%
EBITDA margin		29.51%	16.16%	11.03%	10.85%	21.67%	21.62%	9.28%	19.89%	-17.10%
CAPEX_(in US$ million)_		0.50	0.72	0.72	0.72	0.72	0.72	0.72	0.72	0.17
OPEX_(in US$ million)_		139.29	134.26	139.34	139.64	139.61	139.09	140.21	137.48	38.62

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OPEX comprises of production cost, SG&A and depreciation. Production cost generally include the cost of labour, consumables, equipment, processing and transportation. The projection of the production cost provided by the Management was estimated the CPR and other engineering studies with consideration of various geological, geotechnical and mining conditions. EBITDA is the excess of revenue after deducting production costs and SG&A. Based on the revenue and production cost projection estimated by the Management, the gross profit margin throughout the LOM was expected to range from 22.06% to 46.17%. The gross profit margin and EBITDA margin would vary across different years because the geological, geotechnical and mining conditions may vary across different years during the process of development and mining operation, including factors such as coal seam thickness, depth of coal seams, dip angle of coal seams, impacts of fault zones, and the extent of development work needed to access the coal seams. Given that the Makhado Project is in the development stage, CAPEX and OPEX estimated by the CPR and other engineering studies throughout the LOM play a critical role in assessing the economic feasibility of coal resources and reserves. The coal products delivered by the Makhado Project include both hard coking coal and thermal coal and therefore its profitability is in general expected to be lower than that of the Uitkomst Colliery which primarily sells hard coking coal.

SG&A was estimated by the Management based on the historical performance and their best estimation. The SG&A projection provided by the Management was adopted in the valuation of the Makhado Project.

CAPEX includes the costs of mine development, infrastructures, equipment and support facilities for the Makhado Project. The CAPEX was projected with reference to the CPR. The projected depreciation was calculated based on the forecasted CAPEX and the existing carrying amounts of the fixed assets of the Makhado Project.

Discount Rate

The abovementioned key quantitative inputs were applied to the financial projections by discounting the expected free cashflow using an appropriate discount rate. For the discount rate, Win Bailey has adopted real WACC as the discount rate for the Makhado Project. WACC represents the weighted average return attributable to all of the operating assets of the Makhado Project.

Risk free rate	11.46%
Market risk premium	9.00%
Adopted beta	0.61
Size premium	3.05%
Company specific risk premium	2.00%
Cost of equity	21.97%
Cost of debt (after-tax)	8.58%
Weight of equity	81.90%
Weight of debt	18.10%
Corporate tax rate	27.00%
Nominal WACC	19.55%
Inflation rate	5.20%
Real WACC (adopted discount rate)	13.64%

– 8 –

Notes:

• (a) The risk-free rate adopted was the 10-year yield rate of the South Africa government debt as at the date of valuation as extracted from S&P Capital IQ;

• (b) The market risk premium adopted was determined with reference to “2024 Country Default Spreads and Risk Premiums” published by Aswath Damodaran;

• (c) The relevered beta coefficient adopted was the median of adjusted beta of the comparable companies as extracted from S&P Capital IQ;

• (d) The size premium adopted was with reference to the 2022 CRSP Deciles Size Study by Kroll;

• (e) The company specific risk premium adopted was determined based on the production stage and business conditions of the Makhado Project;

• (f) The cost of equity adopted was determined based on the capital asset pricing model. It is calculated with the following formula: risk-free rate + (beta coefficient ✕ market risk premium) + size premium + company specific risk premium;

• (g) The cost of debt adopted was the South Africa’s long-term borrowing rate sourced from Trading Economics as at the date of valuation;

• (h) The weight of equity value to enterprise value adopted was derived from the median debt-to-equity ratio of the comparable companies as at the date of valuation;

• (i) The weight of debt value to enterprise value adopted was derived from the median debt-to-equity ratio of the comparable companies as at the date of valuation;

• (j) The corporate tax rate adopted was the corporate tax rate in the South Africa sourced from Trading Economics;

• (k) Accounting for the above items, nominal WACC was derived by averaging the rate of the debt and equity, weighted by the proportion of each component;

• (l) The inflation rate adopted was the South Africa’s inflation rate sourced from Trading Economics;

• (m) The real WACC is derived after adjusting by the South Africa’s inflation rate.

The discount rate is a key input for this valuation, but its impact on the overall fair value of MC Mining is considered to be insignificant, hence sensitivity analysis is not presented.

Vele Colliery

The profit forecast for the Vele Colliery was determined in accordance with (i) the production scheduling, mine planning, CAPEX, OPEX and other various technical metrics adopted in the CPR prepared for the Vele Colliery; (ii) the historical performance of the Target Group and the Vele Colliery; and (iii) the best estimation by the Management.

– 9 –

Quantitative Assumptions and Key Inputs

The annual production capacity adopted in the valuation of the Vele Colliery was conformable with its permitted production capacity and designed production schedule with reference to the CPR. The revenue was estimated in accordance with the five-year contract mining agreement (the “ Agreement ”) entered into by the Target Group and Hlalethembeni Outsourcing Services (Pty) Ltd (“ HOS ”) in December 2022. The Agreement is expected to be renewed by 2027 till the full depletion of coal resources by 2035. The decline in revenue by 2035 is mainly attributable to the decline of coal resources available for depletion by 2035.

Below are the key assumptions and inputs adopted throughout the LOM for the valuation of the Vele Colliery:

		July to
	December
		2024	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035
Coal production
(Million Tons)		Nil	2.20	2.20	2.20	2.20	2.20	2.20	2.20	2.20	2.20	2.20	1.34
Revenue_(in US$_
million)		Nil	7.92	7.92	7.92	7.92	7.92	7.92	7.92	7.92	7.92	7.92	4.83
Annual revenue growth
rate		N/A	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Gross profit margin		N/A	2.31%	2.31%	2.31%	2.31%	2.31%	2.31%	2.31%	2.31%	2.31%	2.31%	2.31%
EBITDA margin		N/A	-6.14%	-6.14%	-6.14%	-6.14%	-6.14%	-6.14%	-6.14%	-6.14%	-6.14%	-6.14%	-7.07%
CAPEX_(in US$ million)_		0.33	0.36	0.36	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
OPEX_(in US$ million)_		0.64	9.59	9.60	9.62	9.63	9.65	9.66	9.68	9.70	9.72	9.72	6.47

OPEX comprises of production cost, SG&A and depreciation. The production cost is constituted by the subcontracting cost to HOS. The projection of the production cost was determined with reference to the historical performance of the Vele Colliery. EBITDA is the excess of revenue after deducting production costs and SG&A. Based on the revenue and production cost projection estimated by the Management, the gross profit margin throughout the LOM was expected to maintain at 2.31%.

According to the Agreement, HOS is obligated to pay the Target Group ZAR 200 per ton of saleable coal (excluding VAT), which imposes a constraint on the revenue derived from the mining operations at the Vele Colliery. This restriction leads to a reduced gross profit margin and consequently results in a negative EBITDA margin.

SG&A was estimated by the Management based on the historical performance and their best estimation. The SG&A projection provided by the Management was adopted in the valuation of the Vele Colliery.

– 10 –

CAPEX includes the costs of mine development, infrastructures, equipment and support facilities for the Vele Colliery. CAPEX was projected with reference to the CPR. The projected depreciation was calculated based on the forecasted CAPEX and the existing carrying amounts of the fixed assets of the Vele Colliery.

Discount Rate

The abovementioned key quantitative inputs were applied to the financial projections by discounting the expected free cashflow using an appropriate discount rate. For the discount rate, Win Bailey has adopted real WACC as the discount rate for the Vele Colliery. WACC represents the weighted average return attributable to all of the operating assets of the Target Group.

Risk free rate	11.46%
Market risk premium	9.00%
Adopted beta	0.61
Size premium	3.05%
Company specific risk premium	1.00%
Cost of equity	20.97%
Cost of debt (after-tax)	8.58%
Weight of equity	81.90%
Weight of debt	18.10%
Corporate tax rate	27.00%
Nominal WACC	18.73%
Inflation rate	5.20%
Real WACC (adopted discount rate)	12.86%

Notes:

• (a) The risk-free rate adopted was the 10-year yield rate of the South Africa government debt as at the date of valuation as extracted from S&P Capital IQ;

• (b) The market risk premium adopted was determined with reference to “2024 Country Default Spreads and Risk Premiums” published by Aswath Damodaran;

• (c) The relevered beta coefficient adopted was the median of adjusted beta of the comparable companies as extracted from S&P Capital IQ;

• (d) The size premium adopted was with reference to the 2022 CRSP Deciles Size Study by Kroll;

• (e) The company specific risk premium adopted was determined based on the production stage and business conditions of the Vele Colliery;

• (f) The cost of equity adopted was determined based on the capital asset pricing model. It is calculated with the following formula: risk-free rate + (beta coefficient ✕ market risk premium) + size premium + company specific risk premium;

• (g) The cost of debt adopted was the South Africa’s long-term borrowing rate sourced from Trading Economics as at the date of valuation;

– 11 –

• (h) The weight of equity value to enterprise value adopted was derived from the median debt-to-equity ratio of the comparable companies as at the date of valuation;

• (i) The weight of debt value to enterprise value adopted was derived from the median debt-to-equity ratio of the comparable companies as at the date of valuation;

• (j) The corporate tax rate adopted was the corporate tax rate in the South Africa sourced from Trading Economics;

• (k) Accounting for the above items, nominal WACC was derived by averaging the rate of the debt and equity, weighted by the proportion of each component;

• (l) The inflation rate adopted was the South Africa’s inflation rate sourced from Trading Economics;

• (m) The real WACC is derived after adjusting by the South Africa’s inflation rate.

The discount rate is a key input for this valuation, but its impact on the overall fair value of MC Mining is considered to be insignificant, hence sensitivity analysis is not presented.

Greater Soutpansberg Projects

During the course of the valuation of the Greater Soutpansberg Projects, Win Bailey has adopted EV/Resource multiple because it is specifically tailored to the mining industry and reflects the key value driver for early-stage mining companies. Coal mining is a highly assetintensive industry, with the value of a company primarily driven by the mineral resources it controls. EV/Resource multiple also captures the value of a company’s exploration and development potential, which is essential for the long-term growth of a coal mining operation.

Selection Criteria

The fair value of the Greater Soutpansberg Projects was determined with reference to the business nature and operational information of the different mining companies. Since there is no company exactly like the Greater Soutpansberg Projects, a set of the different mining companies must be selected for its valuation. To determine the set of the different mining companies, Win Bailey focused on the following criteria during its selection process from the public resources (e.g. S&P Capital IQ), including:

• (i) The companies are entirely engaged in exploration of coal resources;

• (ii) The companies are publicly listed in major stock exchanges; and

• (iii) Sufficiency of information (such as listing and operating histories and availability of the financial and technical information to the public).

– 12 –

Comparable Companies Selected

Win Bailey has identified 7 publicly listed mining companies that were considered to be comparable to the Greater Soutpansberg Projects (the “ Comparable Companies ”). Other listed mining companies under the same sector which might comprise business similar to that of the Greater Soutpansberg Projects but do not fulfil the selection criteria mentioned above have been excluded from the list of Comparable Companies. Based on the abovementioned selection criteria, Win Bailey considered the set of the Comparable Companies adopted in the valuation was representative and exhaustive. Details of the Comparable Companies and the valuation multiples are listed as follows:

	Total
	Enterprise	Mining Asset	Attributable
Company Name and S&P Capital IQ Ticker	Value	Location	Resources	EV/Resource
	(US$ million)		(Tons)	(US$/Ton)
Aspire Mining Limited (ASX:AKM)	95.39	Mongolia	292,665,000	0.33
Bathurst Resources Limited (ASX:BRL)	101.33	New Zealand	137,880,000	0.73
Jameson Resources Limited (ASX:JAL)	15.54	Canada	63,271,692	0.25
Stanmore Resources Limited (ASX:SMR)	2,458.39	Australia	3,861,400,000	0.64
TerraCom Limited (ASX:TER)	110.36	Australia, South Africa	4,117,365,700	0.03
Tigers Realm Coal Limited (ASX:TIG)	3.58	Russia Far East	528,280,000	0.01
Thungela Resources Limited (JSE:TGA)	225.74	Australia, South Africa	4,169,205,360	0.054
		Weighted Average		0.23

The weighted average valuation multiples of the Comparable Companies, which was 0.23, was adopted in the valuation of the Greater Soutpansberg Projects. It was multiplied by the Greater Soutpansberg Projects’ latest resources as of 30 June 2024, which was approximately 1,241 million tons quoted from page 12 of the 2023 annual report published by MC Mining, to determine the enterprise value of the Greater Soutpansberg Projects. It was then adjusted to the equity value of the Greater Soutpansberg Projects with reference to the financial position of MC Mining, MbeuYashu Proprietary Limited and its subsidiaries, the holding entities of the Mining Assets of the Greater Soutpansberg Projects.

ADJUSTMENTS ADOPTED

The fair value of each individual Mining Asset during the course of the Valuation has been adjusted to reflect its lack of marketability by adopting an appropriate Discount of Lack of Marketability (“ DLOM ”). The adopted DLOM was 14.60%, with reference to the Stout Restricted Stock Study Companion Guide 2023 published by Stout Risius Ross, LLC.

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In addition, the fair value of the Target Group is further adjusted, in order to arrive at a comprehensive and accurate valuation, with respect to (i) unallocated general and administrative (G&A) expenses (by income approach); (ii) non-operating assets and liabilities of the Target Group; (iii) operating assets and liabilities of the other companies (i.e. the companies other than the Mining Assets within the Target Group); and (iv) cash and cash equivalents of other companies. The abovementioned adjustments ensure that all relevant financial components are properly accounted for and valued, providing a complete picture of the Target Group’s financial position.

CONCLUSION

The fair value of 100% equity interest in the Target Group as of 30 June 2024 was reasonably estimated at US$217.1 million, which suggests that the current consideration for 51% equity interest in the Target Group at US$90 million offers a 18.7% discount from the fair value of US$110.7 million. The Board is confident that the Acquisition will significantly enhance the value of the Group’s current coal portfolio and broaden its geographical operational diversity.

By Order of the Board Kinetic Development Group Limited Ju Wenzhong Chairman and Executive Director

Hong Kong, 13 September 2024

As at the date of this announcement, the Board comprises seven Directors, of whom three are executive Directors, namely Mr. Ju Wenzhong (Chairman), Mr. Li Bo (Chief Executive Officer) and Mr. Ji Kunpeng; one is a non-executive Director, namely Ms. Zhang Lin; and three are independent non-executive Directors, namely Ms. Liu Peilian, Mr. Chen Liangnuan and Ms. Xue Hui.

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