MAGONTEC LIMITED — AGM Information 2018

May 9, 2018

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Suite 1.03, Level 1 46A Macleay St Potts Point, NSW 2011 Australia Ph +61 2 8005 4109 Fx: +61 2 9252 8960

10 May 2018

Company Announcements Office Australian Securities Exchange Limited 20 Bridge Street Sydney, NSW, 2000

Dear Sirs,

Magontec Limited – Executive Chairman’s Address to 2018 Annual General Meeting Thursday 10 May 2018 11:00am

Attached (below) is the content of the Executive Chairman’s address to be delivered at the Company’s 2018 AGM.

The slides referred to in the body of the Executive Chairman’s address appear in this document at the foot of the Chairman’s address. Both the Chairman’s address and slides are also available on the Company’s website.

Yours sincerely

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John Talbot Company Secretary Magontec Limited

CHAIRMAN’S ADDRESS

The slides that I will show and the text of my speech are now available on the Magontec and ASX websites.

Slide 1 & 2

Ladies and Gentlemen, as usual I would like to spend a few minutes this morning by reviewing Magontec’s business and make some comments on the period ahead.

At the end of my presentation I have short corporate video to show you and I will then open the discussion to the floor for questions.

Slide 3

In the year to 31 December 2017 the company reported a Gross Profit of $12.6 million, down from $14.4 million in the previous corresponding period. Net Profit, excluding the unrealised effects of foreign exchange and significant items, was $685,000 compared with $2.6 million in the previous corresponding period. I use this measure of Net Profit (excluding the unrealised effects of foreign exchange and significant items) because it gives shareholders a direct, year-on-year comparison and a clearer picture of the true earnings power of the company.

The 2017 negative performance against the 2016 result reflects, inter alia, the impact of the start-up and commissioning costs at the new Magontec Qinghai plant, a costly labour situation in Romania, the loss of a major contract in Magontec’s Chinese magnesium anodes business and a fraud that cost the company nearly $300,000. The Romanian labour issues and the Chinese anode volume slump alone cost the company over A$2m at the EBIT line.

Slide 4

It is certainly disappointing that the company was not able to build on the success of 2016 and that delivery of liquid pure magnesium by Qinghai Salt Lake Magnesium Co. Ltd (QSLM) from its new primary magnesium cast house has been slower than

anticipated. However, in the last quarter we have experienced a small recovery in Romania and a more substantial uplift from the magnesium anode business in China, driving the quarterly figures higher in the period to the end of March 2018.

This has seen a recovery in overall margin at the Gross Profit level and an improvement in underlying cash generation; that is the cash generated by underlying operations as opposed to the overall cash position which is impacted each month, occasionally by large swings in working capital.

Slide 5

I want to provide some detail on the two key issues that I have described before I move to the Magontec Qinghai project.

In Romania, Magontec constructed a “green field” magnesium recycling and magnesium anode manufacturing plant that was commissioned in 2013. This project was undertaken in response to demand from a key customer relocating production capacity from western Europe to Romania. Unusually we were able to secure a longterm contract with that customer sufficient to justify the establishment of this new location. Since that time, we have added a second customer and in late 2017 secured an extension of the first contract for a further three-year term. Furthermore, all three of the largest European Tier 1 automotive magnesium alloy die casters have operations in this region and the relocation of OEM manufacturing also continues to shift to eastern European countries. Volkswagen and Jaguar Land Rover are both establishing new manufacturing bases in the surrounding countries.

Slide 6

The economic future for Magontec’s Romanian magnesium alloy plant appears sound and, on that basis, we expect this business to grow further in the years ahead.

Our challenge is to settle the production process in a region that has little historical familiarity with this type of industrial process. Through the latter part of 2016 and the early part of 2017, we experienced an increase in the costs of converting scrap (mostly steering wheels) into magnesium alloy ingots for return to our customers.

The cause of this cost increase was a developing labour dispute. This was partly the result of production management and partly due to the changing nature of the regional labour market.

In early 2017 we appointed a new production manager who has established a solid set of production standards required by our business for its longer-term prosperity. This occasioned the departure of a number of employees and required a period of retraining for new staff. Through this period, we were occasionally required to make up volume shortfalls to our Romanian customers with supply of material from Germany and we temporarily re-located staff from Germany to assist in bringing the new Romanian crews up to speed. These actions were a burden on profitability at Magontec Romania in 2017.

On a wider scale there has been a change in local labour market dynamics that have negatively impacted profitability across the region. With the arrival of many new factories, job vacancies in western Romania are at a low level and the demand for skilled labour is high. This has been accompanied by high employee turnover in many businesses. At our factory we have invested heavily in finding the right new employees and training them so that they are able to work safely in a challenging environment. In the first quarter of 2018 we have seen some improvement; this factory is now able to produce sufficient volume without alternative supply from Germany and production metrics are improved on 2017, albeit yet to reach levels of 2016.

Slide 7

I turn now to our other underperforming business in 2017, Chinese magnesium anodes. This business largely serves the domestic water heater market and is highly sensitive to volume through put. Magontec is one of the three largest manufacturers of magnesium anodes in China and produces both cast and extruded magnesium rods. The Chinese market for this product is dominated by three or four large customers and price is the principal competitive metric. In early 2017 Magontec lost part of a large contract and production fell by several hundred tonnes with a knock-on effect on profitability

Slide 8

I am pleased to report that our China magnesium anode team have won new volumes over the last 6 months including volume lost in early 2017. They have done this by reducing conversion costs, largely through the introduction of automated equipment. We expect a stronger contribution overall from this business in 2018 and hope to further expand our sales volumes in North America and Australia in the medium term.

Slide 9

Before I move on to discuss the Qinghai Project I should make a few comments about other parts of our business.

In Germany our magnesium alloy recycling business has continued to operate profitably on higher volumes, although at slightly inferior metrics. At the gross profit level German recycling was slightly below the previous corresponding period but still strongly ahead of previous years. By offering a very competitive product Magontec GmbH has established itself as the premier magnesium alloy recycling business in western Europe. While this business is operating at close to full capacity we are content to maintain its current configuration as we wait to see the impact of the flow of new primary magnesium alloy material from Qinghai into Europe.

The European anodes business enjoyed a robust increase in volumes and revenues. This business manufacturers both cast magnesium anodes in Romania and electronic anodes in Germany. Over the last 12 months we have grown new markets for both products in Europe, the Middle East and the United States. While there have also been some employee issues in the Romanian magnesium anode plant, the European anodes business made an increased contribution to EBIT in 2017.

And finally, our current primary magnesium alloy manufacturing plant in Shanxi Province, China. As longer-term shareholders will know, this plant has been leased from a local businessman since 2013. In the second half of 2018 the plant will finally close (and will be demolished) as Magontec moves its primary magnesium operations to the new facility in Qinghai Province. Despite the short-term horizon for this

business it continued to perform well in 2017, producing higher volumes and a higher EBIT contribution.

Slide 10

Moving now to the Qinghai project. As I wrote in the first quarter report published on 30 April this year, the Magontec Qinghai cast house has been completed and is ready to start mass production of primary magnesium alloys for sale to our customers around the world.

We held a very well attended opening ceremony in the middle of April where customers, agents, Qinghai Salt Lake Company executives and local, state and regional politicians gathered to view this most modern of magnesium alloy cast houses.

Slide 11 (Cast house)

What this group saw was an operating and commissioned facility. We are currently taking solid pure magnesium produced by QSLM and converting that into modest volumes of magnesium alloy. As our factory is operating, albeit at low volumes, we have been able to invite customers to visit us on-site to review and validate our production process. Qualification of the new cast house is an essential step for all our customers and we expect to see many more visitors in the coming months.

As yet we do not have a consistent supply of liquid pure Mg from our partner company QSLM and this has delayed the commencement of mass production at our alloy cast house. In the early part of this year we had some supply of liquid magnesium from the metal truck – the vehicle that delivers liquid magnesium to our furnaces. However, our partners at QSLM chose to close the two operating lines of the #1 dehydration unit and carry out modifications just before Chinese New Year. These lines were re-opened in late March and the third line in the #1 dehydration unit then commenced production in April.

Slide 12 (metal wagon)

All three lines of QSLM’s #1 dehydration unit are now operating and producing prills – the dehydrated magnesium chloride raw material that goes to the reduction

house. While these three lines are capable of producing around 200,000 metric tonnes per annum of magnesium chloride prills, they are currently operating in a start-up phase and at less than 50% of rated capacity (4 tonnes of magnesium chloride prills produces 1 tonne of magnesium). QSLM’s current rate of production will soon fill the 6,000 metric tonnes of prill storage capacity and they should then have a sufficient buffer to commence production of liquid pure magnesium through electrolytic reduction in the cell house and then supply to the Magontec Qinghai cast house.

Slide 13 (complete plant)

As I have made plain in my quarterly commentary, all of these component parts are operational and there are no obvious reasons why supply of liquid pure magnesium by QSLM should not commence imminently.

If you would like to know more about out Qinghai facility we have published a booklet, copies of which are at the back of the room, and there is a presentation, which can be found on the Magontec website. Of course, I am also happy to answer questions here today.

Finally, I would like to make a couple of comments about the period ahead. Over the next few months we expect to see a rising volume of liquid metal supply to our cast house furnaces at Qinghai, but, without a firm schedule for delivery it is very difficult for management to make predictions about profitability in the immediate future.

However, we expect Magontec Qinghai to start to make a profitable contribution at around 1,000 mt of supply per month, and this is likely to occur in the third quarter.

Through the remainder of this year there will be two other forces at work; on the one hand a more positive contribution from the underperforming businesses of 2017, which I have discussed today, and on the other the one-off costs of closing the existing primary magnesium alloy facility in Shanxi Province.

Over the last few years we have also used the Shanxi Province facility as a recycling plant and with the closure of that facility we will lose our ability to recycle in China. Recycling is an important part of the magnesium alloy supply offering and a business

that has been profitable for Magontec in China over some years now. In the coming months the company may seek a new opportunity to engage in this business in a region of China close to our customers.

Ladies and Gentlemen, that concludes my remarks.

As I said at the outset I will now show you a short video and then take questions before we move to the formal business of the meeting.

Video unavailable

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Disclaimer

This Presentation has been prepared by Magontec Limited (ABN 30 147 131 977) (Magontec or the Company). This Presentation contains summary information about Magontec and its activities current as at the date of this Presentation. The information in this Presentation is of a general background nature and does not purport to be complete or to comprise all the information that a shareholder or potential investor in Magontec may require in order to determine whether to deal in Magontec shares. It should be read in conjunction with Magontec’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX), which are available at www.asx.com.au. This document is not a prospectus or a product disclosure statement under the Corporations Act (Cth) 2001 (Corporations Act) and has not been lodged with the Australian Securities and Investments Commission (ASIC).

Not investment or financial product advice

This Presentation is for information purposes only and is not financial product or investment advice or a recommendation to acquire Magontec shares and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek financial, legal and taxation advice appropriate to their jurisdiction. Magontec is not licensed to provide financial product advice in respect of Magontec shares. Cooling off rights do not apply to the acquisition of Magontec shares.

Financial data

All dollar values are in Australian dollars (A$) unless stated otherwise and financial data is presented within the financial year end of 31 December 2017 unless stated otherwise. Any pro forma historical financial information included in this Presentation does not purport to be in compliance with Article 11 of Regulation S-X of the rules and regulations of the US Securities and Exchange Commission.

Past performance

Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

Future performance

This Presentation contains certain “forward-looking statements”. The words “expect”, “should”, “could”, “may”, “will, “predict”, “plan”, “scenario”, “forecasts”, “anticipates”, “outlook” and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forwardlooking statements. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. Forward-looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Such forward-looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements, and there are risks associated with the Company and the industry (including those set out below) which may affect the accuracy of the forward-looking statements. The Company does not undertake any obligation to release publicly any revisions to any forward looking statement to reflect events or circumstances after the date of this presentation, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

Investment Risk and other risks

Investment in Magontec shares is subject to investment and other known and unknown risks, some of which are beyond the control of Magontec Limited, including risk factors associated with the industry in which Magontec operates and risks specific to Magontec, such as: construction, development and operational risk associated with the Golmud Plant, fluctuations in magnesium alloy prices and exchange rates, risks associated with operating in China, financing risks, market price and demand risk and other risks generally relating to security investments.

Not an offer

This document may not be released or distributed in the United States. This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. Securities in the Company have not been, and will not be, registered under the U.S. Securities Act of 1933 or the securities laws of any state or other jurisdiction of the United States,

and may not be offered or sold in the United States unless the securities are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, registration.

To the maximum extent permitted by law, Magontec and its respective advisers and affiliates, directors, officers and employees:

• Make no representation or warranty, express or implied, as to the accuracy, reliability or completeness of information in the presentation; and

• Exclude and disclaim all liability, for any expenses, losses, damages or costs incurred by you as a result of your participation in any proposed offering and the information in this presentation being inaccurate or incomplete in any way for any reason, whether by negligence of otherwise.

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