MAGONTEC LIMITED — Annual Report 2018

Feb 27, 2019

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Magontec Limited (ASX: MGL) Full Year 2018 Result 28 February 2019

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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 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 forward-looking 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 the 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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Magontec Limited – 2018 Full Year Results

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Photo: Qilai Shen

2018 underlying net profit of +$0.5m* included $0.95 million of extra non-cash depreciation over 2017 from the Magontec Qinghai facility

2018 positive underlying operating cash** generated of +$5.0m

Magontec Qinghai cast house qualified by global customer base

Mg alloys produced at Magontec Qinghai:

• 3,601mt in the year to 31 December 2018

• 705mt in month of January 2019

• Reported net profit excluding the effects of unrealised foreign exchange

• ** Operating cash flow excluding working capital movements, interest and tax payments

FY 2018 Full Year Result Underlying Net Profit* increased to $0.5m in 2018, compared with $1.2m loss in 2017

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Underlying Net Profit After Tax * ($M) FY 2017 FY 2018**

$0.5m

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-$1.2m

• Reported net profit/loss excluding the effects of unrealised foreign exchange ** Includes Depreciation of $0.95m on Magontec Qinghai Magnesium Alloy Cast House assets that were not operating at full capacity in 2018

Magontec Qinghai production profile showing positive quarterly trend

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Magontec Qinghai Production (tonnes)
1,794
1,107
420
280
1Q 2018 2Q 2018 3Q 2018 4Q 2018
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FY 2018 Full Year Result Reconciliation of significant items in earnings

	**12 months to **	12 months to
	31-Dec-18	31-Dec-17
	'$000	'$000
Net Profit Before Tax, unrealised FX and significant items	2,266	685
Significant items before tax
Less MAQ start up costs	(101)	(194)
Less MAQ depreciation (non cash)	(951)	-
Less non-cash equity expense	(78)	(191)
Less impact of fraudulent inventory loss	-	(292)
Less one off historical real estate tax + bad debt exp	(32)	(165)
Less Magontec US start up costs	-	(211)
Net Profit Before Tax excluding unrealised FX	1,104	(368)
Less tax expense	(623)	(809)
Net Profit After Tax before unrealised FX (underlying NPAT*)	480	(1,177)
Add/(subtract) unrealised FX gains/(losses)	296	(437)
Reported Net Profit After Tax	776	(1,614)

2018 reported profit of $776k included an additional $951k of non cash depreciation from the MAQ facility

Prior year included significant items not repeated in the current year

Magontec Qinghai first profit contribution in FY 2018

FY 2018 Full Year Result Overall performance showing an improving trend on 2017

Gross Profit ($M) and GP margin

Underlying Operating Cashflow ($M)*

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11.3% 11.3%
$5.0
$4.9
9.6%
9.3%
$3.5
6.4%
$2.3
$0.7
$8.5 $12.9 $14.4 $12.5 $14.8
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
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• Operating cashflow excluding working capital movements, interest and tax payments

FY 2018 Full Year Result EBITDA and EBIT trend stabilising, EBIT impacted by additional depreciation from Magontec Qinghai

EBITDA and EBIT contributions ($M)

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$4.6
$4.3
$3.3
$2.5
$2.0
$1.8
$1.6
$1.5
$0.1
-$0.3
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2015

2016 2017

2014

2018

Qinghai electrolytic magnesium smelter complex (Golmud)

Cast house

Dehydration

Reduction

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Magontec Qinghai

MGL operates a new magnesium alloy cast house at Golmud in Qinghai Province PRC

Agreements Supply of 56,000 mtpa Exclusive Mg alloy rights Fixed off-take price metrics Lease (10+10 years)

Production

4* Mg alloy cast lines 85% renewable energy Future growth options

Magontec Qinghai will triple production and make Magontec the world’s largest supplier of electrolytic Mg alloy

~10% Mg alloy market share 2015

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Largely high CO2
“Pidgeon process”
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Target > 20% Mg alloy market share

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Largely high CO2
“Pidgeon process”
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Magontec Qinghai will use the lowest CO2 Mg ever produced*

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45 Future Present Past
40
Qinghai
35
incl. credits for incl. use
30 Use of waste gas of SF6
25
incl. credits for
by-products
20
15 incl. credits for
by-products
10
5
0
Golmud 2017 Israel 2011 China 2011 Norway 1997
Electrolysis Pidgeon process
Kg CO2eq / kg Mg
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*German Aerospace Institute of Vehicle Concepts survey on CO2 emissions from magnesium smelters around the World

Magontec has four recycling and manufacturing facilities in China, Germany and Romania

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Production
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Bottrop
Santana
Toronto Golmud
Tokyo
Rhode Is
Xi’an
Sydney
Melbourne
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Sales Office
Technology Centre
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Cast House Project Headquarters

Magontec’s corporate transformation creates an exceptional platform for growth

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Improving Primary Mg alloy financial production fundamentals volumes to triple

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“Green” Profit
magnesium “inflexion” point
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ASX Listed

Magontec Limited

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MAGONTEC

MAGONTEC GmbH

MAGONTEC Xian Co., Ltd

Head Office, Sydney Suite 1.03 46a Macleay St Potts Point Sydney NSW AUSTRALIA 2011

Industriestraße 61 46240 Bottrop Germany

No. 40, Feng Cheng 3 Road, Xian Economic and Development Zone Xian, China, 710021

Tel +61 2 8005 4109 Fax +61 2 9252 8960 corporate@magontec.com www.magontec.com

Tel +49 (0) 20 41 / 99 07-0 Fax +49 (0) 20 41 / 99 07 99 europe@magontec.com www.magontec.com

Tel. +86 29 / 86 52 68 78 Fax +86 29 / 86 52 37 22 china@magontec.com www.magontec.com

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Magontec Limited (ASX: MGL) Full Year 2018 Result 28 February 2019

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