MAGONTEC LIMITED — Annual Report 2021

Feb 27, 2022

Magontec Limited ASX:MGL

FY 2021 Result

28 February 2022

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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 2021 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.

2

FY 2021 Full Year Result

Income statement and Cashflow Overview

(AUD ‘000) Revenue	12 months to 31 Dec 21 115,151	12 months to 31 Dec 20 95,068	21.1%
Cost of Sales	(95,919)	(82,872)	15.7%
Gross Profit	19,232	12,195	57.7%
Gross Profit margin (%)	16.7%	12.8%
Other income	1,747	1,244	40.5%
Other operating expenses*	(10,902)	(9,966)	9.4%
EBITDA	10,077	3,473	190.2%
Depreciation and amortization	(2,823)	(3,115)	(9.4%)
EBIT	7,255	358
Interest	(525)	(572)	(8.2%)
Tax	(1,722)	(502)	242.6%
Reported Net Profit After Tax	5,008	(717)
Cash from Underlying Operations**	10,457	3,916	167.0%
Revenue growth inflated by raw material price increases	2H21 profit boost from Mg price rise benefits metals and CCP	Underlying Operating Cashflow** of +$10.5m reduces debt, funds increased working capital

3

• In 2021, Other operating expenses here included add back of $2.2m of D&A contained in Cost of Sales (2020: $2.4m) ** Operating cashflow excluding working capital movements, interest and tax payments

FY 2021 Full Year Result

Reconciliation of significant items in earnings

(AUD ‘000)	12	months to 31-Dec-21	12 months to 31-Dec-20
Reported Net Profit Before Tax & Significant Items		7,724	338
Significant items before tax
Less non-cash equity writeback / (expense)		(237)	118
Less MAQ depreciation (non-cash)		(917)	(1,013)
Less MAQ Primary Mg Alloy EBITDA losses		(891)	(821)
Add writeback on Romanian VAT legal win		468	-
Add COVID related govt subsidies		-	669
Add COVID related temporary salary	& director fee reductions (EU & HO)	-	923
Reported Net Profit Before Tax excl. unrealised FX		6,147	215
Less tax expense		(1,722)	(502)
Reported Net Profit After Tax excl. unrealised FX (underlying NPAT)		4,426	(288)
Add/Less unrealised FX gains / (losses)		582	(429)
Reported Net Profit After Tax		5,008	(717)
2021 NPAT of $4.4 million	MAQ EBITDA losses and non-cash	Other income included +$468,000
(Excluding unrealised FX)	depreciation costs reduced NPBT by $1.8 million	on positive resolution of Romanian VAT dispute in Magontec’s favour

4

Magontec Limited Market Information

ASX Code: MGL Total Per Share Ordinary shares on issue following 76,729,210 15:1 consolidation in August 2021 1 Market capitalisation $29.9 million 39.0 cents/share Book value of net assets $36.3 million 47.3 cents/share – 31 December 2021 Net debt – 31 December 2021 $6.9 million Enterprise value $36.8 million 2 LTM EBITDA to 31 Dec 2021 $10.1 million 2 LTM Reported NPAT to 31 Dec 2021 $5.0 million 6.5 cents/share Performance rights on issue 5,349,877 28 February 2022

Shareholder Structure 28 February 2022

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Retail
18.7%
Qinghai Salt
Lake
28.7%
Management
4.7%
Other Top 20
20.6%
Institutional &
Family Office
27.3%
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1 Based on share price of $0.39 as of 25 February 2022 2 LTM = Last 12 Months

5

FY 2021 Full Year Result

Sharp improvement in 4Q metals performance, strong CCP performance throughout FY2021 EBITDA and EBIT reflect favourable supply & pricing conditions

Gross Profit ($M) and GP margin (%) Reported EBITDA and EBIT ($M)

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16.7%
$10.1
$19.2
12.8%
11.3%
$7.3
10.0%
9.6%
$14.8
$4.6
EBITDA EBIT
$13.1
$3.5
$12.5
$12.2 $1.8
$2.7
$2.0
$0.4
$0.1
-$0.5
FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21
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FY 2021 Full Year Result

Underlying Net Profit* of $4.4m for the year to 31 December 2021

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Underlying Net Profit After Tax * ($M)
$4.43m
$0.48m
-$0.29m
-$1.20m
-$1.34m
FY17 FY18 FY19 FY20 FY21
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• Reported net profit/loss excluding the effects of unrealised foreign exchange

FY 2021 Full Year Result

Strong cashflows lead to continuing reduction in net debt and gearing

Underlying Operating Cashflow($M)* Net Debt ($M) and Gearing (%)**

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35.5%
33.0%
$10.5
28.8%
$18.0
$15.3
13.0% 16.0%
$11.7
$5.0
$3.9
$6.9
$2.9
$5.2
$2.3
FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21
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• Operating cashflow excluding working capital movements, interest and tax payment **Gearing = net debt / (net debt + equity)

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FY 2021 Full Year Result

CCP business contributed 71% of Gross Profit in 2021

Both metals & anodes businesses strong despite delays at Magontec Qinghai Mg alloy cast house

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$ 25.0 m
Anode (CCP) and Metal Gross Profit split ($M)
Anodes Metals
$ 20.0 m
29%
$ 15.0 m
40%
$ 10.0 m 43% 40% 33%
71%
$ 5.0 m
57% 60% 60% 67%
- FY17 FY18 FY19 FY20 FY21
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Magnesium anode contribution boosted by inventory effect

CCP business a higher gross margin product than primary / recycling Mg alloys

MAQ at full production will increase Metals contribution above CCP

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FY 2021 Full Year Result – CCP / anodes 89.8% sales growth in FY21 over 5 years since FY17

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Global CCP revenues and gross profit (A$M)
$13.6
2021
$8.8
$8.2 $43
$7.9 2020
Gross profit $7.2
$31 $31
2019
$27
Revenue $23
2018
2017
FY17 FY18 FY19 FY20 FY21
Magontec market share growth Steady capex driving cost
in Europe and North America efficiencies and competitiveness
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Global magnesium anode sales volumes (metric tonnes)

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FY21 volumes + 8.4% on pcp
2021 1,639 1,656
2020 1,451 1,587
2019 1,251 1,343
2018 1,030 1,035
2017 931 929
First half Second half
Flexible global production base
and price makes Magontec #1
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FY 2021 Full Year Result - Metals Metals division GP up to $5.6 million in 2021 supported by strong pricing environment for pure Mg

Global metals revenues and gross profit (A$M)

Global Mg alloy and specialist metals sales volumes (metric tonnes)

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Gross profit $6.0 $5.6 2021 10,736 9,103 FY21 volumes + 3.7% on pcp
$5.4 $5.2
Revenue $108 $4.0 2020 8,442 10,688
$104
$100 QSLM suspends
liquid pure Mg supply
2019 15,130 14,481
$72
$64
2018 18,135 16,849
2017 20,924 17,864
FY17 FY18 FY19 FY20 FY21 First half Second half
Volumes and overall profitability Continued innovation to reduce
reduced due to QSLM hiatus conversion costs
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Global Manufacturing & Distribution Platform

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Japan
St Louis
Bottrop, Ge
Xi’an, PRC
Rhode Is
Qinghai, PRC
Santana, Ro
Sydney
Production Technology Sales Head Melbourne
Centre Office Office
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4 manufacturing Mg locations for: alloys

Mg anodes

Sales distribution in all major markets

Research activities/ Technology associations

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Qinghai electrolytic magnesium smelter complex

100,000 tonnes per annum > ~ 10% of global production

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Dehydration Reduction Cast house [#]
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Agreements

Lease Agreement 10 + 10 Year option 56,000 mtpa supply Mg alloys exclusivity Off Take Price formula

*QSLM assets  # Cast House shared by QSLM & Magontec

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Magontec Qinghai magnesium alloy cast house

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Revenue and profit Currently operating Cast house impact
Delayed SOP
opportunity at low levels
2021 Target
Mg production mtpa 7k 56k
Revenue A$ $30m $500m+
Cast house
Contribution Loss Profit
Industry CO [2] output High Low
SOP Timetable
Production restart 2 [nd] Half 2022
Initial volumes ~1k mt/month
Full production 2+ years
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• assumes pure magnesium price of A$10,000 per tonne

Magontec Qinghai will use the lowest CO2 Mg ever produced*

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Qinghai 35
Future Present
30
Includes credits for
25 use of waste gas
20
15
Includes credits
for by-products
10
5
0
Golmud, China 2020
Qinghai 2020
Electrolysis Pidgeon process
eq / kg Mg
2
Kg CO
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*German Aerospace Institute of Vehicle Concepts survey on CO2 emissions from magnesium smelters around the World

Magontec Limited: ASX Code: MGL

Two businesses

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Metals Anodes
Primary & recycled Magnesium and
magnesium alloys electronic anodes
Pure Mg & Scrap Electronic Mg alloy &
other alloying returns components components
elements
Mg alloy Cathodic
ingots Corrosion
Generic Protection
CCP
Specialist
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Magontec is a manufacturing business

Electronic anodes

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Higher margin lower volume - Hot water appliances Cathodic Corrosion Protection for steel tanks

CCP Magnesium anodes Lower margin higher volume - Die casting industry Specialist metals Aerospace Defence Automotive Mg alloys Power tool Electronics Metals

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Magnesium (Mg) alloys

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Light and strong Unique Specific
Low density
structural metal properties applications
Stress resistance
Aluminium 2.70g/cm [3] Mg 36% lighter
Thermal conductivity
Iron 7.87g/cm [3] Mg 78% lighter
Corrosion
Magnesium 1.74g/cm [3]
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Mg alloy recycling: At Bottrop (Germany) and Santana (Romania) An essential part of the European and North American die casting industry

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Recycling adds
Mg is 100% Installed capacity Europe’s largest
recyclable just 0.59 kg CO2 24k mtpa Mg recycler
equivalent/kg of Mg
Magontec Customer
Mg alloy recycling Mg Die cast part manufacturer
process
Automotive Power
tool
Steering wheel
Cross beam
Seat Frame Medical
40-70%
Door frame device
Recycled
Magnesium Front end
Scrap
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*German Aerospace Institute of Vehicle Concepts survey on CO2 emissions from magnesium smelters around the World

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Cathodic Corrosion Protection (CCP)

Every water tank in every house requires corrosion protection

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New
Buildings
20%
CCP
80%
Replacement
Magnesium Electronic anodes
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Industry drivers Urbanisation (water heater installation) 80% replacement (5 to 10 year c)

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Climate change Switch from oil/gas to electric heat pump Accelerated replacement of installed appliances

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Magontec’s corporate transformation creates an exceptional platform for growth

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Mg
Mg
ASX Listed
Capitalisation
Improving Primary Mg alloy “Green” Profit
$29.9m financial production growth magnesium “inflexion” point
fundamentals
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1 Based on share price of $0.39 as of 25 February 2022

21

Thank You

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MAGONTEC

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

Tel +61 2 8084 7813 Fax +61 2 9252 8960 corporate@magontec.com www.magontec.com

MAGONTEC GmbH

Industriestraße 61 46240 Bottrop Germany

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

MAGONTEC Xian Co., Ltd

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

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

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22

Appendix Current Year FY 2021 Result by Region Segment P&L

				12 months to
(AUD ‘000)	EUR	PRC	Head office	31 Dec 21
Gross Profit	16,021	3,211	-	19,232
Other income	974	773	-	1,747
Operating expenses	(7,841)	(3,318)	(1,924)	(13,082)
Add back D&A in Cost of Sales	1,077	1,104	-	2,180
EBITDA	10,231	1,770	(1,924)	10,077
Depreciation and amortization	(1,603)	(1,184)	(35)	(2,823)
EBIT	8,628	585	(1,959)	7,255
Interest	(251)	(273)	(1)	(525)
Tax	(1,748)	27	-	(1,722)
Reported Net Profit After Tax	6,629	339	(1,959)	5,008
EUR key driver of Group result in	PRC business holds significant upside		Head office costs $1.96 m in
2021, including $468k other	from QSLM restart		2021
income from VAT legal case win

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Appendix Prior Year FY 2020 Result by Region Segment P&L

				12 months to
(AUD ‘000)	EUR	PRC	Head office	31 Dec 20
Gross Profit	10,153	2,043	-	12,195
Other income	282	882	80	1,244
Operating expenses	(7,720)	(2,757)	(1,890)	(12,366)
Add back D&A in Cost of Sales	1,210	1,190	-	2,400
EBITDA	3,925	1,358	(1,810)	3,473
Depreciation and amortization	(1,777)	(1,314)	(24)	(3,115)
EBIT	2,148	44	(1,834)	358
Interest	(371)	(201)	-	(572)
Tax	(576)	74	-	(502)
Reported Net Profit After Tax	1,201	(83)	(1,834)	(717)
EUR was profitable to the extent	PRC business in 2020 was similarly		Head office costs $1.83m in 2020
of $1.2m in 2020 despite COVID	COVID impacted
disruptions

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Magontec Limited ASX:MGL

FY 2021 Result

28 February 2022

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