MAGONTEC LIMITED — Interim / Quarterly Report 2017

Oct 30, 2017

==> picture [592 x 57] intentionally omitted <==

==> picture [592 x 56] intentionally omitted <==

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

31 October 2017

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

Dear Sirs,

Appendix 4C – Quarter Ended 30 September 2017

In this letter are –

• Attachment 1 – Executive Chairman’s Commentary

• Attachment 2 - Unaudited Comprehensive Income Statement for the 9 months to 30 September 2017

• Attachment 3 – Unaudited Balance Sheet at 30 September 2017

• Attachment 4 – Unaudited Cash Flow Statement for the 9 months to 30 September 2017

• Attachment 5 – Appendix 4C cash flow report for the quarter ended 30 September 2017

Attachments 1 to 4 are presented in the formats that appear in the Company’s half year and annual reports and prepared on a basis consistent with the requirements of accounting standards.

Attachment 5 is presented in the format required by Paragraph 4.7B of Chapter 4 of the ASX listing rules.

==> picture [592 x 57] intentionally omitted <==

==> picture [592 x 56] intentionally omitted <==

Rounding Errors

The tables in this report may indicate apparent errors to the extent of one unit (being $1,000) in:

• the addition of items comprising total and sub totals; and

• the comparative balances of items from the financial accounts.

Such differences arise from the process of:

• converting foreign currency amounts to two decimal places in AUD; and

• subsequent rounding of the AUD amounts to one thousand dollars.

Yours Sincerely

==> picture [170 x 73] intentionally omitted <==

John Talbot Company Secretary

==> picture [595 x 55] intentionally omitted <==

==> picture [595 x 55] intentionally omitted <==

Attachment 1

Executive Chairman’s Commentary Magontec Limited (ASX: MGL) Quarterly Update for 9 months to 30 September 2017 (Unaudited)

• Production of Mg alloys from Magontec Qinghai commenced in October

• Gross Profit of $10.2m, down 8.7% on Previous Corresponding Period (PCP)

• Continuing labour issues at Romanian plant a major negative impact on 3Q result

• European anodes EBIT up 9.5% on PCP in the 9 months to September 2017

• PRC Mg alloy EBIT up 13.7% on PCP in the 9 months to September 2017

Headline numbers
	9 months to	9 months to
A$	30 Sep 2017	30 Sep 2016	$ chg	% chg
Underlying Operational Cashflow	$1.960 m	$4.208 m	($2.247 m)	(53.4%)
Gross Profit	$10.219 m	$11.195 m	($0.976 m)	(8.7%)
Gross Profit Margin (%)	10.5%	11.4%
Underlying EBITDA*	$2.311 m	$4.144 m	($1.833 m)	(44.2%)
Underlying EBIT*	$1.094 m	$2.845 m	($1.752 m)	(61.6%)
Underlying NPAT*	($0.174 m)	$1.336 m	($1.510 m)	(113.0%)
* Excludes unrealised FX effects of:	($0.825m)	($0.956 m)

==> picture [157 x 22] intentionally omitted <==

----- Start of picture text -----

Cash generated from underlying
operating activities
----- End of picture text -----

==> picture [188 x 189] intentionally omitted <==

----- Start of picture text -----

$4.208m
$1.960m
9 months to 30 9 months to 30
September 2016 September 2017
----- End of picture text -----

Underlying NPAT*

==> picture [187 x 200] intentionally omitted <==

----- Start of picture text -----

$1.336m
-$0.174m
9 months to 30 9 months to 30
September 2016 September 2017
----- End of picture text -----

==> picture [595 x 55] intentionally omitted <==

==> picture [595 x 55] intentionally omitted <==

ABOUT MAGONTEC

ABOUT MAGONTEC	ABOUT MAGONTEC
Magontec is a leading manufacturer of		magnesium	alloys and Cathodic Corrosion Protection (magnesium and electronic anode)
products
Magontec:		Magontec is the only western Mg alloy		Magontec is a pioneer in the field of
		producer with:		magnesium alloys and anode products
				with experience in production and
-	Buys and converts pure Mg into	-	Its own Chinese primary Mg	development of new alloy and anode
	Mg alloy ingots for sale into		alloy manufacturing base and	applications
	global markets		Mg alloy recycling facilities in
			Europe and Asia
				Magontec Qinghai, a recently
-	Acquires Mg alloy scrap from customers for recycling into Mg alloy ingots for re-sale	-	A global sales and logistics capability	completed 59,000mt per annum Mg alloy production facility commenced first production of Mg ingots in October
				2017
-	Casts and extrudes Mg alloys	-	A comprehensive portfolio of
	into anodes for supply to the global water heater industry		proprietary magnesium alloys and an active R&D program	At full production Magontec Qinghai will triple MGL’s primary magnesium alloy production capacity

COMMENTARY

The second and third quarters of 2017 have been particularly challenging for the Company:

1. Since April, labour issues at the Romanian facility have severely reduced group profitability in the year to date

2. At the end of the first quarter of 2017 the Company lost a large Chinese contract for Mg anodes

3. In May Magontec became the victim of a ‘phishing’ fraud that cost the company $0.292m

These events have driven overall profitability below the same period in 2016 and mask strong performances in Chinese and other European metals operations and in the group’s European anode activities. Sales and profitability are up in these businesses and the outlook is positive.

The overall outlook for Magontec in 2018 is a positive one; the Company expects to be producing Mg alloys for sale to customers from our new Qinghai facility and anticipates a return to profitability at its Romanian recycling plant.

Net contributions to/subtractions from Gross Profit

==> picture [431 x 183] intentionally omitted <==

----- Start of picture text -----

+ $11.2 m
+ $10.2 m
Romanian
Chinese Other MGL
recycling
anodes businesses
- $1.1m
- $0.5m + $0.6 m
30-Sep-16 30-Sep-17
(A$ millions)
----- End of picture text -----

==> picture [595 x 55] intentionally omitted <==

==> picture [595 x 55] intentionally omitted <==

Magontec Qinghai Cast House Project

In October 2017 Magontec produced the first qualified Mg alloys from its new cast house in Qinghai Province. The Qinghai Salt Lake Magnesium Co Ltd (QSLM) electrolytic plant began construction in 2013 and Magontec began to install equipment in its adjacent Magnesium Alloy Cast House in 2014. While the construction and commissioning phase were longer than anticipated, the complexity of the project and the location presented significant challenges for Magontec’s project partner and major shareholder, QSLM.

In the last few weeks Magontec engineers and production staff have successfully commissioned the Continuous Refinery Furnace, a complex and critical piece of infrastructure for magnesium alloy casting at this facility. QSLM has now completed the commissioning of 2 dehydration lines and are supplying prill feed - the raw material for the reduction process - to the reduction cells.

Commencement of production at Qinghai is a major event for Magontec. As volumes from this new primary magnesium alloy facility rise to the rated output capacity of ~ 59,000 metric tonnes per annum, so the company will be able to leverage economies of scale and offer an increasingly competitive Mg alloy product to customers in Asia, Europe and North America.

==> picture [356 x 240] intentionally omitted <==

==> picture [360 x 203] intentionally omitted <==

Magontec Qinghai Mg alloy casting line

First production of Mg ingots at Magontec Qinghai

==> picture [595 x 55] intentionally omitted <==

==> picture [595 x 55] intentionally omitted <==

Magnesium Alloy Products

Magontec operates metals businesses in China, Germany and Romania. The current operational Chinese facility in Shanxi Province has performed well through 2017 processing higher volumes and posting a 14% improvement in EBIT over the PCP. The production team at Shanxi have achieved a 13% improvement in conversion costs on slightly higher volumes and have enjoyed an accident free year in 2017.

In Germany the metals business is also operating at a higher level with volumes up 16% and an improvement in EBIT contribution. The German plant has continued to lower conversion costs and has successfully bid for new business by offering a very competitive package to regional die casters. In addition to generic alloys (AZ91, AM50/60) the German business also recycles growing volumes of specialist alloys including Magontec’s AE44 ‘family’ alloys.

While the earnings performance of the Romanian plant has been extremely disappointing, revenues are only marginally down on PCP (-13%) and the Company has continued to supply customers without interruption. Western Romania has been a popular relocation destination for businesses across the European automotive sector. Magontec established its plant at Santana in response to the establishment of high volume Tier 1 automotive die casters in the region. Other automotive and nonautomotive industry groups have also relocated to Eastern European countries in recent years. Bringing new businesses to this region has resulted in various degrees of industrial indigestion and a high level of competition for the local workforce.

Through hard work and the implementation of new employment and incentive schemes the management team at Magontec Romania, together with their colleagues in Germany, are in the process of bringing the factory back to its optimal operating efficiency and have successfully met some significant challenges over the last few months.

Anode Products (Cathodic Corrosion Protection)

Europe

The European anodes business continues to progress well. Both magnesium anodes and electronic anodes saw improvements in volume and the overall business experienced a solid lift in profitability. In a very competitive market for Mg anodes the Company experienced a 7% lift in volumes reflecting new business from customers in the Arabian Peninsular, Eastern Europe, Germany and Spain. Efficiency improvement of Mg anode production is an on-going project at our European factory, as well as in China, and is expected to deliver higher gross profit margins and more competitive product offerings in the months ahead.

Asia

In China the Mg anodes business lost a key contract in early 2017 bringing overall volumes down 17% in the year to date. Through 2017 the team at the Xi’an plant has introduced new equipment to improve competitiveness in the Chinese and international markets and has successfully sought new customers. The contracting season for 2018 is through October and November 2017 when the Company will be seeking to recover volumes and improve margins into the New Year.

Financial Comment

While the financial results for the 9 months to 30 September 2017 have been disappointing the underlying business remains resilient and the prospects for a recovery in Romanian recycling earnings together with increasing volumes from Qinghai augur well for 2018.

==> picture [595 x 55] intentionally omitted <==

==> picture [595 x 55] intentionally omitted <==

In September Magontec’s key banking relationship with Commerzbank was renewed with a new threeyear borrowing-base facility increased from 12 million Euros to 15 million Euros. Magontec has other banking relationships in Romania and China that provide the company with other lines of credit.

As Magontec Qinghai comes on stream there will be an increase in the requirement for working capital through 2018 and 2019. Part of this increase will be met under the terms of the agreements between Magontec and QSLM and part through the existing lines of credit.

Balance sheet gearing stands at 31.2% (net debt to net debt + equity) as at 30 September 2017, up from 25.3% 12 months ago. This reflects an inventory timing issue rather than any change in the underlying nature of the balance sheet. Net borrowings as at 30 September 2017 were $15.0 million compared with $11.4 million at 30 September 2016.

Summary

In November Magontec will welcome its first customers to its Qinghai Magnesium Alloy Cast House. There is a qualification process for die cast manufacturers prior to placing an order at a new plant. This process is different for each manufacturer and often requires technical staff to visit the site and audit the process.

The Magontec Qinghai magnesium alloys will be the first electrolytic magnesium metal available from China and will offer the highest annual volumes of continuous process ‘green’ magnesium in the world. Automotive manufacturers, already under considerable pressure to prove environmental credentials, are keen to access Mg alloy from the world’s lowest CO2 manufacturing source.

The management and Board of Magontec have put considerable efforts into bringing the Qinghai Project into production and shareholders will welcome its commencement despite the delays. While the three events noted in my introduction will impact the full year result for 2017, 2018 is expected to be a year of much positive activity at Qinghai, a return to more stable production at the Company’s Romanian facility and a recovery in bottom line earnings.

Nic Andrews

Executive Chairman 31 October 2017

==> picture [595 x 55] intentionally omitted <==

==> picture [595 x 55] intentionally omitted <==

Attachment 2

UNAUDITED STATEMENT OF PROFIT & LOSS AND OTHER COMPREHENSIVE INCOME

==> picture [506 x 489] intentionally omitted <==

----- Start of picture text -----

Unaudited Consolidated Comprehensive Income Statement
Source: Magontec Limited Management Accounts
9 months to 9 months to
$000 30-Sep-17 30-Sep-16
Sale of goods 97,312 97,883
Cost of sales (87,092) (86,688)
Gross profit 10,219 11,195
Other income 282 302
Interest expense (729) (888)
Impairment (55) (401)
Travel accommodation and meals (526) (500)
Research & development (344) (253)
Promotional activity (96) (34)
Information technology (237) (227)
Personnel (4,842) (4,704)
Depreciation & Amortisation (273) (370)
Office expenses (230) (263)
Corporate and other (2,684) (2,279)
Foreign exchange gain/(loss) (945) (577)
Profit/(Loss) before tax (460) 1,001
Income tax (expense)/benefit (539) (621)
Profit/(Loss) after tax (999) 380
Other comprehensive income
Exchange differences taken to equity (515) (1,313)
Movement in actuarial assessments and other OCI 160 (550)
Total comprehensive income (1,354) (1,483)
Reconciliation of reported NPAT to underlying NPAT (unaudited)
9 months to 9 months to
$000 30-Sep-17 30-Sep-16
Profit/(Loss) after tax (reported) (999) 380
Add/(less) unrealised FX losses/(gains) 825 956
Profit/Loss after tax excluding unrealised FX ("Underlying NPAT") (174) 1,336
----- End of picture text -----

==> picture [595 x 55] intentionally omitted <==

==> picture [595 x 55] intentionally omitted <==

Attachment 3

UNAUDITED BALANCE SHEET

==> picture [504 x 577] intentionally omitted <==

----- Start of picture text -----

Unaudited Consolidated Balance Sheet
Source: Magontec Limited Management Accounts
As at As at
$000 30-Sep-17 31-Dec-16
Cash & cash equivalents 3,582 4,593
Trade & other receivables 23,519 21,956
Inventory 24,412 22,302
Other 290 227
Total Current Assets 51,803 49,077
Property, plant & equipment 22,603 20,543
Intangible assets 2,849 2,869
Deferred tax assets 1,547 1,542
Other 986 1,045
Total Non-Current Assets 27,984 25,999
Total Assets 79,787 75,077
Trade & other payables 15,430 13,672
Bank borrowings 18,620 14,734
Provisions 1,524 1,337
Total Current Liabilities 35,574 29,742
Other payables - 146
- -
Bank borrowings
Provisions 11,024 10,815
Total Non-Current Liabilities 11,024 10,961
Total Liabilities 46,598 40,703
Net Assets 33,189 34,373
Equity attributable to members of MGL
Share capital 58,907 58,616
Reserves 4,689 5,165
Accumulated (losses)/profits (30,870) (29,871)
Share capital 463 463
Reserves - -
- -
Accumulated (losses)/profits
Total equity 33,189 34,373
----- End of picture text -----

==> picture [595 x 55] intentionally omitted <==

==> picture [595 x 55] intentionally omitted <==

Attachment 4

UNAUDITED STATEMENT OF CASH FLOWS

==> picture [529 x 486] intentionally omitted <==

----- Start of picture text -----

Unaudited Consolidated Cash Flow Statement
Source: Magontec Limited Consolidated Management Accounts
Quarter to 9 months to 6 months to
$000 30-Sep-17 30-Sep-17 30-Jun-17
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from/ (utilised in) underlying operating activities (1) 180 1,960 1,780
Net working capital assets
- Trade and other receivables 1,823 (2,058) (3,881)
- Inventory 376 (1,762) (2,138)
- Trade and other payables (2,414) 1,254 3,668
Cash generated from/ (utilised in) net working capital asset (2) (215) (2,566) (2,351)
Other operating activities
- Net Interest paid (137) (686) (549)
- Income tax paid (0) (119) (118)
Cash generated from/ (utilised in) other operating activities (3) (137) (805) (668)
Net Cash generated from/ (utilised in) all operating activities (1+2+3) (172) (1,411) (1,239)
CASH FLOW FROM INVESTING ACTIVITIES
Net cash out on purchase/disposal of property, plant & equipment (779) (3,017) (2,238)
Group information technology (0) (2) (2)
Security deposit (12) (14) (2)
Other - - -
Net cash provided by / (used in) investing activities (792) (3,033) (2,241)
CASH FLOW FROM FINANCING ACTIVITIES
Bank Debt 155 3,621 3,467
- - -
Net capital raised from issue of securities
Other - - -
Net cash provided by / (used in) financing activities 155 3,621 3,467
Net increase / (decrease) in cash and cash equivalents (809) (823) (14)
Foreign exchange effects on total cash flow movement (28) (188) (161)
Cash and cash equivalents at the beginning of the period 4,419 4,593 4,593
Cash and cash equivalents at the end of the period 3,582 3,582 4,419
----- End of picture text -----

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Attachment 5

APPENDIX 4C

==> picture [131 x 33] intentionally omitted <==

Limited

QUARTERLY UNAUDITED CASHFLOW APPENDIX 4C

for the Period Ended 30 September 2017

• See chapter 19 for defined terms Quarterly report for 30 September 2017

Page 1

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Magontec Limited

ABN: 51 010 441 666 Registered & Principal Office: Suite 1.03, Level 1 46 Macleay St, Potts Point, NSW 2011 Australia

Tel: +61 2 8005 4109 Fax: +61 2 9252 8960

Website: www.magontec.com Email: Corporate@magontec.com

Non-Executive Directors As at 30 September 2017

Zhongjun Li Kangmin Xie Andre Labuschagne

Independent Directors As at 30 September 2017

Robert Shaw Robert Kaye

Issued Capital (as at 30 September 2017)

Ordinary Shares (ASX Code MGL)

1,140,073,483 fully paid Ordinary shares on issue Options: Nil

Performance Rights[(1)] :

Performance Period Granted 1 Jan 2015 to 31 Dec 2017 19 May 2017 1 Jan 2016 to 31 Dec 2018 19 May 2017 1 Jan 2017 to 31 Dec 2019 19 May 2017 Total	Number 22,976,789 25,749,882 15,621,146
	64,347,817

Note:

(1) For terms of issue refer to the heading “Vesting of Performance Rights as Magontec Ordinary Shares” in paragraphs o to t of Resolution 5 of the 2017 AGM.

Substantial Shareholders

Shareholder	No. of shares(2)	Percent (3)
Qinghai Salt Lake Magnesium Industry Limited	330,535,784	28.99
Allan Gray Australia Pty Limited	187,230,248	16.42
Straits Mine Management Pty Limited	148,874,507	13.06

Notes:

(2) As per last “Notice of change of interests of substantial holder” lodged with ASX by shareholder.

Management Team

Nicholas Andrews Executive Chairman

John Talbot Company Secretary

Derryn Chin Chief Financial Officer

(3) “No. of Shares” divided by fully paid Ordinary shares on issue as at the date of this report.

Share Registry Services

Boardroom Pty Limited Level 7, 207 Kent St Sydney NSW 2000

Postal Address: GPO Box 3993 Sydney NSW 2001

Tel: 1300 737 760 or

International: +61 2 9290 9600

Fax: 1300 653 459

Website: http://www.boardroomlimited.com.au

The current share price can be obtained from the ASX Website – www.asx.com.au

• See chapter 19 for defined terms Quarterly report for 30 September 2017

Page 2

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16

Name of entity

==> picture [455 x 71] intentionally omitted <==

----- Start of picture text -----

Magontec Limited
ABN Quarter ended (“current quarter”)
51 010 441 666 30 September 2017
----- End of picture text -----

==> picture [455 x 444] intentionally omitted <==

----- Start of picture text -----

Consolidated statement of cash flows Current quarter Year to date
$A’000 (9 months)
$A’000
1. Cash flows from operating activities
1.1 Receipts from customers 32,496 103,494
1.2 Payments for
(a) research and development (162) (401)
(b) product manufacturing and operating
costs (28,917) (94,535)
(c) advertising and marketing (50) (112)
(d) leased assets - -
(e) staff costs (1,672) (4,842)
(f) administration and corporate costs (1,731) (4,293)
1.3 Dividends received (see note 3) - -
1.4 Interest received 16 45
1.5 Interest and other costs of finance paid (153) (732)
1.6 Income taxes paid (0) (119)
1.7 Government grants and tax incentives 0 84
1.8 Other (provide details if material)
1.9 Net cash from / (used in) operating
activities (172) (1,411)
----- End of picture text -----

• See chapter 19 for defined terms Quarterly report for 30 September 2017

Page 3

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

==> picture [455 x 685] intentionally omitted <==

----- Start of picture text -----

Consolidated statement of cash flows Current quarter Year to date
$A’000 (9 months)
$A’000
2. Cash flows from investing activities
2.1 Payments to acquire:
(a) property, plant and equipment [1] (779) (3,034)
(b) businesses (see item 10)
(c) investments
(d) intellectual property (0) (2)
(e) other non-current assets
2.2 Proceeds from disposal of:
(a) property, plant and equipment - 17
(b) businesses (see item 10)
(c) investments
(d) intellectual property
(e) other non-current assets
2.3 Cash flows from loans to other entities
2.4 Dividends received (see note 3)
2.5 Other (provide details if material) (12) (14)
2.6 Net cash from / (used in) investing
activities (792) (3,033)
3. Cash flows from financing activities
3.1 Proceeds from issues of shares
3.2 Proceeds from issue of convertible notes
3.3 Proceeds from exercise of share options
3.4 Transaction costs related to issues of
shares, convertible notes or options
3.5 Proceeds from borrowings 4,740 25,172
3.6 Repayment of borrowing (4,585) (21,551)
3.7 Transaction costs related to loans and
borrowings
3.8 Dividends paid
3.9 Other (provide details if material)
3.10 Net cash from / (used in) financing
activities 155 3,621
----- End of picture text -----

• See chapter 19 for defined terms Quarterly report for 30 September 2017

Page 4

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

==> picture [455 x 618] intentionally omitted <==

----- Start of picture text -----

Consolidated statement of cash flows Current quarter Year to date
$A’000 (9 months)
$A’000
4. Net increase / (decrease) in cash and
cash equivalents for the period
4.1 Cash and cash equivalents at beginning
of quarter/year to date 4,419 4,593
4.2 Net cash from / (used in) operating
activities (item 1.9 above) (172) (1,411)
4.3 Net cash from / (used in) investing activities
(item 2.6 above) (792) (3,033)
4.4 Net cash from / (used in) financing activities
(item 3.10 above) 155 3,621
4.5 Effect of movement in exchange rates on
cash held (28) (188)
4.6 Cash and cash equivalents at end of
3,582 3,582
quarter
5. Reconciliation of cash and cash Current quarter Previous quarter
equivalents $A’000 $A’000
at the end of the quarter (as shown in the
consolidated statement of cash flows) to the
related items in the accounts
5.1 Bank balances 3,582 4,419
5.2 Call deposits
5.3 Bank overdrafts
5.4 Other (provide details)
5.5 Cash and cash equivalents at end of
quarter (should equal item 4.6 above) 3,582 4,419
6. Payments to directors of the entity and their associates Current quarter
$A'000
6.1 Aggregate amount of payments to these parties included in item 1.2 43
6.2 Aggregate amount of cash flow from loans to these parties included
in item 2.3 -
6.3 Include below any explanation necessary to understand the transactions included in
items 6.1 and 6.2
Not applicable
----- End of picture text -----

• See chapter 19 for defined terms Quarterly report for 30 September 2017

Page 5

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

7.	Payments to related entities of the entity and their associates	Current quarter $A'000
7.1	Aggregate amount of payments to these parties included in item 1.2	-
7.2	Aggregate amount of cash flow from loans to these parties included in item 2.3	-
7.3	Include below any explanation necessary to understand the transactions included in
	items 7.1 and 7.2

Not applicable

8.	Financing facilities available Add notes as necessary for an understanding of the position Total facility amount at quarter end $A’000 Amount drawn at quarter end $A’000
8.1	Loan facilities 28,777 19,562
8.2	Credit standby arrangements
8.3	Other (please specify)
8.4	Include below a description of each facility above, including the lender, interest rate and
	whether it is secured or unsecured. If any additional facilities have been entered into or are
	proposed to be entered into after quarter end, include details of those facilities as well.

==> picture [446 x 170] intentionally omitted <==

----- Start of picture text -----

Borrowings facilities as at 30 September 2017
Interest Limit Drawn Security
Lender Maturity % $A 000 $A 000 status
Commerzbank Germany 30-Sep-20 2.15% 14,858 10,046 Secured
Commerzbank Germany 31-Dec-18 2.50% 321 321 Secured
ING Romania Open 3.15% 3,237 2,485 Secured
Bank of Communications China 12-May-18 4.70% 3,836 3,836 Secured
Commerzbank Bank China 14-Feb-18 5.78% 4,795 1,931 Secured
Total borrowings on balance sheet 27,047 18,620
Postbank (factoring) 1,729 942
Total facilities as at 30 Sep 2017 28,777 19,562
----- End of picture text -----

No additional facilities entered into or proposed to be entered into after quarter end.

• See chapter 19 for defined terms Quarterly report for 30 September 2017

Page 6

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

==> picture [456 x 448] intentionally omitted <==

----- Start of picture text -----

9. Estimated cash outflows for next quarter $A’000
9.1 Research and development (142)
9.2 Product manufacturing and operating costs (30,719)
9.3 Advertising and marketing (36)
9.4 Leased assets -
9.5 Staff costs (1,540)
9.6 Administration and corporate costs (1,483)
9.7 Other (provide details if material) -
9.8 Total estimated cash outflows (33,920)
10. Acquisitions and disposals of Acquisitions Disposals
business entities
(items 2.1(b) and 2.2(b) above)
10.1 Name of entity Not applicable Not applicable
10.2 Place of incorporation or
Not applicable Not applicable
registration
10.3 Consideration for acquisition or
Not applicable Not applicable
disposal
10.4 Total net assets
Not applicable Not applicable
10.5 Nature of business
Not applicable Not applicable
----- End of picture text -----

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Sign here:

Date: 31 October 2017 (Executive Chairman)

Print name: Mr Nicholas Andrews

• See chapter 19 for defined terms Quarterly report for 30 September 2017

Page 7

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. See chapter 19 for defined terms Quarterly report for 30 September 2017

Page 8