MAGONTEC LIMITED — Interim / Quarterly Report 2019

Oct 30, 2019

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

31 October 2019

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

Dear Sirs,

Appendix 4C – Quarter Ended 30 September 2019

In this letter are –

• Attachment 1 – Unaudited Cash Flow Statement for the 9 months to 30 September 2019

• Attachment 2 – Unaudited Appendix 4C cash flow report for the quarter ended 30 September 2019

Attachment 1 is presented in the format that appears in the Company’s half year and annual reports and is prepared on a basis consistent with the requirements of accounting standards.

Attachment 2 is presented in the format required by Paragraph 4.7B of Chapter 4 of the ASX listing rules. It is reiterated that all data presented in this report is unaudited.

Yours sincerely

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John Talbot Company Secretary

Rounding

The data in this report may indicate apparent errors to the extent of one unit (being $1,000) in the addition of items comprising totals 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.

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Executive Chairman’s Commentary

Magontec Limited (ASX: MGL)

Quarterly Update for the 9 months to 30 September 2019 (Unaudited)

Operational Highlights – Third Quarter 2019	9 months to 30-Sep-19 9 months to 30- Sep-18 % Change
Gross Profit EBITDA Underlying Net Profit After Tax Underlying Operational Cashflow****	+$10.430m +$11.247m -7.3% +$1.964m +$2.741m -28.4%
	-$1.053m -$0.083m NA +$2.205m +$2.319m -4.9%

*Excludes the impact of unrealised FX gains and losses

**This is defined as cashflow from operations excluding working capital movements, interest and income tax paid

Highlights Commentary

• The 2019 third quarter result reflects a number of one-off effects, continued supply disruption in Qinghai and a challenging period for the European magnesium alloy recycling business.

• At Qinghai the Magnesium Alloy Cast House (MACH) produced 2,423 metric tonnes of primary magnesium alloys in the September Quarter and remains constrained by the absence of meaningful raw material supply from the adjacent Qinghai Salt Lake Magnesium (QSLM) smelter.

• In the 9 months to 30 September 2019 Magontec’s Qinghai MACH has incurred considerable additional expenses relating to the acquisition of raw material from third parties and the supply of finished goods to customers. We estimate the net effect of this to be in the order of $1.4m. However, the total opportunity cost (including forgone sales and other marginal production costs) is considerably greater.

• Excluding the impact of significant items and in particular recognising the burden of fully depreciating the MACH in a period when it is not fully operational, the Group recorded a Net Profit After Tax of $220,818.

Net Profit analysis of significant items	Net Profit analysis of significant items	30-Sep-19 YTD
NPAT	ex unrealised FX	$(1,052,946)
Add back significant items (tax effected)
-	MAQ depreciation(non-cash)	$609,502
-	One-off finepaid to Golmud authorities1	$416,936
-	Long-Term Incentive Plan options accrual(non-cash)	$97,326
-	Provision for unforeseen costs(non-cash)	$150,000
Subtotal		$1,273,764
NPAT	ex FX and significant items	$220,818

1. Related to commissioning events upon commencement of Magontec’s operation at Golmud.

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• Gross Profit of $10.4m Year-to-Date (YTD) is 7.3% lower than the previous corresponding period (PCP) while the Gross Profit margin fell from 11.7% in 2018 to 10.4% over the same period of 2019.

Gross Profit	9 months to 30 Sept 2019	9 months to 30 Sept 2018	% Change
Metals	$3.65m	$4.35m	-16%
Anodes	$6.78m	$6.90m	-1.7%

• The European metals businesses (magnesium alloy recycling and specialist metal production) recorded improved output in Romania, albeit off a low base, but a decline in productivity and profitability in Germany reflecting labour issues and lower volumes of higher margin products.

• The CCP (anodes) businesses were generally in line with the PCP and have enjoyed positive momentum through the 9 months to 30 September. The magnesium anodes in particular are expected to experience further volume and earnings growth in the fourth quarter and into 2020.

• Head Office costs, excluding movements in unrealised foreign exchange, were unchanged compared with the PCP.

ABOUT MAGONTEC LIMITED

ASX Code: MGL

Magontec is a leading manufacturer of magnesium alloys and Cathodic Corrosion Protection (magnesium and electronic anode) products

Magontec activities

• Converts pure Mg and alloying elements into Mg alloys

• Casts and extrudes Mg alloys into anodes for supply to the global water heater industry

• Distributes products through a global sales network to customers in Europe, AsiaPacific and North America

Magontec assets Magontec profile

• World’s greenest primary Mg alloy producer

• A leading global magnesium alloy manufacturer and sales organisation

• Premier Mg alloy recycling assets in Europe

• A pioneer in the field of magnesium alloys and anode products

• A portfolio of proprietary magnesium alloys and an active R&D program

• active R&D program - Vast experience in production and development

• • Mg & electronic anode of new Mg alloys and anode

• manufacturing facilities in applications

• Europe and China

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Headline numbers
9 months to 9 months to
A$M 30 Sep 2019 30 Sep 2018	$ Chg % Chg
Underlying Operational Cashflow $2.205 m $2.319 m*	($0.115 m) -4.9%
Work cap movement & other op cashflow ($8.032 m) $8.516 m	($16.548m)
Total Operational Cashflow ($5.827 m) $10.836 m	($16.663m)
Gross Profit $10.430 m $11.247 m	($0.817 m) -7.3%
Gross Profit Margin (%) 10.4% 11.7%
Underlying EBITDA $1.964 m $2.741 m**	($0.777 m) -28.4%
Underlying EBIT** ($0.315 m) $0.774 m	($1.089 m)
Underlying NPAT** ($1.053 m) ($0.083 m)	($0.970 m)
Reported NPAT ($0.875 m) $0.122 m	($0.997 m)
** Excludes unrealised FX effects of +$0.178m +$0.205m

Financial Comment

In the third quarter, Magontec recorded negative underlying operational cash flow of -$0.45 million and 2019 YTD underlying operational cashflow* now stands at +$2.2 million, down 4.9% on the PCP. During the quarter, lower operating results were exacerbated by the Golmud authority fines and a combination of maintenance and upgrades across facilities in the EU and PRC during the Northern hemisphere summer.

Net debt was $12.2 million as at 30 September 2019 and the net debt to net debt + equity ratio was 27.1%. These remain low compared with historical levels although both metrics are higher than those as at 30 June 2019.

The cash balance as at 30 September 2019 was $8.6 million. The level of cash remains high compared with historical levels due to the lower requirement for working capital from the Magontec Qinghai facility.

* This is defined as cashflow from operations excluding working capital movements, interest and income tax paid

Underlying operational cashflow

Net debt (A$ m)

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$2.319 m
$2.205 m
3Q18 YTD 3Q19 YTD
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19.1
18.0
15.8
15.0
13.9
12.2
9.1 8.9 9.5
6.5
5.2
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
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Review of Operations

Primary Magnesium Alloys – China (Magontec Qinghai Cast House Project)

Through the third quarter of 2019 we have made a number of ASX releases highlighting developments at the Qinghai smelter owned by Magontec’s partner Qinghai Salt Lake Magnesium Co Limited (QSLM) and to which Magontec’s new Magnesium Alloy Cast House (MACH) is adjacent. As the chart below shows, production volumes from this facility have remained at levels well below those anticipated in earlier reviews. Furthermore, the outlook for the next few months, in terms of supply of liquid pure magnesium from QSLM is uncertain.

Over the last 6 months the MACH has sourced most of its raw material from external suppliers of pure magnesium and this is likely to continue for the remainder of 2019 and possibly into 2020.

The MACH operates under the terms of a series of Agreements signed at the outset of the project in May 2014. These Agreements provide for a level of operational and financial support to the MACH from QSLM in terms of transport subsidies, utility supply and rental costs. In the period since 1 April 2019, when QSLM ceased supply of volume raw material and Magontec commenced third party sourcing, there has been no compensation paid for additional costs of bringing in pure magnesium and shipping out magnesium alloy finished product.

These are significant costs and have contributed to the MACH EBIT loss in the third quarter of 2019. The cumulative EBIT

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MAQ production volumes by quarter (mt)
2,423
2,204
2,015
1,794
1,107
420
280
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
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deficit for the primary magnesium alloy business over the third quarter has been -¥2.2m (A$462k). The year to date EBIT deficit for this business in 2019 is -¥2.7m (A$563k) as at 30 September 2019.

The current operating status of the MACH, and the low level of primary magnesium alloy output, impacts the profitability of Magontec’s magnesium alloy operating units in China and in Europe. The Company’s strategy has been focussed on developing a high volume and world leading primary magnesium alloy production unit at Golmud supplying customers in Europe and North America as well as China, Japan and other parts of Asia.

Up until the end of the third quarter of 2018 Magontec supplied a wide group of customers from its Shanxi facility. Since the closure of Shanxi and the emergence of supply issues at the QSLM smelter, the Company has not been able to fully pursue this strategy and carries high fixed costs across its business units in China and Europe. The strength of Magontec’s other businesses supported the Group through the second quarter, but in the third quarter exceptional maintenance costs in Europe and a slower summer period for Cathodic Corrosion Products (CCP), added to the negative effect of the Qinghai project and cumulatively resulted in a reduction in group earnings.

Qinghai Salt Lake Magnesium Co Ltd (QSLM) update

In releases to date, Magontec has relayed to shareholders information supplied by the managers of the QSLM project and translations of releases made by Qinghai Salt Lake Industries Co Ltd (QSLIC), QSLM’s parent company, to the Shenzhen Stock Exchange. These provide a guide to the processes that are being undertaken by the Qinghai companies and the Qinghai court.

Over the last two years QSLIC, as a listed entity, has become increasingly challenged by the size of the debt it has incurred in the construction and commissioning of its magnesium and chlorine projects. These two activities are contained within the QSLM corporate entity.

The restructuring process currently underway is designed to

• place QSLIC and QSLM on a long term financially viable footing (but with the mechanisms to achieve this as yet unknown), and

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• address the debt burden and creditors within both companies

QSLIC is listed on the Shenzhen Stock Exchange and its major shareholders are provincial, state, or state-owned, entities. Furthermore, banks that have provided loans to the group are also understood to be largely state-owned entities. Thus, the assets that are the subject of restructuring orders are principally assets of the Chinese state at national or provincial level.

Over the last month a court in Xining (the capital of Qinghai province) has appointed restructuring Managers to oversee the development of plans to restructure QSLIC, QSLM and another QSLIC subsidiary. This is expected to be concluded within the period to April 2020 and the plans will then be presented to the courts for approval. Existing court approvals allow QSLIC and QSLM to continue to manage their operating businesses (albeit under the supervision of the appointed restructuring Board/Manager).

In the meantime, the Magontec Qinghai MACH continues to produce around 800mt of magnesium alloys each month. This is about 50% of the production level of the Shanxi plant prior to its closure. When supply of liquid pure magnesium from QSLM recommences, Magontec expects to produce higher volumes in line with original expectations.

Magnesium recycling

The magnesium alloy recycling plants in Europe, at Santana in Romania and Bottrop in Germany, have experienced slightly lower volumes than forecast across the two plants, and this has been most pronounced at the German plant. Overall sales volumes have been in line with the targets set by the Company despite the fact that industrywide volumes are lower than in 2018.

The volume of European automobile production has slowed over the last 12 months, in line with sales that are expected to drop by 0.6m units or around 3% between 2018 and 2020. China seems likely to decline by 6% and the North American markets by 7% over the same 24-month period.

In Romania the labour issues that reduced profitability in 2017 and 2018 have been less prominent. Production and sales volumes have been ahead of targets and conversion costs (the broad metric of production efficiency) have been

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Global Automtive Sales 2017 - 2021 (e)
24.7 mil 23.7 mil 22.1 mil 22.3 mil 22.5 mil
20.9 mil 20.7 mil 20.2 mil 19.2 mil 19.3 mil
20.8 mil 21.0 mil 20.5 mil 20.4 mil 20.6 mil
15.1 mil 15.9 mil 15.6 mil 15.6 mil 15.9 mil
8.8 mil 8.5 mil 8.6 mil 9.1 mil 9.5 mil
2017 2018 2019 (e) 2020 (e) 2021 (e)
Rest of World Rest of Asia Europe North America China
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in line. These improvements reflect in profitability which was more than 33% ahead of the previous corresponding period (PCP) at the Gross Profit line. Despite these improvements the financial contribution from this business remains some way below target.

In Germany a number of issues have contributed to a negative quarter at the EBIT line. These include the absence of significant primary magnesium alloy volumes from China, a more competitive market for available scrap in Europe as volumes have reduced and the continuing absence of specialist magnesium alloy demand. In addition to market and supply related issues, there has also been a deterioration in production efficiency. The Bottrop factory has been short-staffed for most of the third quarter reducing production volumes and raising conversion costs. YTD Gross Profit in the German magnesium alloy recycling business stands at 30% below the PCP.

The outlook for the European magnesium recycling business in the fourth quarter is unlikely to change. Demand in China has fallen in the last few months in line with lower Chinese automobile production, pushing new primary magnesium alloy into global markets at lower prices and competing directly with the European scrap product purchased at higher prices in previous months. This is compounded in Germany by a continuing tight labour market and employment laws that make it difficult to address employee issues.

Until Magontec can commence the sale of primary magnesium alloy manufactured by its own plant at the Golmud MACH, the European business model must rely entirely on domestic European recycling volumes and cannot benefit from any trading volumes associated with imported Chinese product.

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Anode Products (Cathodic Corrosion Protection)

The Company operates two magnesium anode manufacturing plants in Romania and in China. The principal customers for this product are water heater manufacturers.

The performance of the magnesium anode operations has been good in the third quarter and Year-to-Date. As discussed in previous commentaries investment in new equipment has raised productivity, improved profitability and grown sales volumes.

Over the last quarter the European and Chinese businesses have continued to grow sales and win new contracts. Both businesses have recorded Gross Profit results above targets for the 9 months to 30 September and ahead of the PCP. In China in the third quarter the factory was closed for a threeweek period to refurbish the Xi’an building and install new processing equipment. The benefit of this upgrade will flow through in the coming months but had a negative effect in the period under review.

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Global Magontec Mg Anodes sales
9 months to 30 September
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1,802mt
1,467mt
1,341mt
2017 YTD 2018 YTD 2019 YTD
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The electronic anodes business continues to perform in line with expectations, although there has been some volatility in call-offs, particularly in the third quarter, again impacting the result in the period under review.

Summary

The Third Quarter has been a particularly difficult period for the Company. A number of one-off effects and suboptimal levels of production at the new Qinghai plant using externally sourced raw materials have negatively impacted profitability.

In Europe the metals business has improved in Romania but gone backwards in Germany. These reflect a return to a higher level of efficiency at the Romanian plant and operating challenges in Germany, resulting from labour shortages in an increasingly competitive operating environment.

The CCP (anodes) businesses experienced a poor quarter but have performed well in the YTD and have a positive outlook for the Fourth Quarter with expectations of higher volumes and improved productivity.

The corporate restructuring of QSLM, the supplier of Magontec’s key raw material, together with a production hiatus at the Qinghai magnesium smelter presents a singular challenge for Magontec. The Company’s executive management group in Australia and China are maintaining close communication with the managers and executives responsible for day to day management of the QSLM plant in Qinghai and will continue to interpret and present announcements from QSLIC and QSLM for Magontec shareholders as required.

Nic Andrews

Executive Chairman 31 October 2019

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Attachment 1

UNAUDITED STATEMENT OF CASH FLOWS

Unaudited Consolidated Cash Flow Statement
Source: Magontec Limited Consolidated Management Accounts
6 months to 3 months to 9 months to
$000 30-Jun-19 30-Sep-19 30-Sep-19
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from/ (utilised in) underlying operating activities 2,654 (449) 2,205
Net working capital assets
- Trade and other receivables (5,526) 196 (5,330)
- Inventory 627 3,410 4,036
- Trade and other payables (504) (5,385) (5,888)
- Other 18 109 126
Cash generated from/ (utilised in) net working capital assets (5,385) (1,671) (7,055)
- Net Interest paid (257) (132) (389)
- Income tax paid (526) (62) (587)
Net Cash generated from/ (utilised in) all operating activities (3,513) (2,314) (5,827)
CASH FLOW FROM INVESTING ACTIVITIES
Net cash out on purchase/disposal of property, plant & equipment (786) (325) (1,111)
Group information technology (128) (6) (133)
Security deposit 157 3 160
Other (135) (96) (231)
Net cash provided by / (used in) investing activities (891) (424) (1,316)
CASH FLOW FROM FINANCING ACTIVITIES
Bank Debt 2,073 612 2,685
Net capital raised from issue of securities - - -
Other - - -
Net cash provided by / (used in) financing activities 2,073 612 2,685
Net increase / (decrease) in cash and cash equivalents (2,331) (2,126) (4,458)
Foreign exchange effects on total cash flow movement 55 69 124
Cash and cash equivalents at the beginning of the period 12,889 10,611 12,889
Cash and cash equivalents at the end of theperiod 10,612 8,555 8,555

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

Attachment 2

APPENDIX 4C

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Limited

QUARTERLY UNAUDITED CASH FLOW APPENDIX 4C

for the Period Ended 30 September 2019

• See Chapter 19 for defined terms Quarterly report for 30 September 2019

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 46A 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 2019

Issued Capital (as at 30 September 2019)

Ordinary Shares (ASX Code MGL)

1,140,073,483 fully paid Ordinary shares on issue

Options: Nil

Options:Nil
Performance Rights(1)(as	at 30 September	2019):
Performance Period	Granted	Number
1 Jan 2017 to 31 Dec 2019	19 May 2017	15,621,146
1 Jan 2018 to 31 Dec 2020	10 May 2018	17,181,612
1 Jan 2019 to 31 Dec 2021	24 Jan 2019	18,967,955
Total		51,770,713

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

Zhongjun Li Kangmin Xie Andre Labuschagne

Independent Directors

As at 30 September 2019

Robert Kaye Atul Malhotra

Shareholder	No. of shares(2)	Percent (3)
Qinghai Salt Lake Magnesium Industry Limited	330,535,784	28.99
Allan Gray Australia Pty Limited	176,858,972	15.51
Straits Mine Management Pty Limited	148,874,507	13.06

Notes:

Management Team

Nicholas Andrews Executive Chairman

John Talbot Company Secretary

Derryn Chin Chief Financial Officer

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

(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 12, 225 George 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 2019

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

Name of entity

Name of entity	Name of entity
Magontec Limited
ABN 51 010 441 666	Quarter ended (“current quarter”)
51 010 441 666	30 September 2019

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A’000	Year to date (9 months) $A’000
1. 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8	Cash flows from operating activities Receipts from customers Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs Dividends received (see note 3) Interest received Interest and other costs of finance paid Income taxes paid Government grants and tax incentives Other (provide details if material)	35,913 (115) (33,894) (18) - (1,930) (2,098) - 13 (145) (61) 21	103,071 (288) (96,655) (84) - (5,892) (5,044) - 50 (439) (587) 42
1.9	Net cash from / (used in) operating activities	(2,314)	(5,827)

• See Chapter 19 for defined terms Quarterly report for 30 September 2019

Page 3

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

Consolidated statement of cash flows	Current quarter $A’000	Year to date (9 months) $A’000
2. Cash flows from investing activities
2.1 Payments to acquire:
(a) property, plant and equipment	(325)	(1,111)
(b) businesses (see item 10)
(c) investments
(d) intellectual property	(6)	(133)
(e) other non-current assets
2.2 Proceeds from disposal of:
(a) property, plant and equipment	-	-
(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)	(94)	(71)
2.6 Net cash from / (used in) investing activities	(424)	(1,316)
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	2,478	12,387
3.6 Repayment of borrowings	(1,865)	(9,702)
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	612	2,685

• See Chapter 19 for defined terms Quarterly report for 30 September 2019

Page 4

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

Consolidated statement of cash flows	Current quarter $A’000	Year to date (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	10,612	12,889
4.2 Net cash from / (used in) operating activities (item 1.9 above)	(2,314)	(5,827)
4.3 Net cash from / (used in) investing activities (item 2.6 above)	(424)	(1,316)
4.4 Net cash from / (used in) financing activities (item 3.10 above)	612	2,685
4.5 Effect of movement in exchange rates on cash held	69	124
4.6 Cash and cash equivalents at end of quarter	8,555	8,555
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts	Current quarter $A’000	Previous quarter $A’000
5.1 Bank balances 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)	8,555	10,612
	8,555	10,612
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 60 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
		Current quarter $A'000
		60
		-
-

• See Chapter 19 for defined terms Quarterly report for 30 September 2019

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 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	Current quarter $A'000
	1,810
	-

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

Payments to Qinghai Salt Lake Magnesium Company for pure Magnesium supply.

8. Financing facilities available Add notes as necessary for an understanding of the position 8.1 Loan facilities 8.2 Credit standby arrangements 8.3 Other (please specify)

Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
23,795	21,813

• 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.

Borrowings facilities as at 30 September 2019	Borrowings facilities as at 30 September 2019
		Interest	Limit	Drawn	Security
Lender	Maturity	%	$A 000	$A 000	status
Commerzbank Germany	30-Sep-20	1.55%	13,514	12,169	Secured
ING Romania	Open	4.84%	4,777	4,389	Secured
Bank of Communications China	28-Apr-19	4.79%	4,147	4,147	Secured
Total borrowings on balance sheet			22,438	20,705
Postbank(factoring)	30-Nov-19	1.34%	1,356	1,108
Total facilities			23,795	21,813

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 2019

Page 6

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

9. Estimated cash outflows for next quarter	$A’000
9.1 Research and development 9.2 Product manufacturing and operating costs 9.3 Advertising and marketing 9.4 Leased assets 9.5 Staff costs 9.6 Administration and corporate costs 9.7 Other (provide details if material) 9.8 Total estimated cash outflows	(97) (30,845) (32) - (1,977) (1,417) -
	(34,368)

10. Acquisitions and disposals of business entities (items 2.1(b) and 2.2(b) above)	Acquisitions	Disposals
10.1 Name of entity	Not applicable	Not applicable
10.2 Place of incorporation or registration	Not applicable	Not applicable
10.3 Consideration for acquisition or disposal	Not applicable	Not applicable
10.4 Total net assets	Not applicable	Not applicable
10.5 Nature of business	Not applicable	Not applicable

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:

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Date: 31 October 2019

(Executive Chairman)

Print name: Mr Nicholas Andrews

• See Chapter 19 for defined terms Quarterly report for 30 September 2019

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 2019

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