MAGONTEC LIMITED — Interim / Quarterly Report 2021

Aug 25, 2021

Magontec Romania

Magontec Limited (ASX: MGL)

First Half 2021 - Interim Result

26 August 2021

Nicholas Andrews, Executive Chairman of Magontec Limited has authorised the release of this document to the market on 26 August 2021

==> picture [120 x 34] intentionally omitted <==

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.

Rounding

The tables in this Presentation 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.

==> picture [120 x 34] intentionally omitted <==

FY 2021 Half Year Result Income Statement and Cashflow Overview

	6 months to	6 months to
	30-Jun-21	30-Jun-20
	'$000	'$000	% chg
Revenue	50,863	45,982	10.6%
Cost of Sales	(43,161)	(40,061)	7.7%
Gross Profit	7,702	5,920	30.1%
Gross Profit margin (%)	15.1%	12.9%
Other income	447	738	(39.4%)
Other operating expenses*	(4,769)	(4,746)	0.5%
EBITDA	3,381	1,913	76.7%
Depreciation and amortization	(1,400)	(1,585)	(11.7%)
EBIT	1,981	327	605.8%
Interest	(250)	(324)	(22.8%)
Tax	(600)	(153)	292.2%
Reported Net Profit After Tax	1,130	(149)
Cash from Underlying Operations**	2,655	2,350	13.0%

Anode business (CCP) key profit driver.

Higher volumes, lower costs, new customers

Cost control and shift in product mix raises EBITDA margin to 6.6%, up from 4.2% in PCP

$2.7 million cash from underlying operations**. Reducing debt, funding working capital

• In 1H21, this caption includes add back of $1.1m of D&A in Cost of Sales (1H20: $1.2m) ** Operating cashflow excluding working capital movements, interest and tax payments

FY 2021 Half Year Result Reconciliation of significant items in earnings

	6 months to	6 months to
	30-Jun-21	30-Jun-20
	'$000	'$000
Reported Net Profit Before Tax & Significant Items	2,238	(49)
Significant items before tax
Less non-cash equity writeback / (expense)	(150)	-
Less MAQ depreciation (non-cash)	(442)	(520)
Less MAQ Primary Mg Alloy EBITDA losses	(143)	(342)
Add writeback on Romanian VAT legal win	226	-
Add COVID related govt subsidies	-	362
Add COVID related temporary salary and director fee reductions (EU & HO)	-	552
Reported Net Profit Before Tax	1,730	4
Less tax expense	(600)	(153)
Reported Net Profit After Tax	1,130	(149)
Add/Less unrealised FX losses / (gains)	(446)	105
Reported Net Profit After Tax excluding unrealised FX	684	(44)

2021 Interim NPAT of $684,000 (Excluding unrealised FX)

• Up from -$0.04m in PCP

Magontec Qinghai EBITDA losses and non-cash depreciation costs reduce Interim NPBT by $585,000

Writeback of +$226,000 on positive resolution of Romanian VAT dispute

Magontec Limited Market Information

ASX Code: MGL	Total	Per Share
Ordinary shares on issue following consolidation	76,729,210
Market capitalisation 1	$17.3 million	22.5 cents/share
Book value of net assets – 30 June 2021	$31.0 million	40.5 cents/share
Net debt - 30 June 2021	$10.2 million
Enterprise value	$41.2 million
Performance rights on issue 30 June 2021	5,349,877

Magontec Ltd Shareholder Structure 30 June 2021

==> picture [230 x 156] intentionally omitted <==

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

34.9%
Other 28.7%
QSLM
13.9%
9.5% Allan Gray
Directors, Management &
Associates 12.9%
Straits
----- End of picture text -----

Post share consolidation, Magontec Limited has 76.7 million ordinary shares on issue

Substantial shareholders as at 30 June 2021:

• Qinghai Salt Lake Magnesium 29.7%

• Allan Gray Australia Pty Limited 13.9%

• Straits Mine Management Pty Limited 12.9%

1 Based on share price of $0.225 as at 23 August 2021

FY 2021 Half Year Result

Underlying Net Profit* of $0.68m, up from -$0.04m loss in the first six months of 2020

Underlying Net Profit After Tax * ($M)

==> picture [156 x 168] intentionally omitted <==

==> picture [42 x 12] intentionally omitted <==

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

$0.68m
----- End of picture text -----

==> picture [397 x 169] intentionally omitted <==

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

$0.40m
$0.35m
-$0.04m
-$0.15m
1H17 1H18 1H19 1H20 1H21
----- End of picture text -----

* Reported net profit/loss excluding the effects of unrealised foreign exchange

FY 2021 Half Year Result

Growth in magnesium and electronic anodes (CCP) volumes driving profit growth and cash flow

Gross Profit ($M) and GP margin (%) Underlying Operating Cashflow($M)*

==> picture [156 x 168] intentionally omitted <==

==> picture [492 x 213] intentionally omitted <==

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

15.1%
12.9% $2.7 $2.7
11.8%
11.2% 10.5% [11.1%] $2.4 $2.4
8.7%
$1.8
$1.6
6.4%
$1.2
$1.2
$4.3 $5.9 $7.4 $7.3 $7.3 $8.0 $5.9 $7.7
1H14 1H15 1H16 1H17 1H18 1H19 1H20 1H21 1H14 1H15 1H16 1H17 1H18 1H19 1H20 1H21
----- End of picture text -----

• Operating cashflow excluding working capital movements, interest and tax payments

FY 2021 Half Year Result

CCP business contributes 74% of Gross Profit as Magontec Qinghai Mg alloy cast house issues continue to impact PRC metals volumes and profit

==> picture [720 x 330] intentionally omitted <==

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

Metal and Anode (CCP) Gross Profit split ($M)
$ 10.0 m
Anodes Metals
$ 8.0 m
35% 26%
$ 6.0 m 43% 38%
54%
39%
50%
$ 4.0 m
48%
74%
65%
62%
$ 2.0 m 57% 46% 61%
50%
52%
-
1H14 1H15 1H16 1H17 1H18 1H19 1H20 1H21
----- End of picture text -----

FY 2021 Half Year Result

Positive EBITDA and EBIT trend – sharp recovery from COVID impacted PCP

EBITDA and EBIT contributions ($M)

==> picture [720 x 320] intentionally omitted <==

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

$3.4
$2.6
$2.1
$2.0
$1.9 $1.9
$1.4
$1.2
$1.1
$1.0
$0.7
$0.6
$0.4
$0.3
-$0.1 1H15 1H16 1H17 1H18 1H19 1H20 1H21
-$0.9
1H14
----- End of picture text -----

Magontec Limited – a global magnesium company

Operational Platform

==> picture [39 x 7] intentionally omitted <==

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

Production
----- End of picture text -----

==> picture [652 x 281] intentionally omitted <==

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

Sales Office
Bottrop
Santana Technology Centre
Golmud
Tokyo
Rhode Is
St Louis
Xi’an
Cast House Project
Sydney
Headquarters
Melbourne
----- End of picture text -----

FY 2021 Half Year Result – CCP / anodes

Year-on-year growth in Cathodic Corrosion Protection product sales

Global supplier of CCP products for Hot Water appliances manufacturers

76% sales growth in 1H21 over 5 years since 1H17

Global CCP Revenues and Gross Profit (A$M)

==> picture [649 x 198] intentionally omitted <==

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

Global CCP Revenues and Gross Profit (A$M) Global magnesium anode sales volumes
Revenue (LHS) Gross Profit (RHS) First Half Second Half
$20.0 $6.0
2021
2020
$4.0
2019
$10.0
$2.0 2018
2017
$- $- - 500 1,000 1,500 2,000 2,500 3,000 3,500
1H18 1H19 1H20 1H21
Metric Tonnes
----- End of picture text -----

• New Hot Water appliance customers in Europe and North America driving higher volumes

• Investment in new equipment and process development improving competitiveness

• Scope for continued growth in international markets from flexible global production base

FY 2021 Half Year Result - Metals

Recovery in metal sales from COVID impacted PCP Qinghai primary Mg alloy plant continues to operate at low volumes

Supplier of primary Mg alloy ingots and recycling services to global automotive, power tool and electronics industries

Global Metals Revenues and Gross Profit (A$M)

Global Mg alloy and specialist metals sales volumes

==> picture [642 x 171] intentionally omitted <==

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

Revenue (LHS) Gross Profit (RHS) First Half Second Half
$60 $3.0
2021 +27% on pcp
QSLM suspends
$40 $2.0 2020 liquid pure Mg supply
2019
$20 $1.0 2018
2017
$- $- -
10,000 20,000 30,000 40,000
1H18 1H19 1H20 1H21
Metric Tonnes
----- End of picture text -----

• Volumes and overall profitability reduced in China and Europe

• Qinghai primary Mg alloy factory continues production at lower levels. Awaiting QSLM magnesium project re-start

• Developing markets in specialist metals, raising margins and reducing exposure to global automotive industry

Qinghai electrolytic magnesium smelter complex (Golmud)

Magontec Qinghai

Cast house

Dehydration Reduction

==> picture [35 x 39] intentionally omitted <==

==> picture [35 x 39] intentionally omitted <==

==> picture [34 x 39] intentionally omitted <==

==> picture [559 x 230] intentionally omitted <==

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

Agreements with QSLM 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 use the lowest CO2 Mg ever produced*

==> picture [592 x 296] intentionally omitted <==

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

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
----- End of picture text -----

*German Aerospace Institute of Vehicle Concepts survey on CO2 emissions from magnesium smelters around the World

Magontec Limited

==> picture [350 x 191] intentionally omitted <==

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 8084 7813 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 / 8652 6878 Fax +86 29 / 8652 3722 china@magontec.com www.magontec.com

Magontec Romania

Magontec Limited (ASX: MGL)

First Half 2021 - Interim Result

26 August 2021

==> picture [120 x 34] intentionally omitted <==