MAGONTEC LIMITED — Interim / Quarterly Report 2021

Jan 31, 2021

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1 February 2021

Magontec Limited Suite 1.03, Level 1 46A Macleay St Potts Point NSW 2011 Australia Ph: +61 2 8084 7813 Fax: +61 2 9252 8960

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

Dear Sirs,

Appendix 4C and Activities Report – Quarter Ended 31 December 2020

We refer to the quarterly report for the period ended 31 December 2020 released by the Company to the market on Friday 29 January 2021. In terms of recently introduced changes, the ASX now requires this report to be accompanied by relevant commentary. Shareholders will be aware that this is the usual practice of the Company except where the quarterly report precedes either the annual or half year report by one month where full commentaries are about to be released.

Notwithstanding the proximity of release of the 2020 Full Year Report, the amended ASX requirement is that the December 2020 quarterly report be accompanied by a commentary. The ASX then suspended trading in the Company’s shares without due explanation or sufficient notice, pending lodgment of the commentary. An intermediate commentary (pending release of the Audited 2020 Annual Report by 28 February 2021) is added below in addition to the previously submitted information.

As before, in this letter are –

• Attachment 1 (Unaudited Cash Flow Statement for the 12 months to 31 December 2020) - 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 (Unaudited Appendix 4C cash flow report for the quarter ended 31 December 2020) presented in the format required by Paragraph 4.7B of Chapter 4 of the ASX listing rules.

All data presented in this report is unaudited.

Yours sincerely

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John Talbot, Company Secretary of Magontec Limited has authorised the release of this document to the market on 1 February 2021

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Executive Chairman’s Commentary

Magontec Limited (ASX: MGL)

Quarterly Activities Update for the 3 months to 31 December 2020 (Unaudited)

In the fourth quarter the metals business saw volumes recover in Europe and China as the early effects of the Coronavirus slowdown began to abate. Compared with the previous corresponding period European fourth quarter volumes were down 5% and in China 8%. Production levels at Magontec’s German recycling cast house were impacted by an accident. More detail on this event will be included in the Annual Report due for release at the end of February.

In the global CCP business (Cathodic Corrosion Protection/Mg anodes) volumes of Mg anodes were the same as the previous corresponding period, although stronger in Europe than China. Shipments of Electronic Anodes were considerably higher in the fourth quarter compared with the previous corresponding period, the result of timing issues and not reflective of annual shipments that were marginally lower overall in 2020.

The Company’s primary magnesium alloy cast house operations at Qinghai continue to operate at lower levels, as they have throughout 2020. Qinghai Salt Lake Magnesium Co Ltd (QSLM), the owner of the magnesium smelter at Golmud in Qinghai Province and the contracted supplier of liquid raw material to Magontec, are seeking a new financial investor and operations at magnesium smelter operations remain suspended. QSLM is expected to make an announcement on this issue in February following the Chinese New Year period and two companies are understood to have undertaken due diligence on the project.

During the 3 months to 31 December 2020, unaudited Underlying Cash from Operations* was +$1.1 million, bringing the full year total to almost $4 million.

Total Unaudited Cash from Operations came in at +$2.3 million for the quarter (2020: +$4.5 million) following the reduced working capital requirement across both debtors and inventory.

Net debt to net debt + equity fell to 28.8% as at 31 December 2020 (September 2020: 34.1%).

In December, the company entered an agreement to renew its Commerzbank facility which expired on 30 September 2020. The structure of this loan is now as follows:

• Borrowing Base working capital facility - EUR 7.5 million limit (maturity 30 November 2023). - Term loan - EUR 1.5 million limit (maturity 31 December 2021)

• Term loan - EUR 1.0 million limit (maturity 31 December 2025)

Total drawings on the Commerzbank facility were EUR 5.4 million as at 31 December 2020.

• Defined as reported operating cash, excluding working capital movements, interest and tax.

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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Attachment 1

UNAUDITED STATEMENT OF CASH FLOWS

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Unaudited Consolidated Cash Flow Statement
Source: Magontec Limited Consolidated Management Accounts
9 months to 3 months to 12 months to
$000 30-Sep-20 31-Dec-20 31-Dec-20
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from/ (utilised in) underlying operating activities 2,898 1,053 3,951
Net working capital assets
- Trade and other receivables 4,817 1,989 6,806
- Inventory (127) 2,925 2,798
- Trade and other payables (4,529) (3,503) (8,032)
- Other (97) (87) (184)
Cash generated from/ (utilised in) net working capital assets 64 1,324 1,388
Other operating activities
- Net Interest paid (507) (68) (575)
- Income tax paid (219) (4) (223)
Cash generated from/ (utilised in) other operating activities (726) (72) (799)
Net Cash generated from/ (utilised in) all operating activities 2,236 2,304 4,540
CASH FLOW FROM INVESTING ACTIVITIES
Net cash out on purchase/disposal of property, plant & equipment (498) (142) (640)
Group information technology (3) (40) (44)
Security deposit (25) (27) (51)
Other including leased assets (132) (226) (358)
Net cash provided by / (used in) investing activities (659) (435) (1,094)
CASH FLOW FROM FINANCING ACTIVITIES
Bank Debt (1,204) (1,588) (2,791)
Net capital raised from issue of securities 11 0 11
Other (8) (6) (14)
Net cash provided by / (used in) financing activities (1,201) (1,593) (2,795)
Net increase / (decrease) in cash and cash equivalents 376 276 652
Foreign exchange effects on total cash flow movement 105 (102) 4
Cash and cash equivalents at the beginning of the period 4,303 4,784 4,303
Cash and cash equivalents at the end of the period 4,784 4,958 4,958
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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 31 December 2020

ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms. Quarterly report for 31 December 2020

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

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity

Magontec Limited

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ABN Quarter ended (“current quarter”)
51 010 441 666 31 December 2020
Consolidated statement of cash flows Current quarter Year to date
$A’000 (12 months)
$A’000
1. Cash flows from operating activities
1.1 Receipts from customers 31,579 110,523
1.2 Payments for
(a) research and development (149) (516)
(b) product manufacturing and operating costs (26,852) (94,203)
(c) advertising and marketing (1) (75)
(d) leased assets - -
(e) staff costs (1,860) (7,174)
(f) administration and corporate costs (575) (4,159)
1.3 Dividends received (see note 3) - -
1.4 Interest received 11 51
1.5 Interest and other costs of finance paid (80) (626)
1.6 Income taxes paid (4) (223)
1.7 Government grants and tax incentives 235 942
1.8 Other (provide details if material)
1.9 Net cash from / (used in) operating activities 2,304 4,540
2. Cash flows from investing activities
2.1 Payments to acquire or for:
(a) entities
(b) businesses
(c) property, plant and equipment (142) (640)
(d) investments
(e) intellectual property (40) (44)
(f) other non-current assets
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ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms. Quarterly report for 31 December 2020

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

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Consolidated statement of cash flows Current quarter Year to date
$A’000 (12 months)
$A’000
2.2 Proceeds from disposal of:
(a) entities
(b) businesses
(c) property, plant and equipment
(d) investments
(e) intellectual property
(f) 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) (252) (409)
2.6 Net cash from / (used in) investing activities (434) (1,094)
3. Cash flows from financing activities
3.1 Proceeds from issues of equity securities
(excluding convertible debt securities) - 117
3.2 Proceeds from issue of convertible debt
securities
3.3 Proceeds from exercise of options
3.4 Transaction costs related to issues of equity
securities or convertible debt securities - (106)
3.5 Proceeds from borrowings 4,532 13,434
3.6 Repayment of borrowings (6,119) (16,225)
3.7 Transaction costs related to loans and
borrowings
3.8 Dividends paid
3.9 Other (provide details if material) (6) (14)
3.10 Net cash from / (used in) financing activities (1,594) (2,795)
4. Net increase / (decrease) in cash and cash
equivalents for the period
4.1 Cash and cash equivalents at beginning of
period 4,784 4,303
4.2 Net cash from / (used in) operating activities
2,304 4,540
(item 1.9 above)
4.3 Net cash from / (used in) investing activities
(434) (1,094)
(item 2.6 above)
4.4 Net cash from / (used in) financing activities
(1,594) (2,795)
(item 3.10 above)
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ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms. Quarterly report for 31 December 2020

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

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Consolidated statement of cash flows Current quarter Year to date
$A’000 (12 months)
$A’000
4.5 Effect of movement in exchange rates on cash
held (102) 4
4.6 Cash and cash equivalents at end of period 4,958 4,958
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5. Reconciliation of cash and cash equivalents Current quarter Previous quarter
at the end of the quarter (as shown in the $A’000 $A’000
consolidated statement of cash flows) to the
related items in the accounts
5.1 Bank balances 4,958 4,784
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) 4,958 4,784
6. Payments to related parties of the entity and their associates Current quarter
$A'000
6.1 Aggregate amount of payments to related parties and their associates -
included in item 1
6.2 Aggregate amount of payments to related parties and their associates -
included in item 2
Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an
explanation for, such payments.
Explanation
During the quarter ended 31 December 2020, there were no payments for purchase of pure Mg from the
Qinghai Salt Lake Magnesium Co Ltd.
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ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms. Quarterly report for 31 December 2020

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

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7. Financing facilities Total facility amount Amount drawn at
Note: the term “facility’ includes all forms of at quarter end quarter end
financing arrangements available to the entity. $A’000 $A’000
Add notes as necessary for an understanding of
the sources of finance available to the entity.
7.1 Loan facilities 22,207 17,926
7.2 Credit standby arrangements
7.3 Other (please specify)
7.4 Total financing facilities
7.5 Unused financing facilities available at quarter end $4,280,796
7.6 Include in the box below a description of each facility above, including the lender, interest rate,
maturity date and whether it is secured or unsecured. If any additional financing facilities have been
entered into or are proposed to be entered into after quarter end, include a note providing details
of those facilities as well.
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Borrowings facilities as at 31 December 2020
Interest Limit Drawn Security
Lender Maturity % $A 000 $A 000 status
Commerzbank Germany 30-Nov-23 1.55% 7,789 4,593 Secured
Commerzbank Germany 31-Dec-21 2.55% 2,380 2,380 Secured
Commerzbank Germany 31-Dec-25 1.85% 1,586 1,586 Secured
ING Romania Open 4.01% 4,561 4,106 Secured
Zheshang Bank 09-Jul-21 3.80% 3,974 3,974 Secured
Total borrowings on balance sheet 20,290 16,639
Postbank (factoring) 31-Dec-21 0.95% 1,917 1,287
Total facilities 22,207 17,926
The Commerzbank Germany facility originally expired on 30 September 2020, and was
subsequently extended to 30 November 2020. The Group and the Bank are finalising the terms and
structure of a new facility which is expected to be as outlined above.
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8. Estimated cash available for future operating activities $A’000
8.1 Net cash from / (used in) operating activities (item 1.9) 2,304
8.2 Cash and cash equivalents at quarter end (item 4.6) 4,958
8.3 Unused finance facilities available at quarter end (item 7.5) 4,281
8.4 Total available funding (item 8.2 + item 8.3) 9,239
8.5 Estimated quarters of funding available (item 8.4 divided by item 8.1) N/A
Note: if the entity has reported positive net operating cash flows in item 1.9, answer item 8.5 as
“N/A”. Otherwise, a figure for the estimated quarters of funding available must be included in
item 8.5.
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ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms. Quarterly report for 31 December 2020

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

• 8.6 If item 8.5 is less than 2 quarters, please provide answers to the following questions:

• 8.6.1 Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?

Answer: N/A

• 8.6.2 Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?

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Answer: N/A

8.6.3 Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?

Answer: N/A

Note: where item 8.5 is less than 2 quarters, all of questions 8.6.1, 8.6.2 and 8.6.3 above must be answered.

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.

Date: 1 February 2021

Authorised by: John Talbot, Company Secretary

(Name of body or officer authorising release – see note 4)

Notes

1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity’s activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2. If this quarterly cash flow 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 cash flow 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. If this report has been authorised for release to the market by your board of directors, you can insert here: “By the board”. If it has been authorised for release to the market by a committee of your board of directors, you can insert here: “By the [ name of board committee – eg Audit and Risk Committee ]”. If it has been authorised for release to the market by a disclosure committee, you can insert here: “By the Disclosure Committee”.

5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations , the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms. Quarterly report for 31 December 2020

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