MGX RESOURCES LIMITED — AGM Information 2019

Nov 12, 2019

Mount Gibson Iron Limited

MGX

Presentation by Chief Executive Officer Peter Kerr

Disclaimer

This Document is Confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person, or published, in whole or in part, for any purpose without prior written approval from Mount Gibson Iron Limited. This Document is not a Prospectus nor an Offer to Subscribe for Shares.

Mount Gibson Iron Limited and its subsidiaries (ASX:MGX, “ MGX ”) makes no representations or warranty (express or implied) as to the accuracy, reliability or completeness of this document. MGX and its respective directors, employees, agents and consultants shall have no liability (including liability to any person by reason of negligence or negligent misstatement) for any statements, opinions, information or matters (expressed or implied) arising out of, or contained in or derived from, or for any omissions from this document, except liability under statute that cannot be excluded.

This document contains reference to certain forecasts, projections, intentions, expectations and plans of MGX, which may or may not be achieved. They are based on certain assumptions which may not be met or on which views may differ.

The performance and operations of MGX may be influenced by a number of factors, uncertainties and contingencies many of which are outside the control of MGX and its directors.

No representation or warranty (expressed or implied) is made by MGX or any of its respective directors, officers, employees, advisers or agents that any forecasts, projections, intentions, expectations or plans set out in this document will be achieved, either totally or partially, or that any particular rate of return will be achieved.

Investments in shares in MGX are considered highly speculative.

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Annual General Meeting Corporate Overview

Issued shares 1,157.6 million shares

Market capitalisation A$930 million ($0.80/share) Cash/investments A$407 million (30 September 2019) Bank Borrowings Nil Index ASX-300

A$274 million (fully franked) since 2011

Dividends

Shareholder Distribution (% issued shares)

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1.6%
APAC Resources
0.4%
Australia/NZ Institutions
1.9% 11.8%
Shougang Fushan
35.0%
Australian/NZ Retail
9.7%
North America
6.5%
UK & Europe
Directors & Management
14.1%
Other 19.0%
Asia/Middle East
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MGX v Platts 62% Fe CFR Index

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1.40 140
1.20 120
1.00 100
0.80 80
0.60 60
0.40 40
0.20 20
- -
MGX Share Price (A$, LHS) Iron Ore Price (US$/dmt 62% Fe CFR China, RHS)
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Board and Management

• Lee Seng Hui – Non-Executive Chairman

• Simon Bird – Independent Non-Executive Director

• Russell Barwick – Independent Non-Executive Director

• –

• Paul Dougas Independent Non-Executive Director

• Alan Jones – Independent Non-Executive Director

• Li Shaofeng – Non-Executive Director

• Peter Kerr - CEO

• Mark Mitchell - COO

• Gill Dobson CFO

• David Stokes – Co. Sec. & General Counsel

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Annual General Meeting Business Overview

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Kimberley Region Koolan Island

• Australia’s highest grade direct shipping ore (DSO) hematite iron ore mine.

• Ore Reserves of 20.3Mt @ 65.5% Fe*, for 6 year mine life.

• Ore sales commenced June Quarter 2019.

• High grade DSO sales of 0.7 Mwmt in September Quarter.

• Ore sales guidance of 2.7–3.0 Mwmt in FY2020.

Mid-West Region

Extension Hill, Perenjori Siding, Geraldton Port

• DSO sales of 2.6 Mwmt in FY2019.

• Sales from low grade stockpiles commenced June 2019.

• Low grade sales program targeting ~1 Mwmt by end 2019, further sales subject to market conditions.

• Right earned to a future income stream based on third party rail volumes, capped at ~A$35 million.

*Refer slide at end of this presentation.

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Annual General Meeting Iron ore market and prices

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Iron Ore Price
(Platts, US$/dmt CFR North China)
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19
65% 62% 58%
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• Chinese steel production is still strong, reaching 748Mt for the nine months ended 30 September .

• 2019, up 8% on the same period in 2018[1]

• Iron ore supply resumption from Brazil is more limited than many expected, and new growth projects are largely replacing depleted resources.

• Chinese steel producers are becoming more particular about iron (Fe) grade and impurities, and environmental performance.

• Steel mill profitability in China has weakened relative to last year, and iron ore buyers are currently cautious, awaiting Chinese Government initiatives re winter regulations and production stimulus.

• Some reductions are now occurring in domestic Chinese iron ore supply.

• Demand for higher grade (and lower impurity) iron ores is expected to remain robust.

• World Steel Association, September 2019 Crude Steel Production report, 25 October 2019.

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Annual General Meeting FY2019 in review

Koolan Island - successful redevelopment of the high grade iron ore operation. Mid-West - extended the mine life through opportunistic sales of stockpiled low grade material at Extension Hill.

• Total iron ore sales of 3.2 million wet metric tonnes (Mwmt), comprising 2.93 Mwmt of direct shipping ore (DSO) and 0.24 Mwmt of stockpiled low grade material.

• Profit before tax from all operations of A$70.5 million .

• Net profit after tax of A$133.4 million after recognition of deferred tax assets totalling $62.9 million.

• Operating cashflow of A$59.4 million and interest income of $11.6 million.

• Cash, term deposits and liquid investments of A$384.5 million at 30 June 2019.

• Right earned to a future income stream based on third party Mid-West rail volumes, capped at ~A$35 million (indexed).

• Fully franked final dividend for 2018/19 of 4.0 cents per share (A$45.2 million) , paid in September 2019.

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Annual General Meeting

September Quarter - a solid start to FY2020

• Total iron ore sales of 1.4 Mwmt , comprising 0.7 Mwmt of high-grade DSO from Koolan Island and 0.7 Mwmt of low-grade material from Extension Hill stockpiles.

• Operating cashflow of A$25 million , after corporate costs.

• Receipt of first bi-annual Mid-West rail refund, with A$4 million received in late September 2019.

• Cash and liquid investments increased to A$407 million at 30 September 2019 after payment of most of the cash component of the final dividend declared for the 2018/19 financial year.

• Koolan Island high grade ore extraction rates continuing to build, targeting 3-4 shipments per month.

• Group cash costs of A$74/wmt FOB* for the quarter, in line with guidance.

• Ore sales guidance for FY2020 of 3.7–4.0 Mwmt at an average all-in group cash cost of A$70-75/wmt FOB* .

• *Group cash costs are reported FOB and include all operating, sustaining capital, royalties and corporate costs.

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Annual General Meeting Mid-West Operations

• Mount Gibson’s operations team in the Geraldton Port achieved 10 years without a Lost Time Injury in September 2019 – an Outstanding milestone.

• Low-grade sales from Extension Hill of 0.7 Mwmt at an average site cash cost of $41/wmt FOB in the September 2019 quarter.

• On track for low grade sales of +1.0 Mwmt by end 2019, with marketing underway for further sales.

• Rail refund entitlement is currently accruing at $1.8-2.0 million per quarter, payable six monthly, to a maximum of $35 million (subject to indexation).

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10 years LTI-Free, September 2019
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Loading low-grade ore at Extension Hill for delivery to
Perenjori Rail Siding, September 2019
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Annual General Meeting Koolan Island – ramp-up progressing

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Main Pit, looking southwest
October 2019
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Annual General Meeting Koolan Island Operation

• High grade DSO sales of 0.7 Mwmt in the September 2019 quarter, almost double the June quarter sales volumes.

• Average grade of ore sold 65.5% Fe , consistent with Ore Reserve.

• Site cash costs of A$89/wmt in the September 2019 quarter reflecting the gradual build-up of shipping volumes. Unit costs will decline as production and shipping volumes increase.

• September quarter mining productivity was constrained by equipment congestion within the initial mining areas, and natural groundwater flows in the central ore zone of the Main Pit.

• The seawall is performing well, and to design expectations.

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Annual General Meeting Koolan Island - December Quarter progress

• Targeting rising shipment rates, building on volumes to date.

Interim replacement conveyor belt en-route to Koolan Island, mid-October 2019.

• October shipping disrupted by a shiploader conveyor belt tear - interim replacement belt fitted and three high grade shipments already completed.

• Newly manufactured belt currently being fitted between shipments.

Repaired conveyor belt carrying ore, late October 2019.

• Main Pit mining productivity lifting as multiple mining faces are opened up, and footwall refurbishment work is progressing.

• Managing natural groundwater flows is a normal daily task at Koolan. Additional groundwater management initiatives include pitend sump establishment and the installation of dewatering bores.

Bulk carrier Guo Yuan 8 being loaded, early November 2019.

• Sales and cost guidance for FY2020 unchanged.

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Annual General Meeting Koolan Island ramp-up progressing

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Main Pit looking southeast
October 2019
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Annual General Meeting Koolan Island ramp-up progressing

Main Pit looking west, October 2019

Seawall Footwall

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Annual General Meeting Koolan Island ramp-up progressing

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Annual General Meeting Koolan Island ramp-up progressing

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High grade ore on the repaired overland conveyor headed for
bulk carrier Ocean Zenon, 30 October 2019
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Annual General Meeting Koolan Island

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Bulk Carrier Guo Yuan 8 departing Koolan Island
7 November 2019
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Annual General Meeting FY2020 Business Objectives

• Mid-West operations – complete the current low-grade sales program and extend the program should favourable market prices continue. Thereafter, transition the site to final closure.

• Koolan Island – complete the ramp-up of ore production and sales in line with the mine plan to maximise cashflow and capitalise on favourable market conditions.

• Cost reductions - continue to drive for sustainable cost improvements.

• Treasury returns - maintain an appropriate yield on the Group’s cash/investment reserves.

• Growth projects - continue the search for acquisition/growth opportunities.

Guidance for 2019/20

Total iron ore sales 3.7 - 4.0 Mwmt Koolan Island DSO sales 2.7 - 3.0 Mwmt at cash cost of A$72 - 77/wmt Mid-West low grade sales ~1.0 Mwmt at cash cost of A$40 - 45/wmt All-in group cash cost A$70 - 75/wmt

Notes:

• Mwmt = million wet metric tonnes.

• Site cash costs are reported FOB and comprise operating costs, sustaining capital expenditure (including capitalised waste stripping), royalties and corporate cost allocations.

• • Group cash costs are reported FOB and include all operating costs, sustaining capital expenditure, royalties and corporate costs.

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Annual General Meeting Summary

• Mount Gibson is the only Australian producer of direct shipping high grade (+65% Fe) and low impurity hematite iron ores.

• Koolan Island sales ramping up and Mid West low grade sales underway, capitalising on iron ore market conditions.

• Demonstrated ability to generate positive operating cashflows in a volatile pricing environment.

• Robust balance sheet – Significant cash/investment reserves and no borrowings providing operational flexibility and the ability to pursue internal and external growth opportunities.

• Desired growth focus in steel sector bulks (iron ore and metallurgical coal) and base metals, with a preference for Australia and other lower risk jurisdictions.

• Experienced management team with a range of operating, commercial and corporate capabilities.

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Thank You

MGX

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Supplementary Information Mineral Resources and Ore Reserves Information at 30 June 2019

Koolan Island	Koolan Island	Koolan Island	Koolan Island	Koolan Island	Koolan Island	Koolan Island	Koolan Island	Koolan Island
	Tonnes millions	Fe %		SiO2 %		Al2O3 %		P %
Mineral Resources, above 50% Fe
Measured	3.71	60.2		13.29		0.30		0.007
Indicated	37.51	65.1		5.48		0.65		0.013
Inferred	9.97	60.6		12.21		0.59		0.013
Total at 30 June 2019	51.18	63.9		7.33		0.62		0.013
Total at 30 June 2018
Ore Reserves, above 50% Fe
Proved	0.08	63.3		7.28		1.11		0.013
Probable	20.22	65.5		4.55		0.88		0.012
Total at 30 June 2019	20.3	65.5		4.56		0.88		0.012
Total at 30 June 2018	21.0	65.5		4.58		0.89		0.012
Extension Hill
	Tonnes millions	Fe %		SiO2 %		Al2O3 %		P %
Mineral Resources, above 50% Fe
Measured	1.27	55.3		9.16		2.76		0.077
Indicated	0.31	57.3		10.42		1.62		0.076
Inferred	0.20	56.6		10.49		1.66		0.055
Total at 30 June 2019	1.79	55.8		9.53		2.44		0.074
Total at 30 June 2018	1.79	55.8		9.53		2.44		0.074
Iron Hill
	Tonnes millions	Fe %		SiO2 %		Al2O3 %		P %
Mineral Resources, above 50% Fe
Measured
Indicated	2.65	55.0		13.94		1.74		0.074
Inferred	1.07	55.0		9.86		2.61		0.081
Total at 30 June 2019	3.72	55.0		12.76		1.99		0.076
Total at 30 June 2018	5.17	56.2		11.73		1.79		0.076
Tallering Peak
	Tonnes millions	Fe %		SiO2 %		Al2O3 %		P %
Mineral Resources, above 50% Fe
Measured	0.41	58.9		6.26		3.50		0.082
Indicated	1.03	58.1		11.70		1.66		0.066
Inferred	0.20	54.7		17.89		1.93		0.056
Total at 30 June 2019	1.65	57.9		11.10		2.15		0.069
Total at 30 June 2018	1.65	57.9		11.10		2.15		0.069
Shine
	Tonnes millions	Fe %	SiO2 %		Al2O3 %		P %
Mineral Resources, above 50% Fe
Measured	5.73	58.9	9.04		1.81		0.076
Indicated	6.57	58.0	10.01		1.35		0.070
Inferred	3.59	56.8	9.61		1.18		0.063
Total at 30 June 2019	15.89	58.1	9.57		1.48		0.071
Total at 30 June 2018	15.89	58.1	9.57		1.48		0.071
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been estimated as dry tonnages.

Total Group Mineral Resources and Ore Reserves at 30 June(above 50% Fe)	Total Group Mineral Resources and Ore Reserves at 30 June(above 50% Fe)	Total Group Mineral Resources and Ore Reserves at 30 June(above 50% Fe)	Total Group Mineral Resources and Ore Reserves at 30 June(above 50% Fe)	Total Group Mineral Resources and Ore Reserves at 30 June(above 50% Fe)	Total Group Mineral Resources and Ore Reserves at 30 June(above 50% Fe)
	Tonnes millions	Fe %	SiO2 %	Al2O3 %	P %
Total Mineral Resources at 30 June 2019	74.2	61.8	8.25	0.95	0.031
Total Ore Reserves at 30 June 2019	20.3	65.5	4.56	0.88	0.012
Total Mineral Resources at 30 June 2018	76.4	61.8	8.23	0.95	0.032
Total Ore Reserves at 30 June 2018	21.0	65.5	4.58	0.89	0.012
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore Reserves. All tonnages have been estimated as dry tonnages.

Competent Persons Statements

Mineral Resources:

The information in this report relating to Mineral Resources is based on information compiled by Elizabeth Haren, a Competent Person who is a member and Chartered Professional of the Australasian Institute of Mining and Metallurgy and member of the Australian Institute of Geoscientists. Elizabeth Haren was a full-time employee of, and is a consultant to, Mount Gibson Iron Limited. Elizabeth Haren has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Elizabeth Haren consents to the inclusion in this report of the matters based on her information in the form and context in which it appears.

Ore Reserves:

The information in this report relating to Ore Reserves at Koolan Island is based on information compiled by Brett Morey, a member of the Australasian Institute of Mining and Metallurgy. Brett Morey is a full-time employee of Mount Gibson Iron Limited. Brett Morey has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Brett Morey consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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