MGX RESOURCES LIMITED — Interim / Quarterly Report 2021

Nov 10, 2020

Mount Gibson Iron Limited

MGX

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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Business Overview

Kimberley Region Koolan Island

• Australia’s highest grade direct shipping ore (DSO) hematite iron ore mine, with Ore Reserves of 18.7 Mt grading 65.2% Fe *.

• Ore sales guidance of 1.8-2.1 Mwmt for FY2021.

• Waste stripping investment phase in next 12-18 months.

• Sales & cashflow to rise significantly from FY2022.

Mid-West Region

Shine Project, Extension Hill, Geraldton Port

• Shine Iron Ore Project progressing to targeted first ore sales in mid-2021.

• Successful Extension Hill low grade sales program, extended to late 2020 targeting 1.0-1.2 Mwmt in FY2021.

• Mid-West rail refund stream accruing at ~$2 million/quarter, based on third party rail volumes on segments of the Mid-West network. Capped at $35M (indexed), with ~$11 million earned to date as at 30 June 2020.

• Refer Mineral Resources and Ore Reserves slide at the end of this presentation.

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Corporate Overview

MGX Share Price

Issued shares

1,186 million shares

Market capitalisation A$830 million ($0.70/share) Cash/investments A$445 million (30 September 2020) Bank Borrowings Nil

Index ASX-300

Dividends A$309 million (fully franked) paid since 2011

Shareholder Distribution (% issued shares at 30 Sept 2020)

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3.7%
APAC Resources
Australia/NZ Institutions
0.5% 13.1%
Shougang Fushan
2.5%
35.8%
Australian/NZ Retail
North America
11.4%
UK & Europe
5.7%
Directors & Management
Other 13.8% 13.5%
Asia/Middle East
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1.40
1.20
1.00
0.80
0.60
0.40
0.20
-
Share Price (A$/share)
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Board and Management

• Lee Seng Hui – Non-Executive Chairman

• Simon Bird – Lead Independent Non-Executive Director

• Russell Barwick – Independent Non-Executive Director

• Paul Dougas – Independent Non-Executive Director

• Alan Jones – Independent Non-Executive Director

• Ding Rucai – Non-Executive Director

• Peter Kerr - CEO

• Mark Mitchell - COO

• Gill Dobson - CFO

• David Stokes - Co. Sec. & General Counsel

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2019/20 Financial Year

(Year ended 30 June 2020; all currency in Australian dollars unless stated otherwise)

• Total iron ore sales of 4.9 million wet metric tonnes (Mwmt), comprising 2.3 Mwmt of Koolan Island high grade fines and 2.6 Mwmt of Mid-West low grade material.

• Positive first year of high-grade sales (average 65.6% Fe ) from the restarted Koolan Island operation.

• Profit before tax from continuing operations of $121 million and net profit after tax of $84 million.

• Operating cashflow of $160.1 million (2018/19: $59.4 million), before mine development expenditure ($64.3 million), purchases of plant & equipment ($26.3 million), lease repayments and other financing activities ($8.6 million), and interest income ($8.0 million).

• Cash and liquid investments of $423 million at 30 June 2020, and no borrowings.

• Construction of new Koolan Island Airstrip completed on schedule and under budget.

• Successful Mid-West low grade sales program extended to late 2020, and Shine Project progressed, targeting first ore sales in mid-2021.

• Final dividend for 2019/20 of 3.0 cents per share fully franked , taking total fully franked dividends paid since late 2011 to $309 million .

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Positive start in September 2020 Quarter

• Total iron ore sales of 1.4 Mwmt comprising:

• 0.7 Mwmt of Koolan Island high grade fines.

• 0.7 Mwmt of Mid-West low grade material.

• Group cashflow of $32 million .

• Group unit cash costs of $56/wmt before Koolan Island advanced waste stripping investment of $24 million.

• Cash and liquid investments increased to $445 million at 30 September 2020, and no borrowings.

• • Koolan Island Airstrip operational , passenger jet services commenced mid-October 2020.

* Group cash costs are reported FOB and include operating costs, royalties, sustaining capital expenditure and allocated corporate costs, and are before waste stripping investment and capital improvement projects.

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Market Conditions - Iron Ore Pricing

Iron Ore Price

(US$/dmt CFR North China)

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160
140
120
100
80
60
40
20
0
65% 62% 58%
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Grade-Adjusted HG Premium / LG Discount (% per dmtu relative to 62% index)

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50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
HG Premium LG Discount
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• Prices across all product types have remained elevated on the back of strong Chinese demand for steel, and ongoing mine supply disruption.

• Brazilian supply adversely impacted by the COVID-19 pandemic and regulatory restrictions related to tailings dam management.

• Premiums and discounts have narrowed as prices have risen above US$100/dmt CFR, in line with historical trends.

• Iron ore prices continue to look well supported.

• Koolan Island provides MGX with the ability to capture premium (+65% Fe) prices, at all price levels.

• Demand for lower grade products remains strong, supporting remaining sales from Extension Hill and the outlook for Shine.

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Koolan Island Australia’s highest-grade DSO iron ore mine

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Main Pit looking west, August 2020
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Koolan Island

A premium product

Koolan Main Pit- Mineral Resources and Ore Reserves	Koolan Main Pit- Mineral Resources and Ore Reserves	Koolan Main Pit- Mineral Resources and Ore Reserves	Koolan Main Pit- Mineral Resources and Ore Reserves	Koolan Main Pit- Mineral Resources and Ore Reserves
	Tonnes	Fe	SiO2	Al2O3	P
	millions	%	%	%	%
Mineral Resources, reported above 50% Fe
Measured	2.7	60.1	13.40	0.34	0.007
Indicated	30.0	65.6	4.83	0.67	0.012
Inferred	5.3	61.4	11.10	0.76	0.010
Total Resources	38.0	64.6	6.30	0.66	0.011
Ore Reserves, reported		above 50% Fe
Proved	0.2	58.5	15.61	0.45	0.006
Probable	18.5	65.3	4.86	0.88	0.013
Total Reserves	18.7	65.2	4.96	0.88	0.013
Discrepancies may appear due to rounding. Mineral Resources are reported inclusive of Ore
Reserves. All tonnages have been estimated as dry tonnages.

• High grade hematite iron ore (65.2% Fe).

• Low contaminants (particularly alumina and phosphorus).

• Well understood orebody, consistent grade and width.

• Sought-after product.

• Production sold under life-of-mine offtakes.

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WA DSO Iron Ore Fines
Comparative Iron and Phosphorus
66
MGX Koolan Island Main Pit
64
62
60
MGX Shine DSO
58
56
0 0.05 0.1 0.15
Phosphorus %
Fe %
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Chart sources: Mount Gibson Iron, public/company reports, Citi Research, Platts and Metals Market Index. MGX Koolan Island and Shine DSO reflects current Ore Reserves, Shine sales targeted from mid-2021. Other ores depicted represent fines products from other WA producers including Rio Tinto, BHP, FMG, Roy Hill, Atlas (now Hancock), and Mineral Resources. Refer slides at the end of this presentation for MGX Mineral Resources and Ore Reserves information.

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Koolan Island

Site layout

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Koolan Island is located in Yampi Sound in the Buccaneer 1km
Archipelago off the northern Kimberley coast of Western
Australia, approximately 140 kilometres north of Derby.
N
Existing
Airstrip
Seawall
Mangrove deposit
(approximate)
Western Australian
Mainland
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Koolan Island Main Pit Operations

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Main Pit, looking west over the eastern end mining operations, November 2020.
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Koolan Island Main Pit Operations

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Ore production in thew western end of the Main Pit, September 2020. Mining is targeted to resume in this
area after the wet season in March 2021, following a localised rockfall on the footwall in this zone.
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Koolan Island Crushing & Shiploading

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ROM stockpiles, crushing plant and shiploader, September 2020
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Koolan Island Positive start to FY2021

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Kamsarmax-class vessel Super Grace being loaded, April 2020.
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• Waste stripping investment phase of the life-of-mine plan, with ore production and cashflow to rise significantly thereafter from FY2022.

• Ore sales guidance of 1.8–2.1 Mwmt at a cash cost of $60-65/wmt* FOB before advanced waste stripping investment (~$100m) and capital improvement projects (~$20m, mostly for crushing circuit upgrade).

• Strong September 2020 quarter:

• 9 shipments totalling 0.7 Mwmt of high-grade fines;

• $66/wmt FOB cash cost before $24 million advanced waste stripping; and

• Average realised price of US$104/dmt FOB.

• Shipments will reduce in the November-March period (peak waste cycle) and increase in June 2021 quarter.

• Crushing circuit upgrade will accommodate increased crushing needs from end-FY2021 as ore production accelerates.

• Potential life extension opportunities to be evaluated.

*Site cash costs include operating costs, sustaining capital and royalties, before Koolan advance waste stripping and capital projects costs. All currency in Australian dollars unless stated otherwise.

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Koolan Island

Mine life extension targets

• Numerous opportunities for incremental life extension beyond the current 5 year mine life.

• Main Pit – existing resources and development potential along strike, to the west and east.

• Mangrove deposit, adjacent to crusher/ROM pad, under evaluation.

• Reviewing prospects adjacent to previously mined satellite pits.

Main Pit, long section, showing Mineral Resources outside pit shell

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Koolan Island New Airstrip

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Completed airstrip, looking west, August 2020 16
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Koolan Island New Airstrip Operational

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First FIFO crew service landing, 14 October 2020 17
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Mid-West Operations Long-Standing Production Presence

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Shine
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Mid-West Operations Extension Hill Low Grade Sales Program

• FY2020 low grade sales totalled 2.6 Mwmt , versus initial sales target of 1.0Mwmt.

• Site operating cashflow of $22 million for FY2020 including rail credit refund of $8 million.

• Low grade sales now extended to late 2020.

• FY2021 guidance of 1.0-1.2 Mwmt at a site cash cost of $40-45/wmt FOB*.

• September quarter sales of 0.7 Mwmt at cash cost of $40/wmt FOB.

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Reclamation of low-grade stockpiles
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Mining of low-grade detrital gravels

• Quarterly site cashflow of $8 million , including rail credit refund.

• Rail credit entitlement accruing at ~$2 million per quarter, capped at a cumulative total of $35 million (indexed) and time limit of 2031.

*Site cash costs include operating costs, sustaining capital and royalties. All currency in Australian dollars unless stated otherwise.

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Mid-West Operations Shine Iron Ore Project

• Staged development plan to align with market conditions, targeting first shipments in mid-2021.

• Ore Reserves of 2.8Mt @ 59.4% Fe in Stage 1* Pit.

• Initial two-year mine life at circa 1.5Mtpa.

• Indicative development capex of $17-20 million.

• Indicative average unit cash cost of $65-70/wmt FOB.

• Base case assumes truck haulage to Geraldton with potential cost-effective alternatives under discussion.

• Potential for Stage 2 pit to extend life by a further ~2 years, subject to market conditions.

• Reported Measured, Indicated and Inferred Hematite Resources of 10.8Mt grading 58.2% Fe .

* Refer slide at end of presentation for additional information and Competent Persons attributions, and ASX release dated 9 October 2020.

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Shine
Location of Shine Project.
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Mid-West Operations Shine Iron Ore Project

Shine Project Site Layout.

Shine Deposit – Cross-section 6808700, looking north.

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The MGX Team and Communities

(statistics as at 30 September 2020)

• Local employment - we seek to increase employment from our local communities. At Koolan Island, over 20% of our employees reside in Derby, Broome and surrounds.

• Gender diversity - women account for 18% of our employees and 30% of all executive and senior management roles, above industry benchmarks. We are aiming higher.

• Traditional Owners - we have positive longstanding relationships with Traditional Owners and are committed to Indigenous employment. Approximately 17% of MGX’s employees are Indigenous and we are actively working with Traditional Owner groups to grow this.

• Local communities and community organisations - we have well established arrangements with local shires and we directly partner and support various community organisations and initiatives, with a focus on youth and education , including:

Clontarf Foundation Girls Academy Shooting Stars Shine Program for Girls Royal Flying Doctor Service Foodbank Lifeline WA Regional sporting clubs Regional schools

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Mount Gibson Iron - Summary

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

• Profitable, with a disciplined pathway to significantly higher sales and cashflows at Koolan Island.

• Mid-West low grade sales further extended, capitalising on favourable iron ore market conditions, and Shine Project to generate additional life and cashflows through the use of existing infrastructure.

• Strong cash (and liquid investment) backing with no borrowings , providing protection, operational flexibility and the ability to pursue internal and external growth opportunities.

• Desired growth in bulk materials and base metals, with a priority focus on Australia.

• Lean, stable and experienced team with a range of operating, commercial and corporate capabilities.

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Mount Gibson Iron Limited

MGX

Mount Gibson Iron Limited

MGX

www.mtgibsoniron.com.au

Supplementary Information Mineral Resources and Ore Reserves Information at 30 June 2020

Koolan Island	Koolan Island	Koolan Island	Koolan Island	Koolan Island	Koolan Island
	Tonnes millions	Fe %	SiO2 %	Al2O3 %	P %
Mineral Resources, above 50% Fe
Measured	3.4	60.3	13.23	0.30	0.007
Indicated	34.8	64.9	5.76	0.65	0.013
Inferred	9.9	60.5	12.30	0.59	0.013
Total at 30 June 2020	48.0	63.7	7.63	0.61	0.013
Total at 30 June 2019	51.2	63.9	7.33	0.62	0.013
Ore Reserves, above 50% Fe
Proved	0.2	58.5	15.61	0.45	0.006
Probable	18.5	65.3	4.86	0.88	0.013
Total at 30 June 2020	18.7	65.2	4.96	0.88	0.013
Total at 30 June 2019	20.3	65.5	4.56	0.88	0.012
Extension Hill
	Tonnes millions	Fe %	SiO2 %	Al2O3 %	P %
Mineral Resources, above 50% Fe
Measured	1.3	55.3	9.16	2.76	0.077
Indicated	0.3	57.3	10.42	1.62	0.076
Inferred	0.2	56.6	10.49	1.66	0.055
Total at 30 June 2020	1.8	55.8	9.53	2.44	0.074
Total at 30 June 2019	1.8	55.8	9.53	2.44	0.074
Iron Hill
	Tonnes millions	Fe %	SiO2 %	Al2O3 %	P %
Mineral Resources, above 50% Fe
Indicated	2.6	55.0	13.94	1.74	0.074
Inferred	1.1	55.0	9.86	2.61	0.081
Total at 30 June 2020	3.7	55.0	12.76	1.99	0.076
Total at 30 June 2019	3.7	55.0	12.76	1.99	0.076
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 2020	15.89	58.1	9.57	1.48	0.071
Total at 30 June 2019	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.

Note: Subsequent to financial year end, on 9 October 2020, the Company declared “Stage 1” Ore Reserves for the Shine Project, as tabulated below:

Shine Hematite Ore Reserves – Stage 1	Shine Hematite Ore Reserves – Stage 1	Shine Hematite Ore Reserves – Stage 1	Shine Hematite Ore Reserves – Stage 1	Shine Hematite Ore Reserves – Stage 1	Shine Hematite Ore Reserves – Stage 1
Ore Reserves, above 55% Fe	Tonnes millions	Fe %	SiO2 %	Al2O3 %	P %
Proved	2.1	59.8	7.40	2.32	0.086
Probable	0.7	58.4	9.70	2.15	0.057
Total	2.8	59.4	8.01	2.27	0.079
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 2020	69.4	61.7	8.40	0.93	0.031
Total Ore Reserves at 30 June 2020	18.7	65.2	4.96	0.88	0.013
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
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

Exploration Results:

The information in this report that relates to Exploration Results including sampling techniques and data management is based on information compiled by Mr Brett Morey, a Competent Person who is a member of the Australasian Institute of Mining and Metallurgy. Mr Morey is a full-time employee of Mount Gibson Iron Limited and has sufficient experience relevant to the style of mineralisation and type of deposits 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”. Mr Morey consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

Mineral Resources:

The information in this report relating to Mineral Resources is based on information compiled by Ms 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. Ms Haren was a full-time employee of, and is a consultant to, Mount Gibson Iron Limited. Ms 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’. Ms 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 is based on information compiled by Mr Brett Morey, a member of the Australasian Institute of Mining and Metallurgy. Mr Morey is a full-time employee of Mount Gibson Iron Limited and 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’. Mr 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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