MGX RESOURCES LIMITED - Interim / Quarterly Report 2021

APPENDIX 4D

MOUNT GIBSON IRON LIMITED 31 DECEMBER 2020 HALF-YEAR FINANCIAL STATEMENTS

This Half-Year Report is provided to the Australian Securities Exchange (ASX) under ASX Listing Rule 4.2A.3

Current Reporting Period: Previous Corresponding Period:

Half-Year ended 31 December 2020 Half-Year ended 31 December 2019

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Consolidated Entity	Movement	A$ million
Revenue from ordinary activities	Up 1.7% to	$262.3
Profit from continuing operations before tax	Up 67% to	$106.9
Net profit after tax attributable to members of the Company	Up 67% to	$74.5

DIVIDENDS

An interim dividend for the half-year ended 31 December 2020 has not been declared.

NET TANGIBLE ASSET BACKING

Consolidated Entity	Unit	31 December 2020	31 December 2019
Net tangible assets	A$ mill	$730.0	$631.5
Fully paid ordinaryshares on issue at balance date	#	1,185,917,178	1,157,682,542
Net tangible asset backing per issued ordinary share as at balance date	c/share	61.6	54.5

DETAILS OF ENTITIES OVER WHICH CONTROL WAS GAINED OR LOST DURING THE PERIOD

None.

STATUS OF AUDIT

This Half-Year Report is based on accounts that have been reviewed by Mount Gibson’s statutory auditors.

NOTICE

It is recommended that the Half-Year Report be read in conjunction with Mount Gibson’s Annual Financial Report for the year ended 30 June 2020 and any public announcements made by Mount Gibson during and after the half-year ended 31 December 2020 in accordance with the continuous disclosure obligations under the Corporations Act 2001 and ASX Listing Rules.

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MOUNT GIBSON IRON LIMITED AND CONTROLLED ENTITIES ABN 87 008 670 817 FINANCIAL REPORT

FOR THE HALF-YEAR ENDED 31 DECEMBER 2020

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Financial Report

For the half-year ended 31 December 2020

Directors’ Report ...........................................................................................................................................2 Auditor’s Independence Declaration ........................................................................................................9 Interim Consolidated Statement of Profit or Loss .............................................................................. 10 Interim Consolidated Statement of Comprehensive Income ........................................................... 11 Interim Consolidated Statement of Financial Position ...................................................................... 12 Interim Consolidated Statement of Cash Flows .................................................................................. 13 Interim Consolidated Statement of Changes in Equity ...................................................................... 14 Directors’ Declaration ............................................................................................................................... 30 Independent Review Report.................................................................................................................... 31

Page 1

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Directors’ Report

Your Directors submit their report for the half-year ended 31 December 2020 for the Group incorporating Mount Gibson Iron Limited (“ Company ” or “ Mount Gibson ”) and the entities that it controlled during the half-year (“ Group ”).

CURRENCY

Amounts in this report and the accompanying financial report are presented in Australian dollars unless otherwise stated.

DIRECTORS

The names of the Company’s directors in office during the half-year and until the date of this report are as below. Directors were in office for the entire period unless otherwise stated.

Lee Seng Hui Chairman, Non-Executive Director Simon Bird Lead Independent Non-Executive Director Alan Jones Independent Non-Executive Director Russell Barwick Independent Non-Executive Director Paul Dougas Independent Non-Executive Director Ding Rucai Non-Executive Director Andrew Ferguson Alternate Director to Lee Seng Hui

Peter Kerr is the Chief Executive Officer. David Stokes is the Company Secretary.

CORPORATE INFORMATION

Corporate Structure

Mount Gibson is a company limited by shares that is incorporated and domiciled in Australia. It is the ultimate parent entity of the Group and has prepared a consolidated half-year financial report incorporating the entities that it controlled during the half-year.

Nature of Operations and Principal Activities

The principal activities of the entities within the Group during the period were:

mining and processing of hematite iron ore at the Extension Hill mine site in the Mid-West region of Western Australia, and haulage of the ore via road and rail for export from the Geraldton Port;
mining and direct shipment of hematite iron ore at the Koolan Island mine site in the Kimberley region of Western Australia;
treasury management; and
the pursuit of mineral resources acquisitions and investments.

OPERATING AND FINANCIAL REVIEW

Overview of the Half-Year Period

The Group’s financial result for the half-year ended 31 December 2020 was a net profit after tax of $74,513,000 compared with $44,641,000 in the prior corresponding half year. On a pre-tax basis, the Group realised a profit before tax from continuing operations of $106,885,000 for the half-year compared with $64,193,000 in the prior corresponding half year period.

This result reflected a significant rise in iron ore prices over the half-year, steady ore sales from the high-grade Koolan Island mine in the Kimberley region albeit during the current high waste stripping investment phase, and the successful conclusion of the Company’s program to monetise remnant low grade material stockpiled or recoverable at the previously closed Extension Hill mine in the Mid-West. The result also benefited from the ongoing rail credit refund of historical rail access charges relating to third party usage of the Mid-West Perenjori to Geraldton railway line.

At the beginning of the half-year, the Platts Index for delivery of 62% Fe iron ore fines to northern China was approximately US$100 per dry metric tonne (“ dmt ”) and rose rapidly towards the end of the period, peaking at US$177/dmt in late December before ending the period at US$159/dmt. The average price for the half year was US$126/dmt, compared with US$95/dmt in the prior corresponding half-year. Over the same period, the A$/US$ exchange rate also rose significantly, ranging from A$1.00/US$0.69 at the start of the period and ending the half-year at US$0.770. The average for the half-year was US$0.723, compared with US$0.685 in the prior corresponding half year.

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Group ore sales for the half-year totalled 2.3 million wet metric tonnes (“ Mwmt ”) comprising 1.1 Mwmt of high grade Koolan Island fines and 1.2 Mwmt of low-grade material from Extension Hill. Sales revenue totalled $258,798,000, comprising $239,291,000 Free On Board (“ FOB ”) revenues, $18,116,000 in shipping freight services and $1,391,000 of realised foreign exchange hedging and commodity collar contract net gains. Mount Gibson achieved an average realised price for Koolan Island high grade iron ore fines product for the half-year of US$121/dmt FOB after grade and provisional pricing adjustments and penalties for impurities. Remnant low grade material sold from the Mid-West realised an average price of US$30/dmt FOB for fines and US$43/dmt FOB for lump. The weighted average realised price received (including provisional pricing adjustments and net foreign exchange hedging gains) for all products sold was $105/wmt FOB in the half-year period, compared with $84/wmt FOB in the 2019/20 financial year.

Total cash reserves comprising cash and cash equivalents, term deposits and subordinated notes and financial assets held for trading, increased by $12,494,000 over the half-year to a total of $435,719,000 as at 31 December 2020.

COVID-19 Business Response

During the half-year, Western Australia’s positive record in containing community transmission of COVID-19 allowed the staged relaxation of a number of restrictions originally imposed across the business from late March 2020. Notably this allowed a return to standard FIFO rosters (generally 2 weeks on/1 week off) from mid-2020. However, Mount Gibson maintained a range of general site and travel protocols to reduce the risk of virus transmission and remained ready to respond promptly in the event of any reinstatement of government restrictions. This readiness was demonstrated in January and February 2021 due to a regulatory lockdown over the Perth metropolitan and southern regions of Western Australia, with the reintroduction of regional travel restrictions, mandatory maskwearing requirements and enhanced site social distancing protocols. Mount Gibson personnel have responded positively to the safety restrictions and no instances of COVID-19 have occurred at Mount Gibson’s sites or workplaces to date.

Operating Results for the Half-Year Period

The summarised operating results for the Group for the half-year ended 31 December 2020 are tabulated below.

Consolidated Group		31 December 2020 $’000	31 December 2019 $’000
Net profit before tax from continuing and discontinued operations Tax expense Net profit after tax attributable to members of the Company Earnings per share	$’000 $’000	106,727 (32,214)	63,987 (19,346)
	$’000	74,513	44,641
	cents/share	6.39	3.92

Consolidated operating and sales statistics for the half-year period are tabulated below:

Consolidated Group	Unit	Sept Quarter 2020	Dec Quarter 2020	Dec Half-Year 2020	Dec Half-Year 2019
Mining and crushing Total waste mined Total ore mined Total ore crushed	kwmt kwmt kwmt	4,544 827 1,363	5,259 607 610	9,804 1,434 1,972	6,261 1,414 2,959
Shipping/sales Standard DSO Fines Low grade DSO Lump Low grade DSO Fines	kwmt kwmt kwmt	672 416 285	396 472 61	1,069 888 346	1,397 951 410
Total	kwmt	1,373	930	2,303	2,757
Average Platts 62% Fe CFR northern China price	US$/dmt	118	134	126	95
MGX Free on Board (FOB) average realised fines price– Koolan Island*	US$/dmt	104	149	121	83
MGX Free on Board (FOB) average realised lump price– Mid-West^	US$/dmt	41	45	43	35
MGX Free on Board (FOB) average realised fines price– Mid-West^	US$/dmt	30	34	30	28
kwmt = thousand wet metric tonnes US$/dmt = USD per dry metric tonne ^ Reflects the realised price after shipping freight and specification adjustments and penalties. Mid-West sales in the December 2020 half year comprised only shipments of low grade cargoes. * Reflects the realised price for Koolan comprising a mix of month of shipping (M), M+1 and M+2 averages, referencing the Platts 62% and 65% Fe Indices, and after adjustments for shipping freight, grade, provisional invoicing adjustments and penalties for impurities. Minor discrepancies may appear due to rounding.

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Koolan Island Hematite Operations

Following a successful first year of commercial production from the Koolan Island operation during 2019/20, the focus of activity in the December 2020 half-year was on progressing the elevated overburden stripping phase of operations in the Main Pit. This major stripping program is required to access significantly greater volumes of higher grade iron ore from the second half of 2021 onwards.

The mine generated earnings before interest and tax of $98,098,000 in the half-year reflecting the volume of ore sales completed in the period and increased pricing and demand for all iron ore products, including Koolan Island’s high grade fines.

Consistent with the mine plan, total material movement increased substantially in the half-year, with 10.7 Mwmt of waste and ore moved in the period, compared with 15.2 Mwmt in the whole of the 2019/20 year. Consistent with the focus on waste movement, ore production in the half-year totalled 0.9 Mwmt compared with 1.4 Mwmt in the prior corresponding half-year.

While mining volumes were significantly higher in the half-year, activity was impacted by mining interruptions in the December quarter.

As reported in November 2020, mining was interrupted by a localised rockfall on the western end of the Main Pit footwall. The rockfall did not result in any injuries to personnel or damage to equipment and was constrained by the protective meshing installed as part of standard geotechnical controls in respect of the footwall. The rockfall occurred shortly before the planned completion of mining in the impacted area, in which mining was scheduled to resume in the June quarter 2021. The seawall side of the Main Pit was not impacted by this event and mining in the rest of the Main Pit continued as planned.

Seawall instrumentation continues to demonstrate that the Main Pit seawall, which incorporates the installed impermeable seepage barrier and has been under full tidal loads for over two years, is performing to design expectations.

The Company is currently finalising its detailed assessment of proposed remedial footwall support measures to safely resume mining in the impacted area and determine appropriate adjustments to the mine plan. It is anticipated that these remedial works will involve modest additional capital expenditure in 2021 for ground support activities on the upper footwall levels where historical installations are less intensive than on lower levels. The timing to complete this work is under further review.

Mining was again interrupted by heavy wet season rains in December, when more than 770mm of rainfall was recorded including over 420mm within one 48 hour period which limited pit access. Mining continued uninterrupted in the upper west end of Main Pit during this period, however total material movement was unavoidably impacted. Mining movement returned towards planned levels in January 2021.

The average grade of shipments in the December half-year was 63.3% Fe, reflecting the higher proportion of production from the upper west end of Main Pit where ore is lower grade, while the overburden stripping phase continues. During the March and June 2021 quarters, shipped product grades are expected temporarily to average 58-61% Fe, reflecting an increased proportion of ore sourced from the upper west end of the Main Pit while the overburden stripping program continues. High-grade (+65% Fe) material from the lower levels of the Main Pit is targeted for access in the September 2021 quarter, however the precise timing is dependent on implementation of necessary additional footwall support measures and any appropriate changes required to mining and ground support practices.

Given the high prevailing prices for all iron ore products and the relative narrowing of high grade premiums in recent months, Mount Gibson has been actively reviewing its product blending strategy to generate the optimal volume/grade return from available material. Sales from Koolan Island are made under long term offtake agreements on FOB terms, with the sale occurring upon shipment loading at Koolan Island.

Reflective of the waste stripping schedule, ore production levels and the mining interruptions in the December quarter, the average cash cost of sales was $64/wmt FOB for the half-year before overburden stripping investment of $63 million and capital projects of $5 million. Waste stripping investment is expected to exceed $100 million for the full 2020/21 financial year. In addition, approximately $20-25 million is planned to be incurred for various Koolan Island capital improvement projects across the March and June 2021 quarters, primarily for an upgrade of the existing crushing plant to ensure it will be capable of processing the significantly increased ore throughput scheduled to occur from the September quarter onwards.

As previously indicated, the planned elevated stripping phase of the mine is scheduled to be substantially completed in the second half of calendar 2021. Thereafter, sales are anticipated to rise and cash costs to decline in step with the significantly reduced waste to ore stripping ratio.

Exploration and Resource Development

The Company is actively assessing potential opportunities to extend the mine life of the Koolan Island operation. Work has to date focused on optimisation of the Main Pit orebody and is now transitioning to known satellite deposits on the Island. Approvals are being sought and preparations are underway for drilling in the 2021 dry season.

Infrastructure Investment - Airstrip

As previously reported, the Company has constructed a new 2.1 kilometre sealed all-weather airstrip in the centre of the Island, on time and under the $20 million budget. First crew flights, transporting circa 100 personnel from Perth direct to Koolan Island, commenced on a twice weekly basis in mid-October. A formal opening and naming ceremony of the Laawun Airport was held with the Dambimangari Traditional Owners in late November. The new airstrip has already demonstrated significant safety and efficiency benefits to the Koolan Island operation by approximately halving the average commute time for Perth personnel. The COVID-19 global pandemic has further highlighted the value of this development.

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Production statistics for the December 2020 half-year are tabulated below:

Koolan Island Production Summary	Unit	Sept Quarter 2020 ’000	Dec Quarter 2020 ’000	Dec Half-Year 2020 ’000	Dec Half-Year 2019 ’000	% incr / (decr)
Mining Waste mined Standard ore mined Crushing Lump Fines Shipping/Sales Fines	wmt wmt wmt wmt wmt	4,544 672 152 531	5,259 184 75 211	9,804 856 226 742	6,261 1,414 389 994	57 (39) (42) (25)
		683	285	968	1,383	(30)
		672	396	1,069	1,397	(24)
		672	396	1,069	1,397	(24)

Minor discrepancies may appear due to rounding.

Extension Hill Hematite Operations

The low grade sales program from Extension Hill was successfully completed in late December, with sales totalling 1.2 Mwmt for the half-year, at the upper end of guidance. Sales comprised 0.9 Mwmt of low-grade lump material and 0.3 Mwmt of low-grade fines taken from the last remaining stockpiles at the site, and also from recoverable low-grade detrital gravels adjacent to the Extension Hill pit.

The Extension Hill operation generated earnings before interest and tax of $18,203,000 in the half-year. Cashflow for the half-year period totalled $16 million, excluding proceeds from the rail credit refund.

Sales of low grade remnant material from Extension Hill were conducted on a fixed price basis and achieved an average realised price of US$30/dmt FOB for fines and US$43/dmt FOB for lump ore during the six month period. The average cash cost of sales was $40/wmt FOB for the-half year, at the lower end of guidance, compared with $41/wmt FOB in the 2019/20 financial year.

Mount Gibson commenced the low-grade (51-54% Fe) sales program from Extension Hill in June 2019 with an initial sales target of approximately 1 Mwmt. Since that time, stronger iron ore prices have supported extensions to the program which have resulted in total sales of approximately 4.1 Mwmt for operating cashflows of over $30 million.

Transition to final closure and rehabilitation of the Extension Hill site has commenced. The accounting provision for rehabilitation for the Extension Hill mine site as at 31 December 2020 was $9,207,000 (30 June 2020: $9,797,000) and, depending on the timing of plant and infrastructure removal, it is expected that much of this amount will be incurred over the next 12 months.

Redeployment of site personnel and equipment to the Shine project has commenced where appropriate. The Company has also received several expressions of interest regarding the site and its various operating and infrastructure assets.

Production and shipping statistics for the December 2020 half-year are tabulated below:

Extension Hill Production Summary	Unit	Sept Quarter 2020 ’000	Dec Quarter 2020 ’000	Dec Half-Year 2020 ’000	Dec Half-Year 2019 ’000	% incr / (decr)
Mining Low grade ore mined Crushing Lump Fines Transported to Perenjori Railhead Lump Fines Transported to Geraldton Port Lump Fines Shipping/Sales* Low grade lump Low grade fines	wmt wmt wmt wmt wmt wmt wmt wmt wmt	155 415 265	423 324 -	578 739 265	- 992 584	- (25) (55)
		680	324	1,004	1,576	(36)
		372 296	413 -	785 296	986 472	(20) (37)
		668	413	1,081	1,458	(26)
		384 301	416 12	800 314	915 413	(13) (24)
		686	428	1,114	1,328	(16)
		416 285	472 61	888 346	951 410	(7) (16)
		701	534	1,234	1,360	(9)

Low grade ore is material grading 50-55% Fe and which is considered saleable. Minor discrepancies may appear due to rounding.

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Shine Iron Ore Project

Development planning for the Shine Iron Ore Project, located approximately 85km north of Extension Hill, was reactivated in early 2020 having been deferred amid deteriorating market conditions in 2014/15.

In October 2020, Mount Gibson declared initial Ore Reserves of 2.8Mt grading 59.4% Fe in the proposed “Stage 1” pit at Shine. Capital development costs are estimated at $17-20 million, with forecast production of approximately 1.5 Mwmt/year over an initial two-year period at an average cash operating cost of $65-70/wmt FOB before royalties.

The sustained increase in iron ore prices and demand in recent months has significantly enhanced the economics and outlook for the Shine Project. Should market conditions remain supportive, there is potential to extend the mine life by a further two years by proceeding with a “Stage 2” pit, based on Measured and Indicated Mineral Resources within the modelled pit shells. The Shine project has total Measured, Indicated and Inferred Hematite Resources of 10.8Mt grading 58.2% Fe.

Activity in the half-year focused on site preparation, progressing remaining permitting requirements, and advancing key commercial arrangements. The base development case assumes ore is hauled approximately 300km by road from the mine site to the Company’s established export facilities at Geraldton Port. Potentially more cost-effective alternative transport options are under advanced negotiation with third parties.

Equipment mobilisation occurred in the December quarter and site works commenced at the start of January 2021, including laydown area clearings and establishment of the site water supply. The mobile mining fleet has been secured and recruitment of key senior site personnel is also largely completed.

Subsequent to period end, Mount Gibson has received relevant mining approvals from regulatory authorities. The project remains on schedule to commence mining in April 2021 to achieve first ore sales early in the September quarter.

Expenditure on the project totalled $1.2 million in the half-year, and Mount Gibson expects to incur most of the budgeted capital development expenditure in the June 2021 half-year. In addition, approximately $15 million is expected to be incurred in the current half-year period on overburden stripping assuming mining activity commences in April 2021 as planned.

Financial Position

The Group’s cash and cash equivalents, term deposits and subordinated notes, and financial assets held for trading totalled $435,719,000 as at 31 December 2020, an increase of $12,494,000 over the half-year from the balance of $423,225,000 as at 30 June 2020.

The key components of the increase include positive cashflow of $96,887,000 (after head office costs, sustaining capital expenditure and working capital movements), interest received of $3,888,000, Koolan Island mine development expenditure of $72,010,000 and payment of the $16,271,000 cash component of the fully franked final dividend to shareholders for the 2019/20 financial year.

As at the balance date, the Group’s current assets totalled $507,492,000 and its current liabilities totalled $80,626,000. Accordingly, as at the date of this report, the Group has sufficient funds, as well as access to further equity and debt sources, to operate and sell iron ore from its operations and to advance its growth objectives.

Derivatives

At 31 December 2020 the Group held foreign exchange collar option contracts covering the conversion of US$6,500,000 into Australian dollars over January to February 2021 with an average guaranteed cap price of A$1.00/US$0.7235 and an average floor price, below which Mount Gibson does not participate, of A$1.00/US$0.6917. These collar contracts had a fair value unrealised net gain at balance date of $570,000.

During the period, the Group also entered into iron ore collar option contracts totalling 270,000 tonnes of iron ore, with maturity dates over the period July to December 2021. The contracts have floor price protection of US$100-110/tonne (for 62% Fe CFR) and cap prices, above which Mount Gibson does not participate, of US$107-133/tonne. With the rise in the iron ore price late in the period, these contracts had a fair value loss of $4,696,000 as at balance date.

Extension Hill Rail Refund/Credit Receivable

Following achievement of a contractual rail volume threshold at Extension Hill during the 2017/18 financial year, the Group has an entitlement to receive a partial refund of historical rail access charges from the Mid-West rail leaseholder, Arc Infrastructure, based upon the future usage by third parties of specific segments of the Perenjori to Geraldton railway line. This entitlement commenced upon termination of the Group’s then existing rail agreements in early 2019, and is calculated at various volume-related rates, and capped at a total of approximately $35 million (subject to indexation) and a time limit expiring in 2031. Receipt of this potential future refund is not certain and is fully dependent on the volumes railed by third parties on the specified rail segments. The entitlement is currently accruing as a receivable at a rate of approximately $2 million per quarter, with payments due every six months. Mount Gibson received its third six-monthly payment, totalling $3,730,000, in September 2020, taking cumulative total proceeds received since the first payment to $12,077,000.

Likely Developments and Expected Results

Mount Gibson’s overall objective is to maintain and grow long-term profitability through the discovery, development, operation and acquisition of mineral resources. As an established producer and seller of hematite iron ore, Mount Gibson’s strategy is to grow its profile as a successful and profitable supplier of raw materials.

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

The Board’s corporate objective is to grow the Company’s cash reserves and to continue to pursue an appropriate balance between the retention and utilisation of cash reserves for value-accretive investments. The Board has determined the following key business objectives for the 2020/21 financial year:

Koolan Island – commission the new airstrip (now completed) and substantially complete the elevated stripping phase of the life-of-mine plan in order to maximise sales and cashflow over the remainder of the mine life as the waste/ore stripping ratio and costs decline and ore shipments increase.
Extension Hill – extend the current program of Extension Hill low-grade sales should favourable market prices continue (achieved and completed) and transition the site to final closure.
Shine - complete development planning and, subject to a favourable assessment outcome, bring the project into production. Development activities are already well underway.
Cost reductions - continue to drive sustainable cost improvements across all business units.
Treasury returns – maintain an appropriate yield on the Group’s cash and investment reserves while preserving capital for future deployment.
Growth projects – continue the search for acquisition opportunities in the resources sector.

Group Sales Guidance and Cash Costs Guidance

As previously reported, the focus in 2020/21 is on increased mining movements at Koolan Island to substantially complete the planned open pit overburden stripping phase ahead of ore shipment levels rising significantly from next financial year onwards.

In the Mid-West, the focus is on bringing the Shine project into production as quickly as possible now that low-grade sources from Extension Hill have been depleted.

In August 2020, Mount Gibson provided ore sales guidance for the 2020/21 year of 2.8 to 3.3 Mwmt comprising 1.8 to 2.1 Mwmt of high-grade fines from Koolan Island and 1.0 to 1.2 Mwmt of low-grade material from the Mid-West, at an average Group cash cost of $60-65/wmt FOB before waste stripping investment and improvement projects at Koolan Island.

Sales from the Mid-West in the December half-year were at the upper end of guidance while mining at Koolan Island has been more challenging and was interrupted by heavy wet season rains in the December quarter. Sales from Koolan Island are therefore expected to be at the lower end of the Company’s guidance range for the 2020/21 year. With the overburden stripping phase and increased investment in geotechnical support activities in the Main Pit, ore sales from Koolan Island in the March and June 2021 quarters are expected to be broadly similar to volumes in the December quarter before increasing significantly in the September quarter, subject to the implementation of necessary additional footwall support measures mentioned in the Koolan Island section above.

Reflecting the timing and cost impacts of recent weather interruptions and increased geotechnical works required at Koolan Island, Mount Gibson is increasing its Group cash cost guidance for the full 2020/21 financial year to $65-70/wmt FOB. This estimate excludes key capital estimates for Shine Project development and pre-production costs ($30 million), Koolan Island capitalised waste stripping ($130 million) and other improvement projects ($25-30 million), the latter primarily for an upgrade of the Koolan crushing circuit to cater for increased ore production once the elevated stripping phase is completed later this year.

Within this Group guidance, Koolan Island site cash costs are anticipated to average $70-75/wmt FOB for the 2020/21 financial year excluding the capital projects mentioned above.

Group cash costs are reported FOB and include all operating, sustaining capital, royalties and corporate costs, but are before capitalised waste stripping, capital upgrade and development projects. Site cash costs are reported FOB on a consistent basis and include royalties, sustaining capital expenditure and allocated corporate costs.

DIVIDENDS

During the half-year, a final dividend of $0.03 per share fully franked ($34,807,000) in respect of the 2019/20 financial year was distributed by way of $16,271,000 in cash and the issue of 25,688,736 new shares under the Company’s Dividend Reinvestment Plan.

An interim dividend for the half-year ended 31 December 2020 has not been declared.

SIGNIFICANT EVENTS AFTER BALANCE DATE

Subsequent to period end, Mount Gibson has received relevant mining approvals from regulatory authorities for the Shine Iron Ore Project.

Except for the above, as at the date of this report there are no significant events after balance date of the Group that require adjustment of or disclosure in this report.

ROUNDING

Amounts in this report and the accompanying financial report have been rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to the company under ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191. The Company is an entity to which the instrument applies.

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

AUDITOR’S INDEPENDENCE DECLARATION

In accordance with section 307C of the Corporations Act 2001, the Directors received the attached independence declaration from the auditor of the Company on page 9 which forms part of this report.

Signed in accordance with a resolution of the Directors.

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Lee Seng Hui Chairman 23 February 2021

Competent Person Statement

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. Ms Haren was a full-time employee of, and is a consultant to, 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’. 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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Ernst & Young 11 Mounts Bay Road Perth WA 6000, Australia GPO Box M939 Perth WA 6843

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Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au

Auditor’s independence declaration to the directors of Mount Gibson Iron Limited

As lead auditor for the review of Mount Gibson Iron Limited for the half-year ended 31 December 2020, I declare to the best of my knowledge and belief, there have been:

a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review.
b. No contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Mount Gibson Iron Limited and the entities it controlled during the financial period.

Ernst & Young

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Gavin Buckingham Partner 23 February 2021

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

GB:AJ:MGI:005

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Interim Consolidated Statement of Profit or Loss

For the half-year ended 31 December 2020

Notes	31 December 2020 31 December 2019
	$’000 $’000
CONTINUING OPERATIONS Revenue 3[a] Interest revenue 3[b] TOTAL REVENUE Cost of sales 4[a] GROSS PROFIT Other income 3[c] Net foreign exchange loss 4[c] Net unrealised marked-to-market gain/(loss) 4[d] Administration and other expenses 4[e] PROFIT FROMCONTINUINGOPERATIONS BEFORE TAX AND FINANCE COSTS Finance costs 4[b] PROFIT FROMCONTINUINGOPERATIONS BEFORE TAX Tax expense 5 PROFIT AFTER TAX FROMCONTINUINGOPERATIONS DISCONTINUED OPERATIONS Loss after tax for the period from discontinued operations PROFIT FOR THE PERIOD AFTER TAX ATTRIBUTABLE TOMEMBERS OF THE COMPANY Earnings per share (cents per share) ▪ basic earnings per share ▪ diluted earnings per share Earnings per share (cents per share) for continuing operations ▪ basic earnings per share ▪ diluted earnings per share	258,798 254,132 3,515 3,923
	262,313 258,055 (146,946) (189,517)
	115,367 68,538 5,129 4,782 (7,495) (1,142) 964 (1,299) (6,626) (5,838)
	107,339 65,041 (454) (848)
	106,885 64,193 (32,261) (19,408)
	74,624 44,785 (111) (144)
	74,513 44,641
	6.39 3.92 6.38 3.91 6.40 3.93 6.39 3.93

Page 10

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Interim Consolidated Statement of Comprehensive Income

For the half-year ended 31 December 2020

	31 December 2020 31 December 2019
	$’000 $’000
PROFIT FOR THE PERIOD AFTER TAX OTHERCOMPREHENSIVEINCOME Items that may be subsequently reclassified to profit or loss: Change in fair value of cash flow hedges Reclassification adjustments for loss on cash flow hedges transferred to the Income Statement Change in fair value of debt instrument classified as financial assets designated at fair value through other comprehensive income Deferred income tax OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX TOTALCOMPREHENSIVE INCOME FOR THEPERIOD	74,513 44,641
	(165) (205) 330 410 480 (4) (194) -
	451 201
	74,964 44,842

Page 11

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Interim Consolidated Statement of Financial Position

Notes	31 December 2020 30 June 2020
	$’000 $’000
ASSETS CURRENT ASSETS Cash and cash equivalents 6 Term deposits and subordinated notes 7 Financial assets held for trading 8 Trade and other receivables 9 Inventories 10 Prepayments Derivative financial assets 18[a] TOTALCURRENTASSETS NON-CURRENT ASSETS Property, plant and equipment 11 Right-of-use assets Deferred acquisition, exploration and evaluation costs Mine properties 12 Prepayments Deferred tax assets TOTALNON-CURRENTASSETS TOTALASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Employee benefits Interest-bearing loans and borrowings 14 Derivative financial liabilities 18[b] Provisions TOTALCURRENTLIABILITIES NON-CURRENT LIABILITIES Employee benefits Interest-bearing loans and borrowings 14 Provisions Deferred tax liabilities TOTALNON-CURRENTLIABILITIES TOTALLIABILITIES NET ASSETS EQUITY Issued capital 15 Accumulated losses Reserves TOTAL EQUITY	135,066 111,661 245,137 275,157 55,516 36,407 31,472 19,236 31,028 39,800 8,703 3,908 570 557
	507,492 486,726
	51,303 44,593 10,507 12,017 1,201 3 294,689 233,785 1,268 1,488 - 26,165
	358,968 318,051
	866,460 804,777
	54,787 60,915 5,315 4,826 8,921 6,846 4,696 - 6,907 8,515
	80,626 81,102
	234 228 1,865 5,382 47,521 47,340 6,243 -
	55,863 52,950
	136,489 134,052
	729,971 670,725
	620,620 602,030 (839,654) (914,167) 949,005 982,862
	729,971 670,725

Page 12

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Interim Consolidated Statement of Cash Flows

For the half-year ended 31 December 2020

Notes	31 December 2020 31 December 2019
	$’000 $’000
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Proceeds from rail credit Payments to suppliers and employees Interest paid NETCASHFLOWSPROVIDEDBY OPERATINGACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Interest received Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Proceeds from term deposits Proceeds from sale of subordinated notes Payment for subordinated notes Proceeds from sale of financial assets held for trading Payment for financial assets held for trading Payment for deferred exploration and evaluation expenditure Payment for mine development NETCASHFLOWSUSEDIN INVESTINGACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of ordinary shares Repayment of lease liabilities Repayment of insurance premium funding Payment of borrowing costs Dividends paid NETCASHFLOWSUSEDIN FINANCINGACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS Net foreign exchange difference Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD 6	234,439 254,833 3,730 3,961 (124,161) (191,879) (214) (467)
	113,794 66,448
	3,888 4,579 189 156 (14,410) (13,282) 18,500 20,000 12,000 - - (3,000) 4,541 6,396 (17,818) (8,217) (641) (41) (72,010) (10,500)
	(65,761) (3,909)
	253 - (4,294) (3,278) - (1,753) (74) (100) (16,271) (26,380)
	(20,386) (31,511)
	27,647 31,028 (4,242) (1,141) 111,661 48,850
	135,066 78,737

Page 13

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Interim Consolidated Statement of Changes in Equity

For the half-year ended 31 December 2020

	Attributable to Equity Holders of the Parent
	Issued Capital Accumulated Losses Share Based Payments Reserve Net Unrealised Gains / (Losses) Reserve Dividend Distribution Reserve	Other Reserves Total Equity
	$’000 $’000 $’000 $’000 $’000	$’000 $’000
At 1 July 2019 Profit for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners - Dividends paid - After tax dividends netted off against loan-funded shares - Shares issued under DRP Share-based payments At 31 December 2019 At 1 July 2020 Profit for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners - Dividends paid - After tax dividends netted off against loan-funded shares - Shares issued under DRP - Exercise of shares vested under LSP Share-based payments At 31 December 2020	583,395 (953,350) 20,837 860 964,262	(3,192) 612,812
	- 44,641 - - - - - - 201 -	- 44,641 - 201
	- 44,641 - 201 - - - - - (45,203) - - - - 188 18,635 - - - - - - 220 - -	- 44,842 - (45,203) - 188 - 18,635 - 220
	602,030 (908,709) 21,057 1,061 919,247	(3,192) 631,494
	602,030 (914,167) 21,277 515 964,262	(3,192) 670,725
	- 74,513 - - - - - - 451 -	- 74,513 - 451
	- 74,513 - 451 - - - - - (34,807) - - - - 199 18,337 - - - - 253 - - - - - - 300 - -	- 74,964 - (34,807) - 199 - 18,337 - 253 - 300
	620,620 (839,654) 21,577 966 929,654	(3,192) 729,971

Page 14

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

For the half-year ended 31 December 2020

1. Corporate Information

The consolidated financial report of the Group, comprising the Company and the entities that it controlled during the half-year ended 31 December 2020, was authorised for issue in accordance with a resolution of the Directors on 23 February 2021.

The Company is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange.

The nature of operations and principal activities of the Group are the mining and export of hematite iron ore from Koolan Island in the Kimberley region of Western Australia, the processing and export of hematite iron ore from Extension Hill in the Mid-West region of Western Australia, treasury management and the pursuit of mineral resources acquisitions and investments.

The address of the registered office is Level 1, 2 Kings Park Road, West Perth, Western Australia, 6005.

2. Basis of Preparation and Accounting Policies

2.1 Basis of preparation

This general purpose condensed financial report for the half-year ended 31 December 2020 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. The half-year financial report:

does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the Group as the full financial report;
should be read in conjunction with the Annual Financial Report of Mount Gibson Iron Limited for the year ended 30 June 2020. It is also recommended that the half-year financial report be considered together with any public announcements made by Mount Gibson during and subsequent to the half-year ended 31 December 2020 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001 and Australian Securities Exchange Listing Rules;
has been prepared on a historical cost basis, except for derivatives and certain financial assets measured at fair value; and
• is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to the Company under Australian Securities and Investment Commission (“ ASIC ”) Instrument 2016/191. The Company is an entity to which the Instrument applies.

For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.

2.2 New standards, interpretations and amendments adopted by the Group

Since 1 July 2020, the Group has adopted all Accounting Standards and Interpretations mandatory to annual periods beginning on or before 1 July 2020. The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 30 June 2020, except for the adoption of new standards and interpretations as of 1 July 2020. Adoption of these standards and interpretations did not have any material effect on the financial position or performance of the Group. The Group has not yet early adopted any other standard, interpretations or amendment that has been issued but is not yet effective.

Page 15

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

Notes	31 December 2020 31 December 2019
	$’000 $’000
3. Revenue and Other Income [a] Revenue Revenue from contracts with customers – sale of iron ore Revenue from contracts with customers – freight/shipping services Other revenue: Quotation period price adjustments – relating to prior year shipments Quotation period price adjustments – relating to current year shipments Realised gain/(loss) on foreign exchange and commodity collar option sales contracts [b] Interest revenue Interest revenue – calculated using the effective interest method Interest revenue - other [c] Other income Net realised gain on foreign exchange transactions Net gain on disposal of property, plant and equipment Net realised gain on financial assets held for trading Insurance proceeds - other Rail credit income Other income 4. Expenses [a] Cost of sales – continuing operations Mining and administration costs Depreciation of property, plant and equipment – mining and site administration Depreciation of right-of-use assets – mining and site administration Capitalised deferred stripping costs (Koolan Island) 12[a] Amortisation of capitalised deferred stripping costs 12[a] Amortisation of mine properties 12[a] Crushing costs Depreciation of property, plant and equipment – crushing Depreciation of right-of-use assets - crushing Transport costs Port costs Depreciation of property, plant and equipment – port Royalties Net ore inventory movement Impairment reversal of ore inventory Rehabilitation revised estimate adjustment Cost of sales – Free on Board (FOB) basis Shipping freight Cost of sales – Cost and Freight (CFR) basis	210,948 244,646 18,116 23,986
	229,064 268,632 3,823 (4,773) 24,520 (11,622) 1,391 1,895
	258,798 254,132
	818 2,167 2,697 1,756
	3,515 3,923
	- 548 189 111 31 11 267 9 4,021 4,072 621 31
	5,129 4,782
	96,251 84,141 3,896 2,283 3,905 2,954 (62,949) (20,994) 4,975 5,452 6,550 9,422 10,301 11,308 647 480 165 165 25,705 32,009 6,623 12,206 34 11 20,668 19,559 12,232 7,105 - (570) (173) -
	128,830 165,531 18,116 23,986
	146,946 189,517

Page 16

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

	31 December 2020	31 December 2019
	$’000	$’000
4. Expenses(Continued) [b] Finance costs Finance charges on banking facilities Finance charges on lease liabilities Non-cash interest accretion on rehabilitation provision [c] Net foreign exchange loss Net realised loss on foreign exchange transactions Net unrealised loss on foreign exchange balances [d] Net unrealised marked-to-market (gain)/loss Unrealised marked-to-market (gain)/loss on foreign exchange derivatives Unrealised marked-to-market loss on commodity derivatives Unrealised marked-to-market (gain)/loss on financial assets held for trading [e] Administration and other expenses include: Depreciation of property, plant and equipment Depreciation of right-of-use assets Share-based payments expense Insurance premiums (net of refunds) Koolan seawall insurance claim and related site works expenses Business development expenses Reversal of expected credit loss on debtors Reversal of write down to net realisable value on consumables inventories [f] Cost of sales & Administration and other expenses include: Salaries, wages expense and other employee benefits Lease expense – short-term Lease expense – low value assets Lease expense – variable	124 193	306 284
	317 137	590 258
	454	848
	3,242 4,253	- 1,142
	7,495	1,142
	152 4,696 (5,812)	(90) - 1,389
	(964)	1,299
	68 293 300 746 484 19 - (421) 26,761 4,869 85 793	63 293 220 692 429 7 (28) (841) 24,328 5,070 12 864

Page 17

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

	31 December 2020 31 December 2019
	$’000 $’000
5. Taxation Reconciliation of tax benefit A reconciliation of tax benefit/(expense) applicable to accounting profit/(loss) before tax at the statutory income tax rate to tax expense at the Group’s effective tax rate for the period ended 31 December 2020 and 2019 is as follows: Accounting profit before tax • At the statutory income tax rate of 30% (2019: 30%) • Expenditure not allowed for income tax purposes • Other Tax expense Effective tax rate Tax expense reported in Income Statement Tax expense relating to continuing operations Tax (benefit) relating to discontinued operations	106,727 63,987
	32,018 19,196 196 152 - (2)
	32,214 19,346
	30.2% 30.2%
	32,214 19,346
	32,261 19,408 (47) (62)
	32,214 19,346

The Company has $1,416,000 of franking credits available as at 31 December 2020 (31 December 2019: $16,334,000). The movement from the prior comparative period is related to the payment in September 2020 of a fully franked dividend of $34,807,000.

Page 18

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

31	December	30 June
	2020	2020
	$’000	$’000

6. Cash and Cash Equivalents

For the purpose of the Cash Flow Statement, cash and cash equivalents comprise the following: Cash at bank and on hand 135,066 111,661 135,066 111,661	For the purpose of the Cash Flow Statement, cash and cash equivalents comprise the following: Cash at bank and on hand 135,066 111,661 135,066 111,661
	135,066 111,661

Notes	31 December 2020 30 June 2020
	$’000 $’000
7. Term Deposits and Subordinated Notes Current Term deposits – financial assets at amortised cost [i] Subordinated notes – financial assets at fair value through OCI [ii]	164,100 182,600 81,037 92,557
	245,137 275,157

[i] Term deposits are made for varying periods of between three and twelve months depending on the cash requirements of the Group, and earn interest at market term deposit rates. Term deposits are held with various financial institutions with short term credit ratings of A-2 or better (S&P). As these instruments have maturity dates of less than twelve months, the Group has assessed the credit risk on these financial assets using life time expected credit losses. In this regard, the Group has concluded that the probability of default on the term deposits is low. Accordingly, no impairment allowance has been recognised for expected credit losses on the term deposits.
[ii] Subordinated notes comprise tradeable floating interest rate instruments with maturities of up to ten years. These instruments are held in order to supplement the Group’s treasury returns, and the Group intends and is able to realise these instruments as and when the Group’s cash needs require. Subordinated notes are held with various financial institutions with short-term and long-term credit ratings of A or better (S&P). The Group has assessed the credit risk on these financial assets and determined that the credit risk exposure has not increased significantly since initial recognition. In determining the expected credit loss for the next twelve months, the Group considers the probability of default to be low. Accordingly, no impairment allowance has been recognised for expected credit losses on these notes.

	31 December 2020 30 June 2020
	$’000 $’000
8. Financial Assets Held for Trading Current Tradeable corporate bonds at fair value through profit or loss Quoted share investments at fair value through profit or loss	44,692 33,291 10,824 3,116
	55,516 36,407

Financial assets held for trading comprise corporate bonds and equity securities which are traded in active markets. These financial assets are acquired principally for the purpose of selling or repurchasing in the short term. The portfolio of tradeable corporate bonds is managed by a professional funds management entity, and Mount Gibson is able to vary or terminate the portfolio management mandate at any time, with applicable notice periods.

Page 19

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

Notes	31 December 2020 30 June 2020
	$’000 $’000
9. Trade and Other Receivables Trade debtors – at amortised cost Expected credit loss Trade debtors – at fair value through profit or loss Sundry receivables Other receivables 10. Inventories Consumables – at cost Allowance for obsolescence and impairment of consumables inventories Ore – at cost At lower of cost and net realisable value 11. Property, Plant and Equipment Property, plant and equipment – at cost Accumulated depreciation and impairment [a] Reconciliation Carrying amount at the beginning of the period Additions Disposals Transfers to road resealing provision Depreciation expense – continuing operations Depreciation expense – discontinued operations	4,421 160 (42) (42)
	4,379 118 17,290 12,001 5,088 4,780 4,715 2,337
	31,472 19,236
	23,752 20,748 (4,021) (4,478)
	19,731 16,270
	11,297 23,530
	11,297 23,530
	31,028 39,800
	493,190 483,220 (441,887) (438,627)
	51,303 44,593
	44,593 21,717 11,355 30,428 - (149) - (807) (4,645) (6,595) - (1)
	51,303 44,593

Page 20

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

	31 December 2020 30 June 2020
	$’000 $’000
12. Mine Properties Mine development expenditure Accumulated amortisation and impairment Total mine properties	1,503,968 1,431,540 (1,209,279) (1,197,755)
	294,689 233,785

[a] Reconciliation

Koolan Island	Extension Hill	Total
31-Dec-20 30-Jun-20	31-Dec-20 30-Jun-20	31-Dec-20 30-Jun-20
$’000 $’000	$’000 $’000	$’000 $’000
96,990 64,576 - - 96,990 64,576 62,949 44,564 - - 62,949 44,564 (4,975) (12,150) - - (4,975) (12,150)
154,964 96,990 - - 154,964 96,990
136,795 130,418 - - 136,795 130,418 9,782 18,812 - - 9,782 18,812 (302) 6,638 - - (302) 6,638 (6,550) (19,073) - - (6,550) (19,073)
139,725 136,795 - - 139,725 136,795
294,689 233,785 - - 294,689 233,785

13. Impairment of Assets

The Group reviews the carrying values of its assets at each balance date for indicators of potential impairment and impairment reversals and, where such indicators exist, utilises the approaches required under applicable accounting pronouncements for assessment of any impairment expenses or reversals thereof.

As at 31 December 2020, there were no indicators of impairment or impairment reversal present. No impairment expenses or reversals thereof have been recognised during the period (2019: nil).

Page 21

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

	31 December 2020 30 June 2020
	$’000 $’000
14. Interest-Bearing Loans and Borrowings Current Lease liabilities Non-Current Lease liabilities The following off balance sheet financing facility had been negotiated and was available at the reporting date: Performance bonding facility Used at reporting date Unused at reporting date Total facility	8,921 6,846
	8,921 6,846
	1,865 5,382
	1,865 5,382
	6,587 6,587 13,413 13,413
	20,000 20,000

Terms and conditions relating to the above facility:

In May 2011, the Company entered into a Facility Agreement comprising a Corporate Loan facility and a Performance Bonding facility. The undrawn Corporate Loan facility was cancelled in April 2013. The Performance Bonding facility was reduced in amount from $55,000,000 to $20,000,000 in June 2017 and extended to 30 June 2021. As at balance date, bonds and guarantees totalling $6,587,000 were drawn under the Performance Bonding facility.

The security pledge for the Performance Bonding facility is a fixed and floating charge over all the assets and undertakings of Mount Gibson Iron Limited, Mount Gibson Mining Limited, Geraldton Bulk Handling Limited, Koolan Iron Ore Pty Ltd and Aztec Resources Limited together with mining mortgages over the mining tenements owned by Mount Gibson Mining Limited and Koolan Iron Ore Pty Ltd and the contractual rights of Mount Gibson Mining Limited to mine hematite iron ore at Extension Hill.

Page 22

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

	Notes	31 December 2020 30 June 2020
		$’000 $’000
	[b]	620,620 602,030
15. Issued Capital
[a] Ordinary shares Issued and fully paid

Notes	31 December 2020	30 June 2020
	Number of Shares $’000 Number of Shares $’000
[b] Movement in ordinary shares on issue Unrestricted shares Balance at the beginning of the period Shares issued under Dividend Reinvestment Plan Shares fully paid under LSP Restricted shares – Loan Share Plan (LSP) [e] Balance at the beginning of the period Shares issued under LSP Shares reallotted from treasury shares Shares forfeited under LSP Conversion of fully paid shares under LSP Balance at end of the period Treasury shares: Balance at the beginning of the period Shares forfeited under LSP, not reallotted Shares reallotted under LSP	1,151,472,447 602,030 1,123,865,435 583,395 25,688,736 18,337 27,607,012 18,635 1,123,851 253 - -
	1,178,285,034 620,620 1,151,472,447 602,030
	5,769,595 - 4,504,295 - 2,545,900 - 1,705,800 - 440,500 - - - - - (440,500) - (1,123,851) - - -
	7,632,144 - 5,769,595 -
	1,185,917,178 620,620 1,157,242,042 602,030
	440,500 - - - - - 440,500 - (440,500) - - -
	- - 440,500 -

[c] Share options

During the 6 months ended 31 December 2020, no options were issued.

As at balance date there were no options on issue (30 June 2020: nil).

[d] Performance rights

During the 6 months ended 31 December 2020, no performance rights were issued.

As at 31 December 2020, there were no performance rights on issue (30 June 2020: nil).

[e] Loan Share Plan

On 1 July 2020, the Company issued 2,986,400 shares (including 440,500 shares reallotted) under the LSP. In accordance with the terms of the LSP, the shares were issued at a market price of $0.617 per share and pursuant to the vesting conditions, these shares do not vest unless a share price target of a 10% premium to the issue price is met between 1 July 2021 and 1 July 2025 and the participants remain continuously employed by the Group to 1 July 2021. The award was accounted for as an in-substance option award and the fair value at grant date assessed at $0.201 per loan-funded share. In calculating this fair value, a Monte Carlo simulation model was utilised over several thousand simulations to predict the share price at each vesting test date and whether the 10% hurdle would be satisfied, with the resultant values discounted back to the grant date. The underlying share price and the exercise price were assumed at $0.61 and $0.62 per share respectively, the period to exercise was assumed as three years (being half way between the first possible vesting date and the expiry of the LSP shares), the risk free rate was 0.26% based on Australian Government bond yields with three year lives, the estimated volatility was 50% based on historical share price analysis, and the dividend yield was assumed as nil.

Page 23

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

16. Dividends Paid and Proposed

During the half-year ended 31 December 2020, a final dividend of $0.03 per share fully franked ($34,807,000) in respect of the 2019/20 financial year was distributed by way of $16,271,000 in cash and the issue of 25,688,736 new shares under the Company’s Dividend Reinvestment Plan.

17. Operating Segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Chief Executive Officer and the executive management team in assessing performance and in determining the allocation of resources.

For management purposes, the Group has organised its operating segments into two reportable segments as follows:

Extension Hill segment – this segment includes the mining, crushing, transportation and sale of iron ore from the Extension Hill ore deposits.
Koolan Island segment – this segment includes the mining and sale of iron ore from the Koolan Island ore deposits.

Operating results for discontinued operations (Tallering Peak) have been excluded from the segment results below.

Page 24

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

17. Operating Segments (Continued)

Extension Hill	Koolan Island	Unallocated*	Consolidated
31 December 2020 31 December 2019	31 December 2020 31 December 2019	31 December 2020 31 December 2019	31 December 2020 31 December 2019
$’000 $’000	$’000 $’000	$’000 $’000	$’000 $’000
65,672 63,722 175,010 166,424 - - - - - - 3,515 3,923			240,682 230,146 3,515 3,923
65,672 63,722 175,010 166,424 3,515 3,923			244,197 234,069****
18,274 12,048 117,778 76,812 (8,601) (4,107) 40 647 381 764 - -			127,451 84,753 421 1,411
18,314 12,695 118,159 77,576 (8,601) (4,107) (111) (46) (20,061) (20,721) (361) (356)			127,872 86,164 (20,533) (21,123)
18,203 12,649 98,098 56,855 (8,962) (4,463)			107,339 65,041
(40) (77) (381) (764) - - - (570) - - - -			(454) (848)
			106,885 64,193
			(421) (841) - (570)
(40) (647) (381) (764) - -			(421) (1,411)

‘Unallocated’ includes interest revenue ($3,515,000), net realised loss on foreign exchange transactions ($3,242,000), net unrealised loss on foreign exchange balances ($4,253,000), unrealised marked-to-market loss on commodity derivatives ($4,696,000), unrealised marked-to-market gain on financial assets held for trading ($5,812,000) and corporate expenses such as head office salaries and wages. ** To reconcile segment revenue to statutory revenue, shipping freight of $18,116,000 (2019: $23,986,000) is added.

Page 25

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

port	port	port	port

Extension Hill	Koolan Island	Unallocated*	Consolidated
31 December 2020 30 June 2020	31 December 2020 30 June 2020	31 December 2020 30 June 2020	31 December 2020 30 June 2020
$’000 $’000	$’000 $’000	$’000 $’000	$’000 $’000
27,398 16,952 45,392 58,533 394,971 367,533 467,761 443,018 2,229 4,776 34,303 37,666 3,199 1,266 39,731 43,708 1,383 187 49,598 44,177 322 229 51,303 44,593 - - 9,629 10,847 878 1,170 10,507 12,017 - - 294,689 233,785 - - 294,689 233,785 - - 1,268 1,488 1,201 3 2,469 1,491 - - - - - 26,165 - 26,165
31,010 21,915 434,879 386,496 400,571 396,366 866,460 804,777
13,474 18,025 47,410 51,736 9,385 3,382 70,269 73,143 10,119 11,222 48,000 47,831 1,858 1,856 59,977 60,909 - - - - 6,243 - 6,243 -
23,593 29,247 95,410 99,567 17,486 5,238 136,489 134,052
7,417 (7,332) 339,469 286,929 383,085 391,128 729,971 670,725

‘Unallocated’ current financial assets include cash and cash equivalents of $92,726,000 (30 June 2020: $54,333,000), term deposits of $164,100,000 (30 June 2020: $182,600,000), subordinated notes of $81,037,000 (30 June 2020: $92,557,000), financial assets held for trading of $55,516,000 (30 June 2020: $36,407,000), trade debtors and other receivables of $1,022,000 (30 June 2020: $1,079,000) and derivatives of $570,000 (30 June 2020: $557,000).

Page 26

Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

18. Financial Instruments

[a] Foreign currency risk

The Group is exposed to the risk of adverse movements in the A$ compared to the US$ as its iron ore sales receipts are predominantly denominated in US$. The Group uses derivative financial instruments to manage specifically identified foreign currency exposures by hedging a proportion of forecast US$ sales transactions in accordance with its Financial Risk Management Policy. The primary objective of using derivative financial instruments is to reduce the volatility of earnings and cash flows attributable to adverse changes in the A$/US$ exchange rate.

The Group recognises derivative financial instruments at fair value at the date the derivative contract is entered into. The Group applies hedge accounting to forward foreign currency contracts and collar option contracts that meet the criteria of cash flow hedges.

During the half-year ended 31 December 2020, there were no US dollar foreign exchange forward contract deliveries.

At 31 December 2020, the notional amount of the foreign exchange hedge book totalling US$6,500,000 is made up exclusively of collar option contracts over the period January to February 2021 with an average cap price of A$1.00/US$0.7235 and an average floor price of A$1.00/US$0.6917.

As at 31 December 2020, the marked-to-market unrealised gain on the total outstanding US dollar foreign exchange hedge book of US$6,500,000 was $570,000.

It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness.

The Group uses the following derivative instruments to manage foreign currency risk from time to time as business needs and conditions dictate:

Instrument	Type of Hedging	Objective
Forward exchange contracts	Cash flow hedge	To hedge sales receipts against cash flow volatility arising from the fluctuation of the A$/US$ exchange rate.
Collars	Cash flow hedge	To hedge sales receipts against cash flow volatility arising from the fluctuation of the A$/US$ exchange rate by limiting exposure to exchange rates within a certain range of acceptable rates.

[b] Commodity price risk

The Group’s operations are exposed to commodity price risk as the Group sales of iron ore to its customers are based on market rates. The majority of the Group’s sales revenue is derived under long term sales contracts for each of its operations. The pricing mechanism in these contracts reflects a market based index. The pricing mechanism adopts the Platts Iron Ore Index Price which is published daily for iron ore “fines” with Fe content ranging from 58% to 65% Fe and is quoted on a US$ per dry metric tonne “Cost and Freight” North China basis.

The Group enters into provisionally priced ore sales contracts, for which price finalisation is referenced to relevant market indices at specified future dates. The Group is exposed to movements in benchmark iron ore prices and movements in benchmark lump premium prices on lump product cargoes (if any), between the date of shipping and invoice finalisation date.

During the period, the Group entered into collar option contracts totalling 270,000 dry metric tonnes (“ dmt ”) of iron ore, with maturity dates spread over the period July 2021 to December 2021. The contracts have floor price protection for Mount Gibson of US$100-110/dmt (62% Fe CFR) and cap prices, above which Mount Gibson does not participate, of US$107-133/dmt.

At balance date, these contracts remained outstanding with a fair value loss of $4,696,000 (2019: $nil). The fair value of the collar contracts has been recognised in the Statement of Financial Position as derivative financial liabilities.

[c] Fair value of financial assets and financial liabilities

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – quoted market prices in an active market (that are unadjusted) for identical assets or liabilities;

Level 2 – valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable); and

Level 3 – valuation techniques (for which the lowest level of input that is significant to the fair value measurement is unobservable).

The fair values of derivative financial instruments are sourced from an independent valuation by the Group’s treasury advisors using the valuation techniques with prevailing short and long term observable market inputs sourced from Reuters/Bloomberg to determine an appropriate mid-price valuation (level 2).

The fair values of quoted notes and bonds (classified as either financial assets held for trading or at fair value through other comprehensive income) are determined based on market price quotations at the reporting date (level 1).

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

The fair values of trade receivables classified as financial assets at fair value through profit and loss are determined using a discounted cash flow model incorporating market observable inputs sourced from Platts index pricing (level 2). This model also incorporates interest rate and credit risk adjustments.

The fair values of cash, short-term deposits, other receivables, trade and other payables and other interest-bearing borrowings approximate their carrying values, as a result of their short maturity or because they carry floating rates of interest.

The carrying amounts and fair values of the financial assets and financial liabilities for the Group as at 31 December 2020 are shown below.

Financial assets - current Cash Term deposits Subordinated notes Financial assets held for trading Trade debtors and other receivables Derivatives Financial liabilities – current Trade and other payables Interest-bearing loans and borrowings Derivatives Net financial assets	31 December 2020 31 December 2020 30 June 2020 30 June 2020
	Carrying Amount Fair Value Carrying Amount Fair Value
	$’000 $’000 $’000 $’000
	135,066 135,066 111,661 111,661 164,100 164,100 182,600 182,600 81,037 81,037 92,557 92,557 55,516 55,516 36,407 36,407 31,472 31,472 19,236 19,236 570 570 557 557
	467,761 467,761 443,018 443,018
	54,787 54,787 60,915 60,915 10,786 10,786 12,228 12,228 4,696 4,696 - -
	70,269 70,269 73,143 73,143
	397,492 397,492 369,875 369,875

19. Events After Balance Sheet Date

Subsequent to period end, Mount Gibson has received relevant mining approvals from regulatory authorities for the Shine Iron Ore Project.

Except for the above, as at the date of this report there are no significant events after balance date of the Group that require adjustment of or disclosure in this report.

20. Commitments

At 31 December 2020, the Group has commitments of:

$9,191,000 (31 December 2019: $13,008,000) relating primarily to contractual commitments in respect of mining and transport that are not liabilities at the balance date; and
$7,796,000 (31 December 2019: $2,257,000) relating to capital commitments for the purchase of property, plant and equipment at Koolan Island and Shine.
$726,000 (31 December 2019: $458,000) relating to short-term leases for the provision of plant and equipment.

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Notes to the Half-Year Financial Report

21. Related Party Disclosures

Ultimate parent

Mount Gibson Iron Limited is the ultimate Australian parent company.

Director-related entity transactions

Sales

During all of the half-year, Mr Lee and Mr Ferguson were directors of APAC Resources Limited ( APAC ) which has a 35.8% beneficial shareholding in Mount Gibson Iron Ltd.

The following sales agreements were in place with director-related entities during the period:

The sale to a subsidiary of APAC of 20% of iron ore from Koolan Island’s available mined production over the life of mine.

Pursuant to these sales agreements, during the half-year, the Group sold:

227,649 wmt (2019: 277,410 wmt) of iron ore to APAC.

Amounts recognised at the reporting date in relation to director-related entity transactions:

	31 December 2020 30 June 2020
	$’000 $’000
Assets and Liabilities Current Assets Receivables - APAC Total Assets Current Liabilities Payables – APAC Total Liabilities	519 1,325
	519 1,325
	- -
	- -

	31 December 2020 31 December 2019
Sales Revenue Sales revenue - APAC Sales revenue – SCIT* Total Sales Revenue (before shipping freight)**	33,269 32,520 - 12,568
	33,269 45,088

In the half-year ended 31 December 2019, a former director of the Company, Mr Li, was also a director of Shougang Concord International Enterprises Limited ( SCIE ), the parent of SCIT Trading Limited ( SCIT ), and these entities were guarantor and buyer respectively under a sales agreement for 80% of iron ore from Koolan’s available mined production over the life of mine. On 31 May 2019, SCIE and SCIT novated their respective interests under this offtake agreement to HKSE-listed entity Newton Resources Ltd and its subsidiary Ace Profit Investment Limited ( Ace ), subject to transitional arrangements which were satisfied on 23 July 2019. Ace is not considered to be a related party and only those sales to SCIT during the transition period are included in the disclosures for the half-year to 31 December 2019.

22. Contingent Liabilities

The Group has a performance bonding facility drawn to a total of $6,587,000 (30 June 2020: $6,587,000). The performance bonds secure the Group’s obligations relating to environmental matters and infrastructure.
There are amounts totalling $4,500,000 payable to third parties that are contingent on the commencement of production and commercial sale of iron ore from the Shine Iron Ore Project.
Certain claims arising with customers, employees, consultants and contractors have been made by or against certain controlled entities in the ordinary course of business, some of which involve litigation or arbitration. The Directors do not consider the outcome of any of these claims will have a material adverse impact on the financial position of the consolidated entity.

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Mount Gibson Iron Limited 31 December 2020 Half-Year Financial Report

Directors’ Declaration

In accordance with a resolution of the directors of Mount Gibson Iron Limited, I state that:

In the opinion of the Directors:

a. the financial statements and the notes of the Group for the half-year ended 31 December 2020 are in accordance with the Corporations Act 2001, including:
i) giving a true and fair view of the financial position as at 31 December 2020 and the performance of the Group for the half-year ended on that date; and
ii) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and
b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors.

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Lee Seng Hui Chairman

23 February 2021

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Ernst & Young 11 Mounts Bay Road Perth WA 6000, Australia GPO Box M939 Perth WA 6843

Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au

Independent auditor’s review report to the members of Mount Gibson Iron Limited

Report on the half-year financial report

Conclusion

We have reviewed the accompanying half-year financial report of Mount Gibson Iron Limited (the Company) and its subsidiaries (collectively the Group), which comprises the interim consolidated statement of financial position as at 31 December 2020, the interim consolidated statement of profit or loss, interim consolidated statement of comprehensive income, interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the half-year financial report of the Group is not in accordance with the Corporations Act 2001 , including:

a. Giving a true and fair view of the consolidated financial position of the Group as at 31 December 2020 and of its consolidated financial performance for the half-year ended on that date; and
b. Complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

Directors’ responsibility for the half-year financial report

The directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, anything has come to our attention that causes us to believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s consolidated financial position as at 31 December 2020 and its consolidated financial performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of the Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

GB:AJ:MGI:006

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A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

Ernst & Young

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Gavin Buckingham Partner Perth

23 February 2021

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

AI assistant

MGX RESOURCES LIMITED — Interim / Quarterly Report 2021

65331_rns_2021-02-23_4094e310-cb73-4365-b332-260f56fa8e76.pdf

APPENDIX 4D

MOUNT GIBSON IRON LIMITED 31 DECEMBER 2020 HALF-YEAR FINANCIAL STATEMENTS

This Half-Year Report is provided to the Australian Securities Exchange (ASX) under ASX Listing Rule 4.2A.3

RESULTS FOR ANNOUNCEMENT TO THE MARKET

DIVIDENDS

NET TANGIBLE ASSET BACKING

DETAILS OF ENTITIES OVER WHICH CONTROL WAS GAINED OR LOST DURING THE PERIOD

STATUS OF AUDIT

NOTICE

Financial Report

Directors’ Report

CURRENCY

DIRECTORS

CORPORATE INFORMATION

Corporate Structure

Nature of Operations and Principal Activities

OPERATING AND FINANCIAL REVIEW

Overview of the Half-Year Period

COVID-19 Business Response

Operating Results for the Half-Year Period

Koolan Island Hematite Operations

Exploration and Resource Development

Infrastructure Investment - Airstrip

Extension Hill Hematite Operations

Shine Iron Ore Project

Financial Position

Derivatives

Extension Hill Rail Refund/Credit Receivable

Likely Developments and Expected Results

DIVIDENDS

SIGNIFICANT EVENTS AFTER BALANCE DATE

ROUNDING

AUDITOR’S INDEPENDENCE DECLARATION

Competent Person Statement

Mineral Resources:

Ore Reserves

Auditor’s independence declaration to the directors of Mount Gibson Iron Limited

Interim Consolidated Statement of Profit or Loss

Interim Consolidated Statement of Comprehensive Income

Interim Consolidated Statement of Financial Position

Interim Consolidated Statement of Cash Flows

Interim Consolidated Statement of Changes in Equity

For the half-year ended 31 December 2020

Notes to the Half-Year Financial Report

For the half-year ended 31 December 2020

1. Corporate Information

2. Basis of Preparation and Accounting Policies

2.1 Basis of preparation

2.2 New standards, interpretations and amendments adopted by the Group

Notes to the Half-Year Financial Report

Notes to the Half-Year Financial Report

Notes to the Half-Year Financial Report

Notes to the Half-Year Financial Report

6. Cash and Cash Equivalents

Notes to the Half-Year Financial Report

Notes to the Half-Year Financial Report

[a] Reconciliation

13. Impairment of Assets

Notes to the Half-Year Financial Report

Notes to the Half-Year Financial Report

[c] Share options

[d] Performance rights

[e] Loan Share Plan

Notes to the Half-Year Financial Report

16. Dividends Paid and Proposed

17. Operating Segments

Notes to the Half-Year Financial Report

17. Operating Segments (Continued)

Notes to the Half-Year Financial Report

Notes to the Half-Year Financial Report

18. Financial Instruments

[a] Foreign currency risk

[b] Commodity price risk

[c] Fair value of financial assets and financial liabilities

Notes to the Half-Year Financial Report

19. Events After Balance Sheet Date

20. Commitments

MGX RESOURCES LIMITED Interim / Quarterly Report 2021