Energy Resources of Australia : Preliminary Final Report

Energy Resources of Australia Ltd

Year ended 31 December 2020

(Previous corresponding period: Year ended 31 December 2019)

Results for announcement to the market

Appendix 4E

Energy Resources of Australia Ltd

ABN 71 008 550 865

ASX Preliminary final report - 31 December 2020

Lodged with the ASX under Listing Rule 4.3A

Contents

Results for announcement to the market 2

Preliminary statement of comprehensive income 7

Preliminary balance sheet 8

Preliminary statement of changes in equity 9

Preliminary statement of cash flows 10

Additional information for announcement to the market 11

1

Energy Resources of Australia Ltd

Year ended 31 December 2020

(Previous corresponding period: Year ended 31 December 2019)

Results for announcement to the market

Change

2020 $000

2019 $000

Revenue from sales of uranium

16%To

242,222 209,636

Revenue from continuing operationsProfit/(loss) from continuing operations after tax attributable to members

8% 83%

To

To

254,891 235,929 11,460 6,252

Net Cash flow from operating activities

81%To

• (19,280) (99,500)Earnings before Interest, Tax, Depreciation and Amortisation

  409%To

• 3,413 (1,103)EPS (cents)1

(67%)To

0.4

1.2

These financial results have been prepared in accordance with the Australian accounting standards.

Review of operations

Energy Resources of Australia Ltd (ERA or the Company) incurred a cash outflow from operating activities of $19 million in 2020 compared to an outflow of $100 million in 2019. Rehabilitation costs incurred for the year end 31 December 2020 were $80 million2 compared to $92 million in 2019. Despite negative cash flow ERA continued to generate a positive cash margin from the sale of uranium oxide.

ERA held total cash resources of $737 million at 31 December 2020, comprised of $204 million in cash at bank and $533 million of cash held by the Commonwealth Government as part of the Ranger Rehabilitation Trust Fund. The Company has no debt.

Cash reserves were substantially increased following the completion of the fully underwritten, renounceable entitlement offer, which raised $476 million to support rehabilitation of the Ranger Project Area (Entitlement Offer).

ERA recorded a net profit after tax of $11 million compared to $6 million in 2019. The 2020 net profit was supported by higher sales revenue and lower cash costs, resulting from the continued successful execution of the "Safety Transforming ERA Together" program (Transformation Program). As at 31 December 2020, this performance was partially offset by a revision in the rehabilitation provision discount rate and a number of minor revisions in timing of rehabilitation spend, which resulted in an unfavourable change in rehabilitation expense and therefore impact to earnings of $7 million.

In response to the ongoing COVID-19 pandemic, ERA continues to maintain controls and protocols in accordance with the Company's COVID-19 Management Plan to protect our

1 2021 impacted by the issue of 3,173 million shares following completion of the Entitlement Offer on 18 February 2020.

2 Excludes $2 million (2019: $1 million) in utilisation of lease cost.

2

Energy Resources of Australia Ltd

Year ended 31 December 2020

(Previous corresponding period: Year ended 31 December 2019)

Results for announcement to the market

employees and local communities as our first priority and ensure full compliance with Government requirements. ERA has continued to operate throughout this period with minimal impact to production or sales volumes.

Uranium oxide produced for the year ended 31 December 2020 was 1,574 tonnes, 10 per cent lower than 2019 production of 1,751 tonnes. 2020 production was impacted by declining stockpile grade, in line with the Company's mine plan. Production at the Ranger Mine ceased, in accordance with the Ranger Authority on 8 January 2021. In the first 8 days of January 2021, 34 tonnes of uranium were drummed. This concluded processing activities on the Ranger Project Area after 40 years of operation, during which time more than $500 million of royalty payments have been made to governments and Indigenous interests.

Revenue from the sale of uranium oxide was $242 million (2019: $210 million). Revenue was favourably impacted by higher sales volume and a favourable movement in the Australian/US dollar exchange rate.

Sales volume for 2020 was 1,721 tonnes compared with 1,597 tonnes for 2019. The average realised sales price for 2020 was US$42.60 per pound compared to US$41.89 per pound in 2019. The average realised price was impacted by increased sales into the spot market. The average realised price on contracted sales in 2020 was US$53.77 per pound compared to US$48.53 per pound in 2019. The average realised price compares favourably against the average spot price for 2020 of US$29.74 per pound.

With uranium oxide sales denominated in US dollars, the weakening of the Australian dollar had a positive impact on ERA's financial results. With sales weighted towards the first half, the average exchange rate was 67 US cents, compared with 70 US cents for 2019. ERA sought to maximise exposure to the favourable movement in the Australian dollar, whereby ERA entered into a number of forward foreign exchange contracts from USD denominated sales. Forward contracts were entered in respect to certain contracted sales which were forecast at the time for delivery between May 2020 and March 2021. Forward exchange contracts have been entered into at an average rate of 65 US cents for up to 70 per cent of the contracted US denominated sales proceeds. At 31 December 2020, ERA retained $63 million in forward contracts.

Cash costs for 2020 were lower than the corresponding period in 2019. This was mainly driven by the successful execution and ongoing delivery of ERA's business Transformation Program. During the first half of 2020, ERA launched the next phase of the program, "Transformation 2.0", which has greater focus on the rehabilitation project. The program targets idea generation and initiative implementation, with the objectives to deliver cost reductions and avoidance, without comprising safety or environmental outcomes.

Following a sharp decline in the crude oil price, with a corresponding decrease in gasoil (or diesel), ERA entered into gasoil swap contracts to lock in favourable prices when compared to ERA's assumptions in the recently completed Entitlement Offer. ERA agreed to purchase forward gasoil swaps at a weighted average price of US$41.59 per barrel ex-Singapore. The forward contracts commenced in June 2020 and extend through to 31 March 2022 for a total quantity of 325,133 barrels. At 31 December 2020, ERA retained US$9 million in swap contracts. The contracts were entered in US dollars and are settled monthly in arrears.

Interest income for 2020 was $5.6 million, compared to $7.6 million for 2019. The weighted average interest rate received on term deposit for the period was 0.8 per cent. This compares to 1.5 per cent assumed in the recently completed Entitlement Offer.

3

Energy Resources of Australia Ltd

Year ended 31 December 2020

(Previous corresponding period: Year ended 31 December 2019)

Results for announcement to the market

Cessation of production on the Ranger Project Area

After almost 40 years of production, totalling greater than 132,000 tonnes of drummed uranium oxide, processing of ore ceased at Ranger Mine on the 8 January 2021, as required under the s41 Authority (Atomic Energy Act) (Ranger Authority).

The expiry of the right to mine and process under the Ranger Section 41 Authority extinguishes any reasonable prospects for eventual economic extraction of previously reported Mineral Resources. As a result, the ERA Ore Reserves and Mineral Resources Statement no longer reports any Ore Reserves and Mineral Resources for the Ranger Project Area. The Company retains the MLN1 Jabiluka reported Resources.

In 2018, the Company initiated the "My Future Plan" employee support program to prepare existing employees for "life after ERA". The program provides participants with opportunities to expand their skills and capabilities following the cessation of production at Ranger. The program also provides support to employees seeking to be redeployed within the broader Rio Tinto group and to those who may wish to start their own business or retire. To date, the Company has supported the preparation of career plans for approximately 95 per cent of the workforce. Following cessation of production in January 2021, a number of employees seeking redeployment into Rio Tinto were successfully redeployed to other Rio Tinto business units.

Rehabilitation

At 31 December 2020, the ERA rehabilitation provision was $718 million3. A periodic review was conducted of the estimate and applicable discount rate used. This resulted in a minor reduction of the estimate and a revision of the discount rate used from 2 to 1.5 per cent, following ongoing review of key macro-economic assumptions. These were predominantly due to adjustments in forecast inflation rates and reduction in the assumed cash rate following successive rate reductions by the Reserve Bank of Australia. These changes resulted in a net increase in the closure provision of $6.5 million. During 2020, ERA incurred expenditure of $82 million on rehabilitation activities ($80 million in cashflow and $2 million in utilisation of leased assets).

Good progress was made on the ongoing rehabilitation of the Ranger Project Area in 2020, with a number of key milestones completed. Expenditure was largely associated with dredging to transfer tailings from the Tailings Storage Facility (TSF) to Pit 3, construction and commissioning of water treatment capacity, the backfill of waste material to Pit 1, successful planting of stage 13 (section of Pit 1) revegetation program and various studies.

Importantly, in August 2020, the backfill of waste material to Pit 1 was completed. Furthermore, the transfer of tailings from the TSF to Pit 3 continued with bulk dredging works forecast to complete in February 2021. TSF floor cleaning activities will occur through the first half of 2021.

Further updates on risks are included in the Rehabilitation Provision description within the notes section of this report.

Funding

On 15 November 2019, the Company announced a pro-rata renounceable Entitlement Offer of 6.13 new fully paid ERA ordinary shares for each fully paid ordinary share, raising approximately $476 million, to fund its rehabilitation obligations for the Ranger Project Area.

3 31 December 2020 provision is discounted at 1.5 per cent and presented in real terms ($747 million undiscounted in real terms). This equates to an estimated $801 million in undiscounted nominal terms.

4