Merafe Resources : Annual Financial Statements 2023

MERAFE RESOURCES LIMITED AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS

for the year ended 31 December 2023

Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

Contents

	Page
Directors' Responsibilities and Approval		2
CEO and FD's responsibility statement		3
Report of the Audit and Risk Committee	4	- 7
Company Secretary's Certification		8
Directors' Report	9 - 13
Independent Auditor's Report	14	- 17
Statement of Financial Position	18
Statement of Profit or Loss and Other Comprehensive Income	19
Statement of Changes in Equity	20
Statement of Cash Flows	21
Material Accounting Policies	22	- 35
Notes to the Consolidated and Separate Annual Financial Statements	36	- 78
Shareholder Information	79	- 80

The Group and Company financial statements have been prepared by the Financial Manager, Busisiwe Nteyi CA (SA), and were supervised by the Financial Director, Ditabe Chocho CA (SA).

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Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

Directors' Responsibilities and Approval

The directors are required in terms of the Companies Act, No. 71 of 2008 (Companies Act) to maintain adequate accounting records and are responsible for the content and integrity of the consolidated and separate annual financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated and separate annual financial statements fairly present the financial position and changes in equity of the Group and Company as at the end of the financial year and the results of its operations and cash flows for the year then ended, in conformity with the requirements of International Financial Reporting Standards (IFRS), interpretations by the International Financial Reporting Interpretations Committee (IFRIC), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee (APC), the Financial Pronouncements as issued by Financial Reporting Standards Council, the Johannesburg Stock Exchange Limited Listings Requirements (Listings Requirements) and the requirements of the Companies Act, as amended.

The annual financial statements are prepared in accordance with IFRS and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors (Board) sets standards for internal control aimed at reducing the risk of error or loss in a cost-effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group's business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors confirm that the Company is in compliance with the provisions of the Companies Act, specifically relating to its incorporation and operates in compliance with its memorandum of incorporation.

The directors have reviewed the Company and Group's cash flow forecast for the 12 months from date of issue of the financial statements and, in light of this review, they are satisfied that the Company and Group has or had access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently auditing and reporting on the Group's consolidated and separate annual financial statements. The annual financial statements have been examined by the Group's external auditors and their report is presented on pages 14 to 17.

The annual financial statements set out on pages 2 to 80, which have been prepared on the going concern basis, were approved by the Board on 15 March 2024 and were signed on their behalf by:

Abiel Mngomezulu Chairperson of the Board

Zanele Matlala

Chief Executive Officer

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Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

CEO and FD's responsibility statement

Each of the directors, whose names are stated below hereby confirm that:

• The annual financial statements set out on pages 2 to 80, fairly present in all material respects the financial position, financial performance and cash flows of Merafe Resources Limited in terms of IFRS;
• To the best of our knowledge and belief, no facts have been omitted or untrue statements made that would make the annual financial statements false or misleading;
• Internal financial controls have been put in place to ensure that material information relating to Merafe Resources Limited and its consolidated subsidiaries have been provided to effectively prepare the financial statements of Merafe Resources Limited;
• The internal financial controls are adequate and effective and can be relied upon in compiling the annual financial statements, having fulfilled our role and function as executive directors with primary responsibility for implementation and execution of controls;
• Where we are not satisfied, we have disclosed to the Audit and Risk Committee and the auditors any deficiencies in the design and operational effectiveness of the internal financial controls and have taken steps to remedy the deficiencies; and
• We are not aware of any fraud involving directors.

______________________________________	______________________________________
Zanele Matlala	Ditabe Chocho
Chief Executive Officer	Financial Director
15 March 2024	15 March 2024

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Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

Report of the Audit and Risk Committee

This report is provided by the Audit and Risk Committee (the Committee) appointed for the 2023 financial year of Merafe Resources Limited (Merafe).

1. Introduction

The Committee is pleased to present its report for the financial year ended 31 December 2023. The Committee confirms that it has adopted formal terms of reference as its Audit and Risk Committee Charter (the Charter) and has discharged all of its responsibilities for the current financial year in compliance with the Charter. The report has been prepared based on the requirements of the Companies Act, King IV Report on Corporate Governance for South Africa, 2016 (King IV Code/King IV), the Listings Requirements and other applicable regulatory requirements. The report provides an overview of the work done by the Committee during the year under review.

2. Objectives

The overall objectives of the Committee are to:

• Ensures that appropriate financial reporting procedures exist and are operating, which should include consideration of all entities included in the consolidated and separate IFRS financial statements, to ensure that it has access to all the financial information of Merafe to allow Merafe to effectively prepare and report on the financial position of the Group and Company;
• Assess the adequacy of the internal financial controls and the accounting systems, including the Company's authority framework;
• Oversee a process by which internal audit performs an assessment of the effectiveness of the company's system of internal control and risk management, including internal financial controls;
• Review the summarised financial statements, interim financial statements and annual financial statements and recommend these to the Board for approval;
• Assess and evaluate the Group and Company's combined assurance and provide independent oversight of the effectiveness thereof;
• Nominate the external auditor who in the opinion of the Committee is considered independent for appointment, determine and approve external audit fees, set the Company and its subsidiaries (the Group) policy on non-audit services provided by the external auditor and ensure that the appointment complies with legislation;
• Ensure that the appointment of the external auditor is presented and included as a resolution at the forthcoming annual general meeting of Merafe shareholders pursuant to section 61(8) of the Companies Act;
• Monitor compliance with legal requirements and debt covenants;
• Recommend budgets and plans to the Board;
• Consider and recommend to the Board any dividend;
• Conduct periodic reviews and assessments of the business risks the Group faces by considering Merafe's and the Glencore Merafe Pooling and Sharing Venture (Venture) risk reports;
• Receive and deal with any concerns from within, outside the Company or on its own initiative in relation to accounting practices, internal audit of the Company or any related matter and ensure that all issues are addressed;
• Make submissions to the Board on any matter concerning the Group and Company's accounting policies, financial control, records and reporting. This includes a review of key matters requiring judgement, such as impairment;
• Review the Company's related party transactions;
• Receive and deal with any concern or complaints from the whistleblowing line, whether from within or outside the company;
• Perform duties that are attributed to it by the Act, the Johannesburg Stock Exchange (JSE) and King IV Code; and
• Consider the JSE's proactive monitoring reports.

The objectives of the Committee were adequately met during the year under review.

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Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

Report of the Audit and Risk Committee

3. Composition of the Committee

The Committee consists of three independent non-executive directors, all with the necessary qualifications and experience to execute their responsibilities, with two members forming a quorum.

The members of the Committee are all independent non-executive directors of the Group and include:

Name	Attendance
Ms M Vuso (Chairperson)	3/4
Mr K Tlale	4/4
Ms N Mabusela-Aikhuere	4/4

The Committee is satisfied that the members thereof have the required knowledge and experience set out in Section 94(5) of the Companies Act and Regulation 42 of the Companies Regulation, 2011.

In addition, Ms Z Matlala, Mr D Chocho, Mr A Mngomezulu and Deloitte and Touche are permanent invitees to the meetings. Internal auditors are invitees to all meetings. At the date of this report, there have been no changes to the composition of the Committee. Members of the Committee are independent and are nominated annually by the Board for re-election at the Annual General Meeting. Independence of the long-standing Committee members is assessed annually by the Remuneration and Nomination Committee of the Board. Additionally, every second year, the Committee performs a self-evaluation of their competence and performance via a structured checklist.

At least once a year, a session is held with the independent external auditor where management is not present as a way to strengthen the independent oversight role of the Committee. The session facilitates an exchange of views and concerns about the scope of the audit.

4. Meetings held by the Committee

The Committee performs the duties laid upon it by Section 94(7) of the Companies Act by holding meetings with the key role players on a regular basis and by the unrestricted access granted to the external auditors.

The Committee held four meetings during the year, and the quorum was met at all the meetings. Refer to the composition of the Committee for meeting attendance.

5. 2023 Overview

The CEO and FD have outlined the controls over financial reporting and presented these to the Committee. The Committee believes that Merafe's internal controls can be relied upon as a reasonable basis for the preparation of the consolidated and separate financial statements. The Committee has considered the key audit matters in the independent auditor's report and is satisfied that it is correctly presented. The key audit matters assessed relate to the impairment of the Group's net assets in accordance with the requirements of IAS 36: Impairments of Assets. The Committee reviewed the approach to the impairment assessment and the assumptions and sensitivities underlying the model. The Committee is satisfied with the conclusion reached.

The Committee considered work done and progress made by management and their advisors on the SARS' letter of audit findings for the 2016 and 2017 years of assessment. The Committee considered any risks this matter presented and put mitigating measures in place. It also considered the Company's accounting treatment and disclosure of the matter. The Committee considered the contribution of the Eastern PGMs operations to the Venture. The Committee satisfied itself with this transaction's accounting treatment and disclosure in the 2023 results.

The Committee reviewed Merafe's Risk Policy and Framework to ensure continued relevance and assessed performance against the risk appetite statements.

The Committee considered the nature of the operations, risks and internal control environment at the Merafe head office and continued to rely on the internal audit function at the Venture, which provides reports to the Merafe head office on a quarterly basis. The Committee has satisfied itself with the internal audit function at the Venture through the review of their scope of work, quarterly review of their reports and evaluation of their findings and is satisfied that there were no material areas of concern that would render the function ineffective.

The Committee reviewed the 2024 budgets and 2025/6 plans, which were recommended to the Board.

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Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

Report of the Audit and Risk Committee

5. Overview 2023 (continued)

The Committee retained the appointment of an independent internal auditor from an external firm to focus on assignments specific to Merafe head office. The audit scope for 2023, which was risk-based, was considered and agreed upon. The Committee has also satisfied itself with the scope of work relating to and the findings and remediations arising from the internal audit assignments specific to Merafe head office, which were carried out.

The Committee reviewed the independence, effectiveness and overall performance of the internal audit function. The Committee is of the opinion that nothing has come to the attention of the Committee that caused it to believe that the Group's system of internal controls and risk management is not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements. The Committee is satisfied with the effectiveness of the internal audit function.

The Committee also reviewed all legal and regulatory matters that could have a significant impact on the Group and is satisfied with the compliance thereof.

The Committee reviewed the summarised financial statements, interim financial statements and consolidated and separate financial statements and recommended these to the Board for approval.

The Committee is satisfied that it has discharged its duties as set out in its terms of reference for the year under review.

6. External auditor

The Committee, having considered all relevant matters, satisfied itself through enquiry that auditor independence, objectivity and effectiveness were maintained in 2023. The Committee has considered the external auditor suitability assessment in terms of paragraph 3.84(g) read with paragraphs 3.86 to 3.87 of the Listings Requirements.

The Committee, in consultation with executive management, agreed to the terms of the engagement. The audit fee for the external audit has been considered and approved, considering factors such as the timing of the audit, the extent of the work required and the scope.

In line with a documented policy on the nature and extent of non-audit services the external auditor can provide to the Company, the Committee pre-approves all audit and permitted non-audit services by the external auditor. This is to ensure further that the independence of the external auditor is maintained. For the year, these services comprise income and royalty tax reviews.

Deloitte and Touche have served as the Company's external auditor since 4 May 2017. The performance of the external auditor is reviewed by the Committee annually. The Committee also considered and is satisfied with the quality of the audit for the year under review.

7. JSE proactive monitoring

The Committee is committed to quality financial reporting. Accordingly, the Committee regularly reviews and considers the JSE proactive monitoring reports to ensure that, where applicable, the recommendations are implemented in the preparation of the annual financial statements.

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Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

Report of the Audit and Risk Committee

8. Financial reporting

The review of the consolidated and separate financial statements is also the responsibility of the Committee. The Committee has evaluated the consolidated and separate financial statements of the Company for the year ended 31 December 2023 and, based on the information provided to the Committee, considers that they comply, in all material respects, with the requirements of the various statutes and regulations governing disclosure and reporting.

9. Financial Director and finance function

The Committee reviewed the performance, experience and expertise of the Financial Director, Ditabe Chocho, and continues to be satisfied with his suitability to hold office as the Financial Director in terms of the Listings Requirements. The Committee also considered the appropriateness of the expertise, continued improvement and adequacy of the finance function. The Committee is satisfied that no material areas of concern would render the internal financial controls ineffective.

10. Consolidated and separate annual financial statements

Having taken all of the above assessments into account, the Committee recommended the approval of the consolidated and separate financial statements for the year ended 31 December 2023 by the Board.

Matsotso Vuso CA (SA); CD (SA); RA

Chairperson - Audit and Risk Committee

15 March 2024

7

Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

Company Secretary's Certification

In terms of Section 88(2)(e) of the Companies Act, No. 71 of 2008, as amended, I certify that the Company has lodged with the Commissioner all such returns as are required of a public company in terms of the Companies Act and that all such returns are true, correct and up to date.

CorpStat Governance Services Proprietary Limited

Company Secretary

15 March 2024

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Merafe Resources Limited

(Registration number 1987/003452/06)

Consolidated and Separate Annual Financial Statements for the year ended 31 December 2023

Directors' Report

The directors have the pleasure of submitting their report for the Group for the year ended 31 December 2023.

1. Nature of business

Merafe was incorporated in South Africa with interests in the ferrochrome and chrome industry. The activities of the Group are undertaken through the Company and its principal subsidiaries and joint arrangements. The Group operates in South Africa.

Merafe holds 100% of the issued share capital in Merafe Ferrochrome and Mining Proprietary Limited (Merafe Ferrochrome) which through a pooling and sharing venture with Glencore Operations South Africa Proprietary Limited (GOSA), participates in chrome mining and the beneficiation of chrome ore into ferrochrome. The Glencore-Merafe Chrome Venture (Venture) operates five ferrochrome smelters (including pelletising and sintering plants), twenty-two ferrochrome furnaces, PGM processing plants in the Western and Eastern limbs of the Bushveld Complex, six chrome ore mines and five UG2 plants, situated in the North West, Limpopo and Mpumalanga Provinces of South Africa.

The Venture is one of the largest ferrochrome producers in the world, with an installed capacity of 2.3 million tonnes per annum. Merafe Ferrochrome's share of the earnings before interest, taxation, depreciation and amortisation (EBITDA) is 20.5%. Merafe Ferrochrome shares in the revenue, expenses and liabilities at 20.5%. The Venture comprises assets that both GOSA and Merafe Ferrochrome have granted the right of use but own in different proportions. Merafe Ferrochrome, through the Venture agreement, has a 20.5% interest in Unicorn Chrome (Pty) Ltd (Unicorn Chrome).

Listed below are the operations to which Merafe Ferrochrome has granted the right of use to the Venture:

Ferrochrome smelters	Chrome mines	UG2 plants and pelletisers	PGM Plant
Asset	Merafe	Asset	Merafe	Asset	Merafe	Asset	Merafe
	Ferrochrome's		Ferrochrome's		Ferrochrome's		Ferrochrome's
	interest		interest		interest		interest
Wonderkop	50%	Boshoek	100%	2 Impala	100%	Western PGM 20.5%
smelter		mine		Kanana UG2		plant
(furnaces 5				plants
and 6)
Boshoek	100%	Kroondal	50%	3 Lonmin	20.5%	Eastern	50%
smelter		and		UG2 plants		PGM X plant
		Wonderkop
		mine
Lion I	20.5%	Helena mine	20.5%	Bokamoso	20.5%
smelter				pelletising
				plant
Lion II	20.5%	Magareng	20.5%	Motswedi	100%
smelter		mine		pelletising
				plant
		Marikana	26%	Tswelopele	20.5%
				pelletising
				plant
				Unicorn	20.5%
				Chrome

Effective 6 September 2023, Merafe acquired 0% ownership and 20.5% participation rights in the Eastern PGM plant and 50% ownership and 20.5% participation rights in the second PGM X plant located in the eastern chrome mine operations. The new joint operation relates to all PGM-bearing material produced pursuant to Eastern Mining Right included in the Venture.

2. Group financial results

The financial statements set out the financial results of the Group and Company and have been prepared using appropriate accounting policies, conforming to IFRS and the requirements of the Companies Act, supported by reasonable and prudent judgements where required.

Revenue was R9 244m (2022: R7 939m) supported by high chrome ore prices and a weaker ZAR:USD exchange rate. Both chrome and ferrochrome volumes sold were lower than 2022. Merafe's portion of the Venture's EBITDA for the year ended 31 December 2023 is R2 358m (2022: R2 228m). The EBITDA includes Merafe's attributable share of standing charges of R346m (2022: R108m) and a foreign exchange gain of R99m (2022: R68m). The Company wrote down inventory by R2m during the year (2022: R1m).

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