Metro Mining : Financial Report for Year Ended 31 December 2022 →

Metro Mining Limited and Controlled Entities

ABN 45 117 763 443

Financial Report for the Year Ended

31 December 2022

CORPORATE DIRECTORY

DIRECTORS

Name	Position
Douglas Ritchie	Independent Non-Executive Director and Chair of the Board
Simon Wensley	Managing Director and Chief Executive Officer
Mark Sawyer	Non-Executive Director
Fiona Murdoch	Independent Non-Executive Director
Andrew Lloyd	Independent Non-Executive Director from 28 February 2022
Stephen Everett	Independent Non-Executive Director until 28 February 2022

COMPANY SECRETARY

Mitchell Petrie

NOTICE OF ANNUAL GENERAL MEETING

The annual general meeting of Metro Mining Limited will be held at 11 am on 29 May 2023 at the office of KPMG, Level 16, Riparian Plaza, 71 Eagle Street, Brisbane, QLD 4000

REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS

Level 2, 247 Adelaide Street, Brisbane Queensland 4000

T [phone]

SHARE REGISTER

Computershare Investor Services Pty Limited,

Level 1, 200 Mary Street, Brisbane, Queensland 4000

AUDITORS

Ernst & Young,

111 Eagle Street, Brisbane, Queensland 4000

STOCK EXCHANGE LISTING

Metro Mining Limited shares are listed on the Australian Securities Exchange (ASX code: MMI)

AUSTRALIAN BUSINESS NUMBER

45 117 763 443

WEBSITE ADDRESS

www.metromining.com.au

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DIRECTORS' REPORT

INTRODUCTION

Your Directors present their report on the consolidated entity (referred to hereafter as "the Group") consisting of Metro Mining Limited ("Metro Mining" or "the Company") and its controlled entities for the Financial Year (FY) ended 31 December 2022.

This Directors' Report has been prepared in accordance with the requirements of Division 1 of Part 2M.3 of the Corporations Act 2001.

BOARD OF DIRECTORS

The Directors of Metro Mining Limited during the year and up to the date of this report were:

Name	Position
Douglas Ritchie	Independent Non-Executive Director and Chair of the Board
Simon Wensley	Managing Director and Chief Executive Officer
Mark Sawyer	Non-Executive Director
Fiona Murdoch	Independent Non-Executive Director
Andrew Lloyd	Independent Non-Executive Director from 28 February 2022
Stephen Everett	Independent Non-Executive Director until 28 February 2022

PRINCIPAL ACTIVITIES

Metro Mining is an Australian exploration and mining company based in Brisbane, Queensland. Its flagship project, the Bauxite Hills Mine, located 95km north of Weipa is one of the largest independent projects within the internationally acclaimed Weipa Bauxite Region.

The principal activities of the Group during the period were the exploration, mining and sale of bauxite, and the brownfield expansion of the Bauxite Hills Mine.

Metro Mining Limited - Directors' Report 31 December 2022

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REVIEW AND RESULTS OF OPERATIONS

FY22 KEY HIGHLIGHTS

In FY22 the Group continued to implement operational efficiency and risk mitigation strategies that commenced in mid FY21. Whilst much has, and continues to be, done to improve the sustainability of operational performance to support an expanded capacity of the Bauxite Hills Mine, a range of factors occurred in FY22 that resulted in a disappointing financial result.

Chinese demand for bauxite remained firm and a number of new customers off-take commitments for FY23 to FY26 were achieved. Australian benchmark pricing and Metro prices only rose slowly within the period, constrained by previous contract positions. The final average sales price for the year was lower than the prior period. The Group was on track to meet its revised guidance of 3.6 million to 3.7 million wet metric tonnes (WMT) of sales for FY22, however in the second half of December a combination of unplanned shutdowns of the floating crane barge and severe weather resulted in total shipments for FY22 of 3.41 million WMT and early cessation of the FY22 operating season compared to previous years.

Freight and operational costs were higher than budget as a result of a range of factors including adverse weather, inconsistency of operational performance, inflationary impacts and exchange rate fluctuations as well as the Group not achieving 2022 planned production and sales volumes.

The Group's expansion strategy has, and continues to be, to reduce unit delivered costs to market towards the lowest in the world by expanding annual production capacity. In June 2022 the Board approved a Final Investment Decision, subject to financing, to expand the capacity of the Bauxite Hills Mine to 7.0 million WMT per annum. The approval is underpinned by additional sales offtakes secured for 2023 and beyond. The Board's decision is a major milestone for the Group and provides it with the basis to deliver long term returns to investors.

In August 2022 the Group completed a $27.5 million equity raising via a two-tranche Placement and Share Purchase Plan.

OPERATIONAL PERFORMANCE

The Group's flagship project, the Bauxite Hills Mine, located on western Cape York in Queensland, shipped 0.33 million WMT in January and February and then re-commenced operations for the year in early April 2022. The Group finished FY22 with a total of 3.41 million WMT of bauxite sold (FY21: 2.8 million WMT).

The Group's sold its FY22 production through binding offtake agreements with Shandong Xinfa Import and Export Co., Ltd (Xinfa) and Xiamen Xiangsen Aluminium Limited. The offtake pricing for both customers was a mix of previously agreed fixed price contracts and pricing negotiated during the year.

All production during FY22 was sold to Chinese refineries and deliveries were within contractual specifications. All deliveries were shipped on a Cost Insurance Freight (CIF) bases in Capesize vessels except one Free on Board (FOB) basis delivery.

In FY22, the Group recorded an average sales price per tonne delivered China basis of A$52.2 compared to A$57.2 for FY21.

The Group has focused significant efforts on improving both the volume of production and shipping as well as the consistency of operational performance. The Group continues to work with major contractors to investigate and implement improvements to processes, with a view to improving reliable output, efficiency and driving cost effectiveness.

Metro Mining Limited - Directors' Report 31 December 2022

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REVIEW AND RESULTS OF OPERATIONS (continued)

	2022	2021
	WMT	WMT
	'000	'000
Bauxite mined	3,193	3,034
Bauxite shipped	3,412	2,798

With 100% of the Group's FY23 production season contracted, the Group's marketing strategy is currently focused on executing further spot and long-term offtake agreements to support the pathway to expansion of production to a long-term annualised rate of 7.0 million WMT per annum.

Expansion

On 29 June 2022, the Group announced the Directors had approved, subject to finance, the Stage 2 expansion of the Bauxite Hills Mine, providing the pathway to increase capacity from 4 million WMT to 7 million WMT per annum, underpinned by sales commitments. The expansion of the Bauxite Hills mine will deliver economies of scale and consequently improve economic returns.

The Group's Stage 2 expansion remains a core strategy for the long-term future of the Bauxite Hills Mine. Timing for the formal commitment to Stage 2 remains influenced by economic conditions across the aluminium supply and financing. The Group are considering a number of financial options in addition to the Northern Australia Infrastructure Facility (NAIF) loan facility. NAIF have indicated their continued support of the expansion project however they would like to see improved financial performance before seeking necessary approvals and advancing the loan.

Second floating crane

A combination of lead time on critical items, shipyard delivery and financing timing has delayed the expected commissioning of the second floating crane barge until early 2024 for commencement of operations. Procurement activities on the major components and shipyard construction has continued in Q4 FY22 with 90% of the total build now under firm quotation.

Barge loading facility upgrades

The upgrades to the Barge Loading Facility have been scoped, engineered, and procured with improvement works commencing in February 2023.

The improvement works are focused on the modification of chutes and sampling station which is designed to reduce product blockage followed by motor and electrical upgrades. This phase is scheduled to be completed by March 2023 and is expected to deliver a steady-state throughput rate of 1,900 tonnes per hour (tph). This is equivalent to a 90% increase relative to the average rates achieved in Q4 FY22.

The expansion of screening capacity has been amended since the Definitive Feasibility Study (DFS) with Metro electing to utilise an Apron and Wobbler Feeder as replacement for one of the existing screens. It is expected that adopting this alternate screening technology will increase throughput and provide greater resiliency in handling wet product and reduce operating costs.

Based on the procurement activities completed to date, the commissioning of the Apron and Wobbler Feeder is expected in March 2024, aligned to the commissioning of the second floating crane. In the interim the existing screening circuit with a significant maintenance attention in Q1 FY23 will provide sufficient throughput capacity to meet rates to meet a 4.5 to 5.0 million WMT plan for FY 23. In partnership with our major equipment contractor, Blake Machinery Group, the new higher-powered Scania trucks and additional supporting trailers are on track to be mobilised to site from March 2023 with the final units arriving by August 2023.

Metro Mining Limited - Directors' Report 31 December 2022

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