Metro Mining : July 2022 Quarterly Activities Report

Metro Mining Ltd (ASX: MMI)

Quarterly Activities Report | July 2022

		Q2 2022 Highlights
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			 Operation risk is reduced: Offtake binding, mine and floating crane at full capacity, contract prices rising
				through the year underpinned by low-cost freight
			 Q2 production 900 WMT despite weather impacts: 3.6 to 4.0 M Wet Metric Tonnes (WMT) guidance for
				2022 production & sales
			 Bauxite trade is at record levels, market prices recovering strongly during Q2
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				Transformational 75% capacity expansion from 4 to 7 M WMT pa, taking Metro to lowest cost supplier with
				binding offtake underpinning a less than 2-year payback

Metro has undergone significant positive change in the last 12 months. The new management team has
taken actions to reduce risk, strengthen and improve the core fundamentals of the business, and create a
more resilient operation through:
	 Adding further customers, binding offtake and increased contract pricing,
	 Significantly reducing delivered costs through new transhipment crane into large Capesize vessels,
	 Locking in 90% of freight and bunkers with forward contracts,
	 Investment in asset reliability and productivity: such as trucks, trailers, screens, conveyors, marine
	assets, and crane grabs.
Mining for the quarter was 0.92 M Wet Metric Tonnes (WMT) and shipments were 0.85 M WMT, a 35%
increase on June quarter 2021. Revenue received was $37M at an average price of A$44.1/WMT. Despite
shipping commencing on 10th April, the June quarter was affected by lengthy periods of unseasonal
adverse weather, multiple workforce COVID/flu events and a floating crane fault covered by warranty. As
a result, production and shipping volumes were less than planned.
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The improvement actions in place, more of which have been taken subsequent to the end of the quarter,
have resulted in better results than may have been expected in similar conditions in the past. Metro has
confidence in forward looking production and shipping rates with guidance for 3.6 to 4.0 M WMT produced
and shipped in 2022.
The bauxite market is strong and demand for imports from China is at record levels. There is a continuing
positive outlook given expected supply disruptions from Indonesia and Guinea (a combined 68% of Chinese
Forimports). Within this context, and the additional demand for bauxite, the Metro Board gave investment
approval, subject to financing, in June 2022 to expand the production capacity at the Bauxite Hills Mine by
75% from 4 to 7 M WMT/a, underpinned by a refreshed definitive feasibility study and committed additional
offtake from foundation customer Xinfa. The expansion requires a low level of capital expenditure of A$28.3
M and forecasts payback in less than 2 years and thus impressive returns for investors (See ASX announcement
29 June 2022). The expansion is scheduled to be completed in Q3 2023 at which point Metro will be one of
the lowest cost suppliers of bauxite delivered to China.

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Quarterly Activities Report | July 2022

onlyStrengthening fundamentals, improving operational efficiency and resilience

Metro is currently in the first quartile of the China delivered cost curve and is on a path to becoming one of the world's lowest cost suppliers of bauxite delivered to China.

useIn the last 12 months, Metro's new management team has implemented a number of significant initiatives to improve the Bauxite Hills operational efficiency and resilience. These have resulted in a reduction in risk and an improvement in efficiency and unit costs.

These have included:

 Procurement (predominantly through Metro's marine services supplier, TSA) of a floating crane

	barge, mobilised ahead of schedule, which enabled Metro to secure lower cost Cape-size freight
	markets,
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	A program to reduce both operational and corporate costs and improve efficiencies with the goal

that the Bauxite Hills Mine will become the World's lowest cost global quality bauxite supplier into China.

Major improvements implemented in the last quarter to improve operational resilience have been:

 Incorporation of lessons learned from operating in the 2021/22 wet season, including change to screen sizes and operating practice, and conveyor belt maintenance program,

 Dry hire and maintenance contract with mobile mining fleet partner BMG of 5 additional prime movers on a short-term basis to replacing ageing fleet which were proving unreliable and expensive to maintain,

 Contracts of Affreightment (CoA) have been entered into to lock in the majority of freight costs for 2022 and 90% of 2023 and 2024 delivered offtake,

 Additional workforce for labour coverage in the event of COVID/flu outbreaks and to provide additional capacity and consistency of operational performance for the remainder of the 2022.

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Quarterly Activities Report | July 2022

Operational performance for the Quarter

only	Production Results (wmt) ('000)		Q2 2022	Q2 2021
use	Bauxite Mined		915	729
Bauxite Shipped		849	629
Unit Operating Results (A$/wmt)
Revenue		44.1	49.9
Costs
Site Costs		28.1	28.2
	Freight		18.6	29.8
	Royalties		3.2	3.6
	Total		49.9	61.6
	EBITDA Margin		(5.8)	(11.7)
personalDespite lower than planned production in the quarter,	aggregate operational costs were consistent

Production for the 2022 operating season commenced in early April 2022.

Despite improvements made throughout 2021 and 2022 to improve operational efficiency and resilience (refer above) production and shipping this quarter were affected by a range of factors - the number of days of adverse weather being greater than forecast, plant and equipment availability and COVID/flu impacting employee absenteeism. Due to the interrupted operations production unit costs, standby costs and demurrage were higher than forecast.

Mining for the quarter was 915K WMT with 849K WMT shipped.

with expectations.

ForPleasingly, the Floating Crane Barge tonnage rates and capability continued to improve in the quarter as processes, procedures were refined and operator skills improved, with data indicating it is achieving its nameplate capacity.

With the actions taken over the last 12 months, and which continue to be taken, to improve operational efficiency and resilience, Metro is confident that more consistent production and shipping rates will be achieved and that 3.6 to 4.0 M WMT will be produced and shipped in 2022.

The 2022 rehabilitation program progressed during the quarter with 40 hectares prepared in readiness for seeding later in the year.

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only	Quarterly Activities Report | July 2022
Bauxite market
The bauxite market is recovering from COVID induced lows. The key facts from the last quarter are:

 Record bauxite imports into China in the current calendar year-to-date,

 New refineries have been commissioned in China at the same time domestic transport has been impacted by COVID,

 Delivered China prices are trending upwards quite strongly,
 There is evidence that Indonesia (15% of Chinese imports) is starting to implement its well signalled
use	ban on bauxite exports,
 In Guinea (53% of Chinese imports), the military Government is starting to enforce lease
For personal	requirements to construct downstream refineries and also is investigating alleged manipulation of
declared sales prices to minimise local tax payments.
Floating crane docked, with positioned barge awaiting unloading

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For personal use only

Quarterly Activities Report | July 2022

China bauxite demand by source (Million DMT)

			Imported Bauxite Prices
			(US$/DMT CIF China)
	75
	70
	65
dmt	60
55
/
USD	50
45
	40
	35
	30
	Jan-15	Jan-16	Jan-17	Jan-18	Jan-19	Jan-20	Jan-21	Jan-22
			AUS HT	GUINEA LT	INDO LT

Sources: CM Group

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