MINERGY : INTEGRATED ANNUAL REPORT 2023

Integrated Annual Report

2023

www.minergycoal.com

01	Minergy	Group overview	Leadership feedback	Coal resource and reserve	Our approach to ESG	Annual financial statements	Shareholder info
Integrated Annual Report 2023

Contents

01		03		05
Group overview		Coal resource and reserve information	Group annual financial statements
About Minergy	04	Mining licence	22	Directors' responsibilities and approval	59
Overview of the year	05	Coal resource and reserve	23	Directors' report	60
Milestones	06			Independent auditors' report	63
Business model and sales strategy	07			Statements of financial position	66
Mine infrastructure	08			Statements of comprehensive income	66
Risk management	10			Statements of changes in equity	67
				Statements of cash flows	67
				Notes to the annual financial statements	68

02

Leadership feedback

Chairman's report	14
Outgoing Chief Executive Officer's report	16
Acting Chief Financial Officer's report	19

04

Approach to environment, social and governance ("ESG") to support sustainability

Sustainable development goals	27
Carbon emissions	28
Environment	29
Social	31
Corporate social investments and community support	35
Social and Ethics Committee report	36
Stakeholder engagement	38
Board of Directors	41
Corporate Governance report	43
Minergy King IV™ summary 2023	48
Remuneration and Nomination Committee report	53
Audit and Risk Committee report	56

06

Shareholder information and Notice of Annual General Meeting

Shareholders' diary	94
Interaction with shareholders	95
Shareholder analysis	96
Notice of Annual General Meeting	97
Form of proxy	99
Corporate and general information	101

02	Minergy	Group overview
Integrated Annual Report 2023

About this report

Leadership feedback

Coal resource and reserve

Our approach to ESG

Annual financial statements

Shareholder info

Report objective

Minergy Limited's 2023 Integrated Annual Report aims to provide a balanced, transparent, understandable and complete view of our business by reporting on both the financial performance and non-financial aspects of the Group. The aim is to provide stakeholders with insight into our ability to create value over the short, medium, and long term. The report outlines the Group's strategy and business model, operating environment, positions the coal narrative, and explains our approach to risk management, and governance. It also contains the consolidated annual financial statements of Minergy for the financial year ending 30 June 2023 and the notice of the Annual General Meeting ("AGM").

The 2023 Integrated Annual Report (referred to herein as the "report", "IAR", or Integrated Annual Report) further covers a review of the Group as it pertains to the Masama Coal Mine and the status of saleable coal production, future developments, who our stakeholders are and how we interact with them, an extract from the Competent Persons Report ("CPR"), aspects about the Group's environment, social and governance ("ESG") approach, as well as the market into which Minergy's products are sold.

• where applicable, the CPR, which reports the Group's Resources and Reserves, and which was independently prepared in accordance with The South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves 2016 Edition ("SAMREC CODE");
• the annual financial statements are prepared and presented in accordance with International Financial Reporting Standards ("IFRS") and in accordance with the laws of Botswana; and
• the United Nations Social Development Goals ("SDGs").

Minergy has assessed applicable conformity to the following SDGs:

assured apart from an extract from the CPR. The audited full year consolidated financial statements were prepared by the Acting Chief Financial Officer, Julius Ayo (Bachelor of Accounting ("BACC") and Association of Certified Chartered Accountants ("ACCA")), under the supervision of the Outgoing Chief Executive Officer ("CEO"), Morné du Plessis CA(SA).

Board approval

The Board acknowledges responsibility for ensuring the integrity of this Integrated Annual Report. Following collective assessment, the Audit and Risk Committee, responsible for oversight of the IAR, recommended approval of the report by the Board.

In the Board's opinion, the Integrated Annual Report provides a fair and balanced representation of the integrated performance of the Company and addresses all material issues and presents the performance of Minergy fairly. The Board accordingly approved the IAR on 25 October 2023.

References

References to "Minergy" or "the Company" in this report are to Minergy Limited. References to "the Group" in this report are to Minergy and its subsidiaries, Minergy Coal (Pty) Limited and Min Sales (Pty) Limited.

  This report further indicates, via this icon, where additional information is available on the Company's website.

The report is guided by:

• the King Code of Governance Principles for South Africa ("King IV™") - the King IV™ application summary is contained on the Company's website: www.minergycoal.com;
• the Botswana Companies Act, CAP 42:01, as amended ("the Companies Act");
• the Equity Listing Requirements of the Botswana Stock Exchange ("BSE");

Forward-looking statements

This Integrated Annual Report contains forward-looking statements about the operating environment, outlook, and operations, which are affected by risks and uncertainty. Certain factors could influence the ultimate outcomes to be significantly different from our expectations. Our external auditors have not audited our forward-looking statements.

Board responsibility statement

Minergy's Board of Directors ("the Board") confirms its responsibility for the integrity of the report, the content of which has been collectively assessed by the Directors, who believe that all material issues have been addressed. The annual financial statements have been audited by the independent external auditor, Grant Thornton Botswana, in accordance with the Companies Act, as indicated in their report, but no other information contained in the IAR has been independently

Mokwena Morulane	Morné du Plessis
Independent	Outgoing Chief
Non-executive	Executive Officer
Chairman
Julius Ayo	Leutlwetse Tumelo
Acting Chief	Non-executive Director
Financial Officer
Cross Kgosidiile	Matome Tsholetsa Malema
Non-executive Director	Non-executive Director

03	Minergy	Group overview	Leadership feedback	Coal resource and reserve	Our approach to ESG	Annual financial statements	Shareholder info
Integrated Annual Report 2023

Group overview

This chapter contains information to assist readers of this report in understanding the core business of the Group, as well as highlights of and the successes achieved during the financial year.

Despite being dubbed a controversial commodity, coal remains a strategic resource for Botswana.

The role of coal in the local, regional and international markets is discussed and explained, primarily as

to how this influences the Minergy business model and supports the sales strategy.

Effective risk management is critical to sustainability. The top 10 business risks pertaining to Minergy are discussed with their risk mitigation strategies and what will be focused on in the year ahead.

04	Minergy	Group overview	Leadership feedback	Coal resource and reserve	Our approach to ESG	Annual financial statements	Shareholder info
Integrated Annual Report 2023

About Minergy

Minergy, (listed on the Botswana Stock Exchange), the holding company of the Minergy Group, is a coal mining and trading group committed to becoming the supplier of choice of consistent quality coal to industrial customers and power utilities across southern Africa. The Masama Coal Mine, located in the Mmamabula coalfield, is the company's cornerstone asset, the size and location of which supports Minergy's competitive cost structure, allowing for the cost-effective opencast mining of quality coal. The resource has access to existing rail, road and water infrastructure, and is closer to certain target markets than existing coal suppliers for regional supply. The mining operation has demonstrated that the quality of coal is ideally suited for export to Europe, Africa, India, Asia and China.

Minergy Ltd

Minergy is a Botswana registered company listed on the main board of the BSE, with a proposed listing on an international stock exchange pursued.

Additional information available in 06

Shareholder information and notice of Annual General Meeting

Minergy Coal

Minergy Coal operates the Masama Coal Mine which is located on the south-western edge of the Mmamabula Coalfield in southern Botswana, 60km northeast of Gaborone. It has access to a rail siding situated at Tshele Hills.

The 25-year mining licence spans 67km2 and holds 376 million tonnes of coal, of which 78 million tonnes are opencast.

376 million tonne coal resource

78 million tonne opencast

>100 years life of mine ("LoM")

Additional information available in 03

Coal resource and reserve information.

Masama Coal Mine

Coal mining, beneficiation and trading

The Masama Coal Mine has exceptional coal qualities, specifically low ash and sulphur, accessible through economical stripping ratios.

The mine is a fully developed greenfields project with infrastructure which includes:

• Fully operational beneficiation plant
• Open pit mining operations
• Water and power reticulation
• 25-yearsurface lease over the mining licence area.
• This supports a monthly production capacity of 125 000 tonnes Run of Mine ("ROM") and Feed-to-Plant, yielding 75 000 tonnes of saleable product monthly, which can be increased to double the capacity. Some of the plant infrastructure for this expansion is already installed.

Target markets include the sized industrial market in southern Africa as well as seaborne thermal exports (serviced via the east and west coast of Africa).

Additional information available in 03

Coal resource and reserve information.

(9)

40

Pricing change (%)

(69)

10

Volumes change (%)

05	Minergy	Group overview	Leadership feedback	Coal resource and reserve	Our approach to ESG	Annual financial statements	Shareholder info
Integrated Annual Report 2023

Overview of the year

Financial and non-financial summary

Financial

• Total revenue increased by 21% to P512 million (2022: P425 million). Pure coal sales (excluding transport recoveries) increased to P459 million (2022: P297 million).

• To illustrate the impact between half years, H1 2023 pure coal sales amounted to P298 million (the same amount as the full FY 2022 sales ), tapering down to just P161 million sales in H2 2023 as a result of the difficult market conditions post the 2022 boom. The impact on pricing half year and year-on-year are shown below:

H1 v H2

FY23 v FY22

• Compared to 2022, operating losses decreased by 30% to P52 million, with EBITDA losses decreasing by 48% to P30 million, continuing the trend of decreasing losses, buoyed by the positive operating and EBITDA numbers from H1 2023.

Operational

• Sales volumes dropped from monthly averages of ~67 000 tonnes per month ("tpm") in H1 2023 to only ~40 000tpm for H2 2023. The impact on volumes half year and year-on- year are shown below:

H1 v H2

FY23 v FY22

• ~174 000 tonnes of coal were successfully dispatched on four vessels from Walvis Bay for export markets. In total 6 vessels or 210 000 tonnes dispatched.
• Since inception, 1.84 million tonnes of coal have been sold, with each of the four active sales years improving annually.
• Production trends followed sales trends, decreasing from production averages of ~120 000tpm for mining and beneficiation feed in H1 2023 to ~80 000tpm to accommodate reduced demand.
• Since inception 17.6 million m3 of waste has been moved and 3.4 million tonnes mined and processed, again showing continuous growth annually.

Health, safety and social

• Yet another reporting period with an excellent safety record, with no lost time injuries ("LTI").
• The current LTI record stands at 1 064 days and as at reporting date stood at 669 days.
• We are proud to have had zero fatalities since inception.

• 97% of employees are either fully vaccinated or have

received their first dose of the COVID-19 vaccine.

• Mining costs, specifically diesel and explosives, increased >50% from the previous period, due to the global energy security crisis, only stabilising late in H2 2023 but remaining at high levels.
• Mining cost increases were exacerbated by a higher mining strip ratio and additional fixed costs accompanying the ramp-up to full capacity.

• Water resources proved sufficient for increased production through effective water management, including filter press operations.
• North South Carrier approvals received will support future expansion.

• As part of cost restructuring post the March 2023 halting

of mining operations, the workforce decreased from 536

to 366 employees.

• First time generation of cash flow from operating activities		• Cessation of mining operations by the mining contractor
compared to historical cash utilisation.		in March 2023 had a negative impact on the business
		and continues to do so.
• Operating expenditure was impacted by a seaborne export		• Public Private Partnership ("PPP") with the Botswana
vessel claim and large foreign exchange losses from a		government to tar roads is progressing and will
weakening Rand, especially in H2 2023.		support future expansion.

• An average of between 95% - 96% of the workforce

is Batswana.

• Various internships were undertaken, and local employment

was used for fencing and related tasks.

06 Minergy

Integrated Annual Report 2023

Milestones

Group overview

Leadership feedback

Coal resource and reserve

Our approach to ESG

Annual financial statements

Shareholder info

2017

• Completed additional exploration drilling
• Submitted Environmental Impact Assessment ("EIA")
• Listed on the main board of the BSE

2017

2018

2019

• Mine development completed

• Commissioned stage 1 of the Coal Handling and Processing Plant ("CHPP") - DMS washing module

• First coal sales by road with three-

year offtake agreement secured

• Ramped-up operations

• First tranche of debt raised

2019	2020

2021

• Commissioned stage 3 of CHPP
• • Dewatering System ("DWS") and filter press
• Ramped-upoperations close to nameplate capacity
• Additional off-take agreements concluded
• Coal market recovery
• Commissioned stage 4 of CHPP
• • Screening and product handling section

2021	2022

2023

• Last export vessel of seaborne coal supplied
• Additional funding secured
  to enable mining operations to continue, albeit at reduced rates

2023

2018

• EIA approved
• Mining licence awarded
• Commenced mine development
• Additional equity raised

2020

• Second and third tranches of debt raised
• Rail siding completed
• Commissioned stage 2 of CHPP
  - rigid crushing section
• Exported first coal via rail to cement producer in South Africa
• Operations halted by COVID-19

2022

• Successfully exported seaborne thermal coal via Walvis Bay harbour Free-on-Board ("FOB") basis
• Extraordinary coal prices due to supply shortages enabled record sales volumes
• Railed product to Maputo harbour for seaborne thermal coal market sales
• Maintaining production capacity

07	Minergy	Group overview	Leadership feedback	Coal resource and reserve	Our approach to ESG	Annual financial statements	Shareholder info
Integrated Annual Report 2023

Business model and sales strategy

Minergy can guarantee sustainability by utilising the diverse set of skills in conjunction, with consistent quality and size of coal resource, with our business model and sales strategy.

Core purpose

To extract coal from the vast resource demarcated in and around the Masama Coal Mine whilst ensuring profitability, generating diversified

Skill and capital utilisation

Financial

•  Retain profit and equity

•  Ensure sufficient working capital •  Royalties, taxes and wages

Intellectual

•  Open pit coal mining and sized

What we do

Sale of coal to the industrial market

Minergy's coal marketing effort concentrates on targeting industrial customers with specific coal needs. Demand for the correct size, quality and consistent supply remains paramount.

Minergy's focus is ensuring that industrial and international customers receive a steady volume of consistent quality coal.

Product mix

Duff (0 -10mm)

The smaller fraction product or "duff" is targeted for sale on longer-term contracts.

Cement and lime producers, brick makers.

Outcomes

Since inception

1.84 million tonnes

of coal have been sold, with each of the four active sales years improving annually, of which 210k tonnes exported through Walvis Bay.

foreign income and royalty streams for Botswana, creating employment, transferring skills and all within an ethical and responsible manner.

What sets us apart

Masama's high quality, such as low ash and low sulphur, and consistent supply to customers in the regional industrial and seaborne export markets, with resources available to become involved in the power generation market should the opportunity arise.

coal beneficiation knowledge transfer

•  Coal trading and marketing

Human

• Community development and support
• Job creation

•  Values and ethics

•  Active skills development and in-country skills retention

Social

•  Stakeholder and community relations

•  Corporate social development •  Health and safety

•  Skills and enterprise development

Manufactured

• Mine rehabilitation
• Coal extraction

•  Mine infrastructure maintenance

• Logistics

Annual South African industrial demand (MT)

						47 480
685	26 750	25 414	34 303	31 880	36 248
20
2016	2017	2018	2019	2020	2021	2022

Minergy sales split -

Industry (%)

Total South African coal demand 2022 (%)

Total

188 MT

Power generation	53
Industrial	25
Synthetic fuel	22

Minergy sales split -

Geography (%)

Peas (10 - 30mm)

Typically sold on short-term contracts on a spot basis. Boiler fuelled manufacturing such as breweries, canners, hospitals.

Nuts (30 - 50mm)

Typically sold on short-term contracts on a spot basis and used in specialised heating and manufacturing.

Minergy sales split -

Sales mix (%)

Active Citizen Economic Empowerment ("CEE") participation and implementation.

Zero

fatalities

Social investment and community support.

Full production capacity demonstrated resulting in first time operating profitability.

Value added - 2023 (%)

Natural

• Land
• Coal Resource
• Water reticulation

Cement	42	South Africa	66	Duff	42	Employee costs	47
Seaborne export	27	International	27	Peas	36	Royalties	37
Steel	20	Namibia	7	Nuts	20	Taxation	16
Traders/industry	11			0-50mm	2

08	Minergy	Group overview	Leadership feedback	Coal resource and reserve	Our approach to ESG	Annual financial statements	Shareholder info
Integrated Annual Report 2023

Mine infrastructure

The Masama Coal Mine has all the necessary infrastructure installed to ensure a sustainable mining operation, including access roads, electrified power supply, water supply, offices, weighbridges and fully installed and operational beneficiation plant.

Medie village

Dust suppression applied to village road

Softs dumps

Overburden dumps

Mine rehabilitation

Ramp

Beneficiation plant

Ramp

Offices and mine workshops

Mine gate

Stockpiles

Weigh bridges

Highwall

Mine pit

Direction of mining

09	Minergy	Group overview	Leadership feedback	Coal resource and reserve	Our approach to ESG	Annual financial statements	Shareholder info
Integrated Annual Report 2023

Masama Coal Mine operations

Responsible miner, ensuring dust suppression on roads in and around inhabited areas

Quality coal products

Supporter of gender equality

Creating employment

Skills development opportunities