Minergy : CONDENSED GROUP AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2022

Condensed group audited financial results

for the year ended 30 June 2022

Minergy Limited

(Incorporated in accordance with the laws of Botswana) (Company Number: BW00001542791)

www.minergycoal.com

("Minergy" or "the Company")

This commentary on the financial results follows the voluntary market update issued on 25 July 2022, which captured the main factors impacting the financial year ending 30 June 2022 ("FY22"). The year ending 30 June 2021 ("FY21") is used as a comparison.

Overview of the 2022 financial year

The financial year was historic, with a challenging first three quarters followed by an exceptional turnaround in the fourth quarter, as many European and Asian countries looked for alternative sources of energy supply security. As a result, Minergy's high-quality coal became a sought- after commodity. Coal mining and trading are volume-driven, and results were directly impacted accordingly.

Trends and/or events impacting FY22 include:

• The final tranche of debt funding was paid out early in the financial year, and the debt restructuring in support of stabilising the business was completed.
• Stage 4 of the Processing Plant (Rigid Screening and Stock Handling section) was successfully commissioned in October 2021, which completed plant construction and contributed to a steady production environment within the confines of sales demand, which was restricted as elaborated on below.
• Sales demand struggled for most of FY22 as the result of an oversupply of coal into the regional market because Transnet Freight Rail ("TFR") failed to support coal dispatches into the export market via Richards Bay, as was well publicised. This situation was exacerbated by diminishing offtake from contracted key customers from unscheduled breakdowns and plant maintenances. Given this, mining and coal processing rates were reduced to manage stock levels and to avoid coal losses through spontaneous combustion. Outputs were further impacted by operational interruptions from freak rainfall in April 2022 and intermittent power outages.
• The ongoing war in Ukraine brought about high coal prices at the end of the third quarter of FY22, as the energy market supply came under severe pressure. This led to extraordinary demand facilitating previously uncompetitive and uneconomical exports into the seaborne market during the fourth quarter. Reciprocally, with plant and mining capacity available, production was ramped up to meet this new burgeoning demand.
• Hyperinflationary price increases in explosives and administered prices such as diesel had unfortunately reduced the positive effects of increased revenue.

The recovery recorded in the fourth quarter is setting the tone for a recovery to profitability for FY23.

01

Financial results 2022

Financial and non-financial highlights

Operational

Financial

ESG

02

2022

Overburden moved, and coal	Increasing cost pressure of	Rehabilitation is an ongoing
extracted increased by 82%	diesel and explosives increasing	process, and all mining is
and 54%, respectively	by 127% and 57%, respectively,	undertaken within the parameters
‣ For the first time since inception,	exacerbated by double-digit	of the mining licence
inflation in Botswana
>1 000 000 tonnes was	‣ 4.2 million m3 rehabilitated in
extracted in a financial year		FY22. This exceeded the total
		volume rehabilitated since the
		start of mining operations.
		‣ Increased use of dust
		suppression to curtail dust and
		construction of speed humps
Plant throughput volumes, buoyed	Pure coal revenue (ex-transport)	96% of the workforce is Batswana,
by the completion of stage 4,	increased by 77% to P297 million	and 97% of the staff are vaccinated
increased by 49%	(2021: P167 million), driven by
‣ This supported the production	‣ 40% volume increase
of product mixes in line with	‣ average sales prices increasing
forecasts and away from	by 26%
uneconomical fractions
Water utilisation is improving	A continued trend in decreasing	P488 million was spent on local
(33% savings in litre per tonne),	operating expenditures, including	registered company procurement
justifying the investment in the	employee costs
dewatering screen, filter press	‣ Foreign exchange gains from
and rigid screening section
selling in US$ and stable ZAR/
	BWP exchange rate
Sales volumes increased by 40%	Operating loss improved to P74	Corporate social responsibility
using the six half-yearly measures	million (2021: loss P85 million),	remains core to Minergy for
since start-up; this equates to a	primarily due to Minergy achieving	communities in and around
25% compound annual growth rate	breakeven in the last quarter,	the mining area
‣ Since inception Minergy has	including individual month	‣ Refer to the Minergy Cares
profitability, cementing a good
sold more than 1 000 000	brochure on the website
foundation for the future
tonnes of coal
‣ Monthly sales volume record	‣ Cash losses improved from
>75 000 tonnes achieved	P74 million to P58 million
in May 2022 on the back of	(a 22% improvement from
destocking and Free-on-Board	2021 and 39% improvement
("FOB") export sales	from 2020)
‣ Sales of larger, more profitable
product sizes into seaborne
thermal coal export markets
‣ Successfully delivering two
FOB vessels from Walvis
Bay and exporting coal via
Zimbabwe to Maputo by rail

Environmental

Social

Social

Social

Financial results

Operational	Financial	ESG
Continuous and effective road	High and increasingly expensive	Citizen Economic Empowerment
maintenance of the public road	finance costs from increased	Plan in place, including using 22
from Medie, albeit expensive,	funding and higher debt	local transporters	Social
allowing minimal interruptions	restructuring rates
during the rainy season and
supported increased road transport
Excellent health and safety	P10 million paid in royalties (2021	Unitary, functioning board
records	P5 million) and P5 million paid	of directors in place
	in withholding taxation which		Governance
	support the local economy
Bolstering of the management	Net cash used in operating	Strong ethical base with
team, including the first female	activities increased to P110 million	Whistleblowing Hotline in place
manager appointed as a process	(2021: P37 million) on the back		Governance
engineer	of increased working capital
	investment contributing a swing of
	P91 million alone from growth in Q4

Looking towards the future, Minergy now operates at production capacity of 125 000 tonnes of Run-of-Mine ("ROM") with stable plant performance and export opportunities favouring a better product mix and pricing

Health and safety

Minergy continues to uphold an outstanding safety record, having had only one minor lost time injury during FY22 the only one since inception. The Company is grateful to be fatality free on the back of strictly managed health and safety systems.

COVID-19 remained a threat, with a total of 138 cases reported since the pandemic's start,

78 of which were recorded during FY22. Thankfully, all staff have fully recovered, and the high vaccination rates limit business interruptions.

Minergy is committed to providing its workers with a safe work environment. As of the end of FY22, 97% of employees were vaccinated.

Financial review

The financial performance for the 2022 financial year is presented below:

As an overview, the Group achieved combined revenue of P425 million (2021: P193 million) with

costs of sales of P484 million (2021: P256 million). Revenue and cost of sales include P128 million

(2021: P26 million) relating to transport and FOB-related recoveries and costs. Operating costs

continued to show a decreasing trend and amounted to P19 million (2021: P23 million). An operating

loss of P74 million (2021: P85 million) was recorded, while the cash or EBITDA loss was P58 million

(2021: P74 million). Finance costs remain a challenge as a result of the skewed capital structure at

P93 million (2021: P51 million), bringing the net loss after taxation to P131 million (2021: P107 million).

03

Financial results 2022

The challenging market conditions in the first 9 months, resulted in total operating losses of P74 million. The boom in coal prices boosted sales in the fourth quarter. This allowed for breakeven during the final quarter, including first-time achievement of an operating profit during a single month.

Statement of financial position

As at 30 June 2022

Figures in Pula	2022	2021

Assets

Non-current assets
Property, plant and equipment	457 309 038	390 835 008
Deferred tax asset	104 483 623	68 103 074
	561 792 661	458 938 082
Current assets
Inventories	76 277 729	42 632 873
Trade and other receivables	95 392 892	40 941 636
Cash and cash equivalents	9 156 322	911 485
	180 826 943	84 485 994
Total assets	742 619 604	543 424 076
Equity and liabilities
Capital and reserves
Stated capital	165 563 026	165 563 026
Accumulated loss	(376 420 873)	(245 269 838)
Other reserves	30 578 264	23 676 115
Equity attributable to owners of the parent	(180 279 583)	(56 030 697)
Total equity	(180 279 583)	(56 030 697)
Non-current liabilities
Rehabilitation provision	161 665 560	82 498 832
Borrowings	565 017 069	365 377 304
	726 682 629	447 876 136
Current liabilities
Borrowings	17 826 904	17 967 584
Trade and other payables	178 389 654	133 611 053
	196 216 558	151 578 637
Total liabilities	922 899 187	599 454 773
Total equity and liabilities	742 619 604	543 424 076

04

Financial results 2022