PTA-AFR: Half-yearly financial report according to article 125 BörseG

SunMirror Group

Interim Report 2023/24 consisting of Group Management Report and

Condensed Interim Consolidated Financial Statements for the six months ended 31 December 2023

SunMirror Group

Group management Report for the six months ended 31 December 2023

Table of Contents

• 1 Economic environment.................................................................................................................................... 5

  • 1.3.1 Gold ...................................................................................................................................................................... 8

  • 1.3.2 Lithium ............................................................................................................................................................... 11

  • 1.3.3 Iron Ore ............................................................................................................................................................ 16

• 2 Business Development ....................................................................................................................... 20

• 3 Earnings and Balance Sheet Analysis ........................................................................................... 25

• 4 Company Structure ............................................................................................................................... 30

• 5 Risk Report ................................................................................................................................................. 32

• 6 Accounting, Control and Risk Management Process ........................................................... 36

• 7 Disclosures in accordance with Section 243a para 1 UGB .................................................. 37

• 8 Outlook for the coming business year ................................................................................................. 39

• 1 Economic environment

  Executive summary

• • World economic growth remains relatively soft, weighed down by tighter financial conditions; central banks in the major Western economies continue to clamp down on inflation, which appears to be easing in some nations. The IMF's latest forecasts (October) are largely unchanged. However, concerns around a hard landing in the US have eased considerably and the outlook for China has improved, given stronger than expected economic results and the Government taking further measures to stabilise the nation's residential property sector. Both developments help the outlook for resource and energy commodity demand.

• • Strong infrastructure and manufacturing sector capital expenditures as well as rising motor vehicle exports have helped sustain Chinese steel production in the face of falling residential construction. Steady world steel output and low Chinese iron ore inventories recently helped push iron ore prices above US$120 a tonne. Other bulk commodity prices also remain high in historical terms. Improving supply is expected to see bulk commodity prices drift down in the outlook period.

• • To date, there has been very limited impact of the conflict in the Middle East on the global economy and energy prices. After repeated OPEC+ supply cuts, world oil stocks remain relatively low, keeping oil prices more vulnerable to supply shocks. Worries that the Hamas-Israel conflict could cause a disruption to Middle East oil and LNG supplies sparked a rise in energy prices early in Q4 2023 but weak world demand and the absence of any fallout on Middle East oil supply has helped move oil and LNG prices back close to pre-conflict levels.

• • Reduced global supply of energy commodities following the implementation of Russian sanctions has raised the vulnerability of gas/LNG/coal prices to supply outages and demand spikes. As such, there is more uncertainty than in the past around how energy prices may develop through the Northern Hemisphere winter and summer demand peaks. However, stockpiles of gas in Europe were high heading into winter. Likewise, high stocks of thermal coal in China and Europe have seen thermal coal prices come down.

• • There has been a surge in uranium prices in recent months. New supply problems have added to the impact of hoarding and, on the demand side, some nations continue to favourably reconsider the role nuclear power can make in meeting their 'net zero' targets and ensuring their energy security.

• • Lithium prices have fallen further from their record peak in late 2022. Driving the fall has been concerns about short term demand for electric vehicles and ongoing increases in lithium supply. Export volumes of Australian lithium ores and chemicals are still expected to grow strongly over the outlook period, with lithium hydroxide set to account for a rising share of those exports. The long-term outlook for lithium demand remains strong, as does Australian lithium producers' ability to compete.

Macroeconomic Environment

Summary

• • Global industrial production and manufacturing activity have continuedto soften in H2 2023, due to falling goods demand in major economies.

• • The core outlook for global growth in 2024 has weakened slightly, with the balance of risks surrounding the outlook remaining tilted to the downside. As inflation returns to target levels, central banks will be able to adopt less restrictive stances, allowing growth to pick up in 2025.

• • Despite better-than-expected growth in the Q3 2023, key downside risks challenge China's growth outlook, including ongoing issues in the real estate sector.

GDP Growth Forecasts (below)

The world economy is growing at a relatively slow rate

The world economy remains relatively subdued, mainly due to tighter monetary conditions adopted by most central banks over the past twenty months. Over Q4 2023, most Western central banks have kept a tightening bias to cut inflation and anchor inflation expectations. Services inflation in the West remains high, due to tightness in labour markets. Forecasts are for OECD economic growth to slow and labour market tightness to ease, so that services inflation should fall, giving central banks scope to withdraw their current restrictive monetary stance.

There are signs that China's economic growth has steadied at relatively low levels as Beijing rolls out more measures to stabilise China's residential property sector. The relatively slow rate of economic growth in China is causing higher unemployment - especially among young people - and deterring foreign investment: with slow company sales, Chinese equities are weak, and high/rising interest yields in the West are also causing capital flows away from China, where official rates are falling. In the Q3 2023, China recorded negative foreign direct investment (of US$11.8 billion) for the first time since 1998. Nevertheless, there are pockets of strength: the Chinese steel and auto sectors have proven significant sources of demand for resource commodities in recent months. Chinese steel output has been assisted by higher infrastructure spending in China and strong steel exports. Chinese auto exports have risen six-fold in the past 3 years to 4.2 million a year. China recently overtookGermany as the world's 2nd biggest car exporter.

The IMF expects global economic growth of 3.0% in 2023 and 2.9% in 2024, down from 3.5% in 2022. Growth in developed nations is expected to slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024. Developing and emerging market economies are forecast to grow by 4.0% in 2023 and 2024. China is forecast to grow by 4.6% in 2024, down from 5.4% in 2023.

Of course, geopolitical developments (the Hamas-Israel conflict, the Russian-Ukraine war, piracy resurgence in the Red Sea, etc) continue to pose downside risks to the outlook for commodity markets.

Source:https://www.industry.gov.au/sites/default/files/2023-12/resources-and-energy-quarterly-december-2023.pdf

World Economic Outlook

The International Monetary Fund (IMF) forecasts the world economy to grow by 3.0% in 2023 and 2.9% in 2024, with growth then rising to 3.2% in 2025). Compared to the July 2023 World Economic Outlook, this represents a downgrade of 0.1 percentage points for 2024 but no change for 2023 and 2025.

Over the next couple of years, the IMF continues to expect a notable divergence to emerge between the performance of Advanced and Emerging economies. The US economy has surprised on the upside with resilient consumption and investment this year, however European economies appear to have slowed substantially in 2023 under the weight of tighter monetary policy.

Weaker consumer demand for goods relative to services over the past year in the US and Europe has weighed on the economic growth of manufacturing exporters - including China, Japan and Korea. Demand for services now also looks to be weakening, with manufacturing in a prolonged slowdown, suggesting a slowing of global growth into 2024.

After recording growth below the global average in 2022, China's economy grew by 5.2% in 2023. Due to stronger-than-expected growth in Q3 2023 and recent policy announcements, the IMF issued a 0.4 percentage point upgrade to China's growth outlook in November to 4.6% in 2024.

While global growth forecasts were only revised marginally from the July update, the IMF stated the balance of risks is less negative than it was in April, however it is still tilted to the downside.

Headline and core inflation measures have continued to moderate in most economies in recent months, but they remain above central bank targets, as do near-term inflation expectations. There is a risk that ongoing labour market tightness and further drawdown of excess savings in some nations could see inflation fail to return to central bank targets, or even rebound. This would lead to monetary policy staying restrictive, constraining economic growth.

An additional risk to global growth the IMF has emphasised is the potential for China's economic recovery to disappoint, or its financial stability to worsen if the property downturn continues.

Source:https://www.industry.gov.au/sites/default/files/2023-12/resources-and-energy-quarterly-december-2023.pdf

Relevant Commodity Markets

1.3.1

Gold

Summary

• • After averaging US$1,930 an ounce in Q3 2023, gold rose to above US$2,000 an ounce in November following the onset of conflict in the Middle East. Prices are forecast to remain elevated but soften gradually to average around US$1,830 an ounce in 2025.

• • Australian gold production decreased to 72 tonnes in Q3 2023 due to lower grades, planned maintenance and several mines put in care and maintenance. Production is forecast to be steady due to project delays.

• • Higher volumes will lift exports to A$27 billion in 2023-24 from A$24 billion in 2022-23. Price falls will then cut exports to A$21 billion in 2024-25.

Gold consumption to grow over the medium-term

Rising jewellery consumption and a recovery in demand for high tech manufacturing are expected to drive world gold consumption, which is forecast to stabilise below recent elevated levels, reaching about 4,450 tonnes by 2025. Investment demand is forecast to steady above 2023 levels and average about 1,100 tonnes over the forecast period. As inflation eases towards central bank targets, interest rates are assumed to decline over the medium-term. If interest rates are cut faster than inflation declines over the medium-term, this will support institutional investment and retail demand through lower real interest rates.

Official sector demand is forecast to ease from recent record levels, but remain relatively high, to about 700 tonnes a year by 2025. Buying is expected to be driven by emerging market central banks, who will continue their long term aim to diversify their reserves with gold. According to World Gold Council data for declared gold purchases, Russia added 31 tonnes to official reserves in 2022. Given ongoing sanctions on foreign exchange andrestricted access to its foreign reserves, Russian official sector demand will likely be strong over the outlook period.

World supply increased in Q3 2023

World gold supply increased by 6.4% year-on-year to about 1,270 tonnes in Q3 2023, driven by both higher mine production and increased recycling.

Global mine production rose to a record 971 tonnes in the Q3 2023. Growth was led by increased production from the major producers.

In Australia - the world's third-largest gold producing nation - output decreased by 2.5% year-on-year in Q3 2023, to 73 tonnes. Australian mine production fell due to lower mine grades, planned maintenance and several mine closures.

Gold recycling in Q3 2023 rose year-on-year to 289 tonnes, largely due to stronger gold prices in China and India.

World supply to stabilise as mine supply growth slows

Global gold supply is forecast to stabilise above 4,800 tonnes in the period to 2025, with increasing world gold mine production offset by decreasing supply from recycling activity.

World gold mine production is forecast to rise by 1.4% a year on average by 2025 to 3,780 tonnes, led by gains in Canada, the US, Chile and Brazil, while gold recycling activity is forecast to decline on average by 5.4% a year by 2025, due to lower forecast gold prices.

World Gold Supply (below)

Gold prices surged in October 2023 on geopolitical concerns

Rising bond yields tend to decrease gold's appeal to institutional and retail investors as a secure asset to hedge against inflation or other risks. However, the relationship between real bond yields and gold prices weakened sharply following the Russian invasion of Ukraine - as prices were lifted by heightened safe-haven demand for gold. This has persisted as a driver since, muting the effect of rising interest rates.

The LBMA gold price is estimated to have averaged about US$1950/oz over 2H 2023 - 13% higher than in 2022. Price support has come from ongoing strength in central bank purchasing, economic uncertainty and geopolitical risk.

Prior to the conflict in the Middle East, pressures from surging bond yields and a strong US dollar were pushing gold prices lower - declining by 6.4% over 2 weeks to a low of US$1,820/oz on 5 October.

The gold price rose sharply after the Hamas-Israel conflict started, reaching the US$2,000/oz mark in late October on strong safe-haven demand, falling US Treasury yields and a weakening US dollar. On 3rd December 2023, gold prices surged to US$2,100 an ounce, a new record high.

US and Australian dollar gold prices (below)

Gold exploration expenditure declined in Q3 2023

Australia's gold exploration expenditure decreased by 12% year-on-year to $334 million in Q3 2023. As a result, gold's share of Australian mineral exploration expenditure declined to 29% in Q3 2023, down from 35% a year earlier. This decline in exploration occurred despite high Australian gold prices, which have historically motivated high exploration expenditure. Western Australia remained the centre of gold exploration activity in Australia, accounting for 72% of total gold exploration expenditure.

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