The Merafe Board is responsible for our governance of risk and for setting levels of risk tolerance. It has tasked the Audit and Risk Committee with assisting the Board in carrying out its risk responsibilities. The process of risk management has been delegated to management and the Audit and Risk Committee, acting on behalf of the Board, ensures that there is ongoing assessment and monitoring of our risks. The Merafe Executive Committee is accountable to the Board for designing, implementing and monitoring Merafe’s risk management processes and senior managers are responsible for effectively managing risks within their respective areas of responsibility.

Merafe’s risk management policy and framework describe our risk management philosophy, approach and process and guides the implementation of our risk management process in a uniform manner across the Company.

Certain risks are inherent in a mining business and these need to be managed effectively. The Venture’s risk management system allows it to pursue business opportunities and grow shareholder value, while at the same time developing and protecting its people, assets, environment and reputation. Its processes are defined within a risk framework that is well understood across its operations.

Both Merafe and the Venture undertake comprehensive quarterly risk reviews, the results of which are included in their annual business plans and regularly reviewed.

The Board will continue in 2026 to focus on the principal risks set out hereunder and also attempt to identify any further emerging risks in a fast-changing environment.

This summary should be read in conjunction with material issues set out in this report.

Principal risks

Our principal risks, which include risks related to the Venture, are the following:

• South African ferrochrome smelters face significant risks mainly related to increased ferrochrome production from China, volatile global chrome prices, and rising production costs, particularly associated with electricity. These risks, threaten permanent closure of the ferrochrome smelting industry in South Africa. The Venture is actively collaborating with various governmental and other stakeholders to identify viable and impactful interventions. It is crucial for smelters to pursue strategies that effectively mitigate these risks to ensure their long-term viability.
• The possible negative impact on our earnings of commodity price volatility, currency exchange rate fluctuations and the health of the global economy. Controlling costs is the most effective manner to weather such volatility and the Venture prides itself on being a low-cost producer and cost control is a key management performance measurement.
• Managing costs and the availability of reliable and competitively priced energy supply is critical to the Venture’s ability to operate. The Venture has an ongoing programme and is engaged with various governmental departments to assess and monitor energy-related risks, including scenario analyses. We also manage the risk by implementing energy‑efficiency plans and assessing the risks associated with energy supply at the design phase of our projects. While the conclusion of the NPA with Eskom brought about price certainty for electricity at the Venture’s smelters, the tariff remained much higher than our key competitors. Engagements with various stakeholders are in progress and are aimed at finding avenues to make electricity tariffs more competitive for South African smelting businesses.
• The Venture’s development of cost-efficient proprietary technology plays a significant part in its cost reduction. We are also engaging with government regarding carbon taxes and electricity costs. The preventative actions the Venture takes to reduce the impact of such volatility, which include managing production levels, scaling down mining and smelting activities during downturns in global demand are described in the principal risks and uncertainties table.
• The Venture operates in a high-risk safety environment, with potential injuries, illnesses and fatalities being inherent to the Venture’s operations. As such, the Company is subject to extensive health, safety and environmental regulations and legislation as well as community expectations. The Venture has invested heavily in workplace safety training, programmes and initiatives to promote and reward safe behaviour at all of our operations by all of our employees and has adopted a zero-tolerance policy for non-adherence to these requirements. The Venture constantly monitors diseases that could affect the health and safety of employees and/or pose major healthcare challenges for our industry. Additionally, these diseases could have a negative impact on the Venture’s operations and profitability. The Venture gives these issues priority and significant resources are committed to providing a safe and healthy workplace, keeping our impact on the environment to a minimum and addressing the impact of any occupational health and safety concerns on our employees and the communities in the vicinity of our operations.
• A possible tailings facility/dam failure, as well as any insufficient capacity at any of the facilities represent significant risks to the operations and reputation of the Venture. Our tailings dams are regularly monitored by competent engineers to ensure that any risks of failure are detected promptly to allow corrective measures to be implemented. Capacity monitoring technologies are also employed to ensure that sufficient capacity is available as and when required.
• The Department of Water and Sanitation is planning on the implementation of substantial increases in water tariffs over the next three to ten years with increased requests from governmental institutions for mining houses to invest in water infrastructure to assist in providing a secure water supply. This could increase production costs and limit expansion potential of the Venture’s operations. Actions to mitigate this risk are the implementation of contracts undertaken with water providers, as well as the increase of reservoir facilities to ensure constant supply when water is scarce. The Venture has also successfully reduced its water consumption per tonne of product produced.
• A breach in the Merafe’s or the Venture’s IT system by fraudsters in an attempt to gain confidential information or to sabotage the operation of the Company could result in external parties having access to confidential and sensitive information that can be used against the Company. Furthermore, systems could become unavailable or not function correctly. Merafe and the Venture make significant investments in IT security measures to minimise the risk of potential breaches wherever possible.
• The socio-political and economic climate in South Africa has seen a significant increase in unemployment in the country. This scenario creates opportunities for increased crime and industrial unrest, causing the risk of the Venture not winning broad support for its activities from local communities. Both of these possibilities could result in disruptions affecting our profitability. To reduce these risks, the Venture’s stakeholder engagement and responsiveness efforts play a critical role. In addition, Merafe and the Venture invest in social and labour plan commitments, which include local economic development, healthcare and education projects. We also invest in CSR initiatives.
• Delays or non-delivery of final product to customers could occur should any breakdowns in the supply chain be experienced. Additional storage facilities have been secured at various ports to ensure that stock holdings are available when and as required to meet contractual deliveries.
• Any disruption in the supply of raw materials to the production process could have detrimental consequences on the Venture’s ability to operate. Supply contracts are entered into as far as possible to secure delivery and raw material stock holdings have been increased to ensure that enough is available should an industry shortage be experienced.
• A lack of key and skilled employees within the business to support the transformation strategy of the Venture could result in financial loss and reputational damage. Merafe and the Venture continue to implement management retention strategies and staff training programmes to enhance the transformation of the Group. Investors’ negative perceptions of the South African mining industry’s impact on investors’ appetite for investment in South African mining stocks. Merafe focuses on maintaining relationships with our existing investors and building new relationships. To achieve this our team regularly makes presentations and has discussions with investors and potential investors. We also keep investors informed through our reporting and our website.
• Inability to obtain debt finance due to a downgrading of Merafe’s credit status could adversely affect our financial position. To counteract this risk, we maintain a strong balance sheet, low gearing, a good reputation and relationship with our bankers and have tangible assets to secure financing.
• Empowerment credentials: In this regard see our commentary in the material issues section of this report.