NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

These unaudited condensed consolidated interim results for the six months ended 30 June 2022 have been prepared under the supervision of Ditabe Chocho CA(SA) (Financial Director), in accordance with and containing the information required by IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, and the Financial Pronouncements as issued by Financial Reporting Standards Council, the requirements of the Companies Act of South Africa No. 71 of 2008 and the JSE Limited Listings Requirements.

The unaudited condensed consolidated financial statements are presented in South African Rands, and all values are rounded to the nearest thousand (R'000), except where otherwise indicated.

1.1 Going concern

In determining the appropriate basis of preparation of the interim results, the directors are required to consider whether the Group can continue to be in operational existence for the foreseeable future. The financial performance of the Group is dependent upon the wider economic environment in which the Group operates.

These interim results are prepared on a going concern basis. The Board has undertaken a rigorous assessment of whether the Group is a going concern in the light of current economic conditions taking into consideration available information about future risks and uncertainties. The projections for the Group have been prepared, covering its future performance, capital and liquidity including performing sensitivity analyses. The Group has the benefit of a healthy balance sheet and unutilised debt facilities that are available. The Group's forecasts and projections of its current and expected profitability, taking account of reasonably possible changes in production and performance, show that the Group will be able to operate within the level of its cash resources for at least the next 12 months.

The Board is satisfied that the Group is sufficiently liquid and solvent to be able to support the operations for the next 12 months.

1.2 Accounting policies

The accounting policies applied in the preparation of these interim results are in terms of the International Financial Reporting Standards ("IFRS") and are consistent with those applied in the previous consolidated annual financial statements. The Group did not early adopt any new, revised or amended accounting standards or interpretations.

1.3 Critical accounting judgements and key sources of estimation uncertainty

The preparation of the unaudited condensed consolidated interim results requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates are reviewed on an ongoing basis. Underlying assumptions are also reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised.

Information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the unaudited condensed consolidated interim results are as follows:

• Measurement of depreciation and impairment, useful lives and residual values of property, plant and equipment and intangible assets;
• Inputs used in the determination of the fair value of the share-based payment transactions;
• Lease classification and depreciation of right-of-use assets;
• Assumptions used in calculation of the life of the mines/smelters, estimation of the closure and restoration costs and inputs used in the calculation of the present value of the provision for closure, restoration costs and discount rate applied;
• Fair value measurement of trade receivable subject to provisional pricing;
• Assumptions used in the assessment of expected credit losses on financial assets;
• Estimation of the tonnages extracted in determining the royalty provision;
• Assumptions around joint control of the Venture;
• Impairment of financial assets – The Group determines whether any of the cash-generating units are impaired at each reporting date. This requires consideration of the current and future economic and trading environment and available valuation information, to ascertain if there are indications of impairment to those owned by the Group;
• Inventories – The Group determines whether there is obsolete inventory on an annual basis and adjustments to the net realisable value of inventory; and
• Financial risk management – The Group assesses credit risk, liquidity risk, cash and cash equivalents and trade and other receivables. There has been no material increase in either liquidity risk and own credit risk based on this assessment.

Several of the accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.

Fair values have been determined for measurement and/or disclosure purposes based on the methods as indicated below.

2.1 Trade receivables subject to provisional pricing terms

Trade receivables includes R33.6 million of liabilities (December 2021: R25 million asset) subject to provisional pricing terms which are accordingly accounted for at fair value through profit and loss. Level 2 hierarchy per IFRS 13.

The fair value at the reporting date is based on the latest available ferrochrome prices and closing foreign exchange rate of R16.33.

6.1 Related party transactions and balances

During the current reporting period, management reviewed its related party relationships in accordance with IAS 24: Related Party Disclosures. The Glencore Plc Group is a related party taking into consideration the shareholding and related significant influence coupled with the substance of the relationship. Significant transactions and balances with all entities within the Glencore Plc Group are therefore disclosed together with the comparative figures.

All related party transactions relate to Merafe's attributable 20.5% interest in the Venture. There were no outstanding commitments at period end.

The Group's annualised effective tax rate is 27.7% (June 2021: 28%) for the six months ended 30 June 2022.

During the reporting period, inventory of Rnil (December 2021: R17.4m) was written down.

Merafe had no contingent liabilities as at 30 June 2022.

The directors are not aware of any material events which occurred after the reporting period and up to the date of authorisation of this report that may require adjustment or disclosure in these interim financial statements.

There were no changes to the Board composition during the period.

Notice is hereby given that a gross interim cash dividend of 12 cents per share (June 2021: 7 cents per share) has been declared payable, by the Board, to holders of ordinary shares. The dividend will be paid out of income reserves.

The ordinary dividend will be subject to a local dividend tax rate of 20%. The net local ordinary dividend, to those shareholders who are not exempt from paying dividend tax, is therefore 9.60000 cents per share. Merafe's income tax number is 9550 008 602. The number of ordinary shares issued at the date of the declaration is 2 499 126 870.

The important dates pertaining to the dividend are as follows:

Shareholders will not be permitted to dematerialise or rematerialise their shares between Wednesday, 14 September 2022 and Friday, 16 September 2022, both days inclusive.

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