Commentary

The unaudited condensed consolidated financial results for the six months ended 30 June 2023 are presented below.

Rounding of figures may result in minor computational discrepancies of the tabulations.

Merafe's revenue and operating income are primarily generated from the Glencore-Merafe Chrome Venture ("Venture"), which is one of the global market leaders in ferrochrome production, with a total installed capacity of 2.3 million tonnes of ferrochrome per annum. Merafe shares 20.5% of the earnings before interest, taxation, depreciation and amortisation ("EBITDA") from the Venture. Merafe has one reportable segment being the mining and beneficiation of chrome ore into ferrochrome and the extraction of associated minerals. As a result, no segment report has been presented.

Merafe's share of the revenue from the Venture increased by 11% from the prior period to R4 764 million (June 2022: R4 291 million).

Ferrochrome revenue increased by 5% from the prior period to R3 792 million (June 2022: R3 614 million) primarily as a result of an 18% weakening of the average ZAR:USD exchange rate over the period. This was partially offset by a 10% decrease in the average net cost, insurance and freight (CIF) prices and a ferrochrome sales volume decrease of 1% to 177kt (June 2022: 180kt) over the reporting period. Chrome ore revenue increased by 49% from the prior period to R936 million (June 2022: R630 million), driven by an 8% average sales price increase over the period, a weaker ZAR:USD exchange rate and a 17% increase in chrome ore sales volumes to 201kt (June 2022: 172kt). Platinum Group Metals ("PGMs") concentrate sold over the period, generated revenue of R35 million (June 2022: R46 million). This was negatively impacted by a weakening in the average basket price of PGMs.

Merafe's portion of the Venture's EBITDA for the six months ended 30 June 2023 is R1 581 million (June 2022: R1 397 million). The EBITDA includes Merafe's attributable share of standing charges of R82 million (June 2022: R32 million) and a foreign exchange gain of R148 million (June 2022: R27 million). The R1 million (June 2022: Rnil) write down of inventory during the six months ended 30 June 2023 was negligible. The diesel rebate matter with the South African Revenue Services ("SARS") as disclosed in the Company's Integrated Annual Report for the year ended 31 December 2022, continues. Accordingly, the disallowed amount (inclusive of interest payable to SARS) of R24 million (June 2022: R21 million) continues to be fully provided for at the period end.

After accounting for corporate costs of R33 million (June 2022: R24 million), which include a cash-settled share-based payment expense of R3 million (June 2022: R7 million), Merafe achieved EBITDA of R1 548 million (June 2022: R1 373 million). Corporate costs also include a bonus provision of R5 million (June 2022: R6 million).

Earnings for the six months ended 30 June 2023 amounted to R1 049 million (June 2022: R925 million), after taking into account depreciation and amortisation of
R116 million (June 2022: R106 million), net financing income of R21 million (June 2022: R10 million) and taxation expense of R414 million (June 2022: R354 million). The increase in depreciation is due to depreciation on new assets procured over the reporting period. An impairment assessment on property, plant and equipment was performed at period end, resulting in no cash-generating unit impairment adjustments for the period. Additionally, there was no specific asset impairment loss for the period (June 2022: Rnil). Taxation includes a deferred tax expense of R125 million (June 2022: R48 million), which arose primarily as a result of temporary differences on property, plant and equipment as well as those relating to provisions and accruals. There is no unredeemed capital expenditure balance as of 30 June 2023 (June 2022: Rnil) as taxable profits exceeded capital expenditure.

Income of R9 million (June 2022: R1 million), being Merafe's proportionate share of the income from an associate of Unicorn Chrome (Pty) Ltd, was recorded for the period.

Sustaining capital expenditure increased by 56% to R222 million (June 2022: R143 million) as a result of capital expenditure rolled over from the previous years and price increases. Expansionary capital expenditure of R5 million (June 2022: R12 million) includes R0.3 million spent on the PGMs processing plant.

The unsecured credit facility with ABSA of R300 million remained unutilised at period end.

At 30 June 2023, Merafe had cash and cash equivalents of R1 604 million (December 2022: R1 269 million), which comprised cash held by Merafe of R325 million
(December 2022: R617 million) and R1 279 million (December 2022: R652 million), being Merafe's share of the cash balance in the Venture and Unicorn Chrome. The cash held by the Venture for rehabilitation is not restricted cash but has been set aside to fund future environmental rehabilitation obligations. Merafe's share of this cash is
R315 million (December 2022: R301 million) and is included in its share of the cash in the Venture of R652 million (December 2022: R652 million) referred to above. The restricted cash of R7 million is not available for general use by the Group and is held in a trust bank account for the rehabilitation of the Kroondal mine.

Trade and other receivables increased by 35% compared to the 31 December 2022 balance primarily as a result of a weaker closing ZAR:USD exchange rate. The ZAR:USD exchange rate closed at R18.85 as of 30 June 2023 (December 2022: R17.00).

Ferrochrome finished goods volume of 116kt (June 2022: 99kt) represents approximately three to four months of sales. The closing inventory value increased to
R2 412 million (December 2022: R2 373 million) due to higher production costs and production exceeding sales volumes.

The board of directors ("Board") has declared an interim gross cash dividend of 20 cents (June 2022: 12 cents) per share.

The Venture was fatality free for the 2022 financial year and remains so for the first six months of 2023 ("H1 2023"). Our total recordable injury frequency rate improved by 17% to 2.00 (December 2022: 2.40).

The safety of our employees is our number one priority, and we therefore remain focused on the implementation of SafeWork 2.0 with the aim of continual improvement and the effective implementation of the fatal hazard protocols. Additional to these initiatives, a specific focus this financial year is quality assurance and verification activities on our systems and standards.

COVID-19 controls remain a focus, however, we have seen a reduction in positive cases recorded and COVID-related deaths.

A total of 72 564 tests have been conducted on-site since we started carrying out tests in January 2021. For H1 2023, only 79 positive cases have been reported.

We are pleased to report that no new COVID deaths have been recorded in the 2023 financial year.

Environmental, Social and Governance (ESG) compliance remains one of our important pillars in terms of how we conduct business. Our Health, Safety, Environmental, Community and Human Rights Standards were introduced in 2021 and rolled out in 2022 enabling us to be a responsible producer. We are a member of the International Council on Mining and Metals ("ICMM") and we subscribe to the mining principles, comprising ten sustainable development principles and eight position statements that include specific commitments on issues ranging from biodiversity to water management, public reporting on performance and obtaining independent assurance that members meet the ICMM commitments.

The Venture's decarbonisation objectives are aligned with those of Glencore plc Group. Our portfolio profile provides the flexibility to decarbonise our footprint with a target of achieving a 50% reduction in our total CO₂e emissions by 2035 against our 2019 Baseline. Some of our strategic elements towards achieving our target include managing our operational footprint as well as taking advantage of opportunities to reduce our scope 3 emissions.

Merafe's attributable ferrochrome production decreased by 9% from 203kt to 185kt for the six months ended 30 June 2023. The reduction is mainly due to the planned pullback in production over the winter months. Only the Lion smelter will be operating during this high electricity demand season of elevated power prices. The operations were also impacted, to a lesser extent, by stage 3 and 4 electricity load curtailments over the six months ended 30 June 2023.

Lydenburg smelter, Rustenburg furnace 6 and Waterval mine remain under care and maintenance for the foreseeable future.

The total unit cost of ferrochrome production increased by 17% from December 2022. The increase was driven by general inflation, higher chrome ore market cost and higher reductant costs.

Reductant costs were impacted by higher market prices and inadequate local supply, which necessitated some imports of coke.

Electricity tariffs increased by 19% effective 1 April 2023. The reliability of the electricity supply continues to be a risk for the business.

Logistics challenges continue with not much improvement in rail availability. The chrome industry and Transnet Freight Rail continue to collaborate on improving rail performance.

The disposal of the Boshoek mine is in its final stages and its conclusion rests largely on receipt of regulatory approvals.

There were no material changes to the Mineral Resources, Mineral Reserves and mining rights of the participants in the Venture from those reported in the Company's Integrated Annual Report for the year ended 31 December 2022.

Global stainless steel production decreased by 2%¹ year-on-year during H1 2023 as growth in China and India was more than offset by a slowdown in the rest of the world. Europe experienced a 9%¹ decrease in melt rates while the USA saw a 14%¹ decline. Indonesia, which has been a significant source of growth in the past years, experienced a 19%¹ decline in production during H1 2023. Surplus ferrochrome supply was directed to China due to a lack of demand elsewhere in the world.

Chrome ore prices remained elevated during H1 2023 due to a lack of supply growth and continued logistics constraints out of South Africa, which represents over 90%³ of global seaborne trade. Regions outside of South Africa have seen no meaningful supply growth despite elevated prices.

The average European ferrochrome benchmark price was US cents 161² per pound in H1 2023, which represents a decrease of 2%² from the average price for the six months ended 31 December 2022.

Some key trends that are shaping the environment in which we operate are:

• Economic uncertainty that is characterised by rising inflation, interest rates and trade tensions. This uncertainty is making it difficult for businesses to make long-term plans, and it also leads to volatility in the markets.
• The shift to a more sustainable economy. The global market is increasingly focused on sustainability, and businesses are under pressure to reduce their environmental impact. The Venture has embraced this initiative and incorporated sustainability initiatives into strategic plans. Our green energy initiatives are a key part of these plans.
• Technological innovation has a major impact on the global market, as new technologies are being developed that are changing the way we do business. For our business, the key benefits of innovation are efficiencies and the safety of our employees.

Our business is not immune to the impact of these trends which are firmly on management's radar.

Local challenges, which include power shortages, energy costs and logistics constraints continue to be monitored by the Venture and mitigated in the best ways possible.

We expect the second half of 2023 ("H2 2023") to be softer on a weaker market outlook. Downward pressure on chrome ore prices, which have started coming down, is expected to translate to lower ferrochrome prices. Given the forecast inflationary pressures, our margins are at risk of being squeezed in H2 2023.

The Venture plans on producing ferrochrome only at the Lion smelter over the three-month high electricity demand winter season, a period of elevated power prices. This will assist with managing costs and lowering inventory levels as sales units are expected to be drawn down from inventory.

We remain cautious in our approach to the remaining six months of the year and will continue to focus on efficient operations, cash preservation, cost control and efficient capital allocation.

We are committed to creating shared value for our stakeholders.

Sandton
15 August 2023