RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 JUNE 2018 PRESENTED BY ZANELE MATLALA (CEO) AND KAJAL BISSESSOR (FD)

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1 RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 JUNE 2018 i PRESENTED BY ZANELE MATLALA (CEO) AND KAJAL BISSESSOR (FD) Merafe Resources Ltd Results presentation for the year ended 31 December 2017

2 LEGAL NOTICE/DISCLAIMER This presentation is published solely for informational purposes and does not constitute investment, legal, tax or other advice nor is it to be relied upon in making an investment decision. Information contained herein has been taken from sources considered by Merafe Resources Limited to be reliable but no warranty is given that such information is accurate or complete and it should not be relied upon as such. Views and opinions expressed in this presentation reflect the judgment of Merafe Resources as of the date of this presentation and are subject to change. Merafe Resources Limited will not be responsible for any liability for loss or damage of any kind which arises, directly or indirectly, and is caused by the use of any of the information provided. The entire presentation is subject to copyright with all rights reserved. The information contained herein shall not be published, rewritten for broadcast or publication or redistributed in any medium without prior written consent from Merafe Resources Limited. Prospective investors should take appropriate investment advice and inform themselves as to applicable legal requirements, exchange control regulations and tax considerations in the countries of their citizenship, residence or domicile. The distribution of the information contained in this presentation in certain countries may be restricted by law and persons who access it are required to inform themselves and to comply with any such restrictions. This information does not constitute an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. Past performance is not a guarantee of future performance. The price of shares can go down as well as up and may be affected by change in exchange rates, market conditions and risks associated with a mining venture. 2 Presented by Zanele Matlala (CEO) and Kajal Bissessor (FD)

3 KEY AGENDA 1. Key highlights 2. Market review 3. Operational review 4. Financial review 5. Dividends 6. Outlook 3

4 1 Key highlights 4

5 Pleasing performance within the context of a volatile operating environment Safety 2.4% improvement in TRIFR* from December 2017; Safety remains priority and a critical focus area. Operational 2.3% period on period decrease in production; Production equivalent to installed capacity of 88%; Production cost per tonne increase managed to 4.8%. Market Global stainless steel production grew by 10% to 25.6m tonnes, period on period; Volatile pricing environment as market readjusts; Growth in stainless steel production underpins industry outlook. Financial 5.5% period on period increase in revenue; 12.9% decrease in HEPS to 16.9 cents; Declared interim cash dividend of R200m; Net cash balance of R331m.** * Total recordable injury frequency rate. ** Net cash includes cash and cash equivalents, bank overdraft and working capital loan. 5

6 2 6 Market review

7 China remains the key player in stainless steel, accounting for 50% of global production and 58% of global ferrochrome demand Global Stainless Steel Production (H1 2018) Global Ferrochrome Demand (H1 2018) 22% 20% 6% 6% 50% 5% 5% 58% 11% 15% China Europe Japan USA Other China Europe Japan USA Other Source: CRU 7

8 Sector fundamentals remain strong Global Stainless Steel Production (mt) Global Ferrochrome Demand (mt) mt 6.5 mt mt mt 25.6 mt mt H H H H H H USA Western Europe Japan China Other USA Western Europe Japan China Other Source: CRU 8

9 Ferrochrome production reacted to market conditions; Ore imports into China increased in the first five months Global Ferrochrome Production (mt) Chrome Ore Imports into China (mt) mt mt mt mt 6.5 mt H H H First 5 months 2017 First 5 months 2018 China South africa India Europe Kazakhstan Other Source: CRU 9

10 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul Ferrochrome price environment characterised by some volatility UG2 Metal Bulletin 42% (USD/t) Metal Bulletin Chinese charge chrome 50% (USc/lb) European Benchmark Ferrochrome Price (USc/lb)

11 3 Operational review 11

12 / million hours worked Ensuring the safety of all our employees remains key to building a sustainable production environment Overall, TRIFR improved by 2.4% to 3.65 compared to December 2017; Safety remains the number one priority for the Venture with a goal of achieving zero harm; Education and good decision making are key to building a sustainable safety culture. 5 Total Recordable Injury Frequency Rate (TRIFR) H FY 2016 H FY 2017 H

13 Reaping rewards of initiatives undertaken to drive efficiency Ferrochrome production decreased by 2.3% period on period to 211kt; The production for the period is equivalent to an installed capacity of 88%; Venture s operations were not significantly impacted by the electricity supply constraints; Wage negotiations East - successfully implemented West - ongoing Total Ferrochrome Production (kt) H H H H H

14 Total costs well managed within a high mining inflation environment Total costs per tonne of ferrochrome produced increased by 4.8% compared to 31 December 2017 with key contributors being: Increase in reductant prices due to change in mix; Increases in electricity prices of 5.3%, effective 1 April C3 Production costs can be broken down into the following main categories: H FY % 15% 35% 33% 16% 16% 22% 14% 23% 13% 14

15 4 15 Financial overview

16 Increase in revenue and healthy profit 5.5% increase in total revenue period on period to R2.7bn 2.6% Ferrochrome revenue + Higher sales volumes - Stronger Rand - Lower prices 27.1% Chrome ore revenue + Higher prices - Lower sales volumes - Stronger Rand 3500 Ferrochrome Revenue R'm 600 Chrome Ore Revenue R'm 25 HEPS (cents) H H H H H H H H H H H H H H H

17 R'million EBITDA reconciliation to profit (18) (204) (3) (184) Merafe's 20.5% EBITDA from the Venture Corporate costs Depreciation Net financing cost Current tax expense Deferred tax income Profit 17

18 Continue to drive efficiencies H H H R m R'm R m Ferrochrome revenue Chrome ore revenue Foreign exchange gain/(loss) 103 (50) (23) Operating expenses (1) (2 009) (1 643) (2 468) Merafe EBITDA Merafe corporate costs (2) (18) (22) (18) Depreciation (3) (204) (165) (203) Net financing (costs)/income (4) (3) (24) 5 Current tax expense (5) (184) (282) (129) Deferred tax income/(expense) (6) (45) Profit after tax HEPS (cents) H versus H1 2017: (1) Other operating expenses Higher sales volumes and increase in operating costs. (2) Merafe corporate costs Decrease due to lower CSI spend in (3) Depreciation Driven by accelerated depreciation arising from the scrapping of assets and the reassessment of residual values to zero in the second half of (4) Net financing (costs)/income Driven by lower debt levels. Includes unwinding of discount on rehabilitation provision. (5) Current tax Current tax decrease reflects lower taxable income. (6) Deferred tax Deferred tax income due to temporary and timing differences on property, plant and equipment, the embedded derivative and provisions. 18

19 Strengthening of the balance sheet enables greater flexibility in the future As at As at 30 June 31 December R'000 R'000 Current assets Inventories (1) Trade and other receivables (2) Cash and cash equivalents Total current assets Total assets (1) Inventories Increase mainly due to higher finished goods on hand as result of production being higher than sales and higher production costs; Finished goods on hand is about four to five months of sales. (2) Trade and other receivables Driven by weaker closing Rand/USD exchange rate; Earlier than expected receipts in December Historical Venture working capital movements (Merafe s portion) R million H H H H H H H H H Significant volatility in working capital arising from Exchange rate fluctuations; Pricing; Volumes; Seasonality; Composition of sales (Chinese versus non-chinese) 19

20 R'million Reconciliation of net cash * (174) (226) (28) Opening Cash from operating activities Sustaining capex Dividend Exchange rate fluctuations Closing * Cash from operating activities plus movement of working capital loan. 20

21 Remarkable reduction in debt levels over three year period (200) (400) (600) (800) (1,000) (1,200) Net cash/(debt)⁴ R million 2015 H H H H H H H1 Merafe and Working Merafe Head At 30 June 2018 Venture Cash Capital loan Office debt Total R'm R'm R'm R'm Closing net cash/(debt) Total facilities (337)¹ (281)² (200)³ (818) Total facilities utilised Headroom (327) (281) (200) (808) ¹Merafe s 20.5% of the Venture s $120 million overdraft facility ²Merafe s 20.5% of the Venture s $100 million working capital loan ³Unsecured, 3 year Revolving Credit Facility at Merafe level concluded with ABSA in H Net cash/(debt) includes cash and cash equivalents, bank overdraft, working capital loans and debt. 21

22 5 Dividends 22

23 R million Record interim dividend % 45% 40% 47% % 30% 25% 20% 23% 33% 15% 16% % H H H H H H H % 0% H Dividend as a percentage of profit 23

24 Dividend guidelines At least 30% of headline earnings; Special dividend/share buy-backs dependent on cash position; Excess cash above R50m at Merafe level to be distributed to shareholders; R50m retained to fund head office costs; Merafe portion of the cash in the venture of between R100m and R200m retained to fund working capital and sustaining capex. 24

25 6 Outlook 25

26 Outlook Stainless steel production is currently forecast to grow in excess of 3.5% per annum over the next 3 years; Volatile pricing and exchange rate environment continue; Remain committed to maximising shareholder returns. Source: CRU 26

27 QUESTIONS? i Merafe Resources Ltd Results presentation for the year ended 31 December 2017