MMG : ANNOUNCEMENT ON INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

About this update from Mmg Ltd.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. MMG LIMITED 五礦資源有限公司 (Incorporated in Hong Kong with limited liability ) (STOCK CODE: 1208) ANNOUNCEMENT ON INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020 The Board of Directors (Board) of MMG Limited (Company) is pleased to announce the consolidated results of the Company and its subsidiaries (Group) for the six months ended 30 June 2020. The financial information set out in this announcement does not constitute the Group's complete set of the condensed consolidated interim financial statements for the six months ended 30 June 2020, but rather, represents an extract from those condensed consolidated interim financial statements. The financial information has been reviewed by the Company's Audit and Risk Management Committee and the Company's auditor. The unaudited consolidated interim results of the Group are annexed to this announcement. 1 MMG RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020 KEY POINTS MMG continues to proactively respond to the COVID-19 pandemic, with no cases identified to date at an MMG operation and all sites operating continuously since the outbreak began. Net loss after tax of US$182.7 million, including a loss of US$158.0 million attributable to equity holders of the Company. The loss was primarily attributable to factors associated with COVID-19, specifically lower commodity prices and lower sales volumes, in particular at Las Bambas. EBITDA of US$383.6 million was 41% lower than the first half of 2019. Total copper and zinc production of 168,938 and 113,071 tonnes respectively. Improved C1 cost performance, reflecting an ongoing focus on operating efficiency and cost discipline. Lower C1 unit costs compared to the first half of 2019 were recorded at all sites, except Las Bambas which was impacted by lower production volumes, due largely to COVID-19. MMG's net debt increased by US$69.6 million during the six months ended 30 June 2020. The higher net debt was primarily attributable to the adverse impacts of COVID-19 and community action, on sales volumes, commodity process and ultimately, operating cash flow. Las Bambas produced 131,697 tonnes of copper in copper concentrate in the first half of 2020. EBITDA of US$333.2 million was 38% below the first half of 2019. This result was largely attributable to lower copper prices. Sales volumes for the period were also impacted by community roadblocks that took place in the first quarter and COVID-19 transport restrictions. Kinsevere produced 36,505 tonnes of copper cathode in the first half, 26% higher than the first half of 2019. This reflected a shift to mining at the Central pit, and together with processing cost savings, delivered EBITDA of US$13.4 million. This result, which was 56% above the same period in 2019, was achieved despite lower commodity prices. Dugald River recorded EBITDA of US$9.1 million during the first half of 2020, significantly below the result for the first half of 2019. The impact of increases in zinc and lead sales of 19% and 33% respectively, was offset by lower commodity prices. Rosebery produced 33,894 tonnes of zinc in zinc concentrate during the first half of 2020. EBITDA of US$48.5 million represented a 24% decrease on the first half of 2019. This was largely due to lower zinc and lead prices and lower production volumes as ore grades decline in deeper areas of the mine. The Board did not recommend the payment of a dividend for the period. Despite challenges associated with the COVID-19 pandemic, MMG maintains is original guidance for copper cathode production at Kinsevere of between 68,000 and 75,000 tonnes, and zinc production at Dugald River and Rosebery of between 225,000 and 245,000 tonnes. Guidance for Las Bambas has been withdrawn. 2 MMG RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020 CONTINUED SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % US$ MILLION US$ MILLION FAV/(UNFAV) Revenue 1,191.4 1,387.4 (14%) EBITDA 383.6 646.7 (41%) EBIT (23.3) 195.4 (112%) Loss for the period before income tax (243.7) (71.0) (243%) EBITDA margin 32% 47% n/a Net cash generated from operating activities 366.6 290.0 26% Dividend per share - - n/a Basic loss per share US$ (1.96) cents US$ (1.01) cents Diluted loss per share US$ (1.96) cents US$ (1.01) cents 3 CHAIRMAN'S LETTER Dear Shareholders. I would like to thank you for your long-term support of MMG. On behalf of the MMG Board, I am pleased to present the Company's 2020 interim results. In the first half of 2020, the spread of the COVID-19 pandemic across the world has greatly impacted the global economy. Some regions have fallen into recession, and the price of metals and minerals has fluctuated and fallen, affecting the Company's business performance to some extent. Faced with the challenges of a complex external environment, MMG has taken various active measures to strengthen pandemic prevention and control and to manage its operations during this time. In the first half of the year, the total production of copper was 168,938 tonnes and the total production of zinc was 113,071 tonnes, and we achieved an EBITDA of US$383.6 million during the reporting period. The Company continues to adhere to the core value of "safety first", and gives top priority to the safety and health of employees. In response to the COVID-19 outbreak, we actively implemented contingency plans and formulated strict pandemic prevention procedures in accordance with the requirements of the local governments in our operating regions. We conduct comprehensive medical pre-screening of personnel arriving at site in addition to multiple re-examinations during and before shifts. We implemented social distancing and have strengthened hygiene practices and prevention and control measures. To date, there have not been any confirmed cases of COVID-19 in the mines operated by MMG. In the future, we will continue to focus our efforts on the prevention and control of the pandemic and on maintaining safe production. We will make every effort to protect the health and safety of our employees. Across our operations we have taken active and effective measures to ensure continuous production during the pandemic. However, the national emergency that began in Peru in March has seen a shortage of employees at the Las Bambas mine, resulting in a 29% year-on-year decrease in copper output. On the other hand, optimisation of mining operations at the Kinsevere mine has resulted in a 26% increase in the output of copper cathode; the Dugald River mine has increased its mining volume and recovery rate, and its zinc output has increased by 6% compared to the same period in 2019; the zinc output of the Rosebery mine has decreased by 14% year-on-year due to a decline in ore grades and restricted mining areas. Throughout the year we have continued to promote internal reforms and have implemented specific programs focused on reducing costs, conserving cash, increasing labour productivity, reducing the size of the Head Office, and giving mines more resources and responsibilities. We are increasing our presence in China to further strengthen our relationships with major stakeholders, and to seek collaborative opportunities, and we have continuously improved the international management model that we have built over the past decade. While developing the business, we are focused on organic growth and on making full use of the resources at hand. We are committed to building a corporate culture and philosophy that continuously pursues excellence and value, and creates mutual trust and win-win relationships with communities and stakeholders, and we continue to improve the Company's social and environmental performance. China Minmetals Corporation Limited (CMC), the Company's major shareholder, continues to provide strong and enduring support. CMC is China's largest metal and minerals group with mining as its core business. CMC is the most international and has the strongest technological research and development capabilities in China, with extensive influence around the world. In the first half of this year, under the adverse conditions of the pandemic and with a downturn in the industry, CMC, produced operating indicators in line with progress and expectations, and the operating income increased by 10% year-on-year against the trend. As the flagship platform for CMC to develop its metal and mineral resources business, MMG will continue to receive strong support from its major shareholder, continue to develop its high quality assets and improve its competitiveness. Looking ahead to the second half of the year, we believe that the current difficult situation is temporary. As the largest consumer of metal and mineral products, China is gradually showing signs of economic recovery as the pandemic is brought under control. The long-term positive trend remains unchanged which is a key reason for the recent improvement in metal prices. Although the aftermath of the pandemic is still unfolding, resulting in major uncertainties in the market in the short term, we are confident of overcoming the adverse 4 CHAIRMAN'S LETTER impacts of the pandemic. We intend to keep up with the pace of economic development in China and the world and seize opportunities for the rebound in the metal and mining industry, as we continue our efforts to prevent and control the pandemic and ensure safe, healthy and productive operations. We will work with shareholders, employees, partners and other stakeholders, to create a better future together. I would like to thank all shareholders, communities and business partners for their long-term support and my sincere thank you to all employees for their hard work. GUO Wenqing Chairman 5 CHIEF EXECUTIVE OFFICER'S REPORT Dear Shareholders The first half of 2020 has been presented with significant challenges as we have worked tirelessly to manage the impact of the COVID-19 pandemic on our business. While global uncertainty has resulted in weaker commodity prices, our first priority was maintaining safe operations at each of our sites, and ensuring the health and safety of our people, communities and contractors. I am pleased to report that we have been able to sustain continuous production at each site. SAFETY At MMG, our guiding value is safety. During the first six months of 2020 we recorded a Company-wide TRIF of 1.82, which represents an increase of 4% on the 2019 half year result. We remain steadfast in our commitment to eliminating injuries from our workplaces, recognising that every injury has the potential to cause long term effects on those injured, as well as their families. Across the entire business we have placed significant effort and focus on safe task management to ensure that all tasks are properly planned, risks are identified, controls are implemented and that our people have the required training and skills to complete tasks safely. Essential to this is ensuring that our leaders continue to engage with their teams through measures such as regular safety conversations, pre-start meetings, training and shared learnings. As the COVID-19 pandemic continued to spread across the globe in the first half of this year, each of our operating regions faced challenges, with the greatest impacts experienced at our sites in Peru and the Democratic Republic of Congo. We have worked tirelessly to follow local government directions and to prevent the spread of the virus at our sites. We have implemented a broad range of measures to keep our people and communities safe, including enhanced hygiene measures, social distancing, administration of multiple tests for arriving to site, isolation protocols and community support. Additionally, we have worked with families of our people to share safety and prevention measures. I am proud that, to date, we have not recorded any COVID-19 cases at any of our operations, and we are doing everything possible to ensure that we keep it that way. OUR PERFORMANCE In the first half of 2020, MMG's operations produced 168,938 tonnes of copper and 113,071 tonnes of zinc. While it is pleasing that we were able to sustain production at all operations despite the challenges presented by COVID-19, copper production at Las Bambas was impacted by limited workforce availability, community-related disruptions in January and February and conveyor belt repairs in early 2020. Las Bambas produced 131,698 tonnes of copper in concentrate in the first half. The operation's revenue of US$751.2 million was 17% lower than during the same period in 2019. This was primarily driven by lower commodity prices and lower sales volumes. At Kinsevere, copper cathode production was 26% higher than the corresponding period in 2019, at 36,505 tonnes. This result is attributable to the higher mill throughout and higher ore feed grades due to the transition of mining back to the Central pit. Revenue also increased by 12% to US$198.5 million due to higher production and sales volumes. Dugald River produced 79,177 tonnes of zinc during the first half. However, revenue reduced by 26% to US$120.9 million, largely due to the impact of lower metal prices. Production of all metals at Rosebery was impacted by lower mill throughput and lower feed grades as mining activity continued to advance at deeper levels. Zinc production at Rosebery was 33,894 tonnes, while revenue decreased by 16% to US$119.4 million primarily driven by lower commodity prices and sales volumes. 6 CHIEF EXECUTIVE OFFICER'S REPORT The Company has maintained its focus on cost and operational efficiency throughout 2020. This has resulted in improved C1 unit cost performance across all sites during the first half of the year, other than at Las Bambas due to the impact of COVID-19 on production volumes. In the first half, MMG delivered an EBITDA of US$383.6 million which represents a 41% reduction on the corresponding period in 2019. This result primarily reflects the impact of COVID-19, specifically lower commodity prices and sales volumes. The Company's net debt also increased by US$69.6 million due to the impacts of COVID-19 on operating cash flow. Due to ongoing uncertainty related to the impacts of COVID-19 in Peru, we have withdrawn guidance for Las Bambas at this time. Guidance for the production of copper cathode at Kinsevere remains unchanged at 68,000 to 75,000 tonnes and zinc production at Dugald River and Rosebery is expected to be between 225,000 and 245,000 tonnes. OUR FOCUS While managing the impacts of COVID-19 has been our focus for the first half, the management team has also placed significant attention and effort on our longer-term strategy and the transformation of our business. We have implemented cost saving and cash preservation initiatives and have worked to improve the productivity at each of our operations. These initiatives are part of our commitment to building a culture of excellence and an unwavering commitment to achieve the maximum value from out assets. As we look to the rest of the year, we will undoubtedly continue to contend with market volatility and uncertainty due to the global pandemic. However, I am encouraged by some of the positive signs in the recovery of consumption and investment, particularly in China. Global economic recovery and stimulus measures, as well as supply side constraints in copper production, will likely continue to support commodity prices in the near term. Consistent with our value of Safety First, our first priority remains the safety, health and wellbeing of our people and we will continue to leave no stone unturned in protecting our people from the impact of COVID- 19. Across all sites we have developed a range of strategies to maintain production activities or to deliver an efficient ramp up to normal activity levels. I am confident in the strength and resilience of our team and the support of our major shareholder - this dedication and support will ensure that we can emerge as a strong organisation from this global crisis. Finally, on behalf of the MMG management team, I thank our shareholders, communities, contractors and all of our people for their support. Geoffrey (Xiaoyu) GAO Chief Executive Officer 7 MANAGEMENT DISCUSSION AND ANALYSIS RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020 For the purpose of the management discussion and analysis, the Group's results for the six months ended 30 June 2020 are compared with results for the six months ended 30 June 2019. SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % US$ MILLION US$ MILLION FAV/(UNFAV) Revenue 1,191.4 1,387.4 (14%) Operating expenses (778.0) (726.7) (7%) Exploration expenses (8.1) (13.4) 40% Administration expenses (13.6) (11.5) (18%) Other income, net (8.1) 10.9 (174%) EBITDA 383.6 646.7 (41%) Depreciation and amortisation expenses (406.9) (451.3) 10% EBIT (23.3) 195.4 (112%) Net finance costs (220.4) (266.4) 17% Loss before income tax (243.7) (71.0) (243%) Income tax credit / (expense) 61.0 (2.0) 3,150% Loss after income tax for the period (182.7) (73.0) (150%) Attributable to: Equity holders of the Company (158.0) (81.0) (95%) Non-controlling interests (24.7) 8.0 (409%) (182.7) (73.0) (150%) (Loss)/profit attributable to equity holders of the Company MMG's loss of US$182.7 million for the six months ended 30 June 2020 includes losses attributable to equity holders of US$158.0 million and losses attributable to non-controlling interests of US$24.7 million. This compares to a loss attributable to equity holders of US$81.0 million and profit attributable to non-controlling interests of US$8.0 million for the six months ended 30 June 2019. Amounts attributable to non-controlling interests relate to the 37.5% interest in Las Bambas not owned by the Company. The following table provides a reconciliation of reported profit after tax attributable to equity holders. SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % US$ MILLION US$ MILLION FAV/(UNFAV) Profit after tax - Las Bambas 62.5% interest (41.2) 13.3 (410%) Profit after tax - Other operations (50.9) (22.1) (130%) Exploration expenses (8.1) (13.4) 40% Administration expenses (13.6) (11.5) (18%) Net finance costs (excluding Las Bambas) (50.5) (53.7) 6% Other 6.3 6.4 (2%) Loss for the period attributable to equity holders (158.0) (81.0) (95%) 8 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Overview of operating results The Group's operations comprise Las Bambas, Kinsevere, Dugald River and Rosebery. Exploration, corporate activities and other subsidiaries are classified as 'Other'. REVENUE EBITDA SIX MONTHS 2020 2019 CHANGE % 2020 2019 CHANGE % ENDED 30 JUNE US$ MILLION US$ MILLION FAV/(UNFAV) US$ MILLION US$ MILLION FAV/(UNFAV) Las Bambas 751.2 902.2 (17%) 333.2 541.0 (38%) Kinsevere 198.5 176.6 12% 13.4 8.6 56% Dugald River 120.9 163.8 (26%) 9.1 52.5 (83%) Rosebery 119.4 142.8 (16%) 48.5 64.1 (24%) Other 1.4 2.0 (30%) (20.6) (19.5) (6%) Total 1,191.4 1,387.4 (14%) 383.6 646.7 (41%) The following discussion and analysis of the financial information and results should be read in conjunction with the financial information. Revenue decreased by US$196.0 million (14%) to US$1,191.4 million compared to the first half of 2019, mainly due to lower realised commodity prices (US$230.6 million) partly offset by higher sales volumes (US$34.6 million). Unfavourable commodity price variances of US$230.6 million were driven by lower realised prices for copper (US$150.2 million), zinc (US$101.4 million), lead (US$6.9 million) and molybdenum (US$3.6 million). This was partly offset by higher prices for gold (US$23.8 million) and silver (US$7.7 million). Higher sales volumes resulted from higher sales of copper cathode at Kinsevere (US$47.8 million), due to higher production. Higher production and drawdown of existing stockpiles at Dugald River also resulted in higher zinc, lead and by-product sales revenue (US$34.9 million). This was partly offset by the impact of lower payable metal content for Las Bambas sales (US$45.4 million). Rosebery sales volumes were also lower (US$2.7 million), largely due to lower mill throughput and zinc feed grades. With respect to Las Bambas, the combined impact of community blockades in the first quarter of 2020 and the suspension of trucking over March and April due to the COVID-19 pandemic, had a marginal impact on Las Bambas sales compared to the prior year comparative period, which was also impacted by community blockades. REVENUE BY COMMODITY 2020 2019 CHANGE % SIX MONTHS ENDED 30 JUNE US$ MILLION US$ MILLION FAV/(UNFAV) Copper 851.9 985.6 (14%) Zinc 139.7 223.0 (37%) Lead 31.3 35.5 (12%) Gold 98.8 67.9 46% Silver 65.3 54.3 20% Molybdenum 4.4 21.1 (79%) Total 1,191.4 1,387.4 (14%) 9 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Price London Metal Exchange (LME) base metals prices were lower in the six months ended 30 June 2020 compared to the prior corresponding period for all metals, other than gold and silver. AVERAGE LME CASH PRICE CHANGE % SIX MONTHS ENDED 30 JUNE 2020 2019 FAV/(UNFAV) Copper (US$/tonne) 5,490 6,167 (11%) Zinc (US$/tonne) 2,044 2,734 (25%) Lead (US$/tonne) 1,759 1,961 (10%) Gold (US$/ounce) 1,647 1,307 26% Silver (US$/ounce) 16.63 15.23 9% Molybdenum (US$/tonne) 19,886 26,430 (25%) Sales volumes PAYABLE METAL IN PRODUCT SOLD CHANGE % SIX MONTHS ENDED 30 JUNE 2020 2019 FAV/(UNFAV) Copper (tonnes) 172,041 169,744 1% Zinc (tonnes) 105,434 97,583 8% Lead (tonnes) 20,893 19,537 7% Gold (ounces) 57,181 51,983 10% Silver (ounces) 3,943,411 3,715,231 6% Molybdenum (tonnes) 345 901 (62%) PAYABLE METAL IN PRODUCT SOLD COPPER ZINC LEAD GOLD SILVER MOLYBDENUM SIX MONTHS ENDED 30 JUNE 2020 TONNES TONNES TONNES OUNCES OUNCES TONNES Las Bambas 134,635 - - 39,597 1,876,506 345 Kinsevere 36,551 - - - - - Dugald River - 72,917 10,969 - 715,484 - Rosebery 855 32,516 9,924 17,584 1,351,421 - Total 172,041 105,433 20,893 57,181 3,943,411 345 PAYABLE METAL IN PRODUCT SOLD COPPER ZINC LEAD GOLD SILVER MOLYBDENUM SIX MONTHS ENDED 30 JUNE 2019 TONNES TONNES TONNES OUNCES OUNCES TONNES Las Bambas 140,264 - - 37,711 2,052,664 901 Kinsevere 28,764 - - - - - Dugald River - 61,310 8,226 - 505,675 - Rosebery 716 36,273 11,311 14,272 1,156,892 - Total 169,744 97,583 19,537 51,983 3,715,231 901 10 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Operating expenses include expenses of operating sites, excluding depreciation and amortisation. Site expenses include mining and processing expenses, changes in inventories, royalty expenses, selling expenses and other operating expenses. Total operating expenses increased by US$51.3 million (7%) in the first half of 2020, driven by a net unfavourable inventory movement of US$195.2 million. This was primarily attributable to Las Bambas, with an excess of sales over production resulting in a net drawdown of copper concentrate stocks at site which had built up in 2019. The impact of the stock movement was partly offset by lower production costs across all sites (US$140.3 million). Further detail is set out below in the mine analysis section. Exploration expenses decreased by US$5.3 million (40%) to US$8.1 million in the first half of 2020, with expenditure focused on targets in and around existing operations. Administrative expenses increased by US$2.1 million (18%) in the six months ended 30 June 2020 driven by redundancy and other expenses associated with transformation and restructuring initiatives (US$8.1 million). This was offset by lower people costs, consultant spend and travel expenses as a result of headcount reductions and cash preservation initiatives (US$6.0 million). Other income/(expenses) had a US$8.1 million unfavourable impact on EBIT in the first half of 2020. This compares to a favourable impact of US$10.9 million in the prior corresponding period, which was primarily attributable to foreign exchange gains. The US$8.0 million unfavourable impact in the current period was largely attributable to foreign exchange losses (US$9.7 million), partly offset by insurance proceeds received (US$2.7 million). Depreciation and amortisation expenses decreased by US$44.4 million (10%) to US$406.9 million in the first half of 2020. The decrease was primarily attributable to lower mining and milling volumes at Las Bambas (US$28.3 million). Depreciation expenses were also lower at Rosebery (US$9.9 million) and Dugald River (US$2.5 million). Net finance costs decreased by US$46.0 million (17%) to US$220.4 million compared to the first half of 2019. The decrease was mainly due to lower London Inter-Bank Offered Rate (LIBOR) applicable to floating rate debt compared with the first half of 2019 (US$26.4 million), together with the impact of lower debt balances (US$17.7 million). Income tax credit of US$61.0 million, represents a US$63.0 million movement from the US$2.0 million income tax expense in the prior year comparative period. This reflects the higher pre-tax loss generated during the six months to 30 June 2020. The effective tax rate for the period to 30 June 2020 was 25.0%, with a prima facie income tax rate from operations of 32.0% partly offset by the impacts of non-creditable withholding tax and non-deductible items. 11 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED MINES ANALYSIS Las Bambas SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % FAV/(UNFAV) Production Ore mined (tonnes) 20,335,240 27,286,512 (25%) Ore milled (tonnes) 19,714,337 24,814,293 (21%) Waste movement (tonnes) 66,499,689 54,076,201 23% Copper in copper concentrate (tonnes) 131,698 185,825 (29%) Payable metal in product sold Copper (tonnes) 134,635 140,264 (4%) Gold (ounces) 39,597 37,711 5% Silver (ounces) 1,876,506 2,052,664 (9%) Molybdenum (tonnes) 345 901 (62%) SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE% US$ MILLION US$ MILLION FAV/(UNFAV) Revenue 751.2 902.2 (17%) Operating expenses Production expenses Mining (105.9) (196.6) 46% Processing (103.1) (118.5) 13% Other (143.5) (152.8) 6% Total production expenses (352.5) (467.9) 25% Freight (transportation) (30.2) (24.1) (25%) Royalties (23.8) (26.4) 10% Other (i) (6.2) 149.5 (104%) Total operating expenses (412.7) (368.9) (12%) Other income/(expenses) (5.3) 7.7 (169%) EBITDA 333.2 541.0 (38%) Depreciation and amortisation expenses (293.7) (322.0) 9% EBIT 39.5 219.0 (82%) EBITDA margin 44% 60% (26%) Other operating expenses include changes in inventories, corporate recharges and other costs of operations. Revenue of US$751.2 million was 17% below the first half of 2019, due to lower realised commodity prices (US$105.7 million) and lower copper (US$32.3 million) and molybdenum (US$13.0 million) sales volumes. Copper concentrate volumes sold in the first half of 2020 (396,407 tonnes) were higher than the prior year comparative period (383,036 tonnes), however metal volumes did decline. Community blockades in the first quarter of 2020 and the temporary suspension of trucking in the second half of March to late April due to the impacts of the COVID-19 pandemic also impacted sales, however on a comparative basis this impact was similar to the impact of the community blockades that occurred in the first of 2019. Despite logistics challenges faced over the first half of 2020, the balance of copper in concentrate held at site has reduced from approximately 50,000 tonnes at 31 December 2019, to 38,000 tonnes as at 30 June 2020. At current 12 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED rates, it is anticipated that drawdown of this stock will extend into 2021. Lower molybdenum sales volumes were largely a result of plant de-bottlenecking works which completed in June 2020. Lower mining costs largely reflect a change in the application of the deferred stripping accounting policy for better alignment between the cost of waste removal activity and timing of the economic benefit of this activity. This change, which has no cash impact, was first adopted in the second half of 2019 and resulted in capitalisation of approximately US$83.0 million of mining costs over the first half of 2020, that would have otherwise been expensed. Of this, US$50.1 million represented additional mining costs due to increased waste material movement compared to the prior year comparative period. The remaining US$32.9 million represents amounts that would have been capitalised in the first half of 2019, had the change in accounting policy been adopted at that time. Further production cost savings of US$32.5 million reflect the rescheduling of maintenance costs (US$26.7 million) through business improvement initiatives and operational disruptions, together with lower mining and milling volumes compared to the first half of 2019, largely due to the impacts of the COVID-19 pandemic. Total operating expenses were unfavourable by US$43.8 million (12%). This was largely due to a net drawdown of finished goods that had built up in 2019 (US$165.2 million), together with increased transportation costs due to higher concentrate volumes being sold. This offset the favourable US$115.4 million impact of lower production costs. C1 costs for the first half of 2020 were US$1.15/lb compared to US$1.12/lb in the first half of 2019. The higher C1 is due to lower copper production volumes, partly offset by lower production expenses and higher by-product credits. On 13 April 2020, the Company withdrew its 2020 guidance for Las Bambas, in response to the inherent uncertainty associated with the impacts of the COVID-19 pandemic. Despite the challenges presented by this event, Las Bambas has continued to operate continuously, albeit with limited workforce availability which has impacted activity levels at site and compliance with the original mine plan for much of the first half of the year. This, together with community related disruptions during January and February, as well as the need for repairs to the overland ore conveyor, have impacted the steady supply of ore to the mill. The situation regarding COVID-19 remains highly uncertain, and the Company continues to work on a range of mine planning scenarios to effectively manage the current situation and ensure an efficient ramp-up towards normal activity levels, as workforce availability improves during the second half. Once greater operational certainty has been restored, updated production and other Las Bambas related guidance will be provided. This will include an update on the medium-term production outlook, including impacts to the development timeline for the Chalcobamba pit, with 2020 still targeted for permitting. 13 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Kinsevere SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % FAV/(UNFAV) Production Ore mined (tonnes) 1,008,322 1,145,610 (12%) Ore milled (tonnes) 1,193,960 1,099,421 9% Waste movement (tonnes) 5,835,523 7,803,373 (25%) Copper cathode (tonnes) 36,505 29,002 26% Payable metal in product sold Copper (tonnes) 35,910 28,764 25% SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % US$ MILLION US$ MILLION FAV/(UNFAV) Revenue 198.5 176.6 12% Operating expenses Production expenses Mining (37.7) (38.3) 2% Processing (41.2) (55.8) 26% Other (53.2) (42.4) (25%) Total production expenses (132.1) (136.5) 3% Freight (transportation) (17.3) (13.3) (30%) Royalties (11.6) (9.5) (22%) Other (i) (20.5) (8.1) (153%) Total operating expenses (181.5) (167.4) (8%) Other income/(expenses) (3.6) (0.6) (500%) EBITDA 13.4 8.6 56% Depreciation and amortisation expenses (59.0) (59.6) 1% EBIT (45.6) (51.0) 11% EBITDA margin 7% 5% 39% Other operating expenses include changes in inventories, corporate recharges and other costs of operations. Kinsevere revenue increased 12% to US$198.5 million compared to the first half of 2019, due to higher production and sales volumes (US$47.8 million), partly offset by lower realised copper prices (US$25.9 million). Copper cathode production of 36,505 tonnes was 26% higher compared to the prior corresponding period. This reflected higher mill throughput, due to sustained plant stability, and a 14.5% increase in ore feed grade (3.25%, compared to 2.83% in the first half of 2019), with the majority of mined ore coming from the main Central pit, after mining at the Mashi pit ceased in mid-2019. Ore mined was 12% below the first half of 2019, due to an extended wet season affecting production in the first three months of the year, and a temporary suspension of mining as a result of the COVID-19 lockdown. This did not impact on processing levels, with ore processed increasing by 9.0%, as mill feed was supplemented by the reclamation of long-term stockpiles and third-party ore. 14 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Total production expenses decreased by US$4.4 million (3.0%) compared to the first half of 2019. Ore processing costs decreased by US$14.6 million (26%) mainly due to better ore quality, with lower gangue acid consuming ore and reduced silica in ore feed from external parties resulting in lower consumption of reagents. Despite reduced mining and waste movement volumes, mining costs remained relatively consistent with prior year comparative period. This resulted from a decision to cease capitalisation of mining costs at Kinsevere from 2020 onwards, with US$12.1 million having been capitalised in the first half of 2019. This decision was taken due to the limited remaining oxide life at the mine. Overall lower production costs were offset by higher other production expenses (US$10.8 million) as a result of expenses incurred to mitigate the risk of COVID-19 at site, increased obsolete stock write-downs and higher customs duty expenses. Increased freight and royalties compared to the first half of 2019, reflect higher sales volumes. Other operating expenses increased by US$12.4 million, mainly due to unfavourable inventory movements as a result of higher reclamation from ore stockpiles. C1 costs for the first half of 2020 were US$1.86/lb, compared to US$2.49/lb in the first half of 2019. The lower C1 is due to increased production, together with lower cash production expenses. Noting the ongoing uncertainty associated with COVID-19, the Company, at this stage, maintains its existing 2020 guidance for Kinsevere, with copper cathode production expected to be between 68,000-75,000 tonnes and C1 costs within the range of US$1.80-US$1.95/lb. Dugald River ) SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % FAV/(UNFAV) Production Ore mined (tonnes) 945,735 846,264 12% Ore milled (tonnes) 947,634 886,128 7% Zinc in zinc concentrate (tonnes) 79,177 74,515 6% Lead in lead concentrate (tonnes) 9,846 10,639 (7%) Payable metal in product sold Zinc (tonnes) 72,917 61,310 19% Lead (tonnes) 10,969 8,226 33% Silver (ounces) 715,484 505,675 41% 15 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % US$ MILLION US$ MILLION FAV/(UNFAV) Revenue 120.9 163.8 (26%) Operating expenses Production expenses Mining (35.1) (32.8) (7%) Processing (25.6) (33.7) 24% Other (26.6) (32.7) 19% Total production expenses (87.3) (99.2) 12% Freight (transportation) (6.3) (6.7) 6% Royalties (5.0) (7.1) 30% Other (i ) (11.8) 1.7 (794%) Total operating expenses (110.4) (111.3) 1% Other (expenses)/income (1.4) - (100%) EBITDA 9.1 52.5 (83%) Depreciation and amortisation expenses (29.0) (31.5) 8% EBIT (19.9) 21.0 (195%) EBITDA margin 8% 32% 26% Other operating expenses include changes in inventories, corporate recharges and other costs of operations. Revenue decreased by US$42.9 million (26%) to US$120.9 million, primarily due to lower metal prices ($77.8 million), offset by higher sales volumes across all commodities (US$34.9 million). Higher sales volumes in the first half of 2020 were driven by higher zinc production, as well as a draw-down of existing stockpiles, with 2019 production and sales volumes having also been adversely impacted by significant flooding events. Despite higher mining and milling volumes, total production expenses were US$11.9 million lower compared to the first half of 2019. Lower processing costs (US$8.1 million), largely resulted from gas and electricity credits received, with reduced energy expenditure. Other production expenses were lower in the first half of 2020 (US$6.1 million), with the comparative period including additional transportation costs incurred as a result of flooding events in February 2019. Other expenses were higher by US$13.5 million, attributable to inventory movements due to higher sales volumes. Dugald River's zinc C1 costs were US$0.76/lb in the first half of 2020 compared to US$0.81/lb in the first half of 2019, with lower production expenses and higher volumes being the main drivers of this improved result, partly offset by the impact of overall higher zinc treatment charges on a comparative basis, which impacted by approximately US$0.08/lb. Noting the ongoing uncertainty associated with COVID-19, the Company, at this stage, maintains its existing 2020 guidance for Dugald River, with production of between 170,000 and 180,000 tonnes of zinc in zinc concentrate and C1 costs of US$0.70-US$0.75/lb. 16 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Rosebery SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % FAV/(UNFAV) Production Ore mined (tonnes) 458,901 498,541 (8%) Ore milled (tonnes) 472,647 511,115 (8%) Copper in copper concentrate (tonnes) 736 700 5% Zinc in zinc concentrate (tonnes) 33,894 39,565 (14%) Lead in lead concentrate (tonnes) 10,787 12,096 (11%) Gold (ounces) 4,583 5,480 (16%) Silver (ounces) 2,421 3,138 (23%) Payable metal in product sold Copper (tonnes) 855 716 19% Zinc (tonnes) 32,516 36,273 (10%) Lead (tonnes) 9,924 11,311 (12%) Gold (ounces) 17,584 14,272 23% Silver (ounces) 1,351,421 1,156,892 17% SIX MONTHS ENDED 30 JUNE 2020 2019 CHANGE % US$ MILLION US$ MILLION FAV/(UNFAV) Revenue 119.4 142.8 (16%) Operating expenses Production expenses Mining (30.6) (35.9) 15% Processing (13.6) (16.2) 16% Other (10.6) (11.3) 6% Total production expenses (54.8) (63.4) 14% Freight (transportation) (3.3) (3.6) 8% Royalties (5.8) (6.7) 13% Other (i) (6.4) (5.0) (28%) Total operating expenses (70.3) (78.7) 11% Other (expenses)/income (0.6) - (100%) EBITDA 48.5 64.1 (24%) Depreciation and amortisation expenses (23.6) (33.5) 30% EBIT 24.9 30.6 (19%) EBITDA margin 41% 45% (16%) Other operating expenses include changes in inventories, corporate recharges and other costs of operations. Rosebery produced lower volumes across all metals during the first half of 2020, mainly driven by lower mill throughput and lower feed grades, as mining activity moves deeper. Revenue decreased by US$23.4 million (16%) to US$119.4 million due to lower commodity prices (US$2.7 million) and lower sales volumes (US$20.7 million). Negative price and volume variances were primarily attributable to zinc and lead, with impacts partly offset by higher by-product revenue with higher prices and sales volumes for both gold and silver during the first half of 2020. 17 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Total production expenses decreased by US$8.6 million (13%) compared to the first half of 2019. Lower mining costs (US$5.3 million) were attributable to delays associated with seismic events in late 2019. Lower processing costs (US$2.6 million) reflect lower mill throughput as a result of lower availability of surface ore stocks. Rosebery's zinc C1 costs were US$0.10/lb in the first half of 2020 compared to US$0.30/lb in the first half of 2019, reflecting higher precious metal by-product credits and lower production expenses. Noting the ongoing uncertainty associated with COVID-19, the Company, at this stage, maintains its existing 2020 guidance for Rosebery, with production of between 55,000 and 65,000 tonnes of zinc in zinc concentrate and C1 costs of US$0.20-US$0.30/lb. CASH FLOW ANALYSIS Net cash flow SIX MONTHS ENDED 30 JUNE 2020 2019 US$ MILLION US$ MILLION Net operating cash inflows 366.6 290.0 Net investing cash outflows (255.3) (148.5) Net financing cash outflows (257.9) (501.4) Net cash outflows (146.6) (359.9) Net operating cash inflows increased by US$76.6 million (26%) to US$366.6 million. The impact of lower EBITDA (US$263.1 million), which was largely attributable to lower commodity prices, was offset by favourable working capital movements (US$127.1 million) and lower tax payments of $193.1 million. Net tax refunds of US$39.7 million in the first half of 2020 compared favourably to net tax payments of US$153.8 million in the prior year comparative period. This was in large part due to a change in Peruvian legislation that alters the timing for payment of withholding tax obligations. Net investing cash outflows increased by US$106.8 million (72%) to US$255.3 million. This was mainly due increased capital spend at Las Bambas, including additional deferred mining costs of US$86.8 million in the first half of 2020, compared to US$3.9 million in the prior year comparative period. Net financing cash outflows decreased by US$243.5 million (49%) in the first half of 2020. Included for the period were net repayments of borrowings of US$76.9 million (2019: US$261.0 million), together with payment of interest and financing costs of US$153.7 million (2019: US$197.5 million). Lower net repayments over the six-months to 30 June 2020 were due to net drawdowns on working capital facilities (US$130.0 million) and proceeds received in relation to equipment financing arrangements for new mine fleet at Las Bambas (US$63.9 million), offset by a step-up in scheduled amortisation for Dugald River debt (US$9.4 million). 18 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED FINANCIAL RESOURCES AND LIQUIDITY Total assets Total liabilities Total equity 30 JUNE 31 DECEMBER 2020 2019 CHANGE US$ MILLION US$ MILLION US$ MILLION 12,257.6 12,665.1 (407.5) (9,766.7) (9,987.2) 220.5 2,490.9 2,677.9 (187.0) Total equity decreased by US$187.0 million to US$2,490.9 million as at 30 June 2020, mainly due to the loss for the period of US$182.7 million. The Group's objectives in managing capital are to safeguard its ability to continue as a going concern, support sustainable growth, enhance Shareholder value and provide capital for potential acquisitions and investment. The gearing ratio for the Group is defined as net debt (total borrowings excluding finance charge prepayments, less cash and cash equivalents) divided by the aggregate of net debt and total equity as set out in the following table: 30 JUNE 31 DECEMBER 2020 2019 MMG GROUP US$ MILLION US$ MILLION Total borrowings (excluding prepaid finance charges) 1 7,614.9 7,691.9 Less: cash and cash equivalents (70.9) (217.5) Net debt 7,544.0 7,474.4 Total equity 2,490.9 2,677.9 Net debt +Total equity 10,034.9 10,152.3 Gearing ratio 0.75 0.74 Borrowings at an MMG Group level reflect 100% of the borrowings of the Las Bambas Joint Venture Group. Las Bambas Joint Venture Group borrowings at 30 June 2020 were US$4,783.2 million (31 December 2019: US$4,852.1 million) and Las Bambas Joint Venture Group cash and cash equivalents at 30 June 2020 were US$48.1 million (31 December 2019: US$90.9 million). For the purpose of calculating the gearing ratio, Las Bambas Joint Venture Group's borrowings have not been reduced to reflect the MMG Group's 62.5% equity interest. This is consistent with the basis of preparation of MMG's financial statements. Under the terms of relevant debt facilities held by the Group, the gearing ratio for covenant compliance purposes is calculated exclusive of US$2,261.3 million (31 December 2019: US$2,261.3 million) of Shareholder debt that was used to fund the MMG Group's equity contribution to the Las Bambas Joint Venture Group. For the purpose of the above, it has, however, been included as borrowings. Available debt facilities At 30 June 2020, the Group (excluding the Las Bambas Joint Venture Group) had available to it undrawn debt facilities of US$300.0 million (31 December 2019: US$220.0 million). This was represented by: US$100.0 million (2019: nil) that was undrawn and available under a US$300.0 million revolving credit facility provided by Top Create Resources Limited, for general corporate purposes. This facility, which matures in December 2020, was established in June 2020, to replace a US$300.0 million revolving credit facility provided by the Industrial and Commercial Bank of China Limited (ICBC), Melbourne Branch that was also due to mature in December of 2020; and US$200.0 million (2019: 100.0 million) that was undrawn and available under a US$200.0 million revolving credit facility provided by Top Create Resources Limited, for general corporate purposes. In May of 2020, 19 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED the limit of this facility was increased from US$100.0 million to US$200.0 million and the maturity date extended from April to October 2021. At 30 June 2020, the Las Bambas Joint Venture Group had available to it undrawn debt facilities of US$210.0 million (31 December 2019: US$350.0 million). This was represented by: US$105.0 million (2019: US$175.0 million) that was undrawn and available under a US$175.0 million revolving credit facility provided by Bank of China Limited (BOC), Sydney Branch, for general corporate purposes; and US$105.0 million (2019: US$175.0 million) that was undrawn and available under a US$175.0 million revolving credit facility provided by ICBC, Luxembourg Branch, for general corporate purposes. In addition, as at 30 June 2020, the Las Bambas Joint Venture Group had an agreement with CMC and CITIC, each as direct or indirect off-takers of Las Bambas production, for early payment on cargoes already shipped and invoiced as well as pre-payments for inventory held at both port and site. Early payment and prepayments are permitted up to an aggregate amount of US$200.0 million, allocated to each party in their respective off-take proportions. The Group's available external debt facilities are subject to covenant compliance requirements. The Group was not in breach of covenant requirements in respect of the Group's borrowings at 30 June 2020. Certain financial covenants are measured with reference to the financial performance of the Group or its subsidiaries, and may be influenced by future operational performance and community related disruptions DEVELOPMENT PROJECTS Drilling, permitting and engineering works continue at the Las Bambas Chalcobamba project, however were delayed as a result of the COVID-19 pandemic. Alongside revised guidance for Las Bambas more generally, an updated development timeline for the Chalcobamba pit will be provided when there is greater clarity around the ongoing extent of COVID-19 impacts and curtailment of the virus. In the interim, permitting for Chalcobamba by the end of 2020 is still being targeted. There were no other major development projects noted during the six months ended 30 June 2020. CONTRACTS AND COMMITMENTS During the six months ended 30 June 2020, 225 contracts were reviewed either through market engagements or in-contract renegotiations. The approximate annual operational or capital values addressed by these activities comes to US$748.0 million. Las Bambas New and revised agreements were finalised for requirements in support of optimising production and expansion options for Las Bambas including; contracts for the supply of blasting service and explosives, additional mobile equipment, components (and associated maintenance services), spares, and contracts for engineering, civil and earthmoving services for projects. Multiple IT contracts, site services contracts, contracts covering Tailings Storage Facility and other site infrastructure capital works, multiple contracts covering operations, studies and exploration drilling services, and multiple goods and services contracts were also finalised in support of the operations. Agreements also include engagements with various local communities. A major activity in the six-month period was to review all contracts, with renegotiations conducted to ensure a sustainable cost base for the business. In addition, significant activity was undertaken to ensure surety of supply for critical commodities during COVID-19 pandemic to support continued operations. 20 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Kinsevere New and revised agreements were finalised with regards to various goods and services focussed on supporting production levels while improving operational cost performance. These included; revision of mining and civil services contracts as per mining strategy, operations and exploration services contracts, multiple contracts covering material and service requirements for site infrastructure projects, and multiple contracts for the supply of reagents and commodities. In addition to operations-oriented agreements, multiple engineering services and consultancy agreements were finalised in support of Kinsevere expansion and development studies. Significant activity was undertaken to ensure surety of supply during the COVID-19 pandemic to support continued operations. Dugald River New and revised agreements were finalised with regards to operations including; revised concentrate logistics and drilling services, multiple contracts for the supply of reagents and grinding media, multiple contracts covering goods and service requirements for site infrastructure projects, and other site support services. Multiple agreements were also prioritised as a result of the COVID-19 pandemic, such as arrangements for additional fly in fly out and bus services, and critical hygiene and safety products to support continued operations. Rosebery New and revised agreements were finalised with regard to various goods and services with a focus on supporting mine development activities and maintaining production performance. These included; drilling services and site support services, multiple contracts for the supply of reagents and grinding media and multiple engineering services and consultancy agreements. Multiple agreements were also prioritised as a result of the COVID-19 pandemic, such as arrangements for critical hygiene and safety products to support continued operations. Group (including global Geoscience and Discovery requirements) New and revised agreements were finalised with regards to various goods and services including; group-wide travel management services contracts, IT related services and licence agreements, and a number of professional services consultancy agreements. PEOPLE As at 30 June 2020, the Group employed a total of 3,238 full-time equivalent employees (2019: 3,659) in its operations (excluding contractors and casual employees) with the majority of employees based in Australia, Peru, the Democratic Republic of Congo (DRC) and Laos. Total employee benefits expenses for the Group's operations for the six months ended 30 June 2020, including Directors' emoluments, totalled US$123.0 million (2019: US$156.0 million). The Group has remuneration policies that align with market practice and remunerates its employees based on the accountabilities of their role, their performance, market practice, legislative requirements and the performance of the Group. Employee benefits include market-competitive fixed remuneration, performance- related incentives, a limited company equity scheme and, in specific cases, insurance and medical support. A range of targeted training and development programs are provided to employees across the Group that are designed to improve individual capability and enhance employee and Group performance. 21 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED EXPLORATION ACTIVITIES Positive results continue at Las Bambas from on-going hydrogeological, geotechnical and sterilisation drilling completed during the first half of 2020. Drilling continued at the near-surface, skarn and porphyry copper mineralisation at the Chalcobamba Southwest Zone, which is located immediately to the southwest of the current Chalcobamba pit. Coherent, higher-grade copper skarn (>1% Cu) is located beneath a shallow, unmineralised diorite intrusion that strikes east-west and dips gently to the south. Significant drill intercepts in this area continue to demonstrate that the Chalcobamba Southwest Zone is likely continuous with the main Chalcobamba mineralisation and is expected to drive an expansion of the Chalcobamba pit design. In the DRC, exploration activities continued to focus primarily on the development of satellite copper oxide deposits within a roughly 50km radius of the Kinsevere mine. This activity continues to confirm and define several compelling copper-cobalt targets at the Nambulwa, Mewpu and Sokorshe II projects. Full drilling and exploration results, as well as the full Table 1 JORC 2012 Code disclosure, can be found in full in the First Quarter Production Report that was lodged with the Hong Kong Stock Exchange on 23 April 2020. It can also be downloaded from www.mmg.com. PROJECT HOLE_TYPE METERAGE NUMBER OF AVERAGE LENGTH (METRES) HOLES (METRES) Africa, Australia Kinsevere RAD50 Diamond 1,675 22 76 Reverse Circulation 643 6 107 Kinsevere (Near Mine) Diamond 1,942 5 388 Americas Las Bambas Diamond 12,101 35 346 Reverse Circulation 300 1 300 Total 16,661 69 241 MATERIAL ACQUISITIONS AND DISPOSALS The Group made no material acquisition or disposal in the six months ended 30 June 2020. EVENTS AFTER THE REPORTING DATE Minera Las Bambas S.A. is in the final stage of finalising a US$800.0 million credit facility with China Development Bank (CDB), ICBC Macau, BOC Sydney, and The Export-Import Bank of China Limited. The facility will be available to be drawn over its three-year tenor, with repaid sums available for redraw. The facility has been fully credit approved by lenders and loan documentation has been agreed. It is expected that execution of the facility will take place prior to the end of August 2020, once lenders have completed internal formalities related to the signing process. The facility will be unsecured. The Company is also in the final stage of finalising a US$85.0 million credit facility with CDB. This three-year facility will be available for drawing over the first two years of its term, with funds repayable at the election of 22 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED the borrower. Repaid funds are not able to be redrawn. The facility has been fully credit approved by CDB and loan documentation has been agreed. It is expected that execution of the facility will take place prior to the end of August 2020, once lenders have completed internal formalities related to the signing process. The facility will be unsecured. During July and August 2020, MMG Management Pty Ltd and MMG Dugald River Pty Ltd, wholly owned, indirect subsidiaries of MMG Limited, entered into commodity price swaps as follows: approximately 110,000 dry metric tonnes of copper with respect to sales contracts for Kinsevere copper cathode and the Company's equity share of sales contracts for Las Bambas copper concentrate, at a net price of approximately US$2.91/lb. These volumes relate to sales with quotational period nominations between August 2020 and January 2021. approximately 54,000 dry metric tonnes of zinc with respect to sales contracts for Dugald River zinc concentrate, at a net price of approximately US$1.08/lb. These volumes relate to sales with quotational period nominations between September 2020 and March 2021. Other than the matters outlined in this announcement, there have been no matters that have occurred subsequent to the reporting date, which have significantly affected, or may significantly affect, the Group's operations, results or state of affairs in future years. FINANCIAL AND OTHER RISK MANAGEMENT The Group's activities expose it to a variety of financial risks including commodity price risk, interest rate risk, foreign exchange risk, credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group can use derivative financial instruments, such as foreign exchange contracts and commodity swaps, to manage certain exposures. The Group does not and is prohibited from entering into derivative contracts for speculative purposes. Financial risk management is carried out by the Group Treasury function under proposals approved by the Board. Group Treasury identifies, evaluates and manages financial risks in close cooperation with the Group's operating units. The Board approves written principles for overall risk management, as well as policies covering specific areas such as those identified below. (a) Commodity price risk The prices of copper, zinc, lead, gold and silver are affected by numerous factors and events that are beyond the control of the Group. These metal prices change on a daily basis and can vary significantly up and down over time. The factors impacting metal prices include both broader macro-economic developments and micro-economic considerations relating more specifically to the particular metal concerned. The following table details the sensitivity of the Group's financial assets balance to movements in commodity prices. Financial assets arising from revenue on provisionally priced sales are recognised at the estimated fair value of the total consideration of the receivable and subsequently remeasured at each reporting date. At the reporting date, if the commodity prices increased/(decreased) by 10% and all other variables were held constant, the Group's post-tax loss would have changed as set out below: 23 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED 30 JUNE 2020 31 DECEMBER 2019 Commodity Commodity Increase Commodity price Decrease loss Increase loss price Decrease loss loss movement US$ million US$ million movement US$ million US$ million Copper 10% 16.0 (16.0) 10% 44.0 (44.0) Zinc 10% 3.5 (3.5) 10% 4.0 (4.0) Total 19.5 (19.5) 48.0 (48.0) (b) Interest rate risk The Group is exposed to interest rate risk primarily through interest bearing borrowings and investment of surplus cash holdings. Deposits and borrowings at variable rates expose the Group to cash flow interest rate risk. Deposits and borrowings at fixed rates expose the Group to fair value interest rate risk. The Group regularly monitors its interest rate risk to ensure there are no undue exposures to significant interest rate movements. Any decision to hedge interest rate risk is assessed periodically in light of the Group's overall exposure, the prevailing interest rate market and any funding counterparty requirements. Regular reporting that summarises the Group's debt and interest rates is provided to the Executive Committee. During the period ended 30 June 2020, Minera Las Bambas S.A. entered into a notional US$2,100.0 million, 5- year amortising interest rate swap with respect to the floating 6-month LIBOR base rate applicable under its existing project facility, converting the floating rate to a fixed base rate of 0.43%, excluding credit margins. At 30 June 2020 and 31 December 2019, if the interest rate had increased/(decreased) by 100 basis points, taking into account the interest rate swap, with all other variables held constant, post-tax loss and other comprehensive income (OCI) would have changed as follows: 30 JUNE 2020 31 DECEMBER 2019 +100 basis points -100 basis points +100 basis points -100 basis points Decrease/ Decrease/ Decrease/ Decrease/ (increase) Increase/ (increase) Increase/ (increase) Increase/ (increase) Increase/ US$ MILLION in loss (increase) in loss (increase) in loss (increase) in loss (increase) after tax in OCI after tax in OCI after tax in OCI after tax in OCI Financial assets Cash and cash equivalents 0.5 - (0.5) - 1.5 - (1.5) - Financial liabilities Borrowings (taking into account the impact of the interest rate swap) (21.7) 55.2 9.3 (46.5) (36.9) - 36.9 - Total (21.2) 55.2 8.8 (46.5) (35.4) - 35.4 - (c) Foreign exchange risk The Group operates internationally and is exposed to foreign currency exchange risk. The Group's reporting currency and functional currency of the majority of subsidiaries within the Group is US dollars. The majority of revenue received by the Group is in US dollars. The Group's foreign currency exchange risk arises predominantly from the currency of the countries in which the Group's operations are located. Any decision 24 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED to hedge foreign currency risk is assessed periodically in light of the Group's exposure, the prevailing foreign currency market and any funding counterparty requirements. (d) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group is exposed to counterparty credit risk through sales of metal products on normal terms of trade, through deposits of cash and settlement risk on foreign exchange transactions. While the most significant exposure to credit risk is through sales of metal products on normal terms of trade, the majority of sales for mining operations were made under contractual arrangements; whereby provisional payment is received promptly after delivery and the balance within 30 to 120 days from delivery. All of the Group's trade receivables at 30 June 2020 are aged within six months of the invoice date. Investments in cash, short-term deposits and similar assets are with approved counterparty banks and the intermediate holding company of the Company. Counterparties are assessed prior to, during and after the conclusion of transactions to ensure exposure to credit risk is limited to acceptable levels. The limits are set to minimise the concentration of risks and, therefore, mitigate the potential for financial loss through counterparty failure. (e) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. Management utilises short- and long-term cash flow forecasts and other consolidated information to ensure that appropriate liquidity buffers are maintained to support the Group's activities. (f) Sovereign risk The Group conducts all of its operations outside of Hong Kong and, as such, it is exposed to various levels of political, economic and other risks and uncertainties. These risks and uncertainties vary from country to country. Material risks include, but are not limited to, regime or policy change, fluctuation in currency exchange rates, changes to licensing regimes and amendments to concessions, licences, permits and contracts, and changing political conditions and governmental regulations. Changes in any mining or investment policies or shifts in political attitudes in the jurisdictions in which the Group operates may adversely affect the Group's operations and profitability. The decline in growth and macroeconomic activity in many developing nations has resulted in governments seeking alternative means of increasing their income, including increases to corporate tax, value added tax (VAT) and royalty rates, coupled with increased audit and compliance activity. The DRC Government, during 2018, made changes to the 2002 Mining Code and Mining Regulations. These changes were enacted (2018 Mining Code) and will result in an increased tax burden on mining companies. Some of the countries in which the Group operates carry higher levels of sovereign risk. Political and administrative changes and reforms in law, regulations or taxation may impact sovereign risk. Political and administrative systems can be slow or uncertain and may result in risks to the Group, including the ability to obtain tax refunds in a timely manner. The Group has processes in place to monitor any impact on the Group and implement responses to such changes. CONTINGENT LIABILITIES Bank guarantees Certain bank guarantees have been provided in connection with the operations of certain subsidiaries of the Company primarily associated with the terms of mining leases, mining concessions, exploration licences or key contracting arrangements. At the end of the year, no material claims have been made under these 25 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED guarantees. The amount of these guarantees may vary from time to time depending on the requirements of the relevant regulatory authorities. These guarantees amount to US$348.2 million as at 30 June 2020 (31 December 2019: US$373.4 million). The Group has an Australian dollar 200.0 million (approximately US$137.3 million), revolving bank guarantee facility with Bank of China Limited, Sydney ("BG Facility"), which is guaranteed by CMN. MMG has entered into a counter-indemnity agreement in favour of CMN capped at 27.39% of the maximum principal amount outstanding under the BG Facility. Following the sale of Century mine in 2017, the Group has procured certain bank guarantees amounting to US$133.2 million (31 December 2019: US$135.7 million) for the benefit of New Century Resources Limited ("New Century") until 31 December 2026. New Century is legally required to punctually meet all obligations and must use best endeavours to ensure that no demand is made under the bank guarantees. New Century must ensure that, within 90 days of the end of each financial year, the bank guarantee is reduced by not less than 40% of New Century's EBITDA in respect of a financial year. At 30 June 2020, the Group has recognised financial liabilities of US$133.2 million (31 December 2019: US$135.7 million) in relation to the New Century bank guarantees, which are included in other financial liabilities in the condensed consolidated interim financial statements. Contingent liabilities - tax-related contingencies The Group has operations in multiple countries, each with its own taxation regime. The nature of the Group's activities triggers various taxation obligations including corporation tax, royalties, withholding taxes, transfer pricing arrangements with related parties, resource and production-based taxes, and employment-related taxes. Application of tax laws and interpretation of tax laws may require judgement to assess risk and estimate outcomes, particularly in relation to the application of income taxes and withholding tax to the Group' cross-border operations and transactions. The evaluation of tax risks considers both assessments received and potential sources of challenge from tax authorities. Additionally, the Group is currently subject to a range of audits and reviews by taxation authorities in Australia, Peru, Laos and the DRC. For some of the tax matters under audit in Peru, if unfavourable assessment resolutions were ultimately issued, MLB intends to appeal and not pay any assessed amount. No disclosure of an estimate of financial effect of the subject matter has been made in the interim financial statements as in the opinion of management, such disclosure may seriously prejudice the position of the Group in dealing with these matters. Tax matters with uncertain outcomes arise in the normal course of business and occur due to changes in tax law, changes in interpretation of tax law, periodic challenges and disagreements with tax authorities, and legal proceedings. The status of proceedings for such uncertain tax matters will impact the ability to determine the potential exposure and, in some cases, it may not be possible to determine a range of possible outcomes or a reliable estimate of the potential exposure. Included within such uncertain tax matters is an audit of the 2014 tax year for MLB in relation to withholding taxes on fees paid under certain loans, which were provided to MLB pursuant to facility agreements entered into among MLB and a consortium of Chinese banks in connection with the acquisition of the Las Bambas mine in 2014. MLB received an assessment notice ("Assessment") in July 2020 from the Peruvian tax authority (National Superintendence of Tax Administration of Peru or "SUNAT"), which advised that, in its opinion, MLB and the Chinese banks are related parties and thus a 30% withholding tax rate ought to be imposed rather than the 4.99% applied. The Assessment of omitted tax is PEN 60,687,851 (approximately US$17.3 million). The total Assessment of omitted tax plus penalties and interest imposed by SUNAT is PEN 154,193,808 (approximately US$44.0 million). Having received external legal and tax advice, the Group has formed the view that the company and its controlled entities are not related parties to Chinese banks under Peruvian tax law. MLB notes that the Peruvian tax law was amended to apply from October 2017 onwards to provide expressly that parties are not related by being under state ownership for the purposes of withholding taxes. MLB intends to appeal the 26 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED Assessment and not to pay the assessed amount to SUNAT pending resolution of the appeal. SUNAT could potentially bring a similar challenge regarding the rate of withholding tax applied by MLB in the 2015 and 2016 tax years and the part of the 2017 tax year before the amendment to the Peruvian tax law. Where MLB is not successful in rebutting or appealing such challenge(s), this could result in significant additional tax liabilities. The Group continues to proactively cooperate with the relevant taxation authorities and to actively manage these audits and reviews. Where appropriate, the Group has filed appeals with either the relevant tax authority or the tax court. For all such open tax matters the Group presently has, any ultimate obligation would depend on future resolution of the matter and currently, a payment is either not probably or cannot be measured reliably. As such, no provision has been reflected in the condensed consolidated interim financial statements for such tax matters. Contingent liabilities - other contingencies Mining Company Katanga SARL ("MCK") filed a claim against MMG Kinsevere SARL ("MMG Kinsevere"), a subsidiary of the Group, to compensate MCK for losses suffered as a result of Kinsevere's decision to not renew or extend the mining services contract with its associate entity MCK Trucks (then known as NB Mining SA) in 2018 on the basis that MCK was entitled to a "life of mine" agreement with Kinsevere. MCK is seeking an award of losses suffered and punitive damages. MMG Kinsevere and the Company regard the claim as unfounded and opportunistic, and the amount claimed as completely disproportionate to the losses that could reasonably have been suffered. The Group is vigorously contesting the claim. Court proceedings between MMG Kinsevere and MCK in the DRC have not progressed due to court closures in the DRC as a result of the COVID-19 outbreak. MCK obtained freezing orders in February 2020 over certain assets of Kinsevere, which have been partly enforced over US$15.0 million cash held in bank accounts in the DRC. Considering the uncertainty around this matter and the fact that there is no present obligation for Kinsevere to make any payments, nor such payment being reliably estimated at this time, no provision has been recognised for this matter. CHARGES ON ASSETS As at 30 June 2020, the borrowings of the Group were secured as follows: Approximately US$4,579.8 million (31 December 2019: US$4,852.1 million) from China Development Bank, Industrial and Commercial Bank of China Limited, BOC Sydney and The Export-Import Bank of China was secured by share security over the entire share capital of MMG South America Management Co Ltd and each of its subsidiaries including MLB, a debenture over the assets of MMG South America Management Co Ltd, an assets pledge agreement and production unit mortgage in respect of all of the assets of MLB, assignments of shareholder loans between MMG South America Management Co Ltd and its subsidiaries and security agreements over bank accounts of MLB. Approximately US$354.0 million (31 December 2019: US$469.0 million) of these borrowings are guaranteed on a several basis by China Minmetals Non-ferrous Metals Holding Company Limited and China Minmetals Corporation Limited, Guoxin International Investment Corporation Limited and CITIC Corporation Limited in proportion to the respective shareholdings of MMG SA, Elion Holdings Corporation Limited and Citic Metal Peru Investment Limited in the Company. Approximately US$370.4 million (31 December 2019: US$398.6 million) from China Development Bank and BOC Sydney was substantively secured by the shares and assets of MMG Dugald River Pty Ltd (MMG Dugald River). This consists of a charge over the shares in MMG Dugald River, a real property mortgage over all of the interests in land of MMG Dugald River, a general security agreement in respect of all of the assets of MMG Dugald River, and specific security over certain assets owned by MMG Australia Limited 27 MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED relating to the Dugald River project, and a featherweight charge over all of MMG Australia Limited's other assets. Approximately US$63.4 million (31 December 2019: nil) from ICBC Peru Bank, Banco de Crédito del Peru and Scotiabank Peru was secured by mine fleet equipment procured under asset finance arrangements. FUTURE PROSPECTS MMG continues to pro-actively respond to the COVID-19 pandemic, working closely with national authorities to protect the health and safety of its employees, host communities and other stakeholders. Despite the challenges presented by the pandemic and noting ongoing uncertainty, MMG continues to expect to produce between 68,000 and 75,000 tonnes of copper cathode at Kinsevere, and between 225,000 and 245,000 tonnes of zinc at its Dugald River and Rosebery operations in 2020. All guidance for Las Bambas has been withdrawn due to uncertainty regarding the impacts of the COVID-19 pandemic in Peru. The Company will provide updated production and cost guidance for Las Bambas once there is greater operational certainty. In the interim, the Company continues to effectively work within constraints presented by the pandemic, maximising efficiency at site and working to achieve an efficient ramp-up and resumption of normal operations, as circumstances allow. Total capital expenditure of between US$650.0 million and US$700.0 million was forecast for 2020, of which approximately US$600.0 million was attributable to Las Bambas, inclusive of approximately US$230.0 million of capitalised mining. As noted above, the Company has withdrawn guidance as it relates to Las Bambas, however anticipates that full year 2020 capital expenditure for that site will be approximately US$100.0 million below levels originally expected. Given the non-discretionary nature of the majority of Las Bambas' capital expenditure, it is likely that any savings will be temporary. The Company maintains its capital expenditure forecast for other sites. MMG continues to maintain a favourable outlook for the DRC and continues to progress a feasibility study for the addition of a sulphide ore and cobalt processing circuit. A decision on this project is expected in the second half of 2020. Should it proceed, it will add significant life and value to MMG's operations in the DRC. It will also provide an entry for the Company into the cobalt market and enhance optionality for future potential investments in country. Consistent with this, MMG also continues its exploration activity in the DRC, particularly on tenements held inside a 50-kilometre radius of the Kinsevere mine. In relation to is Australian operations, the Company continues to focus on de-bottlenecking and optimisation works at Dugald River, which are anticipated to increase mine capacity from 1.75 million to over 2 million tonnes per annum by 2022. This will pave the way for targeted zinc equivalent production of at least 200,000 tonnes annually from 2022. At Rosebery, resource extension drilling has provided encouraging early results. MMG remains committed to extending the operating life of this important asset. MMG currently has no future plans for material investments or capital assets sanctioned by the Board, other than those detailed in this report or announced to the market. 28 OTHER INFORMATION CORPORATE GOVERNANCE The Company is committed to maintaining a high standard of corporate governance practices by emphasising a quality Board, sound internal controls, and transparency and accountability to all Shareholders. The Company has complied with all the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules throughout the six months ended 30 June 2020, except for the following deviations: Code provision A.4.1 requires that Non-executive Directors should be appointed for a specific term and subject to re-election. Each of the Non-executive Directors entered into an appointment agreement with the Company for a specific term of three years, except for Dr Peter Cassidy. Dr Cassidy's appointment agreement commenced on 31 December 2010 and continues until either the Company or he terminates such agreement by serving on the other not less than one month's prior written notice. In accordance with the Company's articles of association, each Director appointed by the Board shall be subject to re-election by Shareholders at the next general meeting (in the case of filling a casual vacancy) or at the next annual general meeting (AGM) (in the case of an addition to the Board), and thereafter be subject to retirement by rotation at least once every three years at the AGM. Dr Cassidy, who was appointed by the Board on 31 December 2010 to fill a casual vacancy, is also subject to retirement from the Board by rotation at least once every three years at the AGM. Since Dr Cassidy has been appointed, he has been re-elected by the Shareholders at the AGMs held in 2011, 2013, 2016 and 2019. Code provision E.1.2 requires the Chairman of the Board to attend and answer questions at the AGM. Mr Guo Wenqing, the Chairman of the Board, was not available for the Company's AGM held on 21 May 2020 due to an unplanned business commitment. Accordingly, Mr Leung Cheuk Yan, an Independent Non-executive Director, a member of the Audit and Risk Management Committee and the Governance, Remuneration and Nomination Committee of the Company, was nominated by the Board to take the chair of the said meeting The Company adopted a Board Charter to outline the manner in which its constitutional powers and responsibilities will be exercised, delegated and discharged, having regard to principles of good corporate governance, international best practice and applicable laws. The Board Charter is adopted on the basis that strong corporate governance can add to the performance of the Company, create Shareholder value and engender the confidence of the investment market. AUDIT AND RISK MANAGEMENT COMMITTEE The Audit and Risk Management Committee comprised five members including three Independent Non-executive Directors, namely Mr Chan Ka Keung, Peter as Chair, Dr Peter Cassidy, Mr Leung Cheuk Yan, and two Non-executive Directors, namely Mr Zhang Shuqiang and Mr Xu Jiqing. The Audit and Risk Management Committee is accountable to the Board. It focuses primarily on financial reporting related matters, such as reviewing financial information and overseeing financial reporting related systems and controls. The Committee also advises the Board on high-level risk related matters, risk management and internal control, including advising on risk assessment and oversight of the internal audit function. 29 OTHER INFORMATION The Audit and Risk Management Committee has reviewed the unaudited condensed consolidated interim financial statements of the Group for the six months ended 30 June 2020. DIRECTORS' SECURITIES TRANSACTIONS The Company has adopted a Model Code for securities trading by Directors (Securities Trading Model Code) on terms no less exacting than the required standard of the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules (Model Code). Specific enquiry was made with all the Directors and all confirmed that they have complied with the requirements set out in the Model Code and the Securities Trading Model Code during the six months ended 30 June 2020. PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities during the six months ended 30 June 2020. INDEPENDENT REVIEW The interim financial information for the six months ended 30 June 2020 is unaudited and has been reviewed by the Company's auditor, Deloitte Touche Tohmatsu, in accordance with the Hong Kong Standard on Review Engagements 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Hong Kong Institute of Certified Public Accountants. The auditor's unmodified review report will be included in the 2020 Interim Report. This interim financial information has also been reviewed by the Company's Audit and Risk Management Committee. PUBLICATION OF INTERIM RESULTS AND INTERIM REPORT The interim results announcement is also published on the website of the Company (www.mmg.com). The Company's 2020 Interim Report will be despatched to Shareholders and made available on the websites of the Hong Kong Exchanges and Clearing Limited ( www.hkexnews.hk ) and the Company in due course. 30 FINANCIAL INFORMATION OF THE GROUP The financial information relating to the period ended 30 June 2020 and 2019, included in this preliminary announcement of the 2020 interim results, does not constitute the Company's statutory consolidated interim financial statements for those periods, but is derived from those financial statements. Further information relating to these statutory consolidated interim financial statements, as required to be disclosed in accordance with section 436 of the Companies Ordinance, is as follows: The Company has delivered the Consolidated Financial Statements for the year ended 31 December 2019 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to the Companies Ordinance, and will deliver the consolidated interim financial statements for the period ended 30 June 2020 to the Registrar of Companies in due course. The Company's auditors have reported on these Consolidated Financial Statements. The auditor's reports were unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their reports; and did not contain a statement under sections 406(2), 407(2) or (3) of the Companies Ordinance. 31 CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT OR LOSS NOTES Revenue 3 Other income Expenses (excluding depreciation and amortisation) 4 Earnings before interest, income tax, depreciation and amortisation expenses - EBITDA Depreciation and amortisation expenses 4 (Loss)/profit before interest and income tax - EBIT Finance income 5 Finance costs 5 Loss before income tax Income tax credit/(expense) 6 Loss for the period (Loss)/profit for the period attributable to: SIX MONTHS ENDED 30 JUNE 2020 2019 (UNAUDITED) (UNAUDITED) US$ MILLION US$ MILLION 1,191.4 1,387.4 3.3 2.3 (811.1) (743.0) 383.6 646.7 (406.9) (451.3) (23.3) 195.4 1.2 7.7 (221.6) (274.1) (243.7) (71.0) 61.0 (2.0) (182.7) (73.0) Equity holders of the Company Non-controlling interests Loss per share attributable to the equity holders of the Company Basic loss per share 7 Diluted loss per share 7 (158.0) (24.7) (182.7) US (1.96) cents US (1.96) cents (81.0) 8.0 (73.0) US (1.01) cents US (1.01) cents The accompanying notes are an integral part of the condensed consolidated interim financial statements. 32 CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME SIX MONTHS ENDED 30 JUNE 2020 2019 (UNAUDITED) (UNAUDITED) US$ MILLION US$ MILLION Loss for the period (182.7) (73.0) Other comprehensive loss Item that may be reclassified to profit or loss Fair value loss on hedging instruments designated as cash flow hedges (2.6) - Other comprehensive loss for the period, net of income tax (2.6) - Total comprehensive loss for the period (185.3) (73.0) Total comprehensive (loss)/income attributable to: Equity holders of the Company (159.6) (81.0) Non-controlling interests (25.7) 8.0 (185.3) (73.0) The accompanying notes are an integral part of the condensed consolidated interim financial statements. 33 CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 31 DECEMBER 2019 (UNAUDITED) (AUDITED) NOTES US$ MILLION US$ MILLION ASSETS Non-current assets Property, plant and equipment 9 10,260.1 10,394.2 Right-of-use assets 10 132.0 140.6 Intangible assets 556.3 567.5 Inventories 85.2 106.4 Deferred income tax assets 191.1 180.4 Other receivables 11 148.6 210.3 Other financial assets 1.8 3.1 Total non-current assets 11,375.1 11,602.5 Current assets Inventories 379.1 382.2 Trade and other receivables 11 372.5 361.6 Current income tax assets 60.0 101.3 Cash and cash equivalents 70.9 217.5 Total current assets 882.5 1,062.6 Total assets 12,257.6 12,665.1 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 12 2,916.4 2,912.2 Reserves and accumulated losses 13 (2,065.5) (1,900.0) 850.9 1,012.2 Non-controlling interests 1,640.0 1,665.7 Total equity 2,490.9 2,677.9 The accompanying notes are an integral part of the condensed consolidated interim financial statements. 34 CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION (CONTINUED) AS AT 30 JUNE 2020 31 DECEMBER 2019 (UNAUDITED) (AUDITED) NOTES US$ MILLION US$ MILLION LIABILITIES Non-current liabilities Borrowings 14 6,595.1 6,853.7 Lease liabilities 15 132.4 138.3 Provisions 489.7 471.3 Derivative financial liabilities 3.8 - Other financial liabilities 133.2 135.7 Deferred income tax liabilities 792.0 880.0 Total non-current liabilities 8,146.2 8,479.0 Current liabilities Borrowings 14 960.3 774.6 Lease liabilities 15 20.0 22.5 Provisions 102.8 117.4 Trade and other payables 16 521.8 591.3 Current income tax liabilities 15.6 2.4 Total current liabilities 1,620.5 1,508.2 Total liabilities 9,766.7 9,987.2 Net current liabilities (738.0) (445.6) Total equity and liabilities 12,257.6 12,665.1 The accompanying notes are an integral part of the condensed consolidated interim financial statements. 35 STATEMENT OF CHANGES IN EQUITY US$ MILLION At 1 January 2020 Loss for the period Other comprehensive loss for the period Total comprehensive loss for the period Transactions with owners Employee share options exercised and performance awards vested Employee share options lapsed Employee long-term incentives Total transactions with owners At 30 June 2020 At 1 January 2019 (Loss)/profit for the period Total comprehensive loss for the period Transactions with owners Employee share options exercised Total transactions with owners At 30 June 2019 FOR SIX MONTHS ENDED 30 JUNE 2020 (UNAUDITED) ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY (ACCUMULATED LOSSES)/ NON- SHARE TOTAL RETAINED CONTROLLING TOTAL CAPITAL RESERVES PROFITS TOTAL INTERESTS EQUITY (Note 12) (Note 13) (Note 13) 2,912.2 (1,899.1) (0.9) 1,012.2 1,665.7 2,677.9 - - (158.0) (158.0) (24.7) (182.7) - (1.6) - (1.6) (1.0) (2.6) - (1.6) (158.0) (159.6) (25.7) (185.3) 4.2 (4.1) - 0.1 - 0.1 - (2.1) 2.1 - - - - (1.8) - (1.8) - (1.8) 4.2 (8.0) 2.1 (1.7) - (1.7) 2,916.4 (1,908.7) (156.8) 850.9 1,640.0 2,490.9 2,910.8 (1,898.0) 228.6 1,241.4 1,630.6 2,872.0 - - (81.0) (81.0) 8.0 (73.0) - - (81.0) (81.0) 8.0 (73.0) 1.2 (0.3) - 0.9 - 0.9 1.2 (0.3) - 0.9 - 0.9 2,912.0 (1,898.3) 147.6 1,161.3 1,638.6 2,799.9 The accompanying notes are an integral part of the condensed consolidated interim financial statements. 36 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS SIX MONTHS ENDED 30 JUNE 2020 2019 (UNAUDITED) (UNAUDITED) US$ MILLION US$ MILLION Cash flows from operating activities Receipts from customers 1,377.6 1,558.6 Payments to suppliers and employees (1,042.6) (1,101.4) Payments for exploration expenditure (8.1) (13.4) Income tax refunded/(paid) 39.7 (153.8) Net cash generated from operating activities 366.6 290.0 Cash flows from investing activities Purchase of property, plant and equipment (254.5) (147.5) Purchase of intangible assets (0.8) (0.1) Payments of support package associated with disposal of Century mine - (4.1) Proceeds from disposal of property, plant and equipment - 3.2 Net cash used in investing activities (255.3) (148.5) Cash flows from financing activities Proceeds from external borrowings 354.1 130.0 Repayments of external borrowings (631.0) (291.0) Proceeds from related party borrowings 200.0 - Repayments of related party borrowings - (100.0) Proceeds from shares issued upon exercise of employee share options 0.1 0.9 Repayment of lease liabilities (20.3) (20.5) Interest and financing costs paid on external borrowings (153.5) (194.3) Interest and financing costs paid on related party borrowings (0.2) (3.2) Withholding taxes paid in respect of financing arrangements (8.5) (31.4) Interest received 1.4 8.1 Net cash used in financing activities (257.9) (501.4) Net decrease in cash and cash equivalents (146.6) (359.9) Cash and cash equivalents at 1 January 217.5 601.9 Cash and cash equivalents at 30 June 70.9 242.0 The accompanying notes are an integral part of the condensed consolidated interim financial statements. 37 NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. GENERAL INFORMATION AND INDEPENDENT REVIEW MMG Limited (the "Company") is a limited liability company and was incorporated in Hong Kong on 29 July 1988. The address of its registered office is Unit 8506A, Level 85, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong. The principal place of business of the Company is disclosed in the Corporate Information section to the Group's 2020 Interim Report. The Company is an investment holding company and is listed on the main board of The Stock Exchange of Hong Kong Limited ("HKEx"). The Company and its subsidiaries (the "Group") are engaged in the exploration, development and mining of copper, zinc, gold, silver and lead deposits around the world. The condensed consolidated interim financial statements for the six months ended 30 June 2020 are presented in United States Dollars ("US$" or "USD") unless otherwise stated and have been approved for issue by the Board of Directors of the Company (the "Board") on 19 August 2020. The financial information relating to the year ended 31 December 2019 that is included in these condensed consolidated interim financial statements as comparative information does not constitute the Company's statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance is as follows: The Company has delivered the financial statements for the year ended 31 December 2019 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance. The Company's auditor has reported on those financial statements. The auditor's report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance. The condensed consolidated interim financial statements for the six months ended 30 June 2020 are unaudited and have been reviewed by the audit committee and the external auditor of the Company. 2. BASIS OF PREPARATION These condensed consolidated interim financial statements for the six months ended 30 June 2020 have been prepared in accordance with applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the HKEx and Hong Kong Accounting Standard ("HKAS") 34 Interim Financial Reporting, issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2019, which have been prepared in accordance with the Hong Kong Financial Reporting Standards ("HKFRS") issued by the HKICPA. The condensed consolidated interim financial statements have been prepared on a going concern basis which assumes the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. Management continues to closely monitor the liquidity position of the Group, which includes the sensitised analysis of forecast cash balances for key financial risks (including commodity and foreign exchange risks) over the short and medium term to ensure adequate liquidity is maintained. For the six-month period ended 30 June 2020, the Group generated a net loss of US$182.7 million (2019: US$73.0 million), primarily due to the outbreak of COVID-19 which has adversely impacted production at Las Bambas and led to lower copper and zinc prices. 38 NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) At 30 June 2020, the Group had net current liabilities of US$738.0 million (31 December 2019: US$445.6 million) and generated net operating cash inflows of US$366.6 million (2019: US$290.0 million) and total net cash outflows of US$146.6 million (2019: US$359.9 million), after investing and financing cash flows. Cash flow forecasts, which assume the continuity of normal business activity, indicate that the Group will only have sufficient liquidity to meet its operational, existing contractual debt service and capital expenditure requirements for the 12 month period from the approval of the condensed consolidated interim financial statements if it is able to defer a US$700.0 million loan repayment that falls due in July 2021. This amount falls due under a US$2,262.3 million loan that was established in 2014 between Top Create Resources Limited ("Top Create"), a subsidiary of China Minmetals Corporation ("CMC"), and MMG South America Company Limited. Consistent with past practice when amounts under this loan have fallen due, Top Create has indicated a willingness to further defer the US$700.0 million 2021 repayment, before it falls due. In addition, the Directors of the Company (the "Directors") note the following considerations, relevant to the Group's ability to continue as a going concern: At 30 June 2020, total cash and cash equivalents of US$70.9 million (31 December 2019: US$217.5 million) were held by the Group; The ongoing trading support of the China Minmetals Non-ferrous Metals Co., Ltd ("CMN") and joint venture partner CITIC Metal Peru Investment Limited ("CITIC") each as direct or indirect off-takers of Las Bambas production. This has been demonstrated by an agreement entered into with each party for early payment on cargos already shipped and invoiced as well as prepayments for inventory held at both port and site. Early payment and prepayments are permitted up to an aggregate amount of US$200.0 million until 31 December 2020, allocated to each party in their respective off-take proportions; At 30 June 2020, MMG South America Management Company Limited and its subsidiaries ("Las Bambas Joint Venture Group") had available undrawn debt facilities of US$210.0 million (31 December 2019: US$350.0 million) under a US$175.0 million revolving credit facility provided by Bank of China, Sydney Branch ("BOC Sydney") and a US$175.0 million revolving credit facility provided by ICBC, Luxembourg Branch ("ICBC Luxembourg"), both of which mature in August 2022; The Group has positive relationships with its external financiers, who continue to provide strong support. This has been recently demonstrated by their willingness to advance additional lines of credit to the Group. The Group is also in discussions with its lenders to refinance debt facilities that will be maturing in the second half of 2020. These facilities will be in addition to those executed in August 2020; The strong ongoing support of the Group's major shareholder, CMC. This has been demonstrated by an agreement entered into in May 2020 with Top Create, whereby an existing US$100.0 million working capital facility was increased to US$200.0 million, and the maturity date extended from April 2021 to October 2021. At 30 June 2020 this facility was undrawn (31 December 2019: nil drawn). In addition, in June 2020 Top Create provided a new US$300.0 million revolving credit facility, which will mature in December 2020. At 30 June 2020 this facility was drawn to US$200.0 million. Drawings under this facility were used to repay amounts outstanding under a US$300 million revolving credit facility provided by Industrial and Commercial Bank of China Ltd ("ICBC"), Melbourne Branch. The ICBC facility, which was scheduled to mature in December 2020, was subsequently cancelled by MMG; and In the event forecast cash flow is not achieved or that existing or new debt facilities are insufficient or not obtained within time, the Group has the support of its major shareholder, CMC. In this circumstance, support to the Group may be in the form of providing additional debt facilities, deferral of debt service and repayment obligations in relation to existing shareholder loans from CMC, or through further equity contributions. 39 NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) As a result, the Directors are of the view that the Group will be able to meet its debts as and when they fall due and accordingly the Directors have prepared the condensed consolidated interim financial statements on a going concern basis. 2.1 Accounting policies The accounting policies applied are consistent with those of the consolidated financial statements for the year ended 31 December 2019, except for the adoption of new amendments to the existing standards as set out below. The Group has executed a debt-related cash flow hedge arrangement during the period ended 30 June 2020, refer to Note 2.2 for the relevant accounting policies. Amendments to existing standards effective and adopted in 2020 but not relevant or significant to the Group Amendments to HKAS 1 and HKAS 8 Definition of Material Amendments to HKFRS 9, HKAS 39 and HKFRS 7 Interest Rate Benchmark Reform Amendments to HKFRS 16 COVID-19 Related Rent Concessions (a) Amendments to HKFRS 3 Definition of a Business The Group has early adopted these amendments, which have been issued and are effective for the Group for annual period beginning on 1 January 2020. (b)New standards and amendments to standards that have been issued but not yet effective or early adopted by the Group The Group has not early adopted the following new standards and amendments to standards that have been issued but are not effective for financial year 2020. HKFRS 17 Insurance Contracts (a) Amendments to HKAS 16 Property, Plant and Equipment - Proceeds before Intended Use (b) Amendments to HKAS 37 Onerous Contracts - Cost of Fulfilling a Contract (b) Amendments to HKFRSs Annual Improvements to HKFRSs 2018-2020 (b) Amendments to HKFRS 3 Reference to the Conceptual Framework (b) Amendments to HKAS 1 Classification of Liabilities as Current or Non-current (c) Amendments to HKFRS 10 and HKAS 28 Sale or contribution of assets between an investor and its associate or joint venture (d) Effective for the Group for annual period beginning on: 1 January 2021 1 January 2022 1 January 2023 Effective date to be determined 2.2 Derivative financial instruments and hedge a...

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