MMG : Announcements and Notices – Fourth Quarter Production Report for the Three Months Ended 31 December 2018

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MMG LIMITED 五礦資源有限公司

(Incorporated in Hong Kong with limited liability)

(HKEX STOCK CODE: 1208)

(ASX STOCK CODE: MMG)

FOURTH QUARTER PRODUCTION REPORT

FOR THE THREE MONTHS ENDED 31 DECEMBER 2018

This announcement is made pursuant to Rule 13.09 of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited (Listing Rules) and the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

The board of directors (Board) of MMG Limited (Company or MMG) is pleased to provide the Fourth Quarter Production Report for the three months ended 31 December 2018.

The report is annexed to this announcement.

By order of the Board

MMG Limited GAO Xiaoyu

CEO and Executive Director

Hong Kong, 24 January 2019

As at the date of this announcement, the Board comprises nine directors, of which two are executive directors, namely Mr Gao Xiaoyu and Mr Xu Jiqing; three are non-executive directors, namely Mr Guo Wenqing (Chairman),

Mr Zhang Shuqiang and Mr Jiao Jian; and four are independent non-executive directors, namely Dr Peter William Cassidy, Mr Leung Cheuk Yan, Ms Jennifer Anne Seabrook and Professor Pei Ker Wei.

1

FOURTH QUARTER PRODUCTION REPORT

FOR THE THREE MONTHS ENDED 31 DECEMBER 2018

4Q 18	4Q 18	YTD 18
4Q 18	vs	vs	YTD	vs
4Q 17	3Q 18	YTD 17
COPPER CATHODE (tonnes)
Kinsevere	18,463	-9%	-11%	79,711	-1%
Total	18,463	-9%	-11%	79,711	-1%
COPPER (contained metal in concentrate, tonnes)
Las Bambas	111,865	-8%	29%	385,299	-15%
Rosebery	409	14%	41%	1,465	11%
Total	112,274	-8%	29%	386,764	-15%
ZINC (contained metal in concentrate, tonnes)
Dugald River	41,641	n/a	9%	147,320	n/a
Rosebery	18,444	-8%	-4%	75,721	1%
Total	60,085	200%	4%	223,041	198%
LEAD (contained metal in concentrate, tonnes)
Dugald River	5,297	n/a	-4%	16,693	n/a
Rosebery	6,107	-21%	-4%	28,744	8%
Total	11,404	48%	-4%	45,437	71%
-7%	-20%	1,961	37%
-7%	-20%	1,961	37%

MOLYBDENUM (contained metal in concentrate, tonnes)

Las Bambas 449

Total 449

KEY POINTS

• • Total recordable injury frequency (TRIF) of 1.35 per million hours worked for the fourth quarter in 2018 and 1.00 for the full year. This represents a 14.5% reduction on the full year 2017 TRIF of 1.17.

• • Total copper and zinc production for 2018 was 466,475 and 223,041 tonnes respectively. This drove Net Cash Flow From Operating Activities of more than of US$1.7 billion and Gross Debt reduction of more than

  US$1 billion for the year.

• • Las Bambas produced 385,299 tonnes of copper in copper concentrate in 2018, driven by a 29% increase in fourth quarter production. With actions to remediate the wall slip which affected the third quarter completed, fourth quarter production of 111,865 tonnes was driven by higher tonnes mined, higher ore grades and higher tonnes milled.

• • Dugald River produced 147,320 tonnes of zinc in zinc concentrate in 2018, as the world class ramp up continued during the December quarter, with mining and milling rates now consistently above nameplate capacity.

• • Kinsevere produced 18,463 tonnes of copper cathode during the fourth quarter, a 9% reduction on the prior corresponding period. Production was impacted by lower ore feed grade and reduced ore milled, resulting from a number of unrelated equipment failures. Full year copper cathode production was 79,711 tonnes delivering another year of strong overall performance.

• • Rosebery produced 18,444 tonnes of zinc in zinc concentrate for the quarter and 75,721 tonnes for the full year. With record ore mined and milled driving record metal production in zinc equivalent terms.

• • The sale of MMG's 90% interest in LXML Sepon was completed on 30 November 2018. This follows the successful divestments of the Century, Golden Grove and Avebury assets. These sales were part of a strategy to focus the MMG portfolio on long life, high quality, base metal mining assets.

• • Cost and efficiency improvement initiatives continue across all sites, group and support functions to mitigate the impact of short term commodity price weakness, input cost increases and longer term grade declines.

• • In 2019, MMG expects to produce between 462,500 and 485,000 tonnes of copper and between 250,000 and 270,000 tonnes of zinc driven by improved production at Las Bambas and Dugald River.

SAFETY, HEALTH, ENVIRONMENT AND COMMUNITY

MMG's first value is safety. For the fourth quarter in 2018, MMG recorded a TRIF of 1.35 per million hours worked and 1.00 for the full year 2018. This demonstrates continued improvement in TRIF, with MMG recording a 14.5% reduction on the full year 2017 TRIF of 1.17.

The Peruvian government extended the State of Emergency on a small section of the road at Yavi Yavi between the Las Bambas operation and the rail transfer facility at Pillones until 27 January 2019.

COMMODITY PRICES, MARKETING AND SALES

Quarter - average	Quarter - close
Metal Price*	4Q 18	4Q 17	4Q 18	4Q 17
Copper (US$/lb)	2.80	2.77	3.09	2.71	2.80	3.25
Gold (US$/oz)	1229	1213	1276	1282	1185	1297
Lead (US$/lb)	0.89	0.95	1.13	0.91	0.91	1.13
Molybdenum (US$/lb)	12.05	11.81	8.76	11.88	11.80	10.25
Silver (US$/oz)	14.55	14.99	16.73	15.47	14.31	16.87
Zinc (US$/lb)	1.19	1.15	1.47	1.14	1.17	1.50

3Q 18

3Q 18

*Sources: zinc, lead and copper: LME cash settlement price; Molybdenum: Platts; gold and silver: LBMA.

Copper and zinc prices declined further during the fourth quarter 2018, with continuing trade tensions between the United States (US) and China exacerbated by concerns around global economic growth prospects. The negative macroeconomic sentiment also drove global stock markets sharply lower. Notwithstanding the macroeconomic concerns, markets for refined copper and zinc are tightly balanced, with LME stocks of both metals finishing the year at around 130,000 tonnes, significantly below typical levels and down by 36% and 29% respectively compared to 12 months earlier. Supplies of both copper and zinc have been restricted by various smelter production issues inside and outside China and this resulted in 2019 copper cathode contract premiums rising globally compared to 2018 levels.

While restricted smelter production has tightened the markets for refined copper and zinc, it also contributed to a softening of concentrate markets. However, in the case of copper, the lack of additional concentrate supply for 2019 combined with increases in demand from both existing and new smelter capacity has resulted in a modest reduction in contract treatment and refining charges for 2019.

PROVISIONAL PRICING

The following table provides a summary of the metal that was sold but which remains provisionally priced at the end of the fourth quarter 2018 and the month that final average pricing is expected to occur at the time of provisional invoicing.

Open pricing at 1 January 2019	Jan-19	Feb-19	Mar-19	Apr-19	Total
Copper (tonnes cathode and copper contained in	34,644	23,905	33,033	107	91,689
concentrate)
Gold (ounces)	13,013	1,057	1,176	15,246
Lead (tonnes)	2,959	2,959
Molybdenum (pounds)	94,827	394,361	539,980	1,029,168
Silver (ounces)	962,702	53,514	60,636	1,076,852
Zinc (tonnes)	11,592	4,085	10,469	26,146

OPERATIONS

LAS BAMBAS

4Q 18

4Q 18 vs 4Q 17

4Q 18 vs 3Q 18

YTDYTD 18 vs YTD 17

Copper (tonnes)

Molybdenum (tonnes)

111,865 449

-8% -7%

29% -20%

• 385,299 -15%

• 1,961 37%

Fourth quarter and 2018 performance

Las Bambas produced 385,299 tonnes of copper in copper concentrate in 2018, with fourth quarter production up by 29% compared to the previous quarter. Full year production was in line with the revised guidance range following the localised wall slippage which impacted mining rates and production during the third quarter of 2018. The C1 unit cost for 2018 was US$1.18/lb, also in line with the revised guidance range.

Fourth quarter production was driven by higher milled grade (1.0% vs. 0.7% in 3Q18) and improved mining volumes (+12% vs. 3Q18), following successful actions to remediate and resume mining in the area impacted by the wall slippage. Initiatives to increase mill throughput also continued to deliver sequential improvement, with milling rates near record levels and 4% above the third quarter. On an annualised basis, mill throughput in the fourth quarter was 52.0mt, compared to a nameplate capacity of 51.1mt.

2019 outlook

Copper in concentrate production for 2019 is expected to be between 385,000 and 405,000 tonnes. Forecast 2019 production is underpinned by further improvements in mill throughput with ore grades expected to be in line with those in 2018. Mining and development rates are also set to increase in 2019 to open up additional operating faces consistent with the mine plan.

The risk of further wall instability in the area of the pit impacted by wall slippage is considered to be lower with geotechnical conditions improving with depth. Reliance on ore from this section of the pit is also reduced as other areas of the pit are developed. Further assessment of the geological features in this section of the pit is being undertaken. The results will be incorporated into the design of the next cutback.

C1 unit cost guidance is US$1.15-1.25/lb for 2019. Costs reflect significant increases in both mining and milling volumes, increased mine development investment and longer haul distances as the depth of the Ferrobamba pit increases. These cost pressures will be partially offset by ongoing cost and efficiency programs that in 2018 delivered US$95 million in annualised savings. These programs seek to ensure that Las Bambas remains as one of the lower cost mines of this scale in the world.

Medium term outlook

Las Bambas remains on target to deliver on medium term guidance of two million tonnes of copper in concentrate in the first five years. A series of plant upgrades and debottlenecking activities are expected to increase throughput rates by 5 to 10% above the design capacity over the next five years to offset the longer term impact of declining grades.