Bathurst Resources : Half year results announcement

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Level 12, 1 Willeston Street, Wellington 6011, New Zealand

PO Box 5963 Lambton Quay, Wellington 6145, New Zealand

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H1 FY22 RESULTS ANNOUNCEMENT

24 February 2022: Bathurst Resources Limited 31 December 2021 half year result

EXPORT PRICING UNDERPINS STRONG PERFORMANCE:

• 27 percent increase in revenue
• 29 percent increase in earnings

Financial measures	H1 FY22	H1 FY21
(NZD)	$m	$m
Revenue1	124.6	97.8
EBITDA2	34.7	26.8
Profit after tax	4.6	3.7
Cash	41.8	21.7

CEO'S COMMENTS

The H1 FY22 results are underpinned by a strong recovery in our export segment pricing. The benchmark that our export sales are priced against increased significantly in the first six months. This was largely due to ongoing tight supply particularly of premium hard coking coal from major producers and limited spot cargo availability, against an increase in steel demand. Demand has been influenced by COVID infrastructure stimulus packages that require steel, and key market recoveries.

More recently, ongoing coal supply issues in Australia due to heavy rainfall and worker availability impacted by COVID have influenced pricing levels which have recently exceeded previous records set late last year, which will flow into our H2 results. It is expected that the high pricing environment may continue for the remainder of this financial year, before prices return to more sustainable levels, however continued demand and supply uncertainty could keep the benchmark buoyant.

Like the rest of the world we are seeing a rise in inflation from COVID related supply chain disruptions, labour supply shortages and fuel price increases. Consumer prices in New Zealand have risen at the fastest pace since 1990 with average inflation reaching 5.9 percent at the end of 2021, and fuel costs at our operations have risen approximately 60 percent since June. These factors coupled with some operational challenges at our largest mine from a significant flooding event have caused a dampening effect on profit margins.

Rehabilitation at the Canterbury mine is progressing well, with approximately 21 hectares rehabilitated in the first six months. All coal stocks have been fully depleted, with most surplus equipment now sold and infrastructure removed to allow for the rehabilitation.

1Includes realised FX and coal pricing hedges on export sales. Unrealised movements in coal pricing and FX hedging goes through other comprehensive income.

2 EBITDA is a non-GAAP measure and reflects earnings before net finance costs (including interest), tax, depreciation, amortisation, impairment, non-cash movements on deferred consideration and rehabilitation provisions.

Financial figures in this release are 100% Bathurst and 65% BT Mining and in NZD unless otherwise disclosed

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The strategy of using coal price hedging to help protect revenue in our export segment from sharp dips in pricing levels was re-assessed by the Board. The realised hedging expense has increased in line with the sharp rise in pricing levels, that have significantly exceeded the market consensus of forward pricing when these hedges were contracted. It was reaffirmed that we continue to see the value in adopting a hedging strategy, which over the last few financial years, has provided essential additional revenue.

Looking ahead, the greatest uncertainty comes from the impact that community transmission of COVID and in particular the Omicron variant will have on our workforce, and New Zealand's supply chain. We as a business have decided to provide additional leave support to our workforce in addition to that provided by the government. Additionally, a company-wide reporting tool has been rolled out which enables real-time access to data on employees impacted by COVID, which will help us to better ensure we keep our people healthy and our operations can continue to operate.

OPERATIONS

Bathurst is New Zealand's leading coal producer, engaging in the development and production of coking and thermal coal in New Zealand. Bathurst also has an equity stake in a Canadian high quality coking coal exploration project.

Export operations

					Export		Export
Measure					H1 FY22		H1 FY21
Production (100% basis)	kt		475		428
Sales	(100% basis)	kt		563		529
Overburden (100% basis)	Bcm 000		1,964		1,825
Revenue incl. realised hedging (equity share basis)	$'000		74,075		44,582
Average price received per tonne (100% basis)	$/t		203		130
EBITDA (equity share basis)	$'000		24,012		6,170
Commentary:
Production		Increased due to higher sales pricing.
and sales
Revenue		• The average benchmark price was USD $287/tonne H1FY22 versus USD $113/tonne
	H1FY21. Export sales are a mix of being priced against the spot price or a prior 3 month
		average (t minus 1).
		• FX had a negative impact on the conversion of sales from USD to NZD year-on-year
		("YOY"), as did the sales mix, with a higher percentage of thermal sales replacing semi-
		hard to align with production.
Earnings		Underlying cost increases have partially offset the uplift in revenue:
		• Purchased coal which is added to the mine's coal blend to meet contract specifications. It
		is priced against the USD benchmark so the cost fluctuates in line with revenue.
		• Fuel pricing which moved from an average $0.69/litre to $1.11/litre.
		• Profit share for employees which is pegged to uplifts in sales revenue.
		• Operational inefficiencies from increased rainfall causing more downtime, and the mine
		closure in July due to a local flooding event.
		Note that the decrease in export EBITDA to that as reported in the 31 December quarterly
		activities update ($29.3m) is due to finalisation of accounting for realised hedging contracts
		that relate to the 31 December reporting period.

Financial figures in this release are 100% Bathurst and 65% BT Mining and in NZD unless otherwise disclosed

www.bathurst.co.nz

Domestic operations

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			Domestic	Domestic
Measure			H1 FY22	H1 FY21
Production (100% basis)	kt	477	581
Sales	(100% basis)	kt	476	504
Overburden (100% basis)	Bcm 000	3,674	8,539
Revenue (equity share basis)	$'000	50,523	53,207
EBITDA (equity share basis)	$'000	19,038	26,864

Commentary:

Sales	North Island domestic ("NID") increased by 16kt from increased sales volumes to a steel
	producing customer.
	South Island domestic ("SID") sales volumes declined 44kt due to the closure of the Canterbury
	mine.
Overburden	Waste moved in advance has reduced significantly at the Rotowaro mine as it moves closer to
	the end of its mine life.
Revenue	NID sales revenue improved from the uplift in sales tonnes, and contractual standard annual price
	increases, as well as escalation clauses that allow for producer price index increases.
	SID saw a drop in sales revenue from the closure of the Canterbury mine, partially offset by
	contractual price per tonne increases at Takitimu.
EBITDA	SID EBITDA reduced $5m. This is primarily due to the closure of the Canterbury mine, and a
	reduction in net freight revenue as margins have been eroded by the hike in fuel costs and
	government levies. Discussions are underway to pass these direct cost increases onto customers.
	NID EBITDA decreased $3m from an increase in the underlying cost base offsetting the increase
	in revenue, primarily due to:

• The mines moving closer to the end of their mine life, with costs net of capitalised stripping naturally increasing as there is a certain level of fixed costs incurred, relevant to production and overburden stripping volumes.
• Fuel has moved from an average cost of $0.65/litre to $1.05/litre.
• Labour costs have increased in line with contractual CPI adjustments.
• Repairs and maintenance costs at Rotowaro have stayed relatively consistent notwithstanding reduced production and overburden stripping levels. This is partly a function of deferred work from FY21 moving into FY22, and partly where the machines are at in their life cycle.
• Prior year costs also benefited from a wage subsidy from the New Zealand government as part of their COVID response.

Corporate

Corporate overhead costs included in the total group consolidated EBITDA increased compared to the prior period, $8.4m H1 FY22 versus $6.3m in H1 FY21. This reflects an increase in Bathurst overhead expenses:

• Overhead salary costs increased from short term performance incentives paid in H1FY22. These were not paid in the prior period.
• Legal fees incurred in defending Bathurst against claims bought by L&M (refer note 7 of the financial statements).

Financial figures in this release are 100% Bathurst and 65% BT Mining and in NZD unless otherwise disclosed

www.bathurst.co.nz

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FINANCIAL RESULTS

Net profit after tax ($m)

(1.9)

		(6.9)					11.0		(6.0)
	9.6
						(2.8)				(2.1)
				6.5
3.7											4.6
H1 FY21	PY	PY FX gain	Normalised	BRL gross	BT Mining	Admin	Convertible	Other	H1 FY22
NPAT	Impairment	on deferred		H1 FY21	profit	profit	expenses	bond		NPAT
		consideration		NPAT				derivative

Key movements in net profit after tax:

Impairment	+$9.6m	The Canterbury assets were impaired in the previous period after the decision to
cease operating the Canterbury mine at the end of June 2021.
PY FX gain on	-$6.9m	A favourable movement in the translation of USD denominated deferred consideration
into NZD in the prior period lead to significant unrealised foreign exchange income.
deferred
	The deferred consideration was subsequently reversed at 30 June 2021 due to a
consideration
	favourable ruling by the Supreme Court on the issue.
BRL gross	-$2.8m	The cessation of operating at the Canterbury mine, and a reduction in net freight
revenue are key drivers. Refer to domestic operations overview (South Island
operating profit
	domestic) for further information.
Equity share of	+$11.0m	Increase from export operations driven by higher pricing received on sales, partially
offset by a decrease in earnings for the North Island domestic segment. Refer to
joint venture BT
	export and domestic operations overview for further information.
Mining profit
Admin expenses	-$1.9m	An increase in corporate administration costs, largely driven by increased legal fees
incurred in defending Bathurst against claims bought by L&M, and overhead salary
		costs that included short term incentive performance payments in the current period
		(nil in prior period).
Fair value	-$6.0m	This movement reflects the valuation of the conversion option of the AUD convertible
bonds. This is a non-cash item that will either move to equity (if converted) or reverse
movement on
	through the income statement (if redeemed). The expense has increased in
convertible bond
	correlation to the increase in Bathurst's share price which has been recently trading at
derivative
	a significantly higher value than the strike price of the bonds.

Financial figures in this release are 100% Bathurst and 65% BT Mining and in NZD unless otherwise disclosed

www.bathurst.co.nz

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KEY GROWTH PROJECTS

Project	Project type	Market	Project description
location
British	Exploration	Coking coal for	High quality coking coal joint venture. See
Columbia,	project in new	steelmaking for the	below for further detail.
Canada	mining area	export market
South Island,	Extension to	Coking coal for	Drilling and consenting works continue at the
New Zealand	existing	steelmaking for the	Denniston plateau (West Coast of the South
	operations	export market	Island) projects to assess converting resources
			to reserves.
North Island,	Extension to	Thermal coal and coal	Rotowaro North and Waipuna West extension
New Zealand	existing	for steelmaking for	projects to the Rotowaro mine. The economic
	operations	domestic market	feasibility of these projects is still being
			assessed, with a decision to be made on the
			Waipuna West extension project in the coming
			months.

Crown Mountain exploration project, Canada

A further $0.4m was invested in the six months to 31 December 2021 in the Crown Mountain project, a coking coal exploration project in Canada with joint venture partner Jameson Resources Limited. The funds were invested on a proportional equity basis as a non-callable loan and are being used to further the progression of the environmental assessment application.

Key findings of the bankable feasibility study on the project3 released in July 2020 reaffirmed the project as a high- quality coking coal opportunity with a competitive operating and capital cost structure, with access to existing common user rail and port infrastructure. Results of a yield optimisation study released in August 2021 has confirmed the potential for increased production and considerably improved economic outcomes of the project by increasing product ash levels which enables increased processing yield.

Bathurst's equity share remains at 22.2 percent with the option to buy-in to 50 percent of the project.

3 Refer to the ASX announcement HEREby joint venture partner Jameson Resources Limited for details on the bankable feasibility study and optimisation study result, and HEREfor the yield optimisation study.

Financial figures in this release are 100% Bathurst and 65% BT Mining and in NZD unless otherwise disclosed

www.bathurst.co.nz