MMG : Announcements and Notices – Fourth Quarter Production Report for the Three Months Ended 31 December 2016

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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 2016

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 2016.

The report is annexed to this announcement.

By order of the Board

MMG Limited Andrew Gordon Michelmore

CEO and Executive Director

Hong Kong, 23 January 2017

As at the date of this announcement, the Board comprises eight directors, of which two are executive directors, namely Mr Andrew Gordon Michelmore and Mr Xu Jiqing; two are non-executive directors, namely Mr Jiao Jian (Chairman) and Mr Gao Xiaoyu; 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 2016

4Q 16	4Q 16	YTD 16
4Q 16	vs	vs	YTD	vs
4Q 15	3Q 16	YTD 15
COPPER CATHODE (tonnes)
Kinsevere	20,807	2%	5%	80,650	1%
Sepon	22,527	10%	12%	78,492	-12%
Total	43,334	6%	9%	159,142	-6%
COPPER (contained metal in concentrate, tonnes)
Las Bambas	105,491	N/A	-1%	330,227	N/A
Golden Grove	4,101	-32%	116%	12,194	-53%
Rosebery	505	-24%	25%	1,948	-34%
Total	110,097	1537%	2%	344,369	1088%
ZINC (contained metal in concentrate, tonnes)
Golden Grove	13,959	-43%	134%	38,128	-31%
Rosebery	21,424	4%	7%	81,447	-12%
Total	35,383	-21%	36%	119,575	-19%
LEAD (contained metal in concentrate, tonnes)
Golden Grove	1,658	-23%	224%	3,963	-42%
Rosebery	7,103	33%	14%	26,005	22%
Total	8,761	17%	29%	29,968	6%

KEY POINTS

• MMG delivered copper production of 503,510 tonnes in 2016 against a guidance range of 415,000- 477,000 tonnes. Zinc production was 119,575 tonnes against a guidance range of 120,000-135,000 tonnes.

• Strong copper production was driven by Las Bambas, which produced 330,227 tonnes of copper in copper concentrate during 20161, above the guidance range of 250,000-300,000 tonnes.

• MMG expect to produce 420,000-460,000 tonnes of copper in copper concentrate at Las Bambas in 2017.

• Bulk concentrate trucking at Las Bambas performed above expectations following two significant logistics disruptions in the second half of 2016. Year-end inventory at Las Bambas was reduced to 70,000 tonnes

  of copper concentrate, compared with previous guidance (23 November 2016) for around 150,000 tonnes of copper concentrate.

• Kinsevere delivered a record year in 2016 for safety, volume and cost. This was the third consecutive production record for Kinsevere, which continues to operate well above nameplate capacity.

• Fourth quarter production at Sepon was its strongest for 2016, up 10% on the prior corresponding period and 12% on the third quarter of 2016. Despite the strong finish to the year, production was down 12% for the full year compared to 2015.

• Australian operations delivered their strongest quarter for the year in the fourth quarter.

• Cost improvement initiatives continue across all sites, group and support functions.

• MMG expects to produce 560,000-615,000 tonnes of copper and 65,000-72,000 tonnes of zinc in 20172.

SAFETY, HEALTH, ENVIRONMENT AND COMMUNITY

MMG's first value is safety. MMG's operations recorded a Total Recordable Injury Frequency (TRIF) for the fourth quarter 2016 of 1.94 and 1.90 for the full year3. MMG has achieved an average 9.6% year-on-year reduction in injury rates since the end of 2012.

The Lost Time Injury Frequency (LTIF) was 0.42 for the quarter and 0.52 for 2016.

Whilst we continually strive to eliminate incidents and injuries at our workplaces, we sadly report that we had a fatality during the quarter. On 6 December 2016, a contractor at our Las Bambas operation, Mr Henri Aldana Chanca, died after being injured by an uncontrolled release of water. We will continue to work towards ensuring the safety of all of our people.

COMMODITY PRICES, MARKETING AND SALES

Quarter - average				Quarter - close
LME cash price	4Q 16	3Q 16	4Q 15	4Q 16	3Q 16	4Q 15
Copper (US$/lb)	2.39	2.17	2.22	2.51	2.20	2.13
Gold (US$/oz)	1,217	1,333	1,104	1,148	1,335	1,061
Lead (US$/lb)	0.97	0.85	0.76	0.91	0.96	0.82
Silver (US$/oz)	17.11	19.61	14.77	15.93	19.17	13.85
Zinc (US$/lb)	1.14	1.02	0.73	1.16	1.08	0.72

Prices for all base metals lifted significantly during November 2016, fuelled by renewed investor interest. Although December saw some correction in prices, they remain well above the levels seen throughout the first three quarters of 2016.

The increase in investor activity gives recognition to a more positive economic outlook and improved fundamental conditions across the commodity markets. In particular, Chinese copper consumption is now

2

Guidance excludes Golden Grove which is expected to be sold effective 1 January 2017, subject to final approvals.

3

Provisional, pending completion of data assurance processes.

widely acknowledged to have grown more strongly in 2016 than originally anticipated. The increase in concentrate supply has been readily absorbed by the market, particularly through the further growth in the Chinese smelting industry. This has resulted in declining concentrate treatment and refining charges in recent months.

The zinc and lead concentrate markets saw a further tightening during the quarter as the supply constraint arising from previous mine closures and a lack of new mine supply restricted concentrate availability to smelters and forced further declines in treatment charges.

PROVISIONAL PRICING

The following table provides a summary of the contained metal that was sold but provisionally priced at the end of the fourth quarter 2016 and the month that final average pricing will occur. For the copper tonnes referenced below, approximately 85,000 are subject to the hedging program disclosed by the company on 9 January 2017. These tonnes are hedged at a net price of US$2.60/lb. Further detail on this hedging program is disclosed in the Corporate Update section below.

Open pricing at 31 December 2016	Jan-17	Feb-17	Mar-17	Apr-17	Total
Copper (tonnes cathode and copper contained in concentrate)	49,429	30,222	30,730	31,269	141,650
Gold (payable ounces in concentrate)	16,583	1,158	2,314	8,439	28,495
Lead (tonnes)	4,353	502	-	1,135	5,991
Silver (ounces)	1,113,977	75,080	108,605	348,574	1,646,236
Zinc (tonnes)	12,488	4,058	-	-	16,545

OPERATIONS

LAS BAMBAS

4Q 16	4Q 16	YTD 16
4Q 16	vs	vs	YTD	vs
4Q 15	3Q 16	YTD 15
Copper (tonnes)	105,491	N/A	-1%	330,227	N/A

Las Bambas produced 105,491 tonnes of copper in copper concentrate during the December quarter, taking total production to 330,2274 tonnes for 2016, ahead of our guidance range of 250,000- 300,000 tonnes of copper in copper concentrate. The operation has now delivered two consecutive quarters of strong production since achieving commercial production on 1 July 2016 with the plant operating at an annualised production rate of approximately 423,000 tonnes, demonstrating the design capability of the plant. The progress to date has been pleasing and the transition to steady state operations will continue during the first half of 2017, with the focus on optimising production and reducing costs.