Speciality Metals International Limited Annual Report 2020

Speciality Metals International Limited Annual Report 2020 9 Quarry Activities Following the 100% acquisition of Mt Carbine Quarries Pty Ltd on 28 June 2019, the established quarry operations with substantial growth opportunities and a steady revenue stream, have been successfully integrated into the Speciality Metals Group. Mt Carbine Quarries is the largest and most northern hard rock quarry in Queensland. It is a fully permitted, established business which has been in operation for over 20 years within the Mt Carbine Mining Leases. The Company’s cost competitiveness is primarily due to all of its feed stock being sourced from readily available stockpiled mined rock, meaning no drill and blast activities are necessary. The synergies between the quarry and the Company’s mining activities through beneficial waste reuse, reinforces the Company’s commitment to reducing its environmental footprint and maximising value from all resources on site. To ensure product and service standards were maintained, existing operational employees were retained by the Company following the acquisition. The current employee base has over 60 years’ experience in the quarry industry. Significant maintenance and upgrade work were undertaken during the year on the plant and equipment, workplace health and safety and account and management systems. Whilst these programs created additional operational expenses initially, the investment is required to generate increased efficiency and less down time, and lead to increased profitability. During the quarter ended June 2020, Mt Carbine Quarries was awarded its largest purchase order to date for approximately $4 million (including GST) from Bama Civil Pty Ltd (Bama) for the supply of various quarry materials for a major road construction project in Far North Queensland. Delivery of the material and the corresponding revenue recognition is scheduled to progressively occur during the half-year ending December 2020 (refer to ASX announcement $4 Million Contract Enhances Order Intake for the Mt Carbine Quarrying Operations released on 1 July 2020). The quarry’s general order intake has also improved throughout May and June 2020, with the easing of COVID-19 travel restrictions and the recommencement of various construction projects around Far North Queensland. These orders re- affirm the focus to position the quarrying operations to be a consistent cash generating business unit for the Company. With significant infrastructure funding being made available by the Queensland Government, Mt Carbine Quarries will continue to target the supply of quarry products to government- funded infrastructure projects as well as developing its project pipeline for the private sector. Additional quarry material has been stockpiled comprising various products ready for despatch. The Company has also purchased new equipment in preparation for the Bama contract deliveries to ensure output targets are met and the gradual modernisation plan for the quarry is implemented. This will improve the quarry’s capability and reliability, particularly for the supply of large infrastructure contracts such as the Bama contract. Mt Carbine Quarries Quarry Stockpiles