Stanmore Resources

Climate change presents a strategic challenge for the metallurgical coal sector, with wide-ranging implications for regulation, markets, technology, and stakeholder expectations. For the Group, these dynamics create both risks that may affect the resilience of our business model but also present opportunities to strengthen competitiveness through adaptation and innovation.

The Group considers the potential impacts of climate change and climate-related financial risk exposures across three distinct time horizons: short-term (0–2 years), medium-term (3–5 years), and long-term (5+ years). These time horizons have been selected to align with the Group's operational and strategic planning timelines, including the life-of-mine considerations that shape long-term asset management and investment decisions in the metallurgical coal sector. They also reflect the timelines over which key regulatory and policy developments, as well as market and technology transitions, are expected to unfold and impact the Group's business and value chain.

Climate-related risks identified

CR1 - Increased costs arising from evolving climate and clean energy regulations, including the Safeguard Mechanism and policies that cap emissions or increase the price of carbon. Risk category: Policy & Legal. Relevant time horizon: Short, Medium and Long.

CR2 - Failure to secure sufficient ACCUs from the market to meet Safeguard Mechanism surrender obligations. Risk category: Policy & Legal. Relevant time horizon: Short, Medium and Long.

CR3 - Impact to Development Approvals. Risk category: Reputation. Relevant time horizon: Short, Medium and Long.

Climate-related opportunities

While the Group is progressing various climate related initiatives, the Group has not identified any climate-related opportunities that could reasonably be expected to affect the entity's prospects and the current status of these projects is such that they have been assessed as immaterial. As such, no material climate-related opportunities have been disclosed.

Information base used to identify risks

Conducting an environmental scan to identify climate-related risks and opportunities that may impact Stanmore's business, strategy and financial planning is an integral step in the risk assessment process. The environmental scan draws on a wide range of internal and external sources to ensure a robust and forward-looking view of potential climate risks and opportunities. This includes consideration of market, legal, regulatory changes and trends affecting the metallurgical coal and mining industry and those affecting society more broadly. Assessment of future climate scenarios and projections, and historical data, and conducting industry benchmarking also forms part of the approach to the identification of risks and opportunities.

The Group is a leading Australian producer and exporter of high-quality metallurgical coal used in steelmaking. The Group's operations are located in Queensland's Bowen Basin, with an operating portfolio of three open-cut mines, including South Walker Creek (SWC), Poitrel (PTM), and the Isaac Plains Complex (IPC).

The Group is engaged in the full value chain of coal production, from exploration and development through to processing, logistics, and export. Coal from the Group's operations is transported via established rail infrastructure to the Dalrymple Bay Coal Terminal (DBCT) and Abbot Point Export Terminal (NQXT) for export to key international steel markets across Asia and Europe.

Value chain stages: Exploration and Development (geological exploration to determine and identify valuable deposits); Planning and Development (engineering and construction of the mines); Extraction and Mining (extracting minerals with appropriate tools); Coal Processing (processing raw materials); Inventory (managing inventory and quality levels); Distribution (moving coal to port); Marketing and Sales (delivering materials to the customer for use); Rehabilitation (progressive rehabilitation and mine closure planning).

Concentration - Product Mix and Customer Base

Product Mix (2025, by revenue): Coking 70%, PCI 26%, Thermal 4%. Customer Mix (2025, by tonnes): Japan/Korea/Taiwan 39%, India 17%, Southeast Asia 6%, Europe 26%, Other 12%.

Risks and opportunities affect coal mining, CHPP operations, fuel use and power use across the IPC, SWC, and PTM facilities. Elements of the broader value chain, including rail infrastructure used for product transport and port facilities used for export, are geographically situated in areas that can experience flooding or weather-related access constraints. These components are outside the direct operational control of the Group and represent potential points of interruption to operational movement during periods of heavy rainfall or adverse weather conditions.

For CR3, effect on value chain: this risk affects the Group's business model and value chain by potentially delaying the advancement of key projects, deferring production schedules, and increasing project development costs. Such delays could also hinder the Group's ability to respond to market demand in a timely manner, resulting in foregone revenue opportunities and reduced competitiveness.

The Group has strengthened its strategic approach to climate-related risks and opportunities through the implementation of our Decarbonisation Plan, which now serves as the foundation of the company's broader climate transition strategy. The Plan has already begun shaping decision-making by setting clear emissions intensity reduction objectives, identifying potential investment areas, and embedding climate considerations into operational and capital planning processes. Its direction was further reinforced by the scenario analysis conducted in 2025, which provided deeper insight into how material climate-related risks and opportunities may evolve across different time horizons and policy pathways.

Strategic Risk & Action responses

Technology and Innovation (CR3): In 2025, the Group examined opportunities related to reducing fuel usage across its fleets, assessing viability and identifying technologies with future potential. These efforts are strengthened by the Group's longstanding investment in Low Emission Technology Australia (LETA), a specialist fund dedicated to advancing large-scale deployment of emissions-reducing technologies across critical industries. By maintaining an active role in technology evaluation, the Group reduces the risk of being left behind by breakthrough solutions, ensures access to proven technologies, and strengthens its ability to align with evolving policy requirements and stakeholder expectations. This approach also provides flexibility to adapt as steel-making processes evolve, mitigating the risk that demand for metallurgical coal is eroded by technological change in end-use markets.

Methane Capture (CR1): SWC Gas-to-Electricity Project is the most advanced decarbonisation initiative in the Group's portfolio and forms a cornerstone of its emissions reduction strategy. With support from state government investment programs, the project involves capturing methane released from coal seams prior to mining and converting it into on-site power generation. By preventing fugitive methane emissions and displacing grid electricity, the project has the potential to deliver a reduction in Scope 1 and 2 emissions. In addition to decarbonisation, the initiative enhances energy security by providing a reliable on-site supply of electricity. The project also delivers important governance and reputational benefits, addressing policy and legal risks under the Safeguard Mechanism and demonstrating a clear commitment to emissions reduction. As the project progresses, the Group is also evaluating options to expand drainage capacity and to explore flaring and other beneficial uses of captured gas beyond on-site power generation.

Fugitive Emissions Accounting (CR1): Method 2 reporting will improve the transparency and accuracy of fugitive emissions accounting and is a critical focus of the Decarbonisation Plan, reflecting the fact that fugitive emissions currently account for almost half of the Group's Scope 1 emission profile. The Group is undertaking drainage studies, gas testing, and advanced data development to ensure compliance with the National Greenhouse and Energy Reporting Scheme (NGERS) and to provide more data for mitigation, reporting and carbon accounting. At the same time, the Group is working closely with the Australian Government to address regulatory uncertainties in gas drainage accounting for open-cut mining.

Scope 2 Reductions (CR1, CR2): The final component of the Decarbonisation Plan addresses Scope 2 emissions reduction. The Group's strategy is to align with Queensland's Energy Roadmap 2025 and generation mix – achieving emissions reductions through the increasing percentage of green energy which makes up grid supplied electricity. Opportunities under investigation include behind-the-meter solar generation at PTM and IPC, which would provide clean, reliable power directly to operations, and the potential use of green Power Purchase Agreements (PPAs) to complement these efforts with longer-term price and supply certainty. Although Scope 2 emissions only account for around 10% of the Group's operational emissions footprint (excluding Scope 3), reductions in this category are technically possible and will assist in strengthening the Group's standing with investors, insurers, and workforce stakeholders. In addition to these measures, the Group will continue to purchase certified ACCUs (or SMCs) as required to offset residual emissions, ensuring full compliance with government standards.

Risk Management Embedding

Building on the identification of material climate-related risks and opportunities, the Group has embedded their management into its Enterprise Risk Management Framework (ERMF) to strengthen overall business resilience. The ERMF provides a structured process for assessing, prioritising, and monitoring climate-related risks and opportunities alongside broader strategic and operational risks. Assessments are undertaken using established methodologies, including the Group's Risk Appetite Statement and Risk Matrix, to determine materiality and evaluate the potential financial consequences for the business.

To ensure that financial implications remain current, the Group maintains a dedicated Scenario Analysis and Financial Impacts Register. This register captures the quantified financial effects of identified climate risks and opportunities across different scenarios and time horizons, and its outputs feed directly into the Climate Risk Register.

Capital Allocation & Progress to Date

The Group has established clear plans and allocated the necessary resources to support the activities set out in the Group's Climate Strategy. Annual budgets include operating costs to progress the relevant studies and monitor technology developments. This is across both the decarbonisation work stream and Stanmore NextGen Pty Ltd, which assesses potential commercial partnerships and opportunities to further the Group's objectives. The annual budgeting process also captures future capital requirements. When an opportunity has been endorsed it will go into the project pipeline for further assessment, delivery and reporting.

Emerging Considerations

Under global decarbonisation pathways, emerging steelmaking technologies such as hydrogen-based Direct Reduced Iron (DRI) and Electric Arc Furnaces (EAF) are expected to play an increasing role in reducing emissions across the steel sector. While these processes may gradually alter the long-term composition of steel production, current market outlooks indicate continued reliance on blast-furnace operations, particularly in growth regions such as India and Southeast Asia. Industry analysis by Wood Mackenzie projects that global seaborne metallurgical coal demand will increase from around 330Mt in 2025 to approximately 375Mt by 2050. The Group remains well positioned within this evolving context, with a portfolio focused on premium, low-impurity metallurgical coal that supports lower-emission blast-furnace operations. The Group continues to monitor technology adoption rates and policy developments to ensure its strategy remains aligned with future market dynamics.

Given the inherent uncertainties arising from both external and internal factors, the Group has adopted a qualitative approach to disclosing financial effects, informed by scenario analysis that incorporates quantitative inputs. Translating these inputs into precise financial metrics, such as revenue, operating costs, asset values and cash flows, remains subject to a high degree of measurement uncertainty. This reflects not only the inherent variability of climate projections, policy developments and market dynamics, but also the interaction with strategic and operational decisions. The Group will continue to adapt its business model and investment priorities in response to emerging risks and opportunities as they evolve over time.

Current financial effects

CR1: The financial impact associated with the surrender of ACCUs for the 2025 reporting period is estimated as A$9.5 million.

CR2: For the 2025 reporting period, there have been no associated costs outside the costs of the ACCUs themselves, as the Group has successfully surrendered all required credits without needing to rely on the CCM or incur penalties.

CR3: For the current reporting period, no costs have been incurred, and no projects have been delayed due to delayed receipt of approvals. Furthermore, all environmental approval extension applications lodged for the upcoming reporting year are anticipated to proceed as scheduled.

Anticipated financial effects

CR1: For the year ending 31 December 2027, costs are projected to increase as reporting shifts to Method 2 for fugitive emissions, therefore likely increasing the number of ACCUs required for surrender. Additional costs are expected in the long-term horizon, with ACCU prices forecast to rise under both Scenario 1 and Scenario 2. Under Scenario 1, the maximum total cost of marginal abatement is projected to remain below $35.0 million in the long term, reflecting a more moderated regulatory pathway. Under Scenario 2, the expected marginal cost is projected to exceed $70.0 million in the long term. This risk may have a potential material impact to the Group in the long term, where rising carbon prices and reduced emissions baselines combine to amplify financial exposure. The financial implications may include sustained increases in ACCU liabilities, placing continued pressure on cash flows by diverting capital to compliance obligations, elevating operating costs and decreasing cash flows. In high-cost scenarios, this could require greater reliance on external financing, raising gearing levels and increasing the cost of capital which could be partially mitigated through the effective implementation of the Group's decarbonisation initiatives.

CR2: The CCM, introduced in the 2023–2024 reporting period, sets an indexed ceiling on ACCU prices, starting at A$75 per unit, and increasing annually by CPI plus 2%. This, combined with progressively reducing emissions baselines, is expected to drive up overall compliance costs over time. Under Scenario 1, where baselines tighten more aggressively, the Group may be required to purchase ACCUs at penalty prices, projected to rise to around A$394 per tCO₂-e, a substantial premium over traditional market prices of about A$61 per tCO₂-e. Under Scenario 2, reliance on the CCM limits potential long-term costs, with the CCM price projected to rise to around A$144 per tCO₂-e. Quantitative analysis indicates that the time horizon with the most significant exposure for this risk is the long-term. Increased surrender obligations would create recurring compliance outflows, diverting capital away from growth investments or operational improvements and placing increased pressure on cash flows. Higher ACCU purchase requirements or penalties will elevate operating costs and decrease cash flows.

CR3: The financial implications of deferred approvals include deferral of capital expenditure schedules and project revenue streams and reduced near to medium-term cash flows. Higher annualised costs associated with delays may compress margins and have the potential to reduce profitability, particularly in periods of strong demand. Extended delays may also affect the Group's financial position by creating imbalances in capital allocation, potentially leading to underutilised assets and higher carrying costs. Over time, repeated or prolonged delays have the potential to increase reliance on debt to bridge funding gaps, elevate gearing ratios, and place upward pressure on the cost of capital.

Accordingly, our disclosures focus on providing an analysis of how climate-related risks and opportunities may influence the Group's financial position, performance, and cash flows across the short, medium, and long-term. These disclosures are designed to provide our stakeholders with information on the direction and nature of potential financial impacts, while acknowledging the variables which impact the assessments.

Asset and business activity vulnerability table (per Section 5.2):

Given the scale and uncertainty of climate change, the Group recognises that building resilience requires more than addressing current risks, it demands a forward-looking view of how different futures may unfold. Scenario analysis provides this perspective, allowing the Group to explore how climate-related risks and opportunities could influence its operations, strategy, and financial planning over the short, medium, and long term.

Significant Areas of Uncertainty

In evaluating the resilience of the Group's strategy and business model to climate-related risks and opportunities, several significant uncertainties must be acknowledged. A significant factor relates to the future severity and frequency of physical climate hazards in the Bowen Basin, such as floods, droughts, and extreme heat, and their potential to disrupt mining operations and associated infrastructure. Further complexity arises from data limitations that require assumptions, such as scaling outputs from RCP7.0 to approximate RCP8.5 where direct datasets are unavailable. Beyond physical risks, there is also inherent uncertainty in the pace and scope of policy and regulatory change, including emissions reduction targets, carbon pricing mechanisms, and mine rehabilitation requirements. Market dynamics further add to this uncertainty, particularly the long-term demand outlook for metallurgical coal as global steel production pathways evolve and low-emissions technologies are progressed. In addition, shifts in investor, customer, and stakeholder expectations around climate performance and emissions reduction continue and are difficult to quantify.

Scenario Analysis Approach

In 2025, the Group undertook climate-related scenario analysis to stress test its business strategy against a broad spectrum of plausible climate futures. The analysis was based on two pathways from the Intergovernmental Panel on Climate Change's (IPCC) Sixth Assessment Report (AR6): Scenario 1 (SSP1-2.6) and Scenario 2 (SSP5-8.5). These scenarios draw on two core building blocks of the IPCC framework: the Shared Socioeconomic Pathways (SSPs) and the Representative Concentration Pathways (RCPs).

The Corporations Act 2001 requires the use of a lower-warming scenario that pursues efforts to limit the temperature increase to 1.5°C. SSP1-2.6 remains the appropriate lower-warming scenario as it represents realistic efforts to limit warming consistent with "well below 2°C" outcomes. Although the scenario's central estimate projects a global average temperature increase slightly above 1.5°C by 2100, its full probabilistic range includes outcomes approaching or falling below 1.5°C. Accordingly, the use of SSP1-2.6 supports Paris-aligned scenario analysis under AASB S2. Scenario analysis outputs noted no material difference using SSP1-2.6 aligned data compared to SSP1-1.9 data.

To strengthen robustness, the Group incorporated numerous additional datasets alongside the IPCC scenarios. Domestic insights were drawn from the AEMO's ISP, including the Step Change, Slower Change, and Accelerated Transition scenarios. At the global level, International Energy Agency scenarios, such as the Stated Policies and the Net Zero by 2050, were used, while macroeconomic and financial system perspectives were supplemented by the Network for Greening the Financial System climate pathways. To evaluate physical risks, the Group relied on the Coupled Model Intercomparison Project 6 & 5 climate models, aligned with the RCPs underpinning Scenarios 1 and 2.

For each scenario, the Group undertook both qualitative and quantitative assessments. The qualitative assessment considered how projected climate trends could affect the value chain, highlighting the potential emergence of new risks and opportunities. The quantitative assessment applied scenario data to estimate financial implications, including compliance costs, revenue impacts, and implications for strategic objectives. Each risk or opportunity was assigned a nominated time horizon, short, medium, or long.

Scenario analysis was applied to the Group's three key operations: IPC, SWC, and PTM. These sites were selected due to their scale, revenue contribution, and energy intensity, making them the most critical for testing resilience under varying climate outcomes.

Scenario analysis assumptions table (Scenario 1: Low Warming; Scenario 2: High Warming) covering climate-related policies, macroeconomic trends, national or regional-level variables, energy usage and mix, developments in technology, and reporting period, conducted in the 2025 reporting period.

Resilience Across Time Horizons

In the short term (0–2 years), the Group retains the financial resources and operational flexibility to meet immediate obligations under the Safeguard Mechanism. Strong cash flow generation and access to existing debt facilities provide the capacity to invest in near-term decarbonisation while absorbing compliance costs related to Safeguard Mechanism requirements.

In the medium term (3–5 years), resilience will be shaped by the ability to redeploy and repurpose assets. The Group is assessing the viability of dual-fuel haulage technologies and tracking the commercial readiness of battery-electric trucks. Additionally, investment in the SWC Gas-to-Electricity Project illustrates medium-term flexibility by improving on-site energy security and contributing to Scope 2 emissions reduction.

In the long term (5+ years), financial exposure is projected to intensify under both low and high-warming scenarios and the Group's capacity to respond will depend on its ability to upgrade and enhance efficiency of emissions-intensive assets while continuing to invest in low-carbon technologies. Methane capture, advanced drainage, and Scope 2 initiatives are expected to reduce emissions intensity and strengthen long-term resilience.

Across all horizons, integration of climate risk into the ERMF, supported by the internal carbon price, the Scenario Analysis and Financial Impacts register, and the climate risk register ensures these risks are fully embedded into capital allocation, resource planning, and growth decisions. Ultimately, scenario analysis confirms that although climate change introduces material risks to the Group's operations, these can be mitigated through the execution of the Group's strategic initiatives.

Also within Strategy 3.5: physical climate factors were examined alongside transition considerations to evaluate potential operational sensitivities. Findings from the assessment indicate that, while these factors, both individually and cumulatively, have the potential to cause short-lived operational disruptions, their anticipated impacts are managed within existing infrastructure, procedural frameworks, and adaptive controls. Although physical climate risks are not currently considered financially significant, the Group recognises that their significance may evolve as climatic conditions, regulatory settings, and operational footprints change.