METHANEX CORPORATION 2013-03-27 T-12:19

METHANEX

A Responsible Care” Company

JONS

ANNUAL REPORT

Table of Contents
O 2012 Financial Highlights

O President’s Message to Shareholders

dh Chairman’s Message to Shareholders
O Management’s Discussion and Analysis
O Consolidated Financial Statements

O Notes to Consolidated Financial Statements

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Methanex Corporation is the world’s
largest supplier of methanol to major
international markets in North America,
Asia Pacific, Europe and Latin America.

Methanol is a versatile liquid chemical produced primarily from natural gas and used as a
chemical feedstock in the manufacture of a wide range of consumer and industrial products
such as building materials, foams, resins and plastics. The fastest-growing markets for
methanol are in the energy sector, which today represents one-third of methanol demand.
Methanol is used to produce methyl tertiary-butyl ether (MTBE), a gasoline component, and
there are growing markets for using methanol in olefins production and energy applications

such as direct blending into transportation fuels, dimethyl ether (DME) and biodiesel.

Vancouver (HQ)

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Methanex- Global Methanol Leader

Punta Arenas

0) Production Facilities
O Future Production (Louisiana 2014)
MM Giobal Office Locations
Distribution Terminals and Storage Facilities

Shipping Lanes

Methanex Corporation Annual Report 2012

2012 Financial Highlights (US$ millions, except where noted)

Operations

Revenue

Adjusted net income’

Net income (loss) (attributable to Methanex shareholders)
Adjusted EBITDA:

Adjusted cash flows from operating activities:

Modified Return on Capital Employed (ROCE)?

Diluted Per Share Amounts (US$ per share)
Adjusted net income’
Net income (loss) (attributable to Methanex shareholders)

Financial Position

Cash and cash equivalents

Total assets

Long-term debt, including current portion
Debt to capitalization3

Net debt to capitalizations

Other Information

Average realized price (US$ per tonne)s

Total sales volume (ooos tonnes)

Sales of Methanex-produced methanol (ooos tonnes)

Adjusted EBITDA’*
(US$ millions)

E
a E
E +

2002 2003 2004 2005 2006 2007 2008 2009 2010 201 2012

Regular Dividends Per Share

(uss) Sl E
a E
E
E
E
a
a Ñ
a] 1]
a
e
Ss

2002 2003 2004 2005 2006 2007 2008 2009 2010 20n 2012

2012 2011 2010 20095 20085
2,673 2,608 1,967 1,198 2,314
180 182 91 2 153
(68) 201 96 1 169
429 427 291 143 313
403 392 303 129 235
12.0% 13.8% 8.0% 1.2% 13.6%
1.90 1.93 0.98 0.02 1.61
(0.73) 2.06 1.03 0.01 1.78
746 351 194 170 328
3,545 3,394 3,141 2,923 2,799
1,245 903 947 914 782
46% 36% 40% 40% 36%
25% 26% 35% 35% 25%
382 374 306 225 424
7,459 7,514 6,929 5,948 6,054
4,039 3,853 3,540 3,764 3,363

Share Price Performance
(Indexed at December 31)

ET STE

2002 2003 2004 2005 2006 2007 2008 2009 2010 201 2012

Weighted Average
Shares Outstanding (millions)

2002 2003 2004 2005 2006 2007 2008 2009 2010 201 2012

+ These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the
Supplemental Non-GAAP Measures section on page 34 for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.

2 Modified ROCE is defined as adjusted net income before finance costs (after-tax) divided by average productive capital employed, Average productive capital employed ¡s the sum of average total assets (excluding plants

under production) less the average of current non-interest-bearing liabilities. Average total assets exclude cash held
assets in use during the period. The calculation of Modified ROCE includes our 60% share of income, assets and liabiliti

ies) divided by total capitalization.
ies) less cash and cash equivalents di

3 Defined as total debt (including 100% of Egypt limited recourse debt fal
4 Defined as total debt (including 100% of Egypt limited recourse debt fal

excess of $50 million. We use an estimated mid-life depreciated cost base for calculating our average
in the Egypt methanol facility.

:d by total capitalization less cash and cash equivalents.

5 Average realized price is calculated as revenue, excluding commissions earned and the Egypt non-controlling interest share of revenue, divided by the total sales volumes of Methanex-produced methanol (attributable to

Methanex shareholders) and purchased methanol.

é The Company transitioned from Canadian GAAP to IFRS on January, 2010. Figures prior to 2010 have not been restated in accordance with IFRS and are reported in accordance with Canadian GAAP.

For addi

nal highlights and additional information about Methanex, refer to our 2012 Factbook available at www.methanex.com.

2 Methanex Corporation Annual Report 2012

President’s Message to Shareholders

Dear fellow shareholders,

lam honoured and humbled to have been appointed by the
Board of Directors as the third CEO of Methanex since 1994.
Bruce Aitken, with whom | have worked over the past 12 years,
left the Company in extremely good condition, for which lam
grateful. | am very excited to be in a position to lead such a great
organization at a time when we look to significantly grow our
company in an exceptionally attractive industry environment
and create significant value for shareholders.

We remain fully committed to the methanol business. Our strat-
egy is sound and our focus will continue to be on global leader-
ship, low cost and operational excellence. We will maintain an
unwavering commitment to health, safety and the environment
under the umbrella of Responsible Care.

2012 was another solid year for the Company. We delivered
strong returns for our shareholders and our share price was up
40% over the year. Our leadership position in the industry was
maintained with a 15% market share and sales volumes of

7.5 million tonnes, which matches our highest sales year ever.

During 2012, we also made progress on a number of the Compa-
ny’s strategic initiatives. We secured multiple long-term gas
supply contracts to underpin the 2012 restart of our second
Motunui facility and positioned the New Zealand operations to
further increase production in 2013. The final investment deci-
sion and the aggressive timetable to relocate an idle Chile facility
to Geismar, Louisiana for start-up in O4 2014 should deliver sig-
nificant value for many years to come, as we look to benefit from
our recently signed 10-year natural gas contract with Ches-
apeake Energy. We are also continually enhancing our presence
in the fast-growing Asia Pacific market and 2012 was a year
where we successfully supported energy-based methanol
demand growth.

Looking forward, 2013 ¡is all about executing our strategy and
business plan. We will remain focused on our growth objectives
ofexpanding production in New Zealand, staying on time and
budget for the Geismar relocation project and completing the
Medicine Hat expansion. At the same time, we are committed to
increasing the utilization of our existing assets by achieving

President’s message

excellent plant reliability and increasing natural gas deliveries to
our facilities in Trinidad, Egypt and Chile.

As a result of the current global methanol industry environment,
where we expect to see rapid demand growth and little new
supply, 2013 brings a lot of excitement and opportunity for our
business. Methanol to energy applications made up one-third of
the demand for methanol in 2012. Energy demand for methanol
continues to grow at double-digit rates and there is more and
more interest in methanol as an energy product outside China.
As the world’s largest methanol supplier, we must continue to
focus on meeting and exceeding our customers’ needs as we
work hard every day to earn their business. As well, there are
unique opportunities to invest further in value-creating growth
opportunities to help satisfy our customers’ growing demands
and enrich our global leadership position; for example, we will
make a final investment decision on relocating a second one
million tonne plant from Chile to Geismar by the middle of 2013.
We will achieve our plans by staying focused on Responsible
Care and through an enhanced culture of high performance,
while at the same time staying true to our values of integrity,
trust, respect and professionalism.

The entire team is looking forward to a very exciting and success-
ful future as we grow our production base at a time when our
customers will need additional methanol molecules to grow
their businesses. As we successfully execute our projects to
increase production, this additional methanol should sig-
nificantly improve cash flows and lead to better returns for
shareholders. Our plan isto maintain a conservative balance
sheet and look to continuing a balanced approach between
growing the Company and returning excess cash to share-
holders. With our sound strategy and outstanding team, we are
well positioned to continue to outpace the competition.

John Floren
President €: Chief Executive Officer

Methanex Corporation | Annual Report 2012 3

4 Methanex Corporation | Annual Report 2012

Chairman’s Message to Shareholders

Dear fellow shareholders,

As you have read in the President’s letter, 2012 was a year of
many important achievements and events for Methanex. From a
governance perspective, one of the most significant events was
the change in leadership. Bruce Aitken, who had been President
and Chief Executive Officer since May 2004, retired at the end of
2012 and was succeeded by John Floren, who served as the
Company’s Senior Vice President, Global Marketing and Logistics
for the last seven years.

Experts on governance consider the smooth and orderly succes-
sion of a public company’s President and CEO as perhaps the
most important responsibility of a Board of Directors. We
couldn’t agree more. Indeed, our Corporate Governance Princi-
ples speak explicitly of the Board’s role in overseeing succession.
Let me take this opportunity to provide some insight into how
your Board handled this important task.

A smooth and successful succession process does not and cannot
happen overnight. It is a process that requires careful planning,
evaluation and decision-making. As a matter of course, the
Methanex Board regularly addresses management succession
issues and has contingency plans in place for senior manage-
ment should adverse health issues or catastrophe befall one or
more members of the senior management team.

In terms of appointing a new President and CEO, the succession
process began in July 2010, a full two-and-a-half years before the
transfer of responsibilities actually occurred. At that time, Bruce
Aitken informed the Human Resources Committee that he was
considering retirement in the second half of 2012. The Commit-
tee reviewed the entire slate of the senior management team,
concluded that it offered quality CEO candidates, and began a
process for reviewing these candidates. From that meeting in July
2010 until the end of 2012, the succession process was a key
standing agenda item at every Human Resources Committee
meeting, and after each committee meeting was reported on
fully to the Board for further discussion.

Directors understood the importance of focusing on this
important issue. As is our practice every year, each committee
and the full Board establish “key objectives” upon which to pay
particular attention during the year. (The Board’s objectives for
2013 are disclosed on page 13 of the Information Circular.) In 2011
and 2012, both the Human Resources Committee and the Board
as a whole established CEO succession planning as a key
objective.

By early 2011, it had become clear that John Floren was the pre-
ferred candidate. His extensive chemical industry experience,
knowledge of the global methanol industry and breadth of
leadership abilities was well known to us and made him an out-
standing candidate. While the Board also considered looking
externally for CEO candidates, it did not pursue this option as

the Board felt it had the luxury of time: 2011 would be the year
the Board would decide if John was indeed the best candidate.
If developments proved otherwise, the Board would have the
time to evaluate the other internal candidates or embark on an
external search.

John attended various senior development courses in 2011
(including the Institute of Corporate Directors” Directors Educa-
tion Program), and he participated in an intensive third-party
assessment of his potential as a CEO. Throughout this period,
Board members deepened their individual relationships with
John, who routinely met one on one with each director. These
meetings allowed John to update directors on the business and
develop stronger personal relationships with each of them, and
it gave the directors insight into John’s values and vision for the
Company.

In the first half of 2012, the Human Resources Committee agreed
that it would recommend to the Board that John become the
Company’s next President and CEO, and the full Board discussed
this recommendation in July 2012. The final decision was made
at a Board meeting in September, followed by the public
announcement that John would become the new President and
CEO on January 1, 2013.

As Chairman of the Board, it was my responsibility to ensure that
each director understood the process and had ample opportunity
to provide input and direction. When conducting the annual
director and Board evaluation review, | was gratified to receive
many positive comments from directors about the CEO succession
process. Many directors felt this was one of the Board’s top
accomplishments in 2012, commenting that the process was sys-
tematic and thorough. One director said the process was
“emblematic of both the quality and dedication of Board mem-
bers and the strong and effective interaction with management.”

Lam confident that the CEO succession process followed by the
Board was orderly and robust, and that the end result has pro-
vided Methanex with the best leadership attainable. All mem-
bers of the Board are looking forward to working with John in the
years ahead.

Let me also take this opportunity to thank Bruce Aitken for the
dedication and hard work he has shown as Methanex’s CEO over
the past eight years. Bruce has been an excellent President and
CEO, and on behalf of the directors, management and share-
holders, | wish him well in his retirement. | am so pleased that he
has agreed to remain on the Methanex Board and the entire team
of directors looks forward to working with him in that capacity.

_ ts

Tom Hamilton
Chairman of the Board

Chairmar’s message

Management’s Discussion £ Analysis

Index

O Overview of the Business O Financial Results [34] Supplemental Non-GAAP Measures
dd Our Strategy O Liquidity and Capital Resources 0 Quarterly Financial Data (Unaudited)
O Financial Highlights O Risk Factors and Risk Management O Selected Annual Information

O Production Summary O Critical Accounting Estimates O Controls and Procedures

O How We Analyze Our Business Anticipated Changes to International O Forward-Looking Statements

Financial Reporting Standards

This Management’s Discussion and Analysis (“MD8xxA”) is dated March 13, 2013 and should be read in conjunction with our consolidated
financial statements and the accompanying notes for the year ended December 31, 2012. Except where otherwise noted, the financial
information presented in this MDRA is prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board. We use the United States dollar as our reporting currency and, except where otherwise noted,
all currency amounts are stated in United States dollars.

At March 13, 2013 we had 94,743,044 common shares issued and outstanding and stock options and tandem share appreciation rights
exercisable for 3,618,823 additional common shares.

Additional information relating to Methanex, including our Annual Information Form, is available on our website at www.methanex.com,
the Canadian Securities Administrators’ SEDAR website at www.sedar.com and on the United States Securities and Exchange Commis-

sion’s EDGAR website at www.sec.gov.

OVERVIEW OF THE BUSINESS

Methanol is a clear liquid commodity chemical that is predominantly produced from natural gas and also, particularly in China, from coal.
Approximately two-thirds of all methanol demand is used to produce traditional chemical derivatives, including formaldehyde, acetic
acid and a variety of other chemicals that form the basis of a large number of chemical derivatives for which demand is influenced by
levels of global economic activity. The remaining one-third of methanol demand comes from energy-related applications. There has been
strong demand growth for direct methanol blending into gasoline, as a feedstock in the production of dimethyl ether (DME), which can
be blended with liquefied petroleum gas for use in household cooking and heating, and in the production of biodiesel. Methanol is also
used to produce methyl tertiary-butyl ether (MTBE), a gasoline component, and olefins. This latter use is emerging as a significant meth-
anol demand driver.

We are the world’s largest supplier of methanol to the major international markets in Asia Pacific, North America, Europe and Latin Amer-
ica. Our total annual production capacity, including Methanex equity interests in jointly owned plants, is currently 9.5 million tonnes and
is located in New Zealand, Trinidad, Egypt, Canada and Chile (refer to the Production Summary section on page 9 for more information).
We are currently relocating one of our Chile facilities to Geismar, Louisiana and we expect the relocated facility will be operational by the
end of 2014. We have marketing rights for 100% of the production from the jointly owned plants in Trinidad and Egypt and this provides
us with an additional 1.2 million tonnes per year of methanol offtake supply when the plants are operating at full capacity. In addition to
the methanol produced at our sites, we purchase methanol produced by others under methanol offtake contracts and on the spot mar-

ket. This gives us flexibility in managing our supply chain while continuing to meet customer needs and support our marketing efforts.

2012 Industry Overview 8: Outlook

Methanol is a global commodity and our earnings are significantly affected by fluctuations in the price of methanol, which is directly
impacted by changes in methanol supply and demand.

Demand for methanol is driven primarily by levels of industrial production, energy prices and the strength of the global economy.
Demand for methanol grew by 5% in 2012, leading to global demand of approximately 51 million tonnes, excluding demand from
integrated methanol-to-olefins facilities. The increase in demand was driven by both traditional derivatives and energy-related applica-
tions in Asia, particularly in China.

Industry supply additions outside of China in 2012 consisted primarily of the restart of our second Motunui facility in New Zealand,
which added 0.7 million tonnes to the site’s annual operating capacity, and the restart of a 0.7 million tonne facility in Beaumont, Texas.
New production from supply additions inside China was consumed in that country and China continued to be a significant net importer
of methanol.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 5

Management’s Discussion $ Analysis

Overall, industry conditions were balanced in 2012 and this led to a relatively stable methanol pricing environment. Our average real-

ized price for 2012 was $382 per tonne compared with $374 per tonne in 2011.

The outlook for methanol demand growth continues to be strong. The wide disparity between the price of crude oil and that of natu-
ral gas and coal has resulted in an increased use of methanol in energy-related applications, such as direct methanol blending into
gasoline and DME and biodiesel production. Growth of direct methanol blending into gasoline in China has been particularly strong
and we believe that future growth in this application is supported by numerous provincial and national fuel-blending standards, such
as M15 or M85 (15% methanol and 35% methanol, respectively).

China is also leading the commercialization of methanol’s use as a feedstock to manufacture olefins. The use of methanol to produce
olefins, at current energy prices, is proving to be cost competitive relative to the traditional production of olefins from naphtha. There
are now five methanol-to-olefins (MTO) plants operating in China, with the capacity to consume approximately seven million tonnes
of methanol annually. Three of these projects were not expected to impact the merchant methanol market as they are integrated
projects – coal to methanol to olefins. However, over the past two years, these plants have purchased methanol to supplement their
own methanol production. The two non-integrated plants (representing over 2 million tonnes of methanol demand annually)

are dependent on merchant methanol supply. Several other integrated and non-integrated projects are currently under construction

in China and the demand for methanol as a feedstock for producing olefins is anticipated to continue to grow.

While methanol demand in energy-related applications is strongest in China, there are an increasing number of countries around the
world that have projects in place or are considering adopting these applications on a wider scale. Direct methanol blending into gaso-
line is being used in small quantities in the United Kingdom, Netherlands and Iceland, and other countries, including Australia and
Israel, are conducting fuel-blending trials. DME is being produced and DME projects are under development in various countries

including Japan, Taiwan, Turkey, the United States, Trinidad, India and Indonesia.
We believe demand potential into energy-related applications and olefins production will continue to grow.

We increased our operating capacity in 2012 and anticipate further increases over the next few years. We recently announced our
commitment to add a further o.7 million tonnes of operating capacity to our New Zealand site through the restart of the Waitara
Valley facility and a debottlenecking project at the Motunui site. We are relocating one of our idle Chile facilities to Geismar, Louisiana
and the plant is expected to commence operations by the end of 2014. We are also considering the relocation of a second facility to

the Geismar site and expect to make a decision on this project by mid-2013.

Beyond our own capacity additions, there is a modest level of new capacity expected to come on stream over the next few years out-
side of China. There is a 0.8 million tonne plant expected to restart in Channelview, Texas in 2013 and a 0.7 million tonne plant
expected to start up in Azerbaijan in 2013. We expect that production from new capacity in China will be consumed in that country
and that higher-cost production capacity in China will need to operate in order to satisfy demand growth.

Entering 2013, methanol demand has continued to be healthy, supported by a higher energy price environment. With few industry
capacity additions expected over the next few years relative to expected demand growth, we believe we are well positioned with
several of our own initiatives to increase operating capacity. As production from these initiatives comes on line, we believe our leader-

ship position in the industry will be strengthened and we will have significant upside potential to cash flows and earnings.

The methanol price will ultimately depend on the strength of the global economy, industry operating rates, global energy prices, new
supply additions and the strength of global demand. We believe that our financial position and financial flexibility, outstanding global
supply network and competitive cost position will provide a sound basis for Methanex to continue to be the leader in the methanol

industry.

OUR STRATEGY
Our primary objective is to create value by maintaining and enhancing our leadership in the global production, marketing and delivery
of methanol to customers. Our simple, clearly defined strategy – global leadership, low cost and operational excellence – has helped

us achieve this objective.

6 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

Global Leadership
Global leadership is a key element of our strategy. We are focused on maintaining and enhancing our position as the major supplier to
the global methanol industry, enhancing our ability to cost-effectively deliver methanol supply to customers and supporting both tradi-

tional and energy-related global methanol demand growth.

We are the leading supplier of methanol to the major international markets in Asia Pacific, North America, Europe and Latin America. Our
2012 sales volumes of 7.5 million tonnes represented approximately 15% of global methanol demand. Our leadership position has enabled
us to play an important role in the industry, which includes publishing Methanex reference prices that are generally used in each major

market as the basis of pricing for most customer contracts.

The geographically diverse locations of our production sites allow us to deliver methanol cost-effectively to customers in all major global
markets, while investments in global distribution and supply infrastructure, which include a dedicated fleet of ocean-going vessels

and terminal capacity within all major international markets, enable us to enhance value to customers by providing reliable and secure
supply.

A key component of our global leadership strategy is to strengthen our asset position and we have increased our operating capacity over
the last two years. In 2011, we restarted our 0.5 million tonne per year Medicine Hat, Alberta facility and the 1.3 million tonne per year
methanol plant in Egypt commenced operations. In 2012, we restarted a second facility in New Zealand and this increased our operating
capacity in that country by o.7 million tonnes. We have several other initiatives in progress in New Zealand that are expected to increase
our operating capacity further and allow us to reach the site’s full production capacity of 2.4 million tonnes. Our New Zealand facilities

are ideally situated to supply the growing Asia Pacific market.

During 2012, we operated our Chile methanol facilities significantly below site capacity. We expect to idle our Chile operations in March
2013 due to insufficient natural gas feedstock to operate the plant through the southern hemisphere winter (refer to the Production
Summary – Chile section on page 10 for further information). We are in the process of relocating one of our four Chile facilities to Geismar,
Louisiana. The Geismar facility will have an annual production capacity of approximately 1.0 million tonnes and is expected to be opera-
tional bythe end of 2014. We are also considering other projects to increase the utilization of our Chile assets, including the potential to

relocate an additional facility to the Geismar site.

Another key component of our global leadership strategy is our ability to supplement methanol production with methanol purchased
from third parties to give us flexibility in our supply chain and continue to meet customer commitments. We purchase through a combi-
nation of methanol offtake contracts and spot purchases. We manage the cost of purchased methanol by taking advantage of our global
supply chain infrastructure, which allows us to purchase methanol in the most cost-effective region while still maintaining overall secu-
rity of supply.

The Asia Pacific region continues to lead global methanol demand growth and we have invested in and developed our presence in this
important region. We have storage capacity in China, Korea and Japan that allows us to cost-effectively manage supply to customers and
we have offices in Hong Kong, Shanghai, Beijing, Seoul and Tokyo to enhance customer service and industry positioning in the region.
This enables us to participate in and improve our knowledge of the rapidly evolving and high growth methanol markets in China and
other Asian countries. Our expanding presence in Asia has also helped us identify several opportunities to support the development of

applications for methanol in the energy sector.

Low Cost

A low cost structure is an important competitive advantage in a commodity industry and is a key element of our strategy. Our approach
to major business decisions is guided by a drive to improve our cost structure, expand margins and create value for shareholders. The
most significant components of total costs are natural gas for feedstock and distribution costs associated with delivering methanol to
customers.

Our ownership interest in production facilities in Trinidad and Egypt represents 2.8 million tonnes per year of competitive-cost production
capacity. These facilities are well located to supply global methanol markets and are underpinned by natural gas purchase agreements
where the gas price varies with methanol prices. This pricing relationship enables these facilities to be competitive throughout the
methanol price cycle.

In January 2013, we entered into a 10-year agreement to purchase all of the natural gas required for the methanol plant we are relocating

to Geismar, Louisiana. The agreement is structured so that the natural gas price is linked to the methanol price, which will enable the

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012. 7

Management’s Discussion $ Analysis

project to be profitable across a broad range of methanol prices. We also have a 0.5 million tonne facility located in Medicine Hat,

Alberta and we believe that the long-term natural gas dynamics in North America will support the long-term operation of this facility.

The cost to distribute methanol from production locations to customers is also a significant component of total operating costs. These
include costs for ocean shipping, in-market storage facilities and in-market distribution. We are focused on identifying initiatives to
reduce these costs, including optimizing the use of our shipping fleet and taking advantage of prevailing conditions in the shipping
market by varying the type and length of term of ocean vessel contracts. We are continuously investigating opportunities to further
improve the efficiency and cost-effectiveness of distributing methanol from our production facilities to customers. We also look for
opportunities to leverage our global asset position by entering into product exchanges with other methanol producers to reduce dis-

tribution costs.

Operational Excellence
We maintain a focus on operational excellence in all aspects of our business. This includes excellence in the manufacturing and supply

chain processes, marketing and sales, human resources, corporate governance practices and financial management.

To differentiate ourselves from competitors, we strive to be the best operator in all aspects of our business and to be the preferred
supplier to customers. We believe that reliability of supply is critical to the success of our customers” businesses and our goal is to
deliver methanol reliably and cost-effectively. We have a commitment to Responsible Care (a risk-minimization approach developed
by the Chemistry Industry Association of Canada) and we use it as the umbrella under which we manage issues related to health,
safety, the environment, community involvement, social responsibility, sustainability, security and emergency preparedness at each of
our facilities and locations. We believe a commitment to Responsible Care helps us reduce the likelihood of unplanned events and

achieve an excellent overall environmental and safety record.

Product stewardship is a vital component of a Responsible Care culture and guides our actions through the complete life cycle of our
product. We aim for the highest safety standards to minimize risk to employees, customers and suppliers as well as to the environ-
ment and the communities in which we do business. We promote the proper use and safe handling of methanol at all times through
a variety of internal and external health, safety and environmental initiatives, and we work with industry colleagues to improve safety
standards. We readily share technical and safety expertise with key stakeholders, including customers, end-users, suppliers, logistics
providers and industry associations in the methanol and methanol applications marketplace through active participation in local and

international industry associations, seminars and conferences, and online education initiatives.

As a natural extension of the Responsible Care ethic, we have a Social Responsibility policy that aligns corporate governance,
employee engagement and development, community involvement and social investment strategies with our core values and corpo-

rate strategy.

Our strategy of operational excellence also includes the financial management of the Company. We operate in a highly competitive
commodity industry. Accordingly, we believe it is important to maintain financial flexibility and we have adopted a prudent approach
to financial management. During 2012, we issued a total of $600 million of unsecured notes and a portion of the proceeds was used to
repay $200 million of unsecured notes. Also during 2012, we extended the maturity on our undrawn revolving credit facility to 2016
and increased the amount to $400 million. At December 31, 2012, we had a strong balance sheet with a cash balance of $746 million,
including $36 million relating to the non-controlling interest in Egypt. We believe we are well positioned to meet our financial

commitments and continue investing to grow the Company.

8 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

FINANCIAL HIGHLIGHTS
($ MILLIONS, EXCEPT AS NOTED) 2012 2011
Production (thousands of tonnes) (attributable to Methanex shareholders) 4,071 3,847
Sales volumes (thousands of tonnes):

Methanex-produced methanol (attributable to Methanex shareholders) 4,039 3,853

Purchased methanol 2,565 2,815

Commission sales 855 846
Total sales volumes 7,459 7,514
Methanex average non-discounted posted price ($ per tonne)? 443 440
Average realized price ($ per tonne) 382 374
Revenue 2,673 2,608
Adjusted EBITDA+ 429 427
Adjusted cash flows from operating a: 403 392
Cash flows from operating activities 458 480
Adjusted net income+ 180 182
Net income (loss) (attributable to Methanex shareholders) (68) 201
Adjusted net income per common share ($ per share)a5 1.90 1.93
Basic net income (loss) per common share ($ per share) (0.73) 2.16
Diluted net income (loss) per common share ($ per share) (0.73) 2.06
Common share information (: ns of shares):

Weighted average number of common shares 94 93

Diluted weighted average number of common shares 94 94

Number of common shares outstanding, end of period 94 93

+ Commission sales represent volumes marketed on a commission basis related to the 36.9% of the Atlas methanol facility and 40% of the Egypt methanol facility that we do not own.

> Methanex average non-discounted posted price represents the average of our non-discounted posted prices in North America, Europe and Asia Pacific weighted by sales volume. Current and historical pricing information
is available at www.methanex.com.

3 Average realized price is calculated as revenue, excluding commissions eamed and the Egypt non-controllin
shareholders) and purchased methanol.

4 These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Supple-
mental Non-GAAP Measures section on page 34 for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.

5 For the year ended December 31, 2012, stock options have been excluded from the calculation of diluted net loss per common share (attributable to Methanex shareholders) as their effect would be anti-dilutive. However,
for the calculation of adjusted net income per common share (attributable to Methanex shareholders) stock options have been included in the denominator and the diluted weighted average number of common shares
for the year ended December 31, 2012 is 95 million.

interest share of revenue, divided by the total sales volumes of Methanex-produced (attributable to Methanex

PRODUCTION SUMMARY

The following table details the annual production capacity and actual production of our facilities in 2012 and 2011:

ANNUAL

PRODUCTION
(THOUSANDS OF TONNES) CAPACITY! 2012 2011
New Zealand: 2,430 1,108 830
Atlas (Trinidad) (63.1% interest) 1,125 826 891
Titan (Trinidad) 875 786 m
Egypt (60% interest) 760 557 532
Medicine Hat (Canada)3 470 481 329
Chile 1, lll and IV 2,800 313 554
Geismar, Louisiana (USA)+ 1,000 – –
9,460 4,071 3,847

+ The annual production capacity of our production facilities may be higher than original nameplate capacity as, over time, these figures have been adjusted to reflect ongoing operating efficiencies at these facilities. Actual
production for a facility in any given year may be higher or lower than annual production capacity due to a number of factors, including natural gas composition or the age of the facility’s catalyst.

2 The annual production capacity of New Zealand represents the two facilities at Motunui and the currently idle facility at Waitara Valley. The current operating capacity of the Motunui facilities is 1.5 million tonnes due to
distillation capacity constraints. We recently announced our commitment to restart the Waitara Valley facility and complete a debottlenecking project at the Motunui site, which we expect will allow our New Zealand
operations to operate at their full production capacity of 2.4 million tonnes, depending on natural gas composition.

The Egypt methanol facility commenced commercial production in March 2011 and the Medicine Hat facility was restarted in April 20.

¿We are relocating the Chile l facility to Geismar, Louisiana. The plant is expected to be operational by the end of 2014.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 9

Management’s Discussion $ Analysis

New Zealand

In New Zealand, we produced 1.1 million tonnes of methanol in 2012 compared with 0.8 million tonnes in 2011. We have three plants in
New Zealand with up to 2.4 million tonnes of annual production capacity. After operating one Motunui facility in 2011, we restarted
the second facility in mid-2012 which increased our current operating capacity to 1.5 million tonnes. We recently committed to debot-
tleneck the Motunui facility and restart the Waitara Valley facility and we expect this will allow us to produce at the site’s full pro-
duction capacity, depending on natural gas composition. Our New Zealand facilities are ideally situated to supply the growing Asia
Pacific market.

We have entered into several natural gas purchase agreements with various suppliers to underpin the future operation of our Motu-
nui and Waitara Valley facilities. Each natural gas purchase agreement has base and variable components, where the gas price varies
with methanol prices. We are also pursuing natural gas exploration and development opportunities in that country. We have an
agreement with Kea Petroleum, an oil and gas exploration and development company, to explore areas of the Taranaki basin, which is
close to our plants.

Trinidad

Our equity ownership of methanol facilities in Trinidad represents 2.0 million tonnes of competitive-cost annual capacity. The Titan
and Atlas facilities in Trinidad are well located to supply global methanol markets and are underpinned by take-or-pay natural gas
purchase agreements that expire in 2014 and 2024, respectively, where the gas price varies with methanol prices. These facilities

produced a total of 1.6 million tonnes in each of 2012 and 2011.

The Atlas facility experienced an equipment failure in 2011. During 2012, the plant undertook two outages to repair the equipment

failure and overcome a technical issue.

During 2011 and 2012, we experienced some natural gas curtailments to our Trinidad facilities due to a mismatch between upstream
commitments to supply The National Gas Company of Trinidad and Tobago Limited (NGC) and downstream demand from NGC’s
customers, which becomes apparent when an upstream supplier has a technical issue or planned maintenance that reduces gas
delivery. We are engaged with key stakeholders to find a solution to this issue, but in the meantime expect to continue to experience
some gas curtailments to the Trinidad site. Refer to the Risk Factors and Risk Management – Trinidad section on page 24 for more
information.

Egypt

We have a 60% equity interest in the 1.26 million tonne per year methanol plant in Egypt and have marketing rights for 100% ofthe
production. This facility is well located to supply the European market and is underpinned by a 25-year take-or-pay natural gas pur-
chase agreement where the gas price varies with methanol prices. Production from the Egypt facility in 2012 was lower than capacity
due to planned and unplanned maintenance outages and natural gas supply restrictions. Refer to the Risk Factors and Risk Manage-
ment — Egypt section on page 25 for more information.

Medicine Hat, Canada

We restarted the Medicine Hat, Alberta facility in 2011 and it operated well in 2012, producing o.5 million tonnes. We are currently
debottlenecking the Medicine Hat facility which we expect will add a further o.1 million tonnes of annual production capacity by the
end of the third quarter of 2013.

Chile

During 2012, we operated our Chile methanol facilities significantly below annual production capacity due to insufficient natural gas
feedstock.

In 2007, our natural gas suppliers from Argentina curtailed all gas supply to our plants in Chile. Under the existing circumstances, we
do not expect to receive any further natural gas supply from Argentina. As a result of the Argentinean natural gas supply issues, all of
the methanol production at our Chile facilities since June 2007 has been produced with natural gas from Chile.

Over the past few years, investments have been made by us and others to accelerate the exploration and development of natural gas
in southern Chile. However, the potential for a significant increase in gas production is more challenging than we had originally

10 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

anticipated. As a result of the short-term outlook for gas supply in Chile, we expect to idle our Chile operations in March 2013 due to
insufficient natural gas feedstock to keep the plant operating through the southern hemisphere winter. We are continuing to work with
Empresa Nacional del Petroleo (ENAP) and others to secure sufficient natural gas to sustain our operations, and while the restart of a
Chile plant is possible later in 2013, the restart is dependent on securing a sustainable natural gas position to operate over the medium
term.

The future of our Chile operations is primarily dependent on the level of exploration and development in southern Chile and our ability to
secure a sustainable natural gas supply to our facilities on economic terms. Refer to the Risk Factors and Risk Management – Chile section

on page 25 for more information.

HOW WE ANALYZE OUR BUSINESS

Our operations consist of a single operating segment -the production and sale of methanol. We review our financial results by analyzing
changes in the components of Adjusted EBITDA (refer to the Supplemental Non-GAAP Measures section on page 34 for a description of
Adjusted EBITDA and a reconciliation to the most comparable GAAP measure), mark-to-market impact of share-based compensation,
Louisiana project relocation expenses and charges, asset impairment charges, depreciation and amortization, finance costs, finance
income and other expenses, and income taxes.

In addition to the methanol that we produce at our facilities (“Methanex-produced methanol”), we also purchase and re-sell methanol
produced by others (“purchased methanol”) and we sell methanol on a commission basis. We analyze the results of all methanol sales
together, excluding commission sales volumes. The key drivers of change in Adjusted EBITDA are average realized price, cash costs and
sales volume, which are defined and calculated as follows:

PRICE The change in Adjusted EBITDA as a result of changes in average realized price is calculated as the difference from period
to period in the selling price of methanol multiplied by the current period total methanol sales volume excluding commis-

sion sales volume plus the difference from period to period in commission revenue.

CASH COSTS The change in Adjusted EBITDA as a result of changes in cash costs is calculated as the difference from period to period in
cash costs per tonne multiplied by the current period total methanol sales volume excluding commission sales volume in
the current period. The cash costs per tonne is the weighted average of the cash cost per tonne of Methanex-produced
methanol and the cash cost per tonne of purchased methanol. The cash cost per tonne of Methanex-produced methanol
includes absorbed fixed cash costs per tonne and variable cash costs per tonne. The cash cost per tonne of purchased
methanol consists principally of the cost of methanol itself. In addition, the change in Adjusted EBITDA as a result of
changes in cash costs includes the changes from period to period in unabsorbed fixed production costs, consolidated sell-

ing, general and administrative expenses and fixed storage and handling costs.

VOLUME The change in Adjusted EBITDA as a result of changes in sales volume is calculated as the difference from period to period
in total methanol sales volume, excluding commission sales volumes, multiplied by the margin per tonne for the prior
period. The margin per tonne for the prior period is the weighted average margin per tonne of Methanex-produced meth-
anol and margin pertonne of purchased methanol. The margin per tonne for Methanex-produced methanol is calculated
asthe selling price per tonne of methanol less absorbed fixed cash costs per tonne and variable cash costs per tonne. The
margin per tonne for purchased methanol is calculated as the selling price pertonne of methanol less the cost of pur-

chased methanol per tonne.

We own 63.1% of the Atlas methanol facility and market the remaining 36.9% of its production through a commission offtake agreement.
We account for this investment using proportionate consolidation, which results in 63.1% of its results being included in revenues and

expenses with the remaining 36.9% portion included as commission income.

We own 60% of the 1.26 million tonne per year Egypt methanol facility and market the remaining 40% ofits production through a com-
mission offtake agreement. We account for this investment using consolidation accounting, which results in 100% of the revenues and
expenses being included in our financial statements with the other investors’ interest in the methanol facility being presented as “non-
controlling interests”. For the purposes of analyzing our business, Adjusted EBITDA and Adjusted cash flows from operating activities
exclude the amounts associated with the other investors’ 40% non-controlling interest, which are included in commission income on a
consistent basis with how we present the Atlas facility.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 1

n

Management’s Discussion $ Analysis

FINANCIAL RESULTS
For the year ended December 31, 2012, we reported Adjusted EBITDA of $429 million and Adjusted net income of $180 million ($1.90 per
share on a diluted basis), compared with Adjusted EBITDA of $427 million and Adjusted net income of $182 million ($1.93 per share on a

diluted basis) for the year ended December 31, 2011.

In addition, we recorded a non-cash before-tax asset impairment charge of $297 million ($193 million after-tax) related to the carrying
value of our Chile assets and a before-tax $65 million charge to earnings related to Louisiana project relocation expenses and charges
($41 million after-tax). Including these items, we reported a net loss attributable to Methanex shareholders for the year ended
December 31, 2012 of $68 million ($0.73 loss per share on a diluted basis), compared with net income attributable to Methanex share-
holders for the year ended December 31, 2011 of $201 million ($2.06 income per share on a diluted basis).

We calculate Adjusted EBITDA and Adjusted net income by excluding amounts associated with the 40% non-controlling interest in
Egypt that we do not own, the mark-to-market impact of share-based compensation as a result of changes in our share price and
items that are considered by management to be non-operational, including asset impairment charges and Louisiana project
relocation expenses and charges. Refer to the Supplemental Non-GAAP Measures section on page 34 for further discussion on how we
calculate these measures.

Areconciliation from net income (loss) attributable to Methanex shareholders to Adjusted net income and the calculation of Adjusted

diluted net income per common share is as follows:

($ MILLIONS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS) 2012 201
Net income (loss) attributable to Methanex shareholders $ (68) $ 201
Mark-to-market impact of share-based compensation, net of tax 1“ (19)
Louisiana project relocation expenses and charges, net of tax
Cash expense 23 –
Non-cash charge 18 –
Asset impairment charge, net of tax 193 –
Adjusted net income* $ 180 $ 182
Diluted weighted average shares outstanding (millions) 94 94
Adjusted diluted net income per common share’2 $ 190 $ 193

* These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the
Supplemental Non-GAAP Measures section on page 34.for a description of the non-GAAP measures and a reconciliation to the most comparable GAAP measures.

2 For the year ended December 31, 2012, stock options have been excluded from the calculation of diluted net loss per common share (attributable to Methanex shareholders) as their effect would be anti-diluti
However, for the calculation of adjusted diluted net income per common share (attributable to Methanex shareholders) stock options have been included in the denominator and the diluted weighted average
number of common shares for the year ended December 31, 2012 is 95 million.

We review our financial results by analyzing changes in the components of Adjusted EBITDA, mark-to-market impact of share-based
compensation, Louisiana project relocation expenses and charges, asset impairment charges, depreciation and amortization, finance

costs, finance income and other expenses, and income taxes.

Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion $ Analysis

A summary of our consolidated statements of income for 2012 and 2011 is as follows:

($ MILLIONS) 2012 2011
Consolidated statements of income:
Revenue $ 2,673 $ 2,608
Cost of sales and operating expenses, excluding mark-to-market impact of share-based compensation (2,171) (2,128)
502 480
Comprised of:
Adjusted EBITDA (attributable to Methanex shareholders)’ 429 427
Amounts attributable to non-controlling interests 73 53
502 480
Mark-to-market impact of share-based compensation (16) 21
Louisiana project relocation expenses and charges (65) –
Asset impairment charge (297) –
Depreciation and amortization (172) (157)
Operating income (loss): (48) 344
Finance costs (71) (62)
Finance income and other expenses 1 2
Income tax recovery (expense) 84 (56)
Net income (loss) $ 64 $ 228
Net income (loss) attributable to Methanex shareholders $ (68) $ 201

ento GAAL Messures section On page sa Tr a descaption o he non CANE measures da reconcilia Lo e MOS CIMpRra e AA mES
Revenue

There are many factors that impact our global and regional revenue levels. The methanol business is a global commodity industry
affected by supply and demand fundamentals. Due to the diversity of the end products in which methanol is used, demand for methanol
largely depends upon levels of industrial production, energy prices and changes in general economic conditions, which can vary across

the major international methanol markets. Methanol prices have been relatively stable over the past two years and our revenue for 2012
was $2.7 billion compared with 2011 revenue of $2.6 billion.

Methanex Average Realized Price 2011 – 2012

500

400

($ per tonne)

300

200

2011 2012

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 13

Management’s Discussion $ Analysis

Global methanol demand grew approximately 5% in 2012, to approximately 51 million tonnes, excluding methanol demand from
integrated methanol-to-olefins facilities. Increases in demand were driven by both traditional derivatives and energy-related applica-
tions in Asia, particularly in China.

Industry supply additions outside of China in 2012 consisted primarily of the restart of our second Motunui facility in New Zealand,
which added o.7 million tonnes to the site’s operating capacity on an annualized basis, and the restart of a 0.7 million tonne facility in
Beaumont, Texas. New production from supply additions inside China was consumed in that country and China continued to be a

significant net importer of methanol.

Overall, industry conditions were balanced in 2012 and this led to a relatively stable methanol pricing environment. Our average real-
ized price for 2012 was $382 per tonne compared with $374 per tonne in 2011.

The methanol industry is highly competitive and prices are affected by supply and demand fundamentals. We publish regional non-
discounted reference prices for each major methanol market and these posted prices are reviewed and revised monthly or quarterly
based on industry fundamentals and market conditions. Most of our customer contracts use published Methanex reference prices as
a basis for pricing, and we offer discounts to customers based on various factors. Our average non-discounted published reference

price for 2012 was 54.43 per tonne compared with $440 per tonne in 2011.

Distribution of Revenue
The geographic distribution of revenue by customer location for 2012 was similar to 2011. Details are as follows:

($ MILLIONS, EXCEPT WHERE NOTED) 2012 201
Canada $ 180 7% $ 176 7%
United States 563 21% 632 24%
Europe Ta 29% 679 26%
China 409 15% 431 1%
Korea 286 1% 267 10%
Other Asia 188 1% 155 6%
Latin America 275 10% 268 10%
$ 2,673 100% $ 2,608 100%

Adjusted EBITDA (Attributable to Methanex Shareholders)
2012 Adjusted EBITDA was $429 million compared with $427 million in 2011. The key drivers of changes in our Adjusted EBITDA are
average realized price, sales volume and cash costs as described below (refer to the How We Analyze Our Business section on page 1

for more information).

($ MILLIONS) 2012 vs. 2011
Average realized price $ 57
Sales volume (5)
Total cash costs (50)
Increase in Adjusted EBITDA $ 2

Average Realized Price
Our average realized price for the year ended December 31, 2012 was $382 per tonne compared with $374 per tonne for 2011, and this

increased Adjusted EBITDA by $57 million (refer to the Revenue section on page 13 for more information).

Sales Volumes
Methanol sales volumes, excluding commission sales volumes, for the year ended December 31, 2012 were 64,000 tonnes lower than
in 2011, and this decreased Adjusted EBITDA by $5 million. Including commission sales volumes from the Atlas and Egypt facilities, our

total methanol sales volumes were 7.5 million tonnes in both 2012 and 2011.

14 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

Total Cash Costs

The primary drivers of changes in our total cash costs are changes in the cost of methanol we produce at our facilities (Methanex-
produced methanol) and changes in the cost of methanol we purchase from others (purchased methanol). All of our production facilities
except Medicine Hat are underpinned by natural gas purchase agreements with pricing terms that include base and variable price
components. We supplement our production with methanol produced by others through methanol offtake contracts and purchases on

the spot market to meet customer needs and support our marketing efforts within the major global markets.

We have adopted the first-in, first-out method of accounting for inventories and it generally takes between 30 and 60 days to sell the
methanol we produce or purchase. Accordingly, the changes in Adjusted EBITDA as a result of changes in Methanex-produced and pur-

chased methanol costs primarily depend on changes in methanol pricing and the timing of inventory flows.

The changes in our total cash costs for 2012 compared with 2011 were due to the following:

($ MILLIONS) 2012 vs. 2011
Methanex-produced methanol costs $ (34)
Purchased methanol costs (22)
Proportion of Methanex-produced methanol sales 36
Other, net (30)
Increase in total cash costs $ (50)

Methanex-Produced Methanol Costs

Natural gas is the primary feedstock at our methanol facilities and is the most significant component of Methanex-produced methanol
costs. We purchase natural gas for the New Zealand, Trinidad, Egypt and Chile methanol facilities under natural gas purchase agree-
ments where the unique terms of each contract include a base price and a variable price component linked to the price of methanol to
reduce our commodity price risk exposure. The variable price component of each gas contract is adjusted by a formula related to meth-
anol prices above a certain level. We believe these pricing relationships enable each facility to be competitive throughout the methanol
price cycle. Methanex-produced methanol costs were higher in 2012 compared with 2011 by $34 million, primarily due to the impact of
higher realized methanol prices on our natural gas costs and a change in the mix of production sold from inventory. For additional
information regarding our natural gas supply agreements refer to the Summary of Contractual Obligations and Commercial Commit-

ments section on page 21.

Purchased Methanol Costs

A key element of our corporate strategy is global leadership, and as such we have built a leading market position in each of the major
global markets where methanol is sold. We supplement our production with purchased methanol through methanol offtake contracts
and on the spot market to meet customer needs and support our marketing efforts within the major global markets. In structuring pur-
chase agreements, we look for opportunities that provide synergies with our existing supply chain that allow us to purchase methanol in
the lowest-cost region. The cost of purchased methanol consists principally of the cost of the methanol itself, which is directly related to
the price of methanol at the time of purchase. As a result of higher methanol prices in 2012, and the timing of purchases, the cost of

purchased methanol per tonne increased and this decreased Adjusted EBITDA by $22 million compared with 2011.

Proportion of Methanex-Produced Methanol Sales

The cost of purchased methanol is directly linked to the selling price for methanol at the time of purchase and the cost of purchased
methanol is generally higher than the cost of Methanex-produced methanol. Accordingly, an increase in the proportion of Methanex-
produced methanol sales results in a decrease in our overall cost structure for a given period. The proportion of Methanex-produced
methanol sales for the year ended 2012 was higher compared with 2011 and this increased Adjusted EBITDA by $36 million. We increased
our sales volumes of methanol produced at the New Zealand, Egypt and Medicine Hat facilities and this more than offset the decrease in

sales volumes from the Chile facility.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012. 15

Management’s Discussion $ Analysis

Other, Net

Our investment in global distribution and supply infrastructure includes a dedicated fleet of ocean-going vessels. We utilize these
vessels to enhance value to customers by providing reliable and secure supply and to optimize supply chain costs overall. For the year
ended December 31, 2012 compared with 2011, ocean freight and other logistics costs were higher by $10 million, primarily as a result of
a one-time charge to earnings to terminate a time charter vessel lease contract. In addition to changes in fuel prices, logistics costs

can vary from period to period depending on the levels of production from each of our production facilities and the resulting impact

on our supply chain.

We experienced an equipment failure at our Atlas facility in July 2011. Our operations are covered by business interruption insurance
and we finalized our claim related to this event in 2012. We recorded a $17 million recovery in 2011 related to this event with the
remaining $11 million recorded in 2012.

In October 2012, we completed a restructuring of our Chile operations which reduced the size of our workforce and resulted in a $5
million charge to earnings in 2012. The remaining change in other cash costs is primarily due to the timing of recognizing fixed manu-
facturing costs in earnings. We allocate fixed manufacturing costs to inventory based on the normal operating capacity of our manu-
facturing facilities. During 2012, primarily due to our Chile and Egypt facilities operating below capacity for certain periods, a portion of

fixed manufacturing costs were charged directly to earnings rather than to inventory and this decreased Adjusted EBITDA in 2012.

Mark-to-Market Impact of Share-Based Compensation

We grant share-based awards as an element of compensation. Share-based awards granted include stock options, share appreciation
rights, tandem share appreciation rights, deferred share units, restricted share units and performance share units. For all the share-
based awards, share-based compensation is recognized over the related vesting period for the proportion of the service that has been
rendered at each reporting date. Share-based compensation includes an amount related to the grant-date value and a mark-to-
market impact as a result of subsequent changes in the Company’s share price. The grant-date value amount is included in Adjusted
EBITDA and Adjusted net income. The mark-to-market impact of share-based compensation as a result of changes in our share price is

excluded from Adjusted EBITDA and Adjusted net income and analyzed separately.

($ MILLIONS, EXCEPT AS NOTED) 2012 2011
Methanex Corporation share price’ $ 31.87 $ 22.82
Grant-date fair value expense included in Adjusted EBITDA 20 16
Mark-to-market impact due to change in share price 16 (21)
Total share-based compensation expense (recovery) $ 36 $ (5)

*US dollar share price of Methanex Corporation as quoted on NASDAQ Global Market on the last trading day of the respective period.

For stock options, the cost is measured based on an estimate of the fair value at the date of grant using the Black-Scholes option pric-
ing model, and this grant-date fair value is recognized as compensation expense over the related vesting period with no subsequent
re-measurement in fair value. Accordingly, share-based compensation expense associated with stock options will not vary sig-

nificantly from period to period.

Share appreciation rights (SARs) and tandem share appreciation rights (TSARs) are units that grant the holder the right to receive a
cash payment upon exercise for the difference between the market price of the Company’s common shares and the exercise price,
which is determined at the date of grant. The fair values of SARs and TSARs are re-measured each quarter using the Black-Scholes

option pricing model, which considers the market value of the Company’s common shares on the last trading day of each quarter.

Deferred, restricted and performance share units are grants of notional common shares that are redeemable for cash based on the
market value of the Company’s common shares and are non-dilutive to shareholders. Performance share units have an additional
feature where the ultimate number of units that vest will be determined by the Company’s total shareholder return in relation to a
predetermined target over the period to vesting. The number of units that will ultimately vest will be in the range of 50% to 120% of
the original grant. For deferred, restricted and performance share units, the value is initially measured at the grant date and sub-
sequently re-measured based on the market value of the Company’s common shares on the last trading day of each quarter.

16 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion $ Analysis

Louisiana Project Relocation Expenses and Charges

In July 2012, we reached a final investment decision to proceed with the project to relocate an idle Chile facility to Geismar, Louisiana. The
project will add approximately one million tonnes of operating capacity and is expected to be operational by the end of 2014. Under IFRS,
certain costs associated with relocating an asset are not eligible for capitalization and are required to be charged directly to earnings.
During 2012, we charged $39 million ($23 million after-tax) of Louisiana project relocation expenses directly to earnings. In addition, a
non-cash charge of $26 million ($18 million after-tax) was recorded to earnings in 2012 related to the carrying value of the Chile facility

that is being relocated to Louisiana.

Asset Impairment Charge

Asa result of the continuing challenges related to securing a sustainable natural gas supply in Chile, we recorded a non-cash before-tax
asset impairment charge of $297 million ($193 million after-tax) to write down the carrying value of our Chile assets at December 31, 2012
to $245 million. The remaining $245 million carrying value excludes the first Chile facility that is being relocated to Geismar, Louisiana but
includes the second facility that management is also considering for relocation to Geismar. Refer to the Critical Accounting Estimates –

Recoverability of Asset Carrying Values section on page 33 for more information.

Depreciation and Amortization

Depreciation and amortization was $172 million for the year ended December 31, 2012 compared with $157 million for the same period in
2011. The increase in depreciation and amortization in 2012 compared with 201 is primarily a result of depreciation associated with the
Egypt (100% basis) and Medicine Hat methanol facilities, which commenced operations in the first and second quarters of 2011,
respectively, and depreciation associated with the second Motunui facility in New Zealand, which commenced operations in the third

quarter of 2012.

Finance Costs

($ MILLIONS) 2012 2011

Finance costs before capitalized interest $ 73 $ 70
Less capitalized interest (2) (8)
Finance costs $ T $ 62

Finance costs before capitalized interest primarily relate to interest expense on the unsecured notes and limited recourse debt facilities.

Capitalized interest in 2012 relates to interest costs capitalized for the Louisiana project while capitalized interest in 2011 relates to the

Egypt project.

Finance Income and Other Expenses

Finance income and other expenses were $1 million and $2 million, respectively, for the years ended December 31, 2012 and 2011.

Income Taxes

A summary of our income taxes for 2012 compared with 2011 is as follows:

YEAR ENDED Dec 31, 2012

AMOUNTS EXCLUDING LOUISIANA PROJECT LOUISIANA PROJECT RELOCATION
RELOCATION EXPENSES AND CHARGES EXPENSES AND CHARGES AND ASSET
($ MILLIONS, EXCEPT WHERE NOTED) AND ASSET IMPAIRMENT CHARGE IMPAIRMENT CHARGE TOTAL
Income (loss) before income tax expense $ 244 $ (362) $ (118)
Income tax recovery (expense) (44) 128 34
Net income (loss) $ 200 $ (234) $ (4)
Effective tax rate 18% 35% 11%

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 17

Management’s Discussion tx Analysis

YEAR ENDED Dec 31, 2011

AMOUNTS EXCLUDING LOUISIANA PROJECT LOUISIANA PROJECT RELOCATION
RELOCATION EXPENSES AND CHARGES EXPENSES AND CHARGES AND ASSET
($ MILLIONS, EXCEPT WHERE NOTED) AND ASSET IMPAIRMENT CHARGE IMPAIRMENT CHARGE TOTAL
Income before income tax expense $ 284 $ – $ 284
Income tax expense (56) – (56)
Net income $ 228 $ – $ 228
Effective tax rate 20% – 20%

For the year ended December 31, 2012, the effective tax rate excluding income taxes related to Louisiana project relocation expenses

and charges and the asset impairment charge was 18% compared with 20% for the year ended December 31, 2011.

We earn the majority of our pre-tax earnings in New Zealand, Trinidad, Egypt, Canada and Chile. In Trinidad and Chile, the statutory
tax rate is 35%, and in Egypt, the statutory tax rate is 25%. Our Atlas facility in Trinidad has partial relief from corporation income tax
until 2014. We have significant loss carryforwards in Canada and New Zealand that have not been recognized for accounting pur-
poses. During 2012, we earned a higher proportion of our consolidated income from methanol produced in jurisdictions with low

effective tax rates and this contributed to a lower effective tax rate compared with 2011.

In Chile, the tax rate consists of a first-tier tax that is payable when income is earned and a second-tier tax that is due when earnings
are distributed from Chile. The second category tax is initially recorded as future income tax expense and ¡is subsequently reclassified
to current income tax expense when earnings are distributed. Accordingly, the ratio of Chile’s current income tax expense to total
income tax expense is dependent on the level of cash distributed from Chile.

For additional information regarding income taxes, refer to note 17 of our 2012 consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

A summary of our consolidated statements of cash flows is as follows:

($ MILLIONS) 2012 2011

Cash flows from operating acti

Cash flows from operating activities before changes in non-cash working capital: $ 436 $ 444
Changes in non-cash working capital 22 36
458 480
Cash flows from financing activities:
Dividend payments (68) (62)
Interest paid, including interest rate swap settlements (65) (60)
Net proceeds on issue of long-term debt 590 3
Repayment of long-term debt and limited recourse debt (251) (50)
Other (41) (m)
165 (180)
Cash flows from investing activities:
Property, plant and equipment (134) (126)
Louisiana project expenditures (74) (1)
Oil and gas properties (83) (30)
GeoPark repayments 10 7
Changes in non-cash working capital relating to investing activities 3 7
(228) (143)
Increase in cash and cash equivalents 395 157
Cash and cash equivalents, end of year $ 746 $ 351

* These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the
Supplemental Non-GAAP Measures section on page 34 for a description of the non-GAAP measures and a reconciliation to the most comparable GAAP measures.

18 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

Cash Flow Highlights

Cash Flows from Operating Activities

Cash flows from operating activities for the year ended December 31, 2012 were $458 million compared with $480 million for 2011. The
decrease in cash flows from operating activities is primarily due to lower net income (loss), after excluding depreciation and amortization,
Louisiana project relocation non-cash charges, asset impairment charges and finance costs, and changes in non-cash working capital. The

following table provides a summary of these items for 2012 and 2011:

($ MILLIONS) 2012 2011
Net income (loss) $ 64 $ 228
Add (deduct) non-cash items:
Depreciation and amortization 172 157
Louisiana project relocation non-cash charges, net of tax 18 –
Asset impairment charge, net of tax 193 –
Finance costs mn 62
Other 16 6)
Cash flows from operating activities before changes in non-cash working capital” 436 444
Changes in non-cash working capital:
Trade and other receivables (45) (59)
Inventories 27 (44)
Prepaid expenses (4) 2
Accounts payable and accrued liabilities, including long-term payables 44 137
22 36
Cash flows from operating activities $ 458 $ 480
Adjusted cash flows from operating activities (attributable to Methanex shareholders)’ $ 403 $ 392

* These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Supple-
mental Non-GAAP Measures section on page 34 for a description of the non-GAAP measures and a reconciliation to the most comparable GAAP measures.

For a discussion of the changes in net income (loss), depreciation and amortization, Louisiana project relocation expenses and charges,

asset impairment charges and finance costs, refer to the analysis of our financial results on page 12.

Changes in non-cash working capital increased cash flows from operating activities by $22 million for the year ended December 31, 2012
compared with $36 million for the year ended December 31, 2011. Trade and other receivables increased in 2012 and this decreased cash
flows from operating activities by $45 million, primarily due to the impact on customer receivables of a higher average realized methanol
price. Inventories decreased primarily due to a lower volume of purchased methanol in ending inventory and this increased cash flows
from operating activities by $27 million. Accounts payable and accrued liabilities, including long-term payables increased cash flows from

operating activities by $44 million, primarily due to the impact of higher methanol prices on natural gas supply payables.

Adjusted cash flows from operating activities were $403 million for 2012 compared with $392 million for 2011 (refer to the Supplemental
Non-GAAP Measures section on page 34 for a reconciliation of cash flows from operating activities to adjusted cash flows from operating

activities).

Cash Flows from Financing Activities
During 2012, we increased our regular quarterly dividend by 9% to $0.185 per share, beginning with the dividend payable on June 30, 2012.

Total dividend payments in 2012 were $68 million compared with $62 million in 2011.

Also during 2012, we issued two separate tranches of unsecured notes bearing interest rates of 5.25% (effective yield of 5.3%) and 3.25%
(effective yield of 3.4%), respectively. The $250 million and $350 million of unsecured notes are due on March 1, 2022 and December 15,

2019, respectively.

During 2012, we repaid $200 million of unsecured notes bearing an interest rate of 8.75% and $51 million of other limited recourse debt.
The other limited recourse debt consisted of $34 million of Egypt limited recourse debt facilities, $15 million of Atlas limited recourse debt
facilities and $2 million of other limited recourse debt compared with total repayments in 2011 of $50 million. We have entered into inter-
est rate swap contracts to swap the LIBOR-based interest payments on the Egypt limited recourse debt facilities for an average

aggregated fixed rate of 4.8% plus a spread on approximately 75% of the Egypt limited recourse debt facilities for the period to March 31,

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 19

Management’s Discussion $ Analysis

2015 (refer to the Financial Instruments section on page 23 for more information). The cash settlements associated with these interest

rate swap contracts during 2012 and 2011 were included in interest paid of $65 million.

Cash Flows from Investing Activities
During 2012, we reached a final investment decision to proceed with the project to relocate an idle Chile facility to Geismar, Louisiana
with an estimated project cost of approximately $550 million. During 2012, we incurred $113 million of expenditures in relation to the

project, of which $74 million was capitalized to property, plant and equipment with the remaining amount charged to earnings.

Also during 2012, we incurred a total of $68 million to increase our production capability in New Zealand. We restarted a second
Motunui facility in mid-2012 and recently announced our commitment to further increase capacity with the debottleneck of the
Motunui site and the restart ofthe Waitara Valley facility. We also incurred $66 million of costs associated with turnarounds, catalyst

and maintenance activities at our other facilities.

We incurred a total of $33 million in 2012 related to our share of oil and gas expenditures in southern Chile. In addition to other
exploration blocks in which we are participating, we have an agreement with ENAP to invest in natural gas exploration and develop-
ment in the Dorado Riquelme exploration block in southern Chile. Under the arrangement, we fund a 50% participation in the block

and receive 100% of the natural gas produced in the block.

We also have agreements with GeoPark Chile Limited (GeoPark) under which we have provided $57 million in financing to support and
accelerate GeoPark’s natural gas exploration and development activities in southern Chile. During 2012, GeoPark repaid approximately
$10 million, bringing cumulative repayments for this financing to $50 million as at December 31, 2012. We have no further obligations
to provide funding to GeoPark.

Liquidity and Capitalization
Our objectives in managing liquidity and capital are to provide financial capacity and flexibility to meet our strategic objectives, to
provide an adequate return to shareholders commensurate with the level of risk and to return excess cash through a combination of

dividends and share repurchases.

The following table provides information on our liquidity and capitalization position as at December 31, 2012 and December 31, 2011:

($ MILLIONS, EXCEPT WHERE NOTED) 2012 201
Liquidity:

Cash and cash equivalents $ 746 $ 351

Undrawn credit facilities 400 200
Total liquidity 1,146 551
Capitalization:

Unsecured notes 739 349

Limited recourse debt facilities, including current portion 506 554
Total debt 1,245 903
Non-controlling interest 188 197
Shareholders’ equity 1,290 1,405
Total capitalization $ 2,723 $ 2,505
Total debt to capitalization’ 46% 36%
Net debt to capitalization? 25% 26%

* Defined as total debt (ind
2 Defined as total debt (inch

Ing 100% of Egypt limited recourse debt facilities) divided by total capitalization.
ing 100% of Egypt limited recourse debt facilities) less cash and cash equivalents divided by total capitalization less cash and cash equivalents.

We manage our liquidity and capital structure and make adjustments to it in light of changes to economic conditions, the underlying
risks inherent in our operations and the capital requirements to maintain and grow our business. The strategies we employ include
the issue or repayment of general corporate debt, the issue of project debt, the issue of equity, the payment of dividends and the

repurchase of shares.

We are not subject to any statutory capital requirements and have no commitments to sell or otherwise issue common shares except

pursuantto outstanding employee stock options.

20 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

We operate in a highly competitive commodity industry and believe that itis appropriate to maintain a conservative balance sheet and
retain financial flexibility. At December 31, 2012, we had a strong balance sheet with a cash balance of $746 million, including $36 million
relating to the non-controlling interest in Egypt, and a $400 million undrawn credit facility. We invest our cash only in highly rated

instruments that have maturities of three months or less to ensure preservation of capital and appropriate liquidity.

At December 31, 2012, our long-term debt obligations included $750 million in unsecured notes ($150 million that matures in 2015, $350
million that matures in 2019 and $250 million that matures in 2022), $450 million related to the Egypt limited recourse debt facilities
(100% basis), $50 million related to the Atlas limited recourse debt facilities and $17 million of other limited recourse debt.

We have covenant and default provisions on our long-term debt obligations and we also have certain covenants that could restrict access
to the credit facility. The Egypt limited recourse debt facilities contain a covenant to complete by March 31, 2013 certain land title registra-
tions and related mortgages that require action by Egyptian government entities and which we do not expect to complete by March 31,
2013. The Company is seeking a waiver from the lenders. We do not believe the finalization of these items is material to the security pro-

vided to the lenders.

At December 31, 2012, management believes the Company was in compliance with all ofthe covenants and default provisions related to

its long-term debt obligations.

Our planned capital maintenance expenditure program directed towards maintenance, turnarounds and catalyst changes for existing
operations is currently estimated to total approximately $160 million to the end of 2013, including major refurbishments at some of our
plants. In July 2012, we reached a final investment decision to proceed with the project to relocate an idle Chile facility to Geismar, Louisi-
ana with estimated project costs of approximately $550 million. The plant is expected to be operational by the end of 2014 and during
2012 we spent $113 million on the project. We are in the process of debottlenecking the Medicine Hat, Canada and Motunui, New Zealand
facilities and restarting the Waitara Valley facility. These projects will result in additional capital expenditures of approximately $100 mil-
lion by the end of 2013. We believe that we have the financial capacity to fund these growth initiatives with cash on hand, cash generated

from operations and the undrawn bank facility.

We believe we are well positioned to meet our financial commitments, invest to grow the Company and continue to deliver on our

commitment to return excess cash to shareholders.

Summary of Contractual Obligations and Commercial Commitments
A summary of the estimated amount and estimated timing of cash flows related to our contractual obligations and commercial commit-

ments as at December 31, 2012 is as follows:

($ MILLIONS) 2013 2014-2015 2016-2017 AFTER 2017 TOTAL
Long-term debt repayments $ 53 $ 262 $ 101 $ 852 $ 1,268
Long-term debt interest obligations 60 99 66 102 327
Repayments of other long-term liabilities 30 no 19 88 247
Natural gas and other 263 366 266 1,020 1,915
Operating lease commitments 124 170 134 281 709

$ 530 $ 1,007 $ 586 $ 2343 $ 4466

Long-Term Debt Repayments and Interest Obligations

We have $150 million of unsecured notes that mature in 2015, $350 million of unsecured notes that mature in 2019 and $250 million of
unsecured notes that mature in 2022. The remaining debt repayments represent the total expected principal repayments relating to the
Egypt project debt, our proportionate share of expected principal repayments related to the Atlas limited recourse debt facilities and
other limited recourse debt. Interest obligations related to variable interest rate long-term debt were estimated using current interest

rates in effect at December 31, 2012. For additional information, refer to note g of our 2012 consolidated financial statements.

Repayments of Other Long-Term Liabilities
Repayments of other long-term liabilities represent contractual payment dates or, ifthe timing is not known, we have estimated the

timing of repayment based on management’s expectations.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012. 21

Management’s Discussion $ Analysis

Natural Gas and Other

We have commitments under take-or-pay contracts to purchase natural gas and to pay for transportation capacity related to this
natural gas. We also have take-or-pay contracts to purchase oxygen and other feedstock requirements in Trinidad. Take-or-pay means
that we are obliged to pay for the supplies regardless of whether we take delivery. Such commitments are common in the methanol
industry. These contracts generally provide a quantity that is subject to take-or-pay terms that is lower than the maximum quantity

that we are entitled to purchase. The amounts disclosed in the table represent only the minimum take-or-pay quantity.

The natural gas supply contracts for our facilities in New Zealand, Trinidad and Egypt are take-or-pay contracts denominated in United
States dollars and include base and variable price components to reduce our commodity price risk exposure. The variable price
component of each natural gas contract is adjusted by a formula related to methanol prices above a certain level. We believe this pric-
ing relationship enables these facilities to be competitive at all points in the methanol price cycle and provides gas suppliers with

attractive returns. The amounts disclosed in the table for these contracts represent only the base price component.

We have a program in place to purchase natural gas on the Alberta gas market to support the Medicine Hat facility and we believe
that the long-term natural gas dynamics in North America will support the long-term operation of this facility. In the above table, we

have included natural gas commitments at the contractual volumes and prices.

We also have arrangements with ENAP and GeoPark to accelerate natural gas exploration and development in southern Chile. Under
the arrangements, we contribute capital to fund the exploration and development and have contracts to purchase any natural gas
discovered. As we cannot determine the amount of natural gas that will be purchased under these agreements in the future, no

amounts have been included in the above table.

The above table does not include costs for planned capital maintenance or expansion expenditures or any obligations with original

maturities of less than one year.

We have supply contracts that expire between 2017 and 2025 with Argentinean suppliers for natural gas sourced from Argentina for a
significant portion of the capacity of our facilities in Chile. We have excluded these potential purchase obligations from the table
above. Since June 2007, our natural gas suppliers from Argentina have curtailed all gas supply to our plants in Chile. Under the current

circumstances, we do not expect to receive any further natural gas supply from Argentina.

We also have contracts with ENAP to supply natural gas to produce approximately 0.8 million tonnes of methanol at our facilities in
Chile. Over the last few years, deliveries from ENAP have been declining and ENAP has delivered significantly less than the full amount
of natural gas that it was obligated to deliver under these contracts. We have excluded the potential purchase obligations from the

table above.

We have marketing rights for 100% of the production from our jointly owned Atlas and Egypt plants which results in purchase
commitments of an additional 1.2 million tonnes per year of methanol offtake supply when these plants operate at capacity. At
December 31, 2012, we also have methanol purchase commitments with other suppliers under contracts for approximately o.5 million
tonnes for 2013 and 2.6 million tonnes thereafter. The pricing under these purchase commitments is referenced to pricing at the time

of purchase or sale, and accordingly, no amounts have been included in the above table.

We are in the process of relocating one of the idled Chile methanol plants to Geismar, Louisiana. It is anticipated that this plant will
have a production capacity of 1.0 million tonnes and commence operations by the end of 2014. Subsequent to December 31, 2012, we
entered into a ten-year natural gas agreement for the supply of all of the plant’s natural gas requirements. Contractual deliveries and
obligations under the contract commence on the first date of commercial operations. Also subsequent to December 31, 2012, we
entered into a natural gas purchase agreement to support the restart of the o.5 million tonne per year Waitara Valley facility in New

Zealand. No amounts have been included in the above table related to these contracts.
Operating Lease Commitments

The majority ofthese commitments relate to time charter vessel agreements with terms of up to 15 years. Time charter vessels typi-

cally meet most of our ocean-shipping requirements.

22 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

Off-Balance Sheet Arrangements

At December 31, 2012, we did not have any off-balance sheet arrangements, as defined by applicable securities regulators in Canada and
the United States, that have, or are reasonably likely to have, a current or future material effect on our results of operations or financial
condition.

Financial Instruments

Afinancial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of
another party. Financial instruments are either measured at amortized cost or fair value. Held-to-maturity investments, loans and receiv-
ables and other financial liabilities are measured at amortized cost. Held-for-trading financial assets and liabilities and available-for-sale
financial assets are measured on the balance sheet at fair value. From time to time we enter into derivative financial instruments to limit
our exposure to commodity price, foreign exchange and variable interest rate volatility and to contribute towards achieving cost struc-
ture and revenue targets. Until settled, the fair value of derivative financial instruments will fluctuate based on changes in commodity
prices, foreign exchange rates and variable interest rates. Derivative financial instruments are classified as held-for-trading and are
recorded on the Consolidated Statements of Financial Position at fair value unless exempted. Changes in fair value of held-for-trading

derivative financial instruments are recorded in earnings unless the instruments are designated as cash flow hedges.

The following table shows the carrying value of each of our categories of financial assets and liabilities and the related balance sheet

item as at December 31, 2012 and December 31, 2011:

($ MILLIONS) 2012 2011

Financial assets:

Loans and receivables:

Cash and cash equivalents $ 746 $ 351
Trade and other receivables, excluding tax receivable and current portion of GeoPark financing 3n 333
Project financing reserve accounts included in other assets 45 40
GeoPark financing, including current portion 8 18
Total financial assets* $ 1,170 $ 742

Financial liabilities:
Other financial liabilities:

Trade, other payables and accrued liabilities, excluding tax payable $ 339 $ 306
Deferred gas payments included in other long-term liabiliti 83 51
Long-term debt, including current portion 1,245 903
Financial liabilities held-for-trading:
Derivative instruments designated as cash flow hedges? 33 42
Total financial liabilities $ 1,700 $ 1,302

* The carrying amount of the financial assets represents the maximum exposure to credit risk at the respective reporting periods.
2 The euro hedges and the Egypt interest rate swaps designated as cash flow hedges are measured at fair value based on industry accepted valuation models and inputs obtained from active markets,

At December 31, 2012, all of the financial instruments were recorded on the Consolidated Statements of Financial Position at amortized

cost with the exception of held-for-trading derivative financial instruments, which are recorded at fair value.

The Egypt limited recourse debt facilities bear interest at LIBOR plus a spread. We have entered into interest rate swap contracts to swap
the LIBOR-based interest payments for an average aggregated fixed rate of 4.8% plus a spread on approximately 75% of the Egypt limited
recourse debt facilities for the period to March 31, 2015. These interest rate swaps had outstanding notional amounts of $342 million as at
December 31, 2012. The notional amount decreases over the expected repayment of the Egypt limited recourse debt facilities. At
December 31, 2012, these interest rate swap contracts had a negative fair value of $33 million (December 31, 2011 – negative $42 million)

recorded in other long-term liabilities. The fair value of these interest rate swap contracts will fluctuate until maturity.

The Company also designates as cash flow hedges forward exchange contracts to sell euros at a fixed US dollar exchange rate. At
December 31, 2012, the Company had outstanding forward exchange contracts designated as cash flow hedges to sell a notional amount
of 5.8 million euros in exchange for US dollars and these euro contracts had a negative fair value of $0.2 million (2011 – positive fair value

of $0.3 million) recorded in trade, other payables and accrued liabilities.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 23

Management’s Discussion $ Analysis

Changes in the fair value of derivative financial instruments designated as cash flow hedges have been recorded in other compre-

hensive income.

RISK FACTORS AND RISK MANAGEMENT
We are subject to risks that require prudent risk management. We believe the following risks, in addition to those described in the
Critical Accounting Estimates section on page 32, to be among the most important for understanding the issues that face our business

and our approach to risk management.

Security of Natural Gas Supply and Price

Natural gas is the principal feedstock for producing methanol and it accounts for a significant portion of our operating costs. Accord-

ingly, our results from operations depend in large part on the availability and security of supply and the price of natural gas. If, for any
reason, we are unable to obtain sufficient natural gas for any of our plants on commercially acceptable terms or we experience inter-

ruptions in the supply of contracted natural gas, we could be forced to curtail production or close such plants, which could have an

adverse effect on our results of operations and financial condition.

New Zealand

We have three plants in New Zealand with a total production capacity of up to 2.4 million tonnes per year. Two plants are located at
Motunui and the third is located at nearby Waitara Valley. In 2012, we restarted a second Motunui facility and we recently committed
to debottleneck the Motunui site and restart the Waitara Valley facility. Upon completion of the current projects in New Zealand, we
expect to be able to operate the site at its annual production capacity of 2.4 million tonnes, depending on natural gas composition.
We have entered into several agreements with various suppliers to underpin our New Zealand operations with terms that range in
length up to ten years. All agreements in New Zealand are take-or-pay agreements and include base and variable price components
where the variable price component is adjusted by a formula related to methanol prices above a certain level. We believe this pricing
relationship enables these facilities to be competitive at all points in the methanol price cycle and provides gas suppliers with attrac-
tive returns. Certain of these contracts require the supplier to deliver a minimum amount of natural gas with additional volumes

dependent on the success of exploring and developing the related natural gas field.

We continue to pursue opportunities to contract additional natural gas supply to our plants in New Zealand and are also pursuing
natural gas exploration and development opportunities in that country. We have an agreement with Kea Petroleum, an oil and gas

exploration and development company, to explore areas of the Taranaki basin, which is close to our plants.

The future operation of our New Zealand facilities depends on methanol industry supply and demand, the ability of our contracted
suppliers to meet their commitments, and the success of ongoing exploration and development activities. We cannot provide assur-
ance that our contracted suppliers will be able to meet their commitments or that the ongoing exploration and development activ-

ities in New Zealand will be successful to enable our operations to operate at capacity.

Trinidad

Natural gas for our two methanol production facilities in Trinidad, with our share of total production capacity being 2.0 million tonnes
per year, is supplied under long-term contracts with NGC. The contracts for Titan and Atlas expire in 2014 and 2024, respectively, and
have base and variable price components where the variable portion changes with methanol prices. Although Titan and Atlas are
located close to other natural gas reserves in Trinidad, which we believe could be a source of supply after the expiration ofthese natu-
ral gas supply contracts, we cannot provide assurance that we would be able to secure access to such natural gas under long-term
contracts on commercially acceptable terms and that this will not have an adverse impact on our results of operations and financial

condition.

Since 2011, large industrial consumers in Trinidad, including our Titan and Atlas facilities, have experienced periodic curtailments of
natural gas supply due to a mismatch between upstream commitments to supply NGC and downstream demand from NGC’s
customers, which becomes apparent when an upstream supplier has a technical issue or planned maintenance that reduces gas
delivery. We are engaged with key stakeholders to find a solution to this issue, but in the meantime expect to continue to experience

some gas curtailments to our Trinidad facilities. We cannot provide assurance that we will not experience longer or greater than

24 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

anticipated curtailments due to upstream outages or other issues in Trinidad and that these curtailments will not be material and that

this would not have an adverse impact on our results of operations and financial condition.

Egypt

Natural gas for the 1.26 million tonne per year production facility in Egypt, which commenced commercial production in March 2011, is
supplied under a 25-year contract with the government-owned Egyptian Natural Gas Holding Company (EGAS). The contractual gas price
includes base and variable price components where the variable portion changes with methanol prices. Natural gas is supplied to this
facility from the same gas delivery grid infrastructure that supplies other industrial users in Egypt, as well as the general Egyptian pop-

ulation.

The Egypt facility experienced periodic natural gas supply constraints commencing in mid-2012 and since that time has operated below
full capacity. Egypt’s government is currently in a transition, which has resulted in ongoing civil unrest, political uncertainty and an
adverse impact on the country’s economy. We believe that the political uncertainty is causing delays in decision-making within the Egyp-
tian government including with respect to upstream natural gas development and this, as well as the economic situation in the country,
is contributing to constraints in the development of new supplies of natural gas coming to market. In addition, domestically produced
natural gas is increasingly being used instead of more expensive imported energy for the purpose of generating domestic electricity.
These factors have led to periodic natural gas supply restrictions to the EMethanex facility. This situation may persist in the future and

become more acute during the summer months when electricity demand is at its peak.

Canada
We restarted our o.5 million tonne per year facility in Medicine Hat, Alberta in April 2011. We have a program in place to purchase natural
gas on the Alberta gas market and we believe that the long-term natural gas dynamics in North America will support the long-term

operation ofthis facility.

The future operation of our Medicine Hat facility depends on methanol industry supply and demand and our ability to secure sufficient
natural gas on commercially acceptable terms. There can be no assurance that we will be able to continue to secure sufficient natural gas
for our Medicine Hat facility on commercially acceptable terms and that this will not have an adverse impact on our results of operations

and financial condition.

Chile

Since 2007, we have operated our methanol facilities in Chile significantly below site capacity primarily due to curtailments of natural gas
supply from Argentina. In June 2007, our natural gas suppliers from Argentina curtailed all gas supply to our plants in Chile. Under the
existing circumstances, we do not expect to receive any further natural gas supply from Argentina. As a result of the Argentinean natural

gas supply issues, all ofthe methanol production at our Chile facilities since June 2007 has been produced with natural gas from Chile.

Over the past few years, investments have been made by us and others to accelerate the exploration and development of natural gas in
southern Chile. However, the potential for a significant increase in gas production is more challenging than we had originally anticipated.
Asa result of the short-term outlook for gas supply in Chile, we expect to idle our Chile operations in March 2013 due to insufficient natu-
ral gas feedstock to keep our plant operating through the southern hemisphere winter. We are continuing to work with ENAP and others
to secure sufficient natural gas to sustain our operations, and while the restart of a Chile plant is possible later in 2013, the restart is

dependent on securing a sustainable natural gas position to operate over the medium term.

The future of our Chile operations is primarily dependent on the level of exploration and development in southern Chile and our ability to
secure a sustainable natural gas supply to our facilities on economic terms. We cannot provide assurance that we will be able to restart

our Chile operations later in 2013 and that this will not have an adverse impact on our results of operations or financial condition.

United States

We are in the process of relocating one of our idled Chile methanol plants to Geismar, Louisiana. It is anticipated that this plant will have
a production capacity of 1.0 million tonnes and commence operations by the end of 2014. We have recently entered into a ten-year natu-
ral gas agreement for the supply of all of the plant’s natural gas requirements. Contractual deliveries and obligations commence on the
first

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 25

Management’s Discussion $ Analysis

date of commercial operations. Once the contract is in effect, the supplier is obligated to supply, and we are obliged to take and pay
for, a specified annual quantity of natural gas. The price to be paid for the gas is based on a US dollar base price plus a variable price
component that is determined with reference to methanol prices. We cannot provide assurance that the facility will commence
commercial operations on the planned date or that our natural gas supplier will supply the contracted gas and that this will not have

an adverse impact on our results of operations or financial condition.

Methanol Price Cyclicality and Methanol Supply and Demand

The methanol business is a highly competitive commodity industry and prices are affected by supply and demand fundamentals.
Methanol prices have historically been, and are expected to continue to be, characterized by cyclicality. New methanol plants are
expected to be built and this will increase overall production capacity. Additional methanol supply can also become available in the
future by restarting idle methanol plants, carrying out major expansions of existing plants or debottlenecking existing plants to
increase their production capacity. Historically, higher-cost plants have been shut down or idled when methanol prices are low, but
there can be no assurance that this practice will occur in the future. Demand for methanol largely depends upon levels of global
industrial production, changes in general economic conditions and the level of energy prices.

We are not able to predict future methanol supply and demand balances, market conditions, global economic activity, methanol
prices or energy prices, all of which are affected by numerous factors beyond our control. Since methanol is the only product we pro-

duce and market, a decline in the price of methanol would have an adverse effect on our results of operations and financial condition.

Global Economic Conditions

Volatile global economic conditions over the past few years have added significant risks and uncertainties to our business, including
risks and uncertainties related to the global supply and demand for methanol, its impact on methanol prices, changes in capital mar-
kets and corresponding effects on our investments, our ability to access existing or future credit and increased risk of defaults by cus-
tomers, suppliers and insurers. While the demand for methanol grew in 2012 and methanol prices were relatively stable, there can be
no assurance that future global economic conditions will not have an adverse impact on the methanol industry and that this will not

have an adverse impact on our results of operations and financial condition.

Methanol Demand

Demand for Methanol – General

Methanol is a global commodity and customers base their purchasing decisions principally on the delivered price of methanol and
reliability of supply. Some of our competitors are not dependent on revenues from a single product and some have greater financial
resources than we do. Our competitors also include state-owned enterprises. These competitors may be better able than we are to

withstand price competition and volatile market conditions.

Changes in environmental, health and safety laws, regulations or requirements could impact methanol demand. The US Environ-
mental Protection Agency (EPA) is currently evaluating the human health effects of methanol as part of a standard review of chem-
icals under its Integrated Risk Information System (IRIS). Methanol is currently unclassified under IRIS. A draft assessment for
methanol was released by the EPA in 2010 classifying methanol as “Likely to Be Carcinogenic to Humans.” As of 2010, the EPA’s draft
methanol assessment was placed “on hold.” In 2011, the EPA announced that it was dividing the draft assessment for methanol into
carcinogenic and non-carcinogenic assessments. The timeline for the carcinogenic assessment remains unknown while the non-
carcinogenic assessment is expected in 2013. We are unable to determine whether the current draft classification will be maintained
in the final assessment or if this will lead other government agencies to reclassify methanol. Any reclassification could reduce future

methanol demand, which could have an adverse effect on our results of operations and financial condition.

Demand for Methanol in the Production of Formaldehyde

In 2012, methanol demand for the production of formaldehyde represented approximately 32% of global demand. The largest use for
formaldehyde is as a component of urea-formaldehyde and phenol-formaldehyde resins, which are used in adhesives for plywood,
particleboard, oriented strand board, medium-density fibreboard and other reconstituted or engineered wood products. There is also
demand for formaldehyde as a raw material for engineering plastics and in the manufacture of a variety of other products, including

elastomers, paints, building products, foams, polyurethane and automotive products.

26 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

The current EPA IRIS carcinogenicity classification for formaldehyde is “Likely to Be Carcinogenic to Humans;” however, the EPA is review-
ing this classification for formaldehyde as part of a standard review of chemicals. In 2010, the EPA released its draft formaldehyde
assessment, proposing formaldehyde as “Known to be Carcinogenicto Humans.” The release of the final assessment of formaldehyde is

expected in 2013.

In 2009, the US National Cancer Institute (NCI) published a report on the health effects of occupational exposure to formaldehyde and a
possible link to leukemia, multiple myeloma and Hodgkin’s disease. The NCI report concluded that there may be an increased risk of
cancers of the blood and bone marrow related to a measure of peak formaldehyde exposure. The NCI report is the first part of an update
of the 2004 NCI study that indicated possible links between formaldehyde exposure and nasopharyngeal cancer and leukemia. The NCI
has not outlined its expected schedule with regards to the second portion of the study, which focuses on nasopharyngeal cancer and
other cancers. The International Agency for Research on Cancer also concluded that there is sufficient evidence in humans of a causal
association of formaldehyde with leukemia. In 2011, the US Department of Health and Human Services’ National Toxicology Program
released ¡ts 12th Report on Carcinogens, modifying its listing of formaldehyde from “Reasonably Anticipated to be a Human Carcinogen”

to “Known to be a Human Carcinogen.”

We are unable to determine at this time ifthe EPA or other governments or government agencies will reclassify formaldehyde or what
limits could be imposed related to formaldehyde emissions in the United States or elsewhere. Any such actions could reduce future
methanol demand for use in producing formaldehyde, which could have an adverse effect on our results of operations and financial con-
dition.

Demand for Methanol in the Production of MTBE
In 2012, methanol demand for the production of MTBE represented approximately 12% of global methanol demand. Demand growth has
been strong, particularly in China. MTBE is used primarily as a source of octane and as an oxygenate for gasoline to reduce the amount of

harmful exhaust emissions from motor vehicles.

Several years ago, environmental concerns and legislative action related to gasoline leaking into water supplies from underground gaso-
line storage tanks in the United States resulted in the phase-out of MTBE as a gasoline additive in the United States. We believe that
methanol has not been used in the United States to make MTBE for use in domestic fuel blending since 2007. However, approximately
o.7 million tonnes of methanol was used in the United States in 2012 to produce MTBE for export markets, where demand for MTBE has
continued at strong levels. While we currently expect demand for methanol for MTBE production in the United States for 2013 to remain

steady, it could decline materially if export demand was impacted by legislation or policy changes.

Additionally, the EPA in the United States is preparing an IRIS review of the human health effects of MTBE, including its potential carcino-

genicity. The timeline for the final report is currently unknown.

The European Union issued a final risk assessment report on MTBE in 2002 that permitted the continued use of MTBE, although several

risk-reduction measures relating to the storage and handling of fuels were recommended. Governmental efforts in recent years in some
countries, primarily in the European Union and Latin America, to promote biofuels and alternative fuels through legislation or tax policy
put competitive pressures on the use of MTBE in gasoline in these countries. However, due to strong MTBE demand in other countries,

particularly in Asia, we have observed methanol demand growth for MTBE production.

Although MTBE demand has remained strong outside of the United States, we cannot provide assurance that further legislation banning
or restricting the use of MTBE or promoting alternatives to MTBE will not be passed or that negative public perceptions will not develop
outside of the United States, either of which could lead to a decrease in the global demand for methanol for use in MTBE. Declines in

demand for methanol for use in MTBE could have an adverse effect on our results of operations and financial condition.

Foreign Operations

The majority of our operations and investments are located outside of North America, in New Zealand, Trinidad, Egypt, Chile, Europe and
Asia. We are subject to risks inherent in foreign operations such as loss of revenue, property and equipment as a result of expropriation;
import or export restrictions; anti-dumping measures; nationalization, war, insurrection, civil unrest, terrorism and other political risks;

increases in duties, taxes and governmental royalties; renegotiation of contracts with governmental entities; as well as changes in laws

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 27

Management’s Discussion $ Analysis

or policies or other actions by governments that may adversely affect our operations. Many of the foregoing risks related to foreign

operations may also exist for our domestic operations in North America.

Because we derive the majority of our revenues from production and sales by subsidiaries outside of Canada, the payment of divi-
dends or the making of other cash payments or advances by these subsidiaries may be subject to restrictions or exchange controls on

the transfer of funds in or out of the respective countries or result in the imposition of taxes on such payments or advances.

We have organized our foreign operations in part based on certain assumptions about various tax laws (including capital gains and
withholding taxes), foreign currency exchange and capital repatriation laws and other relevant laws of a variety of foreign juris-
dictions. While we believe that such assumptions are reasonable, we cannot provide assurance that foreign taxation or other author-
ities will reach the same conclusion. Further, if such foreign jurisdictions were to change or modify such laws, we could suffer adverse

tax and financial consequences.

The dominant currency in which we conduct business is the United States dollar, which is also our reporting currency. The most sig-
nificant components of our costs are natural gas feedstock and ocean-shipping costs and substantially all ofthese costs are incurred
in United States dollars. Some of our underlying operating costs, purchases of methanol and capital expenditures, however, are
incurred in currencies other than the United States dollar, principally the Canadian dollar, the Chilean peso, the Trinidad and Tobago
dollar, the New Zealand dollar, the euro and the Egyptian pound. We are exposed to increases in the value of these currencies that
could have the effect of increasing the United States dollar equivalent of cost of sales and operating expenses and capital
expenditures. A portion of our revenue ¡is earned in euros, Canadian dollars and British pounds. We are exposed to declines in the
value of these currencies compared to the United States dollar, which could have the effect of decreasing the United States dollar

equivalent of our revenue.

Trade in methanol is subject to duty in a number of jurisdictions. Methanol sold in China from any of our producing regions is cur-
rently subject to duties ranging from 0% to 5.5%. In 2010, the Chinese Ministry of Commerce investigated allegations made by domes-
tic Chinese producers related to the dumping into China of imported methanol. In December 2010, the Ministry recommended that
duties of approximately 9% be imposed on methanol imports from New Zealand, Malaysia and Indonesia for five years starting from
December 24, 2010. However, citing special circumstances, the Customs Tariff Commission of the State Council, which is China’s chief
administrative authority, suspended enforcement of the recommended dumping duties with the effect that methanol will continue
to be allowed to be imported from these three countries without the imposition of additional duties. Ifthe suspension is lifted, we do
not expect there to be a significant impact on industry supply/demand fundamentals and we would realign our supply chain to
minimize the payment of duties. However, we cannot provide assurance that the suspension will not be lifted or that the Chinese
government will not impose duties or other measures in the future, which actions could have an adverse effect on our results of oper-

ations and financial condition.

Methanol is a globally traded commodity that is produced by many producers at facilities located in many countries around the world.
Some producers and marketers may have direct or indirect contacts with countries that may, from time to time, be subject to interna-
tional trade sanctions or other similar prohibitions (“Sanctioned Countries”). In addition to the methanol we produce, we purchase
methanol from third parties under purchase contracts or on the spot market in order to meet our commitments to customers, and we
also engage in product exchanges with other producers and marketers. We believe that we are in compliance with all applicable laws
with respect to sales and purchases of methanol and product exchanges. However, as a result of the participation of Sanctioned
Countries in our industry, we cannot provide assurance that we will not be exposed to reputational or other risks that could have an
adverse impact on our results of operations and financial condition.

Liquidity Risk
During 2012, we entered into a $400 million revolving credit facility with a syndicate of banks, which remains undrawn at
December 31, 2012. The facility expires in December 2016 and our ability to access the facility is subject to certain financial covenants,

including an EBITDA to interest coverage ratio and a debt to capitalization ratio, as defined.

28 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

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At December 31, 2012, our long-term debt obligations include $750 million in unsecured notes ($150 million that matures in 2015, $350
million that matures in 2019 and $250 million that matures in 2022), $450 million related to the Egypt limited recourse debt facilities
(100% basis), $50 million related to the Atlas limited recourse debt facilities (63.1% basis) and $17 million related to other limited recourse
debt. The covenants governing the unsecured notes, which are specified in an indenture, apply to the Company and its subsidiaries,
excluding the Atlas joint venture and Egypt entity (“limited recourse subsidiaries”), and include restrictions on liens, sale and lease-back
transactions, a merger or consolidation with another corporation or sale of all or substantially all ofthe Company’s assets. The indenture
also contains customary default provisions. The Atlas and Egypt limited recourse debt facilities are described as limited recourse as they
are secured only by the assets of the Atlas joint venture and the Egypt entity, respectively. Accordingly, the lenders to the limited recourse
debt facilities have no recourse to the Company or its other subsidiaries. The Atlas and Egypt limited recourse debt facilities have
customary covenants and default provisions that apply only to these entities, including restrictions on the incurrence of additional
indebtedness, a requirement to fulfill certain conditions before the payment of cash or other distributions and a restriction on these dis-

tributions if there is a default subsisting.

The Egypt limited recourse debt facilities contain a covenant to complete by March 31, 2013 certain land title registrations and related
mortgages that require action by Egyptian government entities and which we do not expect to complete by March 31, 2013. We do not
believe that the finalization of these items is material to the security provided to the lenders. The Company is seeking a waiver from the

lenders. We cannot provide assurance that we will be able to obtain a waiver from the lenders.
For additional information regarding long-term debt, refer to note 9 of our 2012 consolidated financial statements.

We cannot provide assurance that we will be able to access new financing in the future or that the financial institutions providing the
credit facility will have the ability to honour future draws. Additionally, failure to comply with any of the covenants or default provisions
of the long-term debt facilities described above could result in a default under the applicable credit agreement that would allowthe
lenders to not fund future loan requests and to accelerate the due date of the principal and accrued interest on any outstanding loans.
Any of these factors could have a material adverse effect on our results of operations, our ability to pursue and complete strategic ini-

tiatives or on our financial condition.

Customer Credit Risk

Our customers are large global or regional petrochemical manufacturers or distributors and a number are highly leveraged. We monitor
our customers’ financial status closely; however, some customers may not have the financial ability to pay for methanol in the future and
this could have an adverse effect on our results of operations and financial condition. Although credit losses have not been significant in

the past, this risk still exists.

Operational Risks

Production Risks

Most of our earnings are derived from the sale of methanol produced at our plants. Our business ¡is subject to the risks of operating
methanol production facilities, such as equipment breakdowns, interruptions in the supply of natural gas and other feedstocks, power
failures, longer-than-anticipated planned maintenance activities, loss of port facilities, natural disasters or any other event, including
unanticipated events beyond our control, that could result in a prolonged shutdown of any of our plants or impede our ability to deliver
methanol to our customers. A prolonged plant shutdown at any of our major facilities could have an adverse effect on our results of

operations and financial condition.

Purchased Product Price Risk

In addition to the sale of methanol produced at our plants, we also purchase methanol produced by others on the spot market and
through purchase contracts to meet our customer commitments and support our marketing efforts. We have adopted the first-in, first-
out method of accounting for inventories and it generally takes between 30 and 60 days to sell the methanol we purchase. Consequently,
we have the risk of holding losses on the resale of this product to the extent that methanol prices decrease from the date of purchase to
the date of sale. Holding losses, if any, on the resale of purchased methanol could have an adverse effect on our results of operations and

financial condition.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012. 29

Management’s Discussion $ Analysis

Distribution Risks

Excess capacity within our fleet of ocean vessels resulting from a prolonged plant shutdown or other event could have an adverse
effect on our results of operations and financial condition as our vessel fleet is subject to fixed time charter costs. In the event we have
excess shipping capacity, we may be able to mitigate some of the excess costs by entering into sub-charters or third-party backhaul
arrangements, although the success of this mitigation is dependent on conditions within the broader global shipping industry. If we
suffer any disruptions in our distribution system and are unable to mitigate these costs this could have an adverse effect on our

results of operations and financial condition.

Insurance Risks

Although we maintain operational and construction insurances, including business interruption insurance and delayed start-up
insurance, we cannot provide assurance that we will not incur losses beyond the limits of, or outside the coverage of, such insurance
or that insurers will be financially capable of honouring future claims. From time to time, various types of insurance for companies in
the chemical and petrochemical industries have not been available on commercially acceptable terms or, in some cases, have been
unavailable. We cannot provide assurance that in the future we will be able to maintain existing coverage or that premiums will not

increase substantially.

Construction Projects and Louisiana Relocation Project

We believe that our estimates of project costs and anticipated completion dates for our expansion projects in New Zealand, Medicine

Hat and Louisiana are reasonable. However, we cannot provide any assurance that the cost estimates will not be exceeded or that the

facilities will begin commercial production within the anticipated schedules, if at all, or that the facilities will operate at their designed
capacity or on a sustained basis. Any changes to the expected timing of completion or cost to complete these projects could have an

adverse impact on results of operations and financial condition.

New Capital Projects

As part of our strategy to strengthen our position as the global leader in the production and marketing of methanol, we intend to
continue pursuing new opportunities to enhance our strategic position in the methanol industry. Our ability to successfully identify,
develop and complete new capital projects is subject to a number of risks, including finding and selecting favourable locations for new
facilities or relocation of existing facilities where sufficient natural gas and other feedstock is available through long-term contracts
with acceptable commercial terms, obtaining project or other financing on satisfactory terms, constructing and completing the proj-
ects within the contemplated budgets and schedules and other risks commonly associated with the design, construction and start-up
of large complex industrial projects. We cannot provide assurance that we will be able to identify or develop new methanol projects.

Environmental Regulation

The countries in which we operate all have laws and regulations to which we are subject governing the environment and the
management of natural resources as well as the handling, storage, transportation and disposal of hazardous or waste materials. We
are also subject to laws and regulations governing emissions and the import, export, use, discharge, storage, disposal and trans-
portation of toxic substances. The products we use and produce are subject to regulation under various health, safety and environ-
mental laws. Non-compliance with these laws and regulations may give rise to compliance orders, fines, injunctions, civil liability and

criminal sanctions.

Laws and regulations protecting the environment have become more stringent in recent years and may, in certain circumstances,
impose absolute liability rendering a person liable for environmental damage without regard to negligence or fault on the part of
such person. Such laws and regulations may also expose us to liability for the conduct of, or conditions caused by, others, or for our
own acts even if we complied with applicable laws at the time such acts were performed. To date, environmental laws and regulations
have not had a significant adverse effect on our capital expenditures, earnings or competitive position. However, operating
petrochemical manufacturing plants and distributing methanol exposes us to risks in connection with compliance with such laws and

we cannot provide assurance that we will not incur significant costs or liabilities in the future.

30 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

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Management of Emissions

We believe that minimizing emissions and waste from our business activities is good business practice. Carbon dioxide (“CO2”) is a
by-product of the methanol production process. The amount of CO2 generated by the methanol production process depends on the
production technology (and hence often the plant age), the feedstock and any export of by-product hydrogen. We continually strive to
increase the energy efficiency of our plants, which not only reduces the use of energy but also reduces CO2 emissions. We have reduced
CO2 emission intensity in our manufacturing operations by 30% between 1994 and 2012 through asset turnover, improved plant reli-
ability and energy efficiency and emissions management. Plant efficiency, and thus CO2 emissions, is highly dependent on the design of
the methanol plant. Therefore, the CO2 emission figure may vary from year to year depending on the asset mix that is operating. We also
recognize that CO2 is generated from our marine operations, and in that regard we measure the consumption of fuel by our ocean ves-
sels based on the volume of product transported. Between 2002 and 2012, we reduced our CO2 intensity (tonnes of CO2 from fuel burned
per tonne of product moved) from marine operations by nearly 27%. We also actively support global industry efforts to voluntarily reduce

both energy consumption and CO2 emissions.

We manufacture methanol in New Zealand, Trinidad, Egypt, Canada and Chile. All ofthese countries signed and ratified the Kyoto Proto-
col; however, Canada has since removed itself from that Agreement. We are not currently required to reduce greenhouse gases (GHG) in

Trinidad, Egypt and Chile, but our production in New Zealand and Canada is subject to GHG reduction regulations.

New Zealand passed legislation to establish an Emissions Trading Scheme (“ETS”) that came into force in 2010. The ETS imposes a carbon
price on producers of fossil fuels, including natural gas, which is passed on to Methanex, increasing the cost of gas that Methanex pur-
chases in New Zealand. However, as a trade-exposed company, Methanex is entitled to a free allocation of emissions units to partially
offset those increased costs. Recently, the New Zealand government concluded that the legislation will continue providing further
moderation and free allocation of any residual cost exposure until at least 2015. Consequently, our ETS-related costs are not expected to
be significant to the end of 2015. However, after this date, the moderating features are expected to be removed and our eligibility for free
allocation of emissions units may also be progressively reduced. As a consequence, we may incur increasing costs after 2015. It is impos-
sible to accurately quantify the impact on our business of ETS-related costs after 2015 and therefore we cannot provide assurance that

the ETS will not have a significant impact on our results of operations and financial condition beyond 2015.

Medicine Hat is located in the Canadian province of Alberta, which has an established GHG reduction regulation that applies to our plant.
The regulation requires that facilities reduce emissions intensities by up to 12% of their established emissions intensity baseline.
“Emissions intensity” means the quantity of specified GHGs released per unit of production. In order to meet the reduction obligation, a
facility can choose to make emissions reduction improvements or it can purchase either offset credits or “technology fund” credits for
CDN515 per tonne of CO2 equivalent. Financial obligations are set to begin in 2014 and based on the expected GHG baseline intensity, we
do not believe that, when applied, the cost will be significant.

The federal government of Canada is in the process of developing a sector-by-sector approach to reduce GHG emissions in support of its
commitment to reduce GHGs from 2005 levels by 17% by 2020. Final proposed regulations are expected by the end of 2013. As the sole
methanol producer in Canada, Methanex is engaged in a consultative process to ensure achievable performance standards are set and
that these incorporate equivalency agreements with existing regulations in Alberta to prevent the potential of paying double for GHG

emissions under both provincial and federal regimes.

We are currently in the process of relocating one of our idle methanol plants in Chile to Geismar, Louisiana. The reassembled plant in
Geismar is expected to be operational by the end of 2014. Today, there is no GHG legislation that impacts our business in the United
States. We continue to monitor the development of potential GHG legislation in the US and Louisiana to ensure compliance with any
potential future requirements once the plant becomes operational. At this time, it unknown what impact, if any, potential new GHG

legislation or regulation could have on our operations in Geismar.

We cannot provide assurance over ongoing compliance with existing legislation or that future laws and regulations to which we are
subject governing the environment and the management of natural resources as well as the handling, storage, transportation and dis-
posal of hazardous or waste materials will not have an adverse effect on our results of operations and financial condition.

Legal Proceedings
The Board of Inland Revenue of Trinidad and Tobago has issued assessments against our 63.1% owned joint venture, Atlas Methanol
Company Unlimited (“Atlas”), in respect of the 2005 and 2006 financial years. All subsequent tax years remain open to assessment. The

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 31

Management’s Discussion $ Analysis

assessments relate to the pricing arrangements of certain long-term fixed-price sales contracts that extend to 2014 and 2019 related
to methanol produced by Atlas. The impact of the amounts in dispute for the 2005 and 2006 financial years is not significant. Atlas

has partial relief from corporation income tax until 2014.

The Company has lodged objections to the assessments. Based on the merits of the cases and legal interpretation, management

believes its position should be sustained.

CRITICAL ACCOUNTING ESTIMATES
We believe the following selected accounting policies and issues are critical to understanding the estimates, assumptions and
uncertainties that affect the amounts reported and disclosed in our consolidated financial statements and related notes. See note 2 to

our 2012 consolidated financial statements for our significant accounting policies.

Property, Plant and Equipment
Our business is capital intensive and has required, and will continue to require, significant investments in property, plant and equip-

ment. At December 31, 2012, the net book value of our property, plant and equipment was $2,015 million.

Capitalization

Property, plant and equipment are initially recorded at cost. The cost of purchased equipment includes expenditures that are directly
attributable to the purchase price, delivery and installation. The cost of self-constructed assets includes the cost of materials and
direct labour, any other costs directly attributable to bringing the assets to the location and condition for their intended use, the costs
of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on self-constructed

assets that meet certain criteria. Routine repairs and maintenance costs are expensed as incurred.

At December 31, 2012, we have accrued $22.6 million for site restoration costs relating to the decommissioning and reclamation of our
methanol production sites and oil and gas properties. Inherent uncertainties exist in this estimate because the restoration activities
will take place in the future and there may be changes in governmental and environmental regulations and changes in removal tech-
nology and costs. It is difficult to estimate the future costs of these activities as our estimate of fair value is based on current regu-
lations and technology. Because of uncertainties related to estimating the cost and timing of future site restoration activities, future

costs could differ materially from the amounts estimated.

Depreciation and Amortization
Depreciation and amortization is generally provided on a straight-line basis at rates calculated to amortize the cost of property, plant

and equipment from the commencement of commercial operations over their estimated useful lives to estimated residual value.

The estimated useful lives of the Company’s buildings, plant installations and machinery, excluding costs related to turnarounds,
range from 10 to 25 years depending on the specific asset component and the production facility to which it is related. The Company
determines the estimated useful lives of individual asset components based on the shorter of ¡ts physical life or economic life. The
physical life of these assets is generally longer than the economic life. The economic life is primarily determined by the nature of the
natural gas feedstock available to our various production facilities. Factors that influence the nature of natural gas feedstock avail-
ability include the terms of individual natural gas supply contracts, access to natural gas supply through open markets, regional fac-
tors influencing the exploration and development of natural gas, and the expected price of securing natural gas supply. We review the
factors related to each production facility on an annual basis to determine if changes are required to the estimated useful lives.

Oil and Gas Properties

Exploration and evaluation costs incurred for oil and natural gas exploration properties that do not have proven reserves are cap-
italized to other assets. Upon determination of proven reserves and internal approval for development, these costs are transferred to
property, plant and equipment. Costs are also transferred to property, plant and equipment and become subject to depreciation when
the associated properties have been deemed abandoned by management. Subsequent costs incurred for oil and natural gas proper-
ties with proven reserves are capitalized to property, plant and equipment. Oil and gas costs included in property, plant and equip-
ment are depreciated using a unit-of-production method, taking into consideration estimated proven reserves and estimated future

development costs.

32 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion €: Analysis

Proven and probable reserves for oil and natural gas properties are estimated based on independent reserve reports and represent the
estimated quantities of natural gas that are considered commercially feasible. These reserve estimates are used to determine deprecia-

tion and to assess the carrying value of oil and natural gas properties.

Recoverability of Asset Carrying Values

Property, Plant and Equipment and Oil and Gas Properties

Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. Examples of such events or changes in circumstances related to our long-lived assets include, but are not restricted to: a
significant adverse change in the extent or manner in which the asset is being used or in its physical condition; a significant change in
the price or availability of natural gas feedstock required to manufacture methanol; a significant adverse change in legal factors or in the
business climate that could affect the asset’s value, including an adverse action or assessment by a foreign government that impacts the
use of the asset; or a current-period operating or cash flow loss combined with a history of operating or cash flow losses, or a projection

or forecast that demonstrates continuing losses associated with the asset’s use.

We recently announced that we expect to idle our Chile operations in March 2013 due to an expected shortfall of natural gas feedstock to
keep the plant operating through the southern hemisphere winter. We are continuing to work with our natural gas suppliers to secure
sufficient natural gas to sustain our operations, and while the restart of a Chile plant is possible later in 2013, the restart is dependent on

securing a sustainable natural gas position to operate over the medium term.

Asa consequence of the uncertain outlook for the future supply of natural gas feedstock, the carrying value of our Chile assets was tested

for recoverability at December 31, 2012.

Recoverability of long-lived assets is measured by comparing the carrying value of an asset or cash-generating unit to the estimated
recoverable amount, which is the higher of its estimated fair value less costs to sell or its value in use. Value in use was determined by
measuring the pre-tax cash flows expected to be generated from the cash-generating unit over ¡ts estimated useful life discounted by a
pre-tax discount rate. The pre-tax discount rate used of 13% was derived from the Company’s estimated cost of capital. An impairment
writedown was recorded for the difference that the carrying value exceeded the recoverable amount. An impairment writedown recog-
nized in prior periods for an asset or cash-generating unit is reversed ifthere has been a subsequent recovery in the value of the asset or
cash-generating unit due to changes in events and circumstances. For the purposes of recognition and measurement of an impairment
writedown, we group our long-lived assets with other assets and liabilities to form a “cash-generating unit” at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. To the extent that our methanol facilities
in a particular location are interdependent as a result of common infrastructure and/or feedstock from shared sources that can be shared

within a facility location, we group our assets based on site locations for the purpose of determining impairment.

There are two key variables that impact our estimate of future cash flows: (1) the methanol price and (2) the price and availability of natu-
ral gas feedstock. Short-term methanol price estimates are based on current supply and demand fundamentals and current methanol
prices. Long-term methanol price estimates are based on our view of long-term supply and demand, and consideration is given to many
factors, including, but not limited to, estimates of global industrial production rates, energy prices, changes in general economic con-
ditions, future global methanol production capacity, industry operating rates and the global industry cost structure. Our estimate of the
price and availability of natural gas takes into consideration the current contracted terms, as well as factors that we believe are relevant
to supply under these contracts and supplemental natural gas sources. Other assumptions included in our estimate of future cash flows
include the estimated cost incurred to maintain the facilities, estimates of transportation costs and other variable costs incurred in pro-
ducing methanol in each period. Changes in these assumptions will impact our estimates of future cash flows and could impact our
estimates of the useful lives of property, plant and equipment. Consequently, it is possible that our future operating results could be
adversely affected by further asset impairment charges or by changes in depreciation and amortization rates related to property, plant
and equipment.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 33

Management’s Discussion $ Analysis

Based on the test performed at December 31, 2012 related to our Chile assets, we recorded a non-cash before-tax asset impairment
charge of $297 million ($193 million after-tax) to write down the carrying value of the Chile assets at December 31, 2012 to $245 million.
The remaining carrying value of $245 million excludes the first Chile facility that is being relocated to Geismar, Louisiana but includes
the second facility that management is also considering for relocation to Geismar. Refer to note 6 of the consolidated financial state-

ments for the year ended December 31, 2012.

We believe the estimated recoverable amount of all long-lived assets except our Chile cash-generating unit substantially exceeded

their carrying value as at December 31, 2012.

Income Taxes

Deferred income tax assets and liabilities are determined using enacted or substantially enacted tax rates for the effects of net operat-
ing losses and temporary differences between the book and tax bases of assets and liabilities. We recognize deferred tax assets to the
extent it is probable that taxable profit will be available against which the asset can be utilized. In making this determination, certain
judgments are made relating to the level of expected future taxable income and to available tax-planning strategies and their impact
on the use of existing loss carryforwards and other income tax deductions. We also consider historical profitability and volatility to
assess whether we believe it is probable that the existing loss carryforwards and other income tax deductions will be used to offset
future taxable income otherwise calculated. Our management routinely reviews these judgments. At December 31, 2012, we had
recognized future tax assets of $147 million and unrecognized future income tax assets of approximately $144 million. The determi-
nation of income taxes requires the use of judgment and estimates. If certain judgments or estimates prove to be inaccurate, or if

certain tax rates or laws change, our results of operations and financial position could be materially impacted.

Financial Instruments

We enter into derivative financial instruments from time to time to manage certain exposures to commodity price volatility, foreign
exchange volatility and variable interest rate volatility, which contributes towards managing our cost structure. Derivative financial
instruments are classified as held-for-trading and are recorded on the balance sheet at fair value unless exempted. Changes in the fair
value of held-for-trading derivative financial instruments are recorded in earnings unless the instruments are designated as cash flow
hedges, in which case the effective portion of any changes in fair value are recorded in other comprehensive income. Assessment of
contracts as derivative instruments, the valuation of financial instruments and derivatives, and hedge effectiveness assessments
require a high degree of judgment and are considered critical accounting estimates due to the complex nature of these products and

the potential impact on our financial statements.

At December 31, 2012, the fair value of our derivative financial instruments used to limit our exposure to variable interest rate volatility
that have been designated as cash flow hedges approximated their carrying value of negative $33 million. Until settled, the fair value

of the derivative financial instruments will fluctuate based on changes in variable interest rates.

ANTICIPATED CHANGES TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

Consolidation and Joint Arrangement Accounting

In May 2011, the lASB issued new accounting standards related to consolidation and joint arrangement accounting. The lASB has
revised the definition of “control,” which is a criterion for consolidation accounting. In addition, changes to IFRS in the accounting for
joint arrangements were issued that, under certain circumstances, removed the option for proportionate consolidation accounting so
that the equity method of accounting for such interests would need to be applied. We currently account for our 63.1% interest in Atlas
Methanol Company using proportionate consolidation accounting and upon adoption of these new standards effective January 1, 2013
we will account for this entity using equity accounting. The impact of applying equity accounting does not result in any change to net
earnings or shareholders’ equity but will result in changes to the presentation of our Consolidated Statements of Income and Con-

solidated Statements of Financial Position.

SUPPLEMENTAL NON-GAAP MEASURES
In addition to providing measures prepared in accordance with International Financial Reporting Standards (IFRS), we present certain

supplemental measures that are not defined terms under IFRS (non-GAAP measures). These are adjusted EBITDA, adjusted net

34 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion $ Analysis

income, adjusted diluted net income per share, adjusted cash flows from operating activities, cash flow from operating activities before
changes in non-cash working capital and operating income. These measures do not have any standardized meaning prescribed by IFRS
and therefore are unlikely to be comparable to similar measures presented by other companies. We believe these measures are useful in
assessing the operating performance and liquidity of the Company’s ongoing business. We also believe Adjusted EBITDA is frequently

used by securities analysts and investors when comparing our results with those of other companies.

These measures should be considered in addition to, and not as a substitute for, net income, cash flows and other measures of financial

performance and liquidity reported in accordance with IFRS.

Adjusted EBITDA (Attributable to Methanex Shareholders)
Adjusted EBITDA differs from the most comparable GAAP measure, net income (loss) attributable to Methanex shareholders, because it
excludes finance costs, finance income and other expenses, income tax expense (recovery), depreciation and amortization, mark-to-

market impact of share-based compensation, Louisiana project relocation expenses and charges and asset impairment charges.

Adjusted EBITDA and Adjusted net income exclude the mark-to-market impact of share-based compensation related to the impact of
changes in our share price on share appreciation rights, tandem share appreciation rights, deferred share units, restricted share units and
performance share units. The mark-to-market impact related to performance share units that is excluded from Adjusted EBITDA and
Adjusted net income is calculated as the difference between the grant-date value determined using a Methanex total shareholder return
factor of100% and the fair value recorded at each period-end. As share-based awards will be settled in future periods, the ultimate value
of the units is unknown at the date of grant and therefore the grant-date value recognized in Adjusted EBITDA and Adjusted net income

may differ from the total settlement cost.

The following table shows a reconciliation from net income (loss) attributable to Methanex shareholders to Adjusted EBITDA:

($ MILLIONS) 2012 2011

Net income (loss) attributable to Methanex shareholders $ (68) $ 201
Finance costs T 62
Finance income and other expenses (m) (2)
Income tax expense (recovery) (84) 56
Depreciation and amortization 172 157
Mark-to-market impact of share-based compensation 16 (21)
Louisiana project relocation expenses and charges 65 –
Asset impairment charge 297 –
Non-controlling interests adjustments! (89) (26)

Adjusted EBITDA (attributable to Methanex shareholders) $ 429 $ 427

y This adjustment represents finance costs, finance income and other expenses, income tax expense, and depreciation and amortization associated with the 40% non-controlling interest in the methanol facility in Egypt.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 35

Management’s Discussion 8z Analysis

Adjusted Net Income and Adjusted Net Income per Common Share (Attributable to Methanex Shareholders)

Adjusted net income and Adjusted net income per common share are non-GAAP measures because they exclude the mark-to-market
impact of share-based compensation and items that are considered by management to be non-operational, including asset impair-
ment charges and Louisiana project relocation charges and expenses. The following table shows a reconciliation from net income

(loss) attributable to Methanex shareholders to Adjusted net income and the calculation of Adjusted diluted net income per common

share:
($ MILLIONS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS) 2012 2011
Net income (loss) attributable to Methanex shareholders $ (68) $ 201
Mark-to-market impact of share-based compensation 16 (21)
Louisiana project relocation expenses and charges
Cash expense 39 –
Non-cash charge 26 –
Asset impairment charge 297 –
Income expense (recovery) related to above items (130) 2
Adjusted net income $ 180 $ 182
Diluted weighted average shares outstanding 94 94
Adjusted net income per common share! $ 190 $ 1.93

* Forthe year ended December 31, 2012, stock options have been excluded from the calculation of diluted net loss per common share (attributable to Methanex shareholders) as their effect would be anti-dilutive.
However, for the calculation of adjusted diluted net income per common share, stock options have been included in the denominator and the diluted weighted average number of common shares for the year ended
December 31, 2012 is 95 million.

Adjusted Cash Flows from Operating Activities (Attributable to Methanex Shareholders)
Adjusted cash flows from operating activities differs from the most comparable GAAP measure, cash flows from operating activities,
because it does not include cash flows associated with the 40% non-controlling interest in the methanol facility in Egypt, changes in

non-cash working capital and the cash portion of Louisiana project relocation expenses and charges.

The following table shows a reconciliation of cash flows from operating activities to adjusted cash flows from operating activities:

($ MILLIONS) 2012 2011
Cash flows from operating activities $ 458 $ 480
Deduct non-controlling interests adjustment:

Net income (83) (26)

Non-cash items (9) (26)
Changes in non-cash working capital (22) (36)
Cash portion of Louisiana project relocation expenses and charges 39 –
Adjusted cash flow from operating activities (attributable to Methanex shareholders) $ 403 $ 392

Operating Income and Cash Flows from Operating Activities before Changes in Non-Cash Working Capital
Operating income and cash flows from operating activities before changes in non-cash working capital are reconciled to GAAP meas-

ures in our Consolidated Statements of Income and Consolidated Statements of Cash Flows, respectively.

36 Methanex Corporation | Annual Report 2012 Management’s Discussion 8 Analysis

Management’s Discussion $ Analysis

QUARTERLY FINANCIAL DATA (UNAUDITED)

THREE MONTHS ENDED

($ MILLIONS, EXCEPT PER SHARE AMOUNTS) DEC 31 SEP 30 JUN 3o MAR 31
2012

Revenue $ 696 $ 655 $ 656 $ 666
Adjusted EBITDA’ n9 104 13 93
Adjusted net income* 61 36 ¿4 39
Net income (loss)2 (140) 6) 52 22
Adjusted net income per share’ 0.64 0.38 0.47 0.41
Basic net income (loss) per common sharez (1.49) (0.03) 0.56 0.24
Diluted net income (loss) per common sharez (1.49) (0.03) 0.50 0.23
201

Revenue $ 696 $ 670 $ 623 $ 619
Adjusted EBITDA’ 13 m 102 81
Adjusted net income 65 40 39 37
Net income? 64 62 41 35
Adjusted net income per share? 0.69 0.43 0.41 0.39
Basic net income per common share? 0.69 0.67 0.44 0.37
Diluted net income per common share? 0.68 0.59 0.43 0.37

* These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the
Supplemental Non-GAAP Measures section on page 34.for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.

Attributable to Methanex Corporation shareholders,

Adiscussion and analysis of our results for the fourth quarter of 2012 is set out in our fourth quarter of 2012 Management’s Discussion
and Analysis filed with the Canadian Securities Administrators and the U.S. Securities and Exchange Commission and incorporated herein

by reference.

SELECTED ANNUAL INFORMATION

($ MILLIONS, EXCEPT PER SHARE AMOUNTS) 2012 2011 2010
Revenue $ 2,673 $ 2,608 $ 1,967
Adjusted EBITDA’ 429 427 291
Adjusted net income* 180 182 91
Net income (loss)2 (68) 201 96
Adjusted net income per share: 1.90 1.93 0.98
Basic net income (loss) per sharez (0.73) 2.16 1.04
Diluted net income (loss) per sharez (0.73) 2.06 1.03
Cash dividends declared per share 0.725 0.665 0.620
Total assets 3,545 3,394 3,141

Total long-term financial lial les 1,434 886 1,105

* These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the
Supplemental Non-GAAP Measures section on page 34.for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.
> Attributable to Methanex Corporation shareholders.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are those controls and procedures that are designed to ensure that the information required to be
disclosed in the filings under applicable securities regulations is recorded, processed, summarized and reported within the time periods
specified. As at December 31, 2012, under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of the Company’s dis-
closure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our

disclosure controls and procedures are effective.

Management’s Discussion 8 Analysis Methanex Corporation | Annual Report 2012 37

Management’s Discussion $ Analysis

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets

that could have a material effect on the financial statements.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events.
There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of
how remote.

Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, management con-
ducted an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2012, based on the
framework set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Tread-
way Commission. Based on its evaluation under this framework, management concluded that our internal control over financial

reporting was effective as of that date.

KPMMG LLP, an independent registered public accounting firm that audited and reported on our consolidated financial statements, has

issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2012. The attes-

38 Methanex Corporation | Annual Report 2012

tation report is included in our consolidated financial statements on page 43.

Changes in Internal Control over Financial Reporting

There have been no changes during the year ended December 31, 2012 to internal control over financial reporting that have materially

affected, or are reasonably likely to materially affect, internal control over financial reporting.

FORWARD-LOOKING STATEMENTS

This 2012 Management’s Discussion and Analysis (“MD8xxA”) contains forward-looking statements with respect to us and our industry.

These statements relate to future events or our future performance. All statements other than statements of historical fact are

forward-looking statements. Statements that include the words “believes,

“anticipates,” “aim”,

forward-looking statements.

expects,” “may,” “will, “should,” “potential,” “estimates,”

goal” or other comparable terminology and similar statements of a future or forward-looking nature identify

More particularly, and without limitation, any statements regarding the following are forward-looking statements:

Ml expected demand for methanol and its derivatives,

Ml expected new methanol supply or restart of idled capacity
and timing for start-up of the same,

Ml expected shutdowns (either temporary or permanent) or
restarts of existing methanol supply (including our own
facilities), including, without limitation, the timing and

length of planned maintenance outages,
Ml expected methanol and energy prices,

IM expected levels of methanol purchases from traders or other
third parties,
Ml expected levels, timing and availability of economically

priced natural gas supply to each of our plants,

KE capital committed by third parties towards future natural
gas exploration and development in the vicinity of our

plants,

E our expected capital expenditures, including, without limi-
tation, those to support natural gas exploration and
development for our plants and the restart of our idled

methanol facilities,
KM anticipated production rates of our plants,

KM expected operating costs, including natural gas feedstock

costs and logistics costs,
KM expected tax rates or resolutions to tax disputes,
KM expected cash flows, earnings capability and share price,

E ability to meet covenants or obtain waivers associated with
our long-term debt obligations, including, without limi-
tation, the Egypt limited recourse debt facilities that have
conditions associated with finalization of certain land title
registration and related mortgages that require actions by

Egyptian governmental entities,

Management’s Discussion 8 Analysis

E availability of committed credit facilities and other financing,

E our shareholder distribution strategy and anticipated dis-

tributions to shareholders,

Ml commercial viability and timing of, or our ability to execute,
future projects, plant restarts, capacity expansions, plant
relocations, or other business initiatives or opportunities,
including the planned relocation of one of our idle Chile
methanol plants to Geismar, Louisiana (“Geismar”) and certain

initiatives in New Zealand and Canada,

E our financial strength and ability to meet future financial

commitments,

Management’s Discussion $ Analysis

KM expected global or regional economic activity (including

industrial production levels),

KM expected outcomes of litigation or other disputes, claims and

assessments,

KM expected actions of governments, government agencies, gas

suppliers, courts, tribunals or other third parties, and

IM expected impact on our operations in Egypt or our financial
condition as a consequence of civil unrest or actions taken or
inaction by the Government of Egypt and its agencies.

We believe that we have a reasonable basis for making such forward-looking statements. The forward-looking statements in this docu-

ment are based on our experience, our perception of trends, current conditions and expected future developments as well as other fac-

tors. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections that are

included in these forward-looking statements, including, without limitation, future expectations and assumptions concerning the follow-

ing:
E supply of, demand for, and price of, methanol, methanol

derivatives, natural gas, coal, oil and oil derivatives,

IM the success of our natural gas exploration and development in
Chile and New Zealand and our ability to procure economically
priced natural gas in Chile, New Zealand, Trinidad, Canada and
the United States,

Ml production rates of our facilities,

KM receipt of remaining required permits in connection with the

Geismar project,

KM receipt or issuance of third-party consents or approvals, includ-
ing, without limitation, governmental registrations of land
title and related mortgages in Egypt, governmental approvals
related to natural gas exploration rights or rights to purchase

natural gas,

KM receipt of governmental approvals related to natural gas

exploration rights,
Ml the establishment of new fuel standards,

KM operating costs including natural gas feedstock and logistics
costs, capital costs, tax rates, cash flows, foreign exchange

rates and interest rates,

Management’s Discussion 8 Analysis

IM the availability of committed credit facilities and other

financing,

KM timing of completion and cost of the Geismar project and our

initiatives to increase production in New Zealand and Canada,

E global and regional economic activity (including industrial

production levels),

Ml absence of a material negative impact from major natural

disasters,

Ml absence of a material negative impact from changes in laws

or regulations,

M absence of a material negative impact from political instability

in the countries in which we operate,

Ml enforcement of contractual arrangements and ability to per-
form contractual obligations by customers, natural gas and
other suppliers and other third parties, and

KE satisfaction of conditions precedent contained in the Geismar

project natural gas supply agreement.

Methanex Corporation | Annual Report 2012 39

40 Methanex Corporation | Annual Report 2012

Management’s Discussion 8z Analysis

However, forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materi-

ally from those contemplated by the forward-looking statements. The risks and uncertainties primarily include those attendant with

producing and marketing methanol and successfully carrying out major capital expenditure projects in various jurisdictions, including,

without limitation:

E conditions in the methanol and other industries including
fluctuations in the supply, demand for and price of methanol
and its derivatives, including demand for methanol for

energy uses,
E the price of natural gas, coal, oil and oil derivatives,

IM the success of natural gas exploration and development
activities in southern Chile and New Zealand and our ability
to obtain any additional gas in Chile and New Zealand on

commercially acceptable terms,

E the ability to successfully carry out corporate initiatives and

strategies,
E actions of competitors, suppliers and financial institutions,

E conditions within the natural gas delivery systems that may

prevent delivery of our natural gas supply requirements,

E competing demand for natural gas, especially with respect

to domestic needs for gas and electricity in Chile and Egypt,

E actions of governments and governmental authorities,
including, without limitation, the implementation of policies
or other measures that could impact the supply of or

demand for methanol or ¡ts derivatives,
E changes in laws or regulations,

E import or export restrictions, anti-dumping measures,
increases in duties, taxes and government royalties, and
other actions by governments that may adversely affect our

operations or existing contractual arrangements,
E worldwide economic conditions,

KE satisfaction of conditions precedent contained in the Geis-

mar project natural gas supply agreement, and

E other risks described in the 2012 Management’s Discussion

and Analysis.

Having in mind these and other factors, investors and other readers are cautioned not to place undue reliance on forward-looking

statements. They are not a substitute for the exercise of one’s own due diligence and judgment. The outcomes anticipated in forward-

looking statements may not occur and we do not undertake to update forward-looking statements except as required by applicable

securities laws.

Management’s Discussion 8 Analysis

Responsibility For Financial Reporting

The consolidated financial statements and all financial information contained in the annual report are the responsibility of manage-
ment. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and,

where appropriate, have incorporated estimates based on the best judgment of management.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting based on the internal control framework set out in Internal
Control – Integrated Framework issued by the Committee of Sponsoring Organizations ofthe Treadway Commission. Based on our

evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2012.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal con-
trol, and is responsible for reviewing and approving the consolidated financial statements. The Board carries out this responsibility
principally through the Audit, Finance and Risk Committee (the Committee).

The Committee consists of five non-management directors, all of whom are independent as defined by the applicable rules in Canada
and the United States. The Committee is appointed by the Board to assist the Board in fulfilling its oversight responsibility relating to:
the integrity of the Company’s financial statements, news releases and securities filings; the financial reporting process; the systems of
internal accounting and financial controls; the professional qualifications and independence of the external auditor; the performance of
the external auditors; risk management processes; financing plans; pension plans; and the Company’s compliance with ethics policies

and legal and regulatory requirements.

The Committee meets regularly with management and the Company’s auditors, KPMG LLP, Chartered Accountants, to discuss internal
controls and significant accounting and financial reporting issues. KPMG has full and unrestricted access to the Committee. KPMG aud-
ited the consolidated financial statements and the effectiveness of internal controls over financial reporting. Their opinions are included

in the annual report.

LÓA

A. Terence Poole John Floren lan Cameron
Chairman of the Audit, Finance President and Senior Vice President, Finance and Chief
and Risk Committee Chief Executive Officer Financial Officer

March 13, 2013

Methanex Corporation | Annual Report 2012 41

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Methanex Corporation:

We have audited the accompanying consolidated statements of financial position of Methanex Corporation as of December 31, 2012 and
December 31, 2011 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility of Methanex Corporation’s management. Our

responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our

audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Methanex Corporation as of December 31, 2012 and December 31, 2011, and its consolidated financial performance and its
consolidated cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the

International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Methanex
Corporation’s internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated March 13, 2013 expressed an unqualified opinion on the effectiveness of Methanex Corporation’s internal control over financial

reporting.

Lfnó “e?
=-

Chartered Accountants
Vancouver, Canada

March 13, 2013

42 Methanex Corporation | Annual Report 2012 Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Methanex Corporation:

We have audited Methanex Corporation’s (“the Company”) internal control over financial reporting as of December 31, 2012, based on
the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Tread-
way Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the section entitled “Management’s
Annual Report on Internal Control over Financial Reporting” included in the accompanying Management’s Discussion and Analysis. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in

the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Acompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the main-
tenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accord-
ance with generally accepted accounting principles, and that receipts and expenditures ofthe company are being made only in accord-
ance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition ofthe company’s assets that could have a material effect on the finan-

cial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in

conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2012, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations

ofthe Treadway Commission.

We also have audited, in accordance with the Canadian generally accepted auditing standards and the standards of the Public Company
Accounting Oversight Board (United States), the consolidated statements of financial position of the Company as of December 31, 2012
and 2011, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the
years ended December 31, 2012 and December 31, 2011, and our report dated March 13, 2013 expressed an unqualified opinion on those

consolidated financial statements.

Lfnó “e?
=-

Chartered Accountants
Vancouver, Canada

March 13, 2013

Report of Independent Registered Public Accounting Firm Methanex Corporation | Annual Report 2012. 43

Consolidated Statements of Financial Position

(thousands of US dollars, except number of common shares)

Dec 31 Dec 31
ASAT 2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 745,610 $ 350,711
Trade and other receivables (note 3) 429,203 378,430
Inventories (note 4) 253,023 281,015
Prepaid expenses 28,314 24,465
1,456,150 1,034,621
Non-current assets:
Property, plant and equipment (notes 5 and 6) 2,014,748 2,233,023
Other assets (notes 6 and 8) 73,724 125,931
2,088,472 2,358,954
$ 3,544,622 $ 3,393,575
LIABILITIES AND EQUITY
Current liabilities:
Trade, other payables and accrued lial les $ 353,744 $ 327,130
Current maturities on long-term debt (note 9) 53,334 251,107
Current maturities on finance leases (note 10) 7,367 6,713
Current maturities on other long-term liabilities (note 11) 26,536 18,031
440,981 602,981
Non-current liabilities:
Long-term debt (note 9) 1,191,891 652,148
Finance leases (note 10) 48,612 55,979
Other long-term liabilities (note 1) 193,823 178,172
Deferred income tax liabilities (note 17) 191,578 302,332
1,625,904 1,188,631
Equity:
Capital stock
25,000,000 authorized preferred shares without nominal or par value
Unlimited authorization of common shares without nominal or par value
Issued and outstanding common shares at December 31, 2012 were 94,309,970 (2011 – 93,247,755) 481,779 455,434
Contributed surplus 15,481 22,281
Retained earnings 805,661 942,978
Accumulated other comprehensive loss (13,045) (15,968)
Shareholders’ equity 1,289,876 1,404,725
Non-controlling interests 187,861 197,238
Total equity 1,471,137 1,601,963
$ 3,544,622 $ 3,393,575

Commitments and contingencies (notes 17 and 23)

See accompanying notes to consolidated financial statements.

Approved by the Board:

Terence Poole (Director) John Floren (Director)

44 Methanex Corporation | Annual Report 2012 Consolidated Financial Statements

Consolidated Statements of Income

(thousands of US dollars, except number of common shares and per share amounts)

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Revenue $ 2,672,954 $ 2,608,037
Cost of sales and operating expenses (note 12) (2,187,288) (2,107,320)
Depreciation and amortization (note 12) (171,635) (156,667)
Louisiana project relocation expenses and charges (note 5) (64,543) –
Asset impairment charge (note 6) (296,976) –
Operating income (loss) (47,488) 344,050
Finance costs (note 13) (71,314) (61,797)
Finance income and other expenses 509 1,667
Income (loss) before income taxes (118,293) 283,920
Income tax recovery (expense) (note 17):
Current (30,302) (36,241)
Deferred 114,020 (19,679)
83,118 (55,920)
Net income (loss) $ (34,575) $ 228,000
Attributable to:
Methanex Corporation shareholders $ (68,105) $ 201,326
Non-controlling interests 33,530 26,674
$ (84,575) $ 228,000
Income (loss) for the period attributable to Methanex Corporation shareholders:
Basic net income (loss) per common share (note 14) $ (0.73) $ 2.16
Diluted net income (loss) per common share (note 14) $ (0.73) $ 2.06
Weighted average number of common shares outstanding 93,755,509 93,026,482
Diluted weighted average number of common shares outstanding 93,755,509 94,360,956

See accompanying notes to consolidated financial statements.

Consolidated Financial Statements Methanex Corporation | Annual Report 2012 45

Consolidated Statements of Comprehensive Income

(thousands of US dollars)

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Net income (loss) $ (84,575) $ 228,000
Other comprehensive income (loss), net of taxes:
Change in fair value of forward exchange contracts (note 20) (320) 326
Change in fair value of interest rate swap contracts (notes 17 and 20) (5,794) (3,764)
Realized loss on interest rate swap reclassified to finance costs 11,198 12,816
Realized loss on interest rate swap reclassified to property, plant and equipment – 7,279
Actuarial losses on defined benefit pension plans (notes 17 and 22(a)) (1,135) (10,258)
3,949 6,399
Comprehensive income (loss) $ (30,626) $ 234,399
Attributable to:
Methanex Corporation shareholders $ (66,317) $ 201,193
Non-controlling interests 35,691 33,206
$ (30,626) $ 234,399

See accompanying notes to consolidated financial statements.

46 Methanex Corporation | Annual Report 2012 Consolidated Financial Statements

Consolidated Statements of Changes in Equity

(thousands of US dollars, except number of common shares)

Accumulated

Number of Other

Common | Capital Contributed Retained Comprehensive | Shareholders’ Non-Controlling Total

Shares Stock Surplus Earnings Loss Equity Interests Equity

Balance, December 31, 2010 92,632,022 | $440,092 $25,393 $ 813,819 $(26,093) $ 1,253,211 $ 156,412 | $1,409,623

Net income – – – 201,326 – 201,326 26,674 228,000
Other comprehensive income

(loss) – – – (10,258) 10,125 (133) 6,532 6,399

Compensation expense

recorded for stock options – – 837 – – 837 – 837
Issue of shares on exercise of

stock options 615,733 11,393 – – – 11,393 – 11,393

Reclassification of grant-date
fair value on exercise of stock
options – 3,949 (3,949) – – – – –

Dividend payments to
Methanex Corporation

shareholders – – – (61,909) – (61,909) – (61,909)
Distributions to non-controlling

interests – – – – – – (11,580) (11,580)
Equity contributions by non-

controlling interests – – – – – – 19,200 19,200

Balance, December 31, 2011 93,247,755 | 455,434 22,281 942,978 (15,968) 1,404,725 197,238 | 1,601,963

Net income (loss) – – – (68,105) – (68,105) 33,530 (84,575)
Other comprehensive income

(loss) ES ES ES (1,135) 2,923 1,788 2,161 3,949
Compensation expense

recorded for stock options – – 726 – – 726 – 726
Issue of shares on exercise of

stock options 1,062,215 18,819 – – – 18,819 – 18,819

Reclassification of grant-date
fair value on exercise of stock
options – 7,526 (7,526) – – – – –

Dividend payments to
Methanex Corporation
shareholders – – – (68,077) – (68,077) – (68,077)

Distributions to non-controlling
interests – – – – – – (46,068) (46,068)

Equity contributions by non-
controlling interests – – – – – – 1,000 1,000

Balance, December 31, 2012 94,309,970 | $ 481,719 $15,481 $805,661 $ (13,045) $1,289,876 $ 187,861 | $ 1,471,737

See accompanying notes to consolidated financial statements.

Consolidated Financial Statements Methanex Corporation | Annual Report 2012 47

Consolidated Statements of Cash Flows
(thousands of US dollars)

FOR THE YEARS ENDED DECEMBER 31 2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (34,575) $ 228,000
Add (deduct) non-cash items:
Depreciation and amortization 171,635 156,667
Louisiana project relocation non-cash charges 25,688 –
Asset impairment charge 296,976 –
Income tax expense (recovery) (83,718) 55,920
Share-based compensation expense (recovery) 35,907 (4,890)
Finance costs 71,314 61,797
Other 16,578 3,459
Income taxes paid (29,528) (46,331)
Other cash payments, including share-based compensation (33,774) (10,303)
Cash flows from operating activities before undernoted 436,503 444,319
Changes in non-cash working capital (note 18) 21,774 35,388
458,277 479,707

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend payments to Methanex Corporation shareholders (68,077) (61,909)
Interest paid, including interest rate swap settlements (64,914) (60,467)
Net proceeds on issue of long-term debt 590,344 2,700
Repayment of long-term debt and limited recourse debt (251,105) (49,650)
Changes in project finance reserve accounts (4,916) (27,291)
Equity contributions by non-controlling interests 1,000 19,200
Cash distributions to non-controlling interests (49,409) (8,239)
Proceeds on issue of shares on exercise of stock options 18,819 11,393
Repayment of finance leases and other long-term liabilities (6,712) (5,964)
165,030 (180,227)
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment (134,716) (126,198)
Louisiana project expenditures (73,912) (1326)
Oil and gas assets (32,892) (30,098)
GeoPark repayments 10,039 7,551
Changes in non-cash working capital related to investing activities (note 18) 3,073 7,508
(228,408) (142,563)
Increase in cash and cash equivalents 394,899 156,917
Cash and cash equivalents, beginning of year 350,711 193,794
Cash and cash equivalents, end of year $ 745,610 $ 350,711

See accompanying notes to consolidated financial statements.

48 Methanex Corporation | Annual Report 2012 Consolidated Financial Statements

Notes to Consolidated Financial Statements
(Tabular dollar amounts are shown in thousands of US dollars, except where noted)
Year ended December 31, 2012

1. Nature of operations:
Methanex Corporation (“the Company”) is an incorporated entity with corporate offices in Vancouver, Canada. The Company’s operations consist
of the production and sale of methanol, a commodity chemical. The Company is the world’s largest supplier of methanol to the major interna-

tional markets of Asia Pacific, North America, Europe and Latin America.

2. Significant accounting policies:

a) Statement of compliance:
These consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the
International Accounting Standards Board (IASB). These consolidated financial statements were approved and authorized for issue bythe Board

of Directors on March 13, 2013.

b) Basis of presentation and consolidation:

These consolidated financial statements include the accounts ofthe Company, its wholly owned subsidiaries, less than wholly owned entities for
which it has a controlling interest and its proportionate share ofthe accounts of joint ventures. Wholly owned subsidiaries are entities in which
the Company has control, directly or indirectly, where control is defined as the power to govern the financial and operating policies of an enter-
prise so as to obtain benefits from its activities. For less than wholly owned entities for which the Company has a controlling interest, a non-
controlling interest is included in the Company’s consolidated financial statements and represents the non-controlling shareholders’ interest in
the net assets ofthe entity. The Company also consolidates any special purpose entity where the substance of the relationship indicates the
Company has control. All significant intercompany transactions and balances have been eliminated. Preparation ofthese consolidated financial
statements requires estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and
related notes. The areas of estimation and judgment that management considers most significant are property, plant and equipment (note 2(g)),
oil and gas properties (notes 2(g) and 2(h)), financial instruments (note 2(0)), and income taxes (note 2(p)). Actual results could differ from those

estimates.

c) Reporting currency and foreign currency translation:

Functional currency is the currency of the primary economic environment in which an entity operates. The majority ofthe Company’s business in
all jurisdictions is transacted in United States dollars and, accordingly, these consolidated financial statements have been measured and
expressed in that currency. The Company translates foreign currency denominated monetary items at the rates of exchange prevailing at the
balance sheet dates, foreign currency denominated non-monetary items at historic rates, and revenues and expenditures at the rates of

exchange at the dates ofthe transactions. Foreign exchange gains and losses are included in earnings.

d) Cash equivalents:

Cash equivalents include securities with maturities ofthree months or less when purchased.

e) Receivables:
The Company provides credit to its customers in the normal course of business. The Company performs ongoing credit evaluations of its custom-
ers and maintains reserves for potential credit losses. The Company records an allowance for doubtful accounts or writes down the receivable to

estimated net realizable value if not collectible in full. Credit losses have historically been within the range of management’s expectations.

f) Inventories:
Inventories are valued at the lower of cost and estimated net realizable value. Cost is determined on a first-in, first-out basis and includes direct

purchase costs, cost of production, allocation of production overhead and depreciation based on normal operating capacity, and transportation.
8) Property, plant and equipment:

Initial recognition

Property, plant and equipment are initially recorded at cost. The cost of purchased equipment includes expenditures that are directly attributable
to the purchase price, delivery and installation. The cost of self-constructed assets includes the cost of materials and direct labour, any other
costs directly attributable to bringing the assets to the location and condition for their intended use, the costs of dismantling and removing the
items and restoring the site on which they are located, and borrowing costs on self-constructed assets that meet certain criteria. Borrowing
costs, including the impact of related cash flow hedges, incurred during construction and commissioning are capitalized until the plant is operat-

ing in the manner intended by management.

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 49

Notes to Consolidated Financial Statements

Subsequent costs

Routine repairs and maintenance costs are expensed as incurred. At regular intervals, the Company conducts a planned shutdown and
inspection (turnaround) at its plants to perform major maintenance and replacement of catalysts. Costs associated with these shutdowns are
capitalized and amortized over the period until the next planned turnaround and the carrying amounts of replaced components are derecog-
nized and included in earnings.

Depreciation

Depreciation and amortization is generally provided on a straight-line basis at rates calculated to amortize the cost of property, plant and equip-

ment from the commencement of commercial operations over their estimated useful lives to estimated residual value.

The estimated useful lives ofthe Company’s buildings, plant installations and machinery, excluding costs related to turnarounds, ranges from
10 to 25 years depending on the specific asset component and the production facility to which it is related. The Company determines the esti-
mated useful lives of individual asset components based on the shorter of its physical life or economic life. The physical life ofthese assets is
generally longer than the economic life. The economic life is primarily determined by the nature ofthe natural gas feedstock available to the
various production facilities. Factors that influence the nature of natural gas feedstock availability include the terms of individual natural gas
supply contracts, access to natural gas supply through open markets, regional factors influencing the exploration and development of natural
gas, and the expected price of securing natural gas supply. The Company reviews the factors related to each production facility on an annual
basis to determine if changes are required to the estimated useful lives.

Assets under finance lease are depreciated to their estimated residual value based on the shorter of their useful lives and the lease term.

Oil and gas properties

Costs incurred for oil and gas properties with proven reserves are capitalized to property, plant and equipment, including the reclassification of
associated exploration costs and abandoned properties. These costs are depreciated using a unit-of-production method, taking into consid-
eration estimated proven reserves and estimated future development costs. Proven and probable reserves for oil and gas properties are esti-
mated based on independent reserve reports and represent the estimated quantities of natural gas that are considered commercially feasible.
These reserve estimates are used to determine depreciation and to assess the carrying value of oil and gas properties. The accounting for costs
incurred for oil and gas exploration properties which do not have proven reserves is described in note 2(h). Upon transition to IFRS effective Jan-
uary 1, 2010, the Company elected to carry forward the previous GAAP full-cost method of accounting for oil and gas asset carrying values. Atthat
time, the Company allocated costs associated with oil and gas assets between property, plant and equipment and other assets on the basis of
proven and unproven reserves, respectively.

Impairment

The Company reviews the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate an asset’s
carrying value may not be recoverable. Examples of such events or changes in circumstances include, but are not restricted to: a significant
adverse change in the extent or manner in which the asset is being used or in its physical condition; a significant change in the price or avail-
ability of natural gas feedstock required to manufacture methanol; a significant adverse change in legal factors or in the business climate that
could affect the asset’s value, including an adverse action or assessment by a foreign government that impacts the use of the asset; or a current-
period operating or cash flow loss combined with a history of operating or cash flow losses, or a projection or forecast that demonstrates
continuing losses associated with the asset’s use.

Recoverability of long-lived assets is measured by comparing the carrying value of an asset or cash-generating unit to the estimated recoverable
amount, which is the higher of its estimated fair value less cost to sell or its value in use. Value in use is determined by estimating the pre-tax
cash flows expected to be generated from the asset or cash-generating unit over ¡ts estimated useful life discounted by a pre-tax discount rate.
An impairment writedown is recorded for the difference that the carrying value exceeds the estimated recoverable amount. An impairment
writedown recognized in prior periods for an asset or cash-generating unit is reversed ifthere has been a subsequent recovery in the value ofthe
asset or cash-generating unit due to changes in events and circumstances. For purposes of recognition and measurement of an impairment
writedown, the Company groups long-lived assets with other assets and liabilities to form a “cash-generating unit” at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. To the extent that methanol facilities in a partic-
ular location are interdependent as a result of common infrastructure and/or feedstock from shared sources that can be shared within a facility
location, the Company groups assets based on site locations forthe purpose of determining impairment.

h) Other assets:

Intangible assets are capitalized to other assets and amortized to depreciation and amortization expense on an appropriate basis to charge the
cost ofthe assets against earnings.

Financing fees related to undrawn credit facilities are capitalized to other assets and amortized to finance costs over the term of the credit facility.
Financing fees related to project debt facilities are capitalized to other assets until the project debt is fully drawn. Once the project debt is fully

drawn, these fees are reclassified against long-term debt and amortized to finance costs over the repayment term on an effective interest basis.

50 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Costs incurred for oil and gas exploration properties that do not have proven reserves are capitalized to other assets. Upon determination of
proven reserves and internal approval for development, these costs are transferred to property, plant and equipment and are depreciated using a
unit-of-production method based on estimated proven reserves. Costs are also transferred to property, plant and equipment and become subject
to depreciation when the associated properties have been deemed abandoned by management. Upon transfer to property, plant and equipment
an impairment assessment is performed. The Company assesses the recoverability of oil and gas exploration properties as part of a cash-

generating unit as described in note 2(g).

i) Leases:

Leasing contracts are classified as either finance or operating leases. Where the contracts are classified as operating leases, payments are
charged to income in the year they are incurred. A lease is classified as a finance lease ¡fit transfers substantially all ofthe risks and rewards of
ownership of the leased asset. The asset and liability associated with a finance lease are recorded at the lower of fair value and the present value
ofthe minimum lease payments, net of executory costs. Lease payments are apportioned between interest expense and repayments of the
liability.

j) Site restoration costs:

The Company recognizes a liability to dismantle and remove assets orto restore a site upon which the assets are located. The Company esti-
mates the fair value of the liability by determining the current market cost required to settle the site restoration costs, adjusts for inflation
through to the expected date of the expenditures and then discounts this amount back to the date when the obligation was originally incurred.
As the liability is initially recorded on a discounted basis, it is increased each period until the estimated date of settlement. The resulting expense
is referred to as accretion expense and is included in finance costs. The Company reviews asset retirement obligations and adjusts the liability
and corresponding asset as necessary to reflect changes in the estimated future cash flows, timing, inflation and discount rates underlying the

fair value measurement.

k) Employee future benefits:
The Company has non-contributory defined benefit pension plans covering certain employees and defined contribution pension plans. The

Company does not provide any significant post-retirement benefits other than pension plan benefits. For defined benefit pension plans, the net

of the present value ofthe defined benefit obligation and the fair value of plan assets is recorded to the Consolidated Statements of Financial
Position. The determination ofthe defined benefit obligation and associated pension cost is based on certain actuarial assumptions including
inflation rates, plan expenses, salary growth, discount rates and expected return on plan assets. The present value ofthe defined benefit obliga-
tion is determined by discounting estimated future cash flows using current market bond yields that have terms to maturity approximating the
terms ofthe obligation. Actuarial gains and losses arising from differences between these assumptions and actual results are recognized in other
comprehensive income and recorded in retained earnings. The cost for defined contribution benefit plans is recognized in net income as earned

by the employees.

l) Share-based compensation:
The Company grants share-based awards as an element of compensation. Share-based awards granted by the Company can include stock

options, tandem share appreciation rights, share appreciation rights, deferred share units, restricted share units or performance share units.

For stock options granted by the Company, the cost of the service received is measured based on an estimate of the fair value at the date of
grant. The grant-date fair value is recognized as compensation expense over the vesting period with a corresponding increase in contributed
surplus. On the exercise of stock options, consideration received, together with the compensation expense previously recorded to contributed
surplus, is credited to share capital. The Company uses the Black-Scholes option pricing model to estimate the fair value of each stock option

tranche at the date of grant.

Share appreciation rights (SARs) are units that grant the holder the right to receive a cash payment upon exercise for the difference between the
market price ofthe Company’s common shares and the exercise price that is determined at the date of grant. Tandem share appreciation rights
(TSARs) give the holder the choice between exercising a regular stock option or a SAR. For SARs and TSARs, the cost of the service received is ini-
tially measured based on an estimate of the fair value at the date of grant. The grant-date fair value is recognized as compensation expense over
the vesting period with a corresponding increase in liabilities. For SARs and TSARs, the liability is re-measured at each reporting date based on an
estimate of the fair value with changes in fair value recognized as compensation expense for the proportion ofthe service that has been ren-

dered at that date. The Company uses the Black-Scholes option pricing model to estimate the fair value for SARs and TSARs.

Deferred, restricted and performance share units are grants of notional common shares that are redeemable for cash based on the market value
ofthe Company’s common shares and are non-dilutive to shareholders. Performance share units have an additional feature where the ultimate
number of units that vest will be determined by the Company’s total shareholder return in relation to a predetermined target over the period to
vesting. The number of units that will ultimately vest will be in the range of 50% to 120% of the original grant. For deferred, restricted and per-

formance share units, the cost of the service received as consideration is initially measured based on the market value of the Company’s common

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 51

Notes to Consolidated Financial Statements

shares at the date of grant. The grant-date fair value is recognized as compensation expense over the vesting period with a corresponding
increase in liabilities. Deferred, restricted and performance share units are re-measured at each reporting date based on the market value ofthe
Company’s common shares with changes in fair value recognized as compensation expense for the proportion ofthe service that has been ren-
dered at that date.

Additional information related to the stock option plan, tandem share appreciation rights, share appreciation rights and the deferred, restricted

and performance share units is described in note 15.

m) Net income (loss) per common share:

The Company calculates basic net income (loss) per common share by dividing net income (loss) attributable to Methanex shareholders by the
weighted average number of common shares outstanding and calculates diluted net income (loss) per common share under the treasury stock
method. Under the treasury stock method, diluted net income (loss) per common share ¡is calculated by considering the potential dilution that
would occur if outstanding stock options and, under certain circumstances, TSARs were exercised or converted to common shares. Stock options
and TSARs are considered dilutive when the average market price ofthe Company’s common shares during the period disclosed exceeds the

exercise price ofthe stock option or TSAR.

Outstanding TSARs may be settled in cash or common shares at the holder’s option. Forthe purposes of calculating diluted net income per
common share, the more dilutive of the cash-settled or equity-settled method is used, regardless of how the plan is accounted for. Accordingly,
TSARs that are accounted for using the cash-settled method will require adjustments to the numerator and denominator ifthe equity-settled

method is determined to have a dilutive effect on diluted net income per common share.

The calculation of basic net income (loss) per common share and a reconciliation to diluted net income (loss) per common share is presented in

note 14.

n) Revenue recognition:

Revenue is recognized based on individual contract terms when the risk of loss to the product transfers to the customer, which usually occurs at
the time shipment is made. Revenue is recognized at the time of delivery to the customer’s location ifthe Company retains risk of loss during
shipment. For methanol sold on a consignment basis, revenue is recognized when the customer consumes the methanol. For methanol sold on a

commission basis, the commission income is included in revenue when earned.

0) Financial instruments:

The Company enters into derivative financial instruments to manage certain exposures to commodity price volatility, foreign exchange volatility
and variable interest rate volatility. Financial instruments are classified into one of five categories and, depending on the category, will either be
measured at amortized cost or fair value. Held-to-maturity investments, loans and receivables and other financial liabilities are measured at
amortized cost. Financial assets and liabilities held-for-trading and available-for-sale financial assets are measured at fair value. Changes in the
fair value of held-for-trading financial assets and liabilities are recognized in net income and changes in the fair value of available-for-sale finan-
Cial assets are recorded in other comprehensive income until the investment is derecognized or impaired at which time the amounts would be
recorded in net income. The Company classifies cash and cash equivalents and trade and other receivables as loans and receivables. Trade, other

payables and accrued liabilities, long-term debt, net of financing costs, and other long-term liabilities are classified as other financial liabilities.

Under these standards, derivative financial instruments, including embedded derivatives, are classified as held-for-trading and are recorded in
the Consolidated Statements of Financial Position at fair value unless they are in accordance with the Company’s normal purchase, sale or usage
requirements. The valuation of derivative financial instruments is a critical accounting estimate due to the complex nature of these products, the
degree of judgment required to appropriately value these products and the potential impact of such valuation on the Company’s financial
statements. The Company records all changes in fair value of held-for-trading derivative financial instruments in net income unless the instru-
ments are designated as cash flow hedges. The Company enters into and designates as cash flow hedges certain forward exchange purchase and
sales contracts to hedge foreign exchange exposure on anticipated sales. The Company also enters into and designates as cash flow hedges cer-
tain interest rate swap contracts to hedge variable interest rate exposure on its limited recourse debt. The Company assesses at inception and on
an ongoing basis whether the hedges are and continue to be effective in offsetting changes in the cash flows ofthe hedged transactions. The
effective portion of changes in the fair value of these hedging instruments is recognized in other comprehensive income. Any gain or loss in fair
value relating to the ineffective portion is recognized immediately in net income. Until settled, the fair value of the derivative financial instru-

ments will fluctuate based on changes in foreign exchange or variable interest rates.

p) Income taxes:
Income tax expense represents current tax and deferred tax. The Company records current tax based on the taxable profits for the period calcu-
lated using tax rates that have been enacted or substantively enacted by the reporting date. Income taxes relating to uncertain tax positions are

provided for based on the Company’s best estimate, including related interest and penalty charges.

52 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Deferred income taxes are accounted for using the liability method. The liability method requires that income taxes reflect the expected future
tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred income tax
assets and liabilities are determined for each temporary difference based on currently enacted or substantially enacted tax rates that are
expected to be in effect when the underlying items are expected to be realized. The effect of a change in tax rates or tax legislation is recognized
in the period of substantive enactment. Deferred tax assets, such as non-capital loss carryforwards, are recognized to the extent it is probable

that taxable profit will be available against which the asset can be utilized.

The Company accrues for taxes that will be incurred upon distributions from its subsidiaries when it is probable that the earnings will be repa-
triated.

The determination of income taxes requires the use of judgment and estimates. If certain judgments or estimates prove to be inaccurate, or if

certain tax rates or laws change, the Company’s results of operations and financial position could be materially impacted.

q) Provisions:
Provisions are recognized where a legal or constructive obligation has been incurred as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation, and a reliable estimate ofthe amount of the obligation can be made. Provisions are measured

at the present value of the expenditures expected to be required to settle the obligation.

r) Segmented information:

The Company’s operations consist ofthe production and sale of methanol, which constitutes a single operating segment.

s) Anticipated changes to International Financial Reporting Standards:

The !ASB has issued new accounting standards related to accounting and disclosures for consolidation and joint arrangements; IFRS 10, Con-
solidated Financial Statements; IFRS 1, Joint Arrangements; and IFRS 12, Disclosure of Interests in Other Entities. The lASB has revised the defi-
nition of “control,” under IFRS 10, which is a criterion for consolidation accounting. In addition, changes to IFRS in the accounting for joint
arrangements were issued under IFRS 11, which, under certain circumstances, removed the option for proportionate consolidation accounting so
that the equity method of accounting for such interests would need to be applied. The Company currently accounts for the 63.1% interest in Atlas
Methanol Company using proportionate consolidation accounting and will account for this entity using the equity method of accounting effec-
tive January 1, 2013. The change to equity accounting does not result in any change to net earnings or shareholders’ equity, but will result in

changes to the presentation of the Consolidated Statements of Income and the Consolidated Statements of Financial Position.

3. Trade and other receivables:

Dec 31 Dec 31

ASAT 2012 2011
Trade $ 349,632 $ 310,616
Value-added and other tax receivables 49,807 43,132
Current portion of GeoPark financing (note 8) 8,028 7,200
Other 21,736 17,482
$ 429,203 $ 378,430

4. Inventories:
Inventories are valued at the lower of cost, determined on a first-in first-out basis, and estimated net realizable value. The amount of inventories
included in cost of sales and operating expenses and depreciation and amortization for the year ended December 31, 2012 is $2,082 million (2011 =

$2,052 million).

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 53

Notes to Consolidated Financial Statements

5. Property, plant and equipment:

Buildings, Plant

Installations and Plant under Oil and Gas

Machinery Construction Properties Other Total
Cost at January 1, 2012 $ 3,209,597 $ 1,326 $ 77,486 $ 88,642 $ 3,377,051
Additions 132,727 73,912 2,882 4,457 213,978
Disposals and other (62,604) – – (24,193) (86,797)
Cost at December 31, 2012 $ 3,279,720 $ 75,238 $ 80,368 $ 68,906 $ 3,504,232
Accumulated depreciation at January 1, 2012 $ 1,070,267 $ – $ 32,990 $ 40,71 $ 1,144,028
Disposals and other (30,935) – – (18,673) (49,608)
Depreciation 146,949 – 18,437 6,201 171,587
Asset impairment charge 200,753 – 22,724 – 223,477
Accumulated depreciation at December 31, 2012 $ 1,387,034 $ – $ 74,151 $ 28,299 $ 1,489,484
Net book value at December 31, 2012 $ 1,892,686 $ 75,238 $ 6,217 $ 40,607 $ 2,014,748

Buildings, Plant

Installations and Plant under Oil and Gas

Machinery Construction Properties Other Total
Cost at January 1, 2011 $ 2,131,608 $ 966,320 $ 54,049 $ 116,203 $ 3,268,180
Additions 106,693 6,302 13,045 6,806 132,846
Disposals and other – – – (34,367) (34,367)
Transfers 971,296 (971,296) – – –
Reclassified from other assets, net – – 10,392 – 10,392
Cost at December 31, 2011 $ 3,209,597 $ 1,326 $ 77,486 $ 88,642 $ 3,377,051
Accumulated depreciation at January 1, 2011 $ 929,079 $ – $ 20,092 $ 60,433 $ 1,009,604
Disposals and other – – – (25,431) (25,431)
Depreciation 141,188 – 12,898 5,769 159,855
Accumulated depreciation at December 31, 201 $ 1,070,267 $ – $ 32,990 $ 40,71 $ 1,144,028
Net book value at December 31, 2011 $ 2,139,330 $ 1,326 $ 44,496 $ 47,871 $ 2,233,023

Included in buildings, plant installations and machinery at December 31, 2012 and 2011 are capitalized costs of $99.3 million relating to the oxygen
production facilities in Trinidad accounted for as finance leases (note 10). The net book value of these assets as at December 31, 2012 was 543.9

million (201 -$49.8 million).

Other property, plant and equipment includes ocean-shipping vessels with a total net book value of $26.8 million at December 31, 2012
(2011 – $28.6 million).

During 2012, the Company made a final investment decision to proceed with the project to relocate an idle Chile facility to Geismar, Louisiana.
Under IFRS, certain costs incurred in relation to relocating an asset are not eligible for capitalization to property, plant and equipment and are
required to be charged directly to income. For the year ended December 31, 2012, the Company incurred $112.8 million in expenditures related to
this project, of which $73.9 million was recorded to property, plant and equipment and the remaining $38.9 million ($23.3 million after-tax) was
recognized as Louisiana project relocation expenses and charges in the Consolidated Statements of Income. In addition, for the year ended
December 31, 2012, the Company charged to income $25.7 million ($17.6 million after-tax) related to the carrying value of the Chile facility being

relocated and this is also included in Louisiana project relocation expenses and charges.

For the year ended December 31, 2012, the Company recorded an asset impairment charge relating to the carrying value of its Chile operations.

See note 6 of these consolidated financial statements for more information.

6. Asset impairment charge:
The Company reviews the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that the carry-

ing amount may not be recoverable. The Company expects to idle its Chile operations in March 2013 due to an expected shortfall of natural gas

54 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

feedstock to keep the plant operating through the southern hemisphere winter. The Company is continuing to work with its natural gas suppli-
ers to secure sufficient natural gas to sustain its operations, and while the restart of a Chile plant is possible later in 2013, the restart is dependent

on securing a sustainable natural gas position to operate over the medium term.

As a consequence ofthe uncertain outlook for the supply of natural gas feedstock to its Chile operations, the carrying value ofthe Company’s
Chile assets was tested for recoverability at December 31, 2012.

Recoverability was measured by comparing the carrying value of the Chile assets to the estimated recoverable amount which is the higher of
its estimated fair value less costs to sell or its value in use. Value in use was determined by measuring the pre-tax cash flows expected to be
generated from the Chile assets over their estimated useful life discounted by a pre-tax discount rate. The pre-tax discount rate of 13% was

derived from the Company’s estimated cost of capital.

There are two key variables that impact the Company’s estimates of future cash flows: (1) the methanol price and (2) the price and availability of
natural gas feedstock. Short-term methanol price estimates are based on current supply and demand fundamentals and current methanol
prices. Long-term methanol price estimates are based on the Company’s view of long-term supply and demand, and consideration is given to
many factors, including, but not limited to, estimates of global industrial production rates, energy prices, changes in general economic con-
ditions, future global methanol production capacity, industry operating rates and the global industry cost structure. The Company’s estimate of
the price and availability of natural gas takes into consideration the current contracted terms, as well as factors that it believes are relevant to
supply under these contracts and supplemental natural gas sources. Other assumptions included in the Company’s estimate of future cash flows
include the estimated cost incurred to maintain the facilities, estimates of transportation costs and other variable costs incurred in producing
methanol in each period.

Based on the test performed, the Company recorded a non-cash before-tax asset impairment charge of $297 million ($193 million after-tax) to
write down the carrying value of the Chile assets at December 31, 2012 to $245 million, which excludes the Chile facility that is being relocated to

Geismar, Louisiana. The pre-tax asset impairment charge was allocated as follows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011

Asset impairment charge allocated to:
Property, plant and equipment

Buildings, plant installations and machinery $ 200,753 $ –

Oil and gas properties 22,724 –
Other assets

Oil and gas properties 73,499 –

Asset impairment charge $ 296,976 $ –

7. Interest in Atlas joint venture:

The Company has a 63.1% joint venture interest in Atlas Methanol Company (Atlas). Atlas owns a 1.8 million tonne per year methanol production
facility in Trinidad. Included in the consolidated financial statements are the following amounts representing the Company’s proportionate
interest in Atlas:

Dec 31 Dec 31
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 2012 2011
Cash and cash equivalents $ 18,225 $ 9,266
Other current assets 70,017 92,259
Property, plant and equipment 275,855 281,263
Other assets 1,61 9,429
Trade, other payables and accrued liabilities 35,834 32,990
Long-term debt, including current maturities (note 9) 49,659 64,397
Finance leases and other long-term liabilities 45,805 49,305
Deferred income tax liabilities 19,790 20,814

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 55

56

Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31 2012 2011
Revenue $ 166,440 $ 224,902
Expenses (166,386) (199,303)
Income before income taxes 54 25,599
Income tax expense (85) (4,853)
Net income (loss) $ 67) $ 20,746
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 2012 2011
Cash inflows from operating activities $ 60,795 $ 36,062
Cash outflows from financing activities (24,905) (19,641)
Cash outflows from investing activities (26,931) (17,831)
8. Other assets:
Dec 31 Dec 31
ASAT 2012 2011
Oil and gas properties(a) $ 11,209 $ 50,946
Restricted cash(0) 44,753 39,839
GeoPark financingí9 – 10,872
Marketing and production rights, net of accumulated amortization( 3,667 7,634
Defined benefit pension plans (note 22) 1,516 –
Other 12,579 16,640
$ 73,724 $ 125,931

a) Oil and gas properties:

Costs incurred for oil and natural gas exploration properties that do not have reserves are capitalized to other assets. Upon determination of
proven reserves and internal approval for development, the costs are transferred to property, plant and equipment. During the year, the Com-
pany incurred $30.0 million (2011 =$17.5 million) in exploration and evaluation expenditures and $3.8 million in non-cash additions, offset by
amortization charges. At December 31, 2012, the Company recorded an asset impairment charge relating to the carrying value of its Chile oper-
ations, which includes oil and gas properties (note 6).

b) Restricted cash:

During the year ended December 31, 2012, the Company contributed $4.9 million (2011 = $1.7 million drawn) in relation to its limited recourse debt
facilities.

c) GeoPark financing:

Over the past few years, the Company has provided GeoPark Chile Limited (GeoPark) $57.0 million (ofwhich $49.8 million has been repaid at
December 31, 2012) in financing to support and accelerate GeoPark’s natural gas exploration and development activities in the Fell block in
southern Chile. GeoPark agreed to supply the Company with all natural gas sourced from the Fell block under a ten-year exclusive supply
arrangement. As at December 31, 2012, the outstanding balance is $8.0 million (2011 $18.1 million), of which the full amount (2011 -$7.2 million),
representing the current portion, has been recorded in trade and other receivables.

d) Marketing and production rights, net of accumulated amortization:

For the year ended December 31, 2012, amortization of marketing and production rights included in depreciation and amortization was $4.0 mil-
lion (2011 -$4.0 million).

Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

9. Long-term debt:

Dec 31 Dec 31
ASAT 2012 2011
Unsecured notes:
(i) 3.25% due December 15, 2019 (effective yield 3.40%) $ 343,828 $ –
ii) 5.25% due March 1, 2022 (effective yield 5.30%) 246,326 –
(iii) 6.00% due August 15, 2015 (effective yield 6.10%) 149,344 149,119
(iv) 8.75% due August 15, 2012 (effective yield 8.88%) – 199,643
739,498 348,762
Atlas limited recourse debt facilities (63.1% proportionate share):
(i) Senior secured notes with semi-annual interest payments of 7.95% per annum. Principal is paid in
nine semi-annual payments, which commenced December 2010. 27,915 41,730
(ii) Senior fixed rate bond with semi-annual interest payments of 8.25% per annum. Principal will be paid in
four semi-annual payments commencing June 2015. 14,927 14,869
(iii) Subordinated loans with an interest rate based on LIBOR plus a spread ranging from 2.25% to 2.75% per annum.
Principal is paid in 20 semi-annual payments, which commenced December 2010. 6,817 7,798
49,659 64,397
Egypt limited recourse debt facilities:
Four facilities with interest payable semi-annually with rates based on LIBOR plus a spread ranging from 1.0% to
1.7% per annum. Principal is paid in 24 semi-annual payments, which commenced in September 2010. 438,631 470,208
Other limited recourse debt 17,437 19,888
Total long-term debt: 1,245,225 903,255
Less current maturities (53,334) (251,107)
$ 1191891 $ 652,148

y Total debt is presented net of deferred financing fees of $22.2 million at December 31, 2012 (20n – $153 million).

The Egypt limited recourse debt facilities bear interest at LIBOR plus a spread. The Company has entered into interest rate swap contracts to
swap the LIBOR-based interest payments for an average aggregated fixed rate of 4.8% plus a spread on approximately 75% of the Egypt limited
recourse debt facilities for the period to March 31, 2015 (note 20).

The other limited recourse debt includes one limited recourse facility with a remaining term of approximately seven years with interest payable
at LIBOR plus 0.75% and another limited recourse debt facility with a remaining term of approximately four-and-a-half years with interest pay-

able at LIBOR plus 2.8%. Both of these financial obligations are paid in equal quarterly payments including principal and interest.

For the year ended December 31, 2012, non-cash accretion, on an effective interest basis, of deferred financing costs included in finance costs was
$3.2 million (2011 – $3.0 million).

The minimum principal payments for long-term debt in aggregate and for each of the five succeeding years are as follows:

201 $ 53,246
3
2014 61,914
2015 200,092
2016 52,743
2017 47,822
Thereafter 851,610
$ 17267,427

The covenants governing the Company’s unsecured notes apply to the Company and its subsidiaries, excluding the Atlas joint venture and Egypt
entity (“limited recourse subsidiaries”), and include restrictions on liens, sale and lease-back transactions, a merger or consolidation with another

corporation or sale of all or substantially all ofthe Company’s assets. The indenture also contains customary default provisions.

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 57

Notes to Consolidated Financial Statements

During 2012, the Company entered into a $400 million unsecured revolving credit facility with a syndicate of highly rated financial institutions
that expires in December 2016. This facility contains covenant and default provisions in addition to those ofthe unsecured notes as described

above. Significant covenants and default provisions under this facility include:

a) the obligation to maintain an EBITDA to interest coverage ratio of greater than 2:1 and a debt to capitalization ratio of less than or equal
to 50%, calculated on a four-quarter trailing average basis in accordance with definitions in the credit agreement that include adjust-

ments related to the limited recourse subsidiaries,

b) a default if payment is accelerated by the creditor on any indebtedness of $10 million or more of the Company and its subsidiaries, except

for the limited recourse subsidiaries, and

c) a default if a default occurs that permits the creditor to demand repayment on any other indebtedness of $50 million or more of the

Company and its subsidiaries, except for the limited recourse subsidiaries.

The Atlas and Egypt limited recourse debt facilities are described as limited recourse as they are secured only by the assets of the Atlas joint
venture and the Egypt entity, respectively. Accordingly, the lenders to the limited recourse debt facilities have no recourse to the Company or its
other subsidiaries. The Atlas and Egypt limited recourse debt facilities have customary covenants and default provisions that apply only to these
entities, including restrictions on the incurrence of additional indebtedness, a requirement to fulfill certain conditions before the payment of

cash or other distributions and a restriction on these distributions ifthere is a default subsisting.

The Egypt limited recourse debt facilities also contain a covenant to complete by March 31, 2013 certain land title registrations and related mort-
gages that require action by Egyptian government entities and which the Company does not expect to complete by March 31, 2013. The Company
is seeking a waiver from the lenders. The Company does not believe the finalization of these items is material to the security provided to the

lenders. The Company cannot assure you that it will be able to obtain a waiver from the lenders.

Failure to comply with any ofthe covenants or default provisions of the long-term debt facilities described above could result in a default under
the applicable credit agreement that would allow the lenders to not fund future loan requests and to accelerate the due date of the principal and

accrued interest on any outstanding loans.

At December 31, 2012, management believes the Company was in compliance with all ofthe covenants and default provisions related to long-

term debt obligations.

10. Finance leases:

Dec 31 Dec 31

ASAT 2012 2011
Finance lease obligations $ 55,979 $ 62,692
Less current maturities (7,367) (6,713)
$ 48,612 $ 55,979

At December 31, 2012, the Company has finance lease obligations related to oxygen production facilities in Trinidad that are set to expire in 2015

and 2024. The liabilities mature as follows until the expiry of the leases:

Finance

Interest lease

Lease payments component obligations

2013 $ 1,690 $ 4,332 $ 7,358
2014, 11,790 3,733 8,057
2015 10,335 3,091 7,244
2016 7,209 2,640 4,569
2017 7,196 2,239 4,957
Thereafter 29,811 6,017 23,794
$ 78,031 $ 22,052 $ 55,979

58 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

11. Other long-term liabilities:

Dec 31 Dec 31

ASAT 2012 2011
Site restoration costsía) $ 22,596 $ 25,889
Deferred gas payments(0) 70,844 51,079
Share-based compensation liability (note 15) 62,570 42,157
Fair value of Egypt interest rate swap (note 20) 32,707 41,536
Defined benefit pension plans (note 22) 31,642 35,542
220,359 196,203

Less current maturities (26,536) (18,031)
$ 193,823 $ 178,172

a) Site restoration costs:

The Company has accrued liabilities related to the decommissioning and reclamation of its methanol production sites and oil and gas properties.

Because of uncertainties in estimating the amount and timing of the expenditures related to the sites, actual results could differ from the

amounts estimated. At December 31, 2012, the total undiscounted amount of estimated cash flows required to settle the liabilities was $27.6 mil-

lion (2011 =$33.4 million). The movement in the provision during the year is explained as follows:

2012 2011
Balance at January 1 $ 25,889 $ 23,951
New or revised provisions (1,884) 1,454
Amounts charged against provisions (1,917) (66)
Accretion expense 508 550
Balance at December 31 $ 22,596 $ 25,889

b) Deferred gas payments:

The Company has a long-term liability of $82.8 million (2011 =$51.1 million) related to deferred natural gas payments that is payable in install-

ments in 2013, 2014 and 2015, of which $11.9 million (2011 – nil), representing the current portion, has been recorded in trade, other payables and

accrued liabilities. At December 31, 2012, the total undiscounted amount of estimated cash flows required to settle the liability was $86.5 million

(2011 – $52.9 million).

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012

59

Notes to Consolidated Financial Statements

12. Expenses:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Cost of sales $ 1,954,067 $ 1,910,889
Selling and distribution 342,122 319,026
Administrative expenses 62,734 34,072
Total expenses by function $ 2,358,923 $ 2,263,987
Cost of raw materials and purchased methanol $ 1,601,871 $ 1,622,764
Ocean freight and other logistics 300,936 280,313
Employee expenses, including share-based compensation 184,835 130,513
Other expenses 99,646 73,730
Cost of sales and operating expenses $ 2,187,288 $ 2,107,320
Depreciation and amortization 171,635 156,667
Total expenses by nature $ 2,358,923 $ 2,263,987

13. Finance costs:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Finance costs $ 72,897 $ 69,897
Less capitalized interest (1,583) (8,100)

$ 71,314 $ 61,797

Finance costs are primarily comprised of interest on borrowings and finance lease obligations, the effective portion of interest rate swaps des-
ignated as cash flow hedges, amortization of deferred financing fees, and accretion expense associated with site restoration costs. The Company
has interest rate swap contracts on its Egypt limited recourse debt facilities to swap the LIBOR-based interest payments for an average
aggregated fixed rate of 4.8% plus a spread on approximately 75% of the Egypt limited recourse debt facilities for the period to March 31, 2015.

Capitalized interest relates to interest capitalized during construction until a plant is substantially completed and ready for productive use.

14. Net income (loss) per common share:

Diluted net income (loss) per common share is calculated by considering the potential dilution that would occur if outstanding stock options and,
under certain circumstances, tandem share appreciation rights (TSARs) were exercised or converted to common shares. During the year ended
December 31, 2012, the Company incurred a net loss attributable to Methanex shareholders and therefore the impact of the potential dilution of

stock options and TSARs is anti-dilutive.

Outstanding TSARs may be settled in cash or common shares at the holder’s option. Forthe purposes of calculating diluted net income per
common share, the more dilutive of cash-settled and equity-settled method is used, regardless of how the plan is accounted for. Accordingly,
TSARs that are accounted for using the cash-settled method will require adjustments to the numerator and denominator ifthe equity-settled
method is determined to have a dilutive effect on diluted net income per common share. During the year ended December 31, 2011, the Company
recorded a share-based compensation recovery related to TSARs. Therefore, for this period, the equity-settled method has been determined to be

the more dilutive for purposes of calculating diluted net income per common share.

Areconciliation of the net income (loss) attributable to Methanex shareholders used for the purpose of calculating diluted net income (loss) per

common share is as follows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Numerator for basic net income (loss) per common share $ (68,105) $ 201,326
Adjustment for the effect of TSARs:
Cash-settled recovery included in net income – (2,416)
Equity-settled expense – (4,327)
Numerator for diluted net income (loss) per common share $ (68,105) $ 194,583

60 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Stock options and TSARS, if calculated using the equity-settled method, are considered dilutive when the average market price ofthe Company’s
common shares during the period disclosed exceeds the exercise price ofthe stock option or TSAR. A reconciliation ofthe number of common

shares used for the purposes of calculating basic and diluted net income (loss) per common share is as follows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Denominator for basic net income (loss) per common share 93,755,509 93,026,482
Effect of dilutive stock options – 1,305,480
Effect of dilutive TSARs – 28,994
Denominator for diluted net income (loss) per common share’ 93,755,509 94,360,956

* Dueto the net loss attributable to Methanex shareholders, nil outstanding stock options for the year ended December 31, 2012 are dilutive and have been included in the diluted weighted average number of common
shares (December 31, 2011 – 3,039,284). Nil outstanding TSARs for the year ended December 31, 2012 are dilutive and have been included in the diluted weighted average number of common shares (December 31, 20m
724,905),

For the years ended December 31, 2012 and 2011, basic and diluted net income (loss) per common share attributable to Methanex shareholders
were as follows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Basic net income (loss) per common share $ (0.73) $ 216
Diluted net income (loss) per common share $ (0.73) $ 2.06

15. Share-based compensation:
The Company provides share-based compensation to its directors and certain employees through grants of stock options, tandem share apprecia-
tion rights (TSARs), share appreciation rights (SARs) and deferred, restricted or performance share units.

At December 31, 2012, the Company had 1,330,958 common shares reserved for future grants of stock options and tandem share appreciation
rights under the Company’s stock option plan.

a) Share appreciation rights and tandem share appreciation rights:

AI SARs and TSARs granted have a maximum term of seven years with one-third vesting each year after the date of grant. SARs and TSARs units
outstanding at December 31, 2012 are as follows:

SARS TSARS

NUMBER OF EXERCISE NUMBER OF. EXERCISE

UNITS PRICE USD UNITS PRICEUSD

Outstanding at December 31, 2010 388,965 25.22 735,505 25.19
Granted 274,210 28.69 498,190 28.78
Exercised (14,030) 25.22 (7,800) 25.22
Cancelled (25,598) 25.87 (6,160) 27.14
Outstanding at December 31, 2011 623,547 $ 26.72 1,219,735 $ 26.65
Granted 353,890 31.64 652,000 31.69
Exercised (55,331) 26.07 (15,800) 25.93
Cancelled (24,581) 29.10 (40,400) 27.61
Outstanding at December 31, 2012 897,525 $ 28.63 1,815,535 $ 28.45

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 61

Notes to Consolidated Financial Statements

Information regarding the SARs and TSARs outstanding at December 31, 2012 is as follows:

UNITS EXERCISABLE AT
UNITS OUTSTANDING AT DECEMBER 31, 2012 DECEMBER 31, 2012
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING NUMBER AVERAGE NUMBER AVERAGE
CONTRACTUAL OF UNITS EXERCISE OF UNITS EXERCISE
Range of Exercise Prices LIFE (YEARS) OUTSTANDING PRICE EXERCISABLE PRICE
SARs
$25.22 to $31.74 5.2 897,525 $ 28.63 263,759 $ 26.20
TSARs
$23.36 to $31.88 5.2 1,815,535 $ 28.45 616,880 $ 26.12

The fair value ofeach SARs and TSARs grant was estimated on December 31, 2012 using the Black-Scholes option pricing model with the following

weighted average assumptions:

2012 2011
Risk-free interest rate 0.2% 0.3%
Expected dividend yield 2% 3%
Expected life of SARs and TSARs 2 years 2 years
Expected volatility 34% 40%
Expected forfeitures 4% 4%
Weighted average fair value (USD per share) $ 6.89 $ 3.38

Compensation expense for SARs and TSARs is initially measured based on their fair value and is recognized over the vesting period. Changes in
fair value in each period are recognized in net income for the proportion of the service that has been rendered at each reporting date. The fair
value at December 31, 2012 was $18.0 million compared with the recorded liability of $15.7 million. The difference between the fair value and the

recorded liability of $2.3 million will be recognized over the weighted average remaining vesting period of approximately 1.7 years.

For the year ended December 31, 2012, compensation expense related to SARs and TSARs included in cost of sales and operating expenses was an
expense of $10.8 million (2011 – recovery of $3.5 million). This included an expense of $3.1 million (2011 – recovery of $10.4 million) related to the

effect of the change in the Company’s share price.

b) Deferred, restricted and performance share units:

Deferred, restricted and performance share units outstanding at December 31, 2012 are as follows:

NUMBER OF NUMBER OF NUMBER OF

DEFERRED SHARE RESTRICTED SHARE PERFORMANCE SHARE

UNITS UNITS UNITS

Outstanding at December 31, 2010 557,187 46,604 1,169,617
Granted 25,516 17,100 281,470
Granted in lieu of dividends 15,208 1,566 28,887
Redeemed – (16,682) (343,931)
Cancelled – – (32,994)
Outstanding at December 31, 2011 597,911 48,588 1,103,049
Granted 21,649 20,400 358,330
Granted in lieu of dividends 13,821 1,502 25,339
Redeemed (66,531) (31,607) (413,138)
Cancelled – – (19,711)
Outstanding at December 31, 2012 566,850 38,883 1,053,869

62 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Compensation expense for deferred, restricted and performance share units is measured at fair value based on the market value ofthe Compa-

ny’s common shares and is recognized over the vesting period. Changes in fair value are recognized in net income forthe proportion of the serv-

ice that has been rendered at each reporting date. The fair value of deferred, restricted and performance share units at December 31, 2012 was

$52.5 million compared with the recorded liability of $46.9 million. The difference between the fair value and the recorded liability of $5.6 million

will be recognized over the weighted average remaining vesting period of approximately 1.8 years.

For the year ended December 31, 2012, compensation expense related to deferred, restricted and performance share units included in cost of sales

and operating expenses was an expense of $24.4 million (2011 – recovery of $2.2 million). This included an expense of $12.4 million (2011 = recovery

of 510.9 million) related to the effect of the change in the Company’s share price.

c) Stock options:

The exercise price of each incentive stock option is equal to the quoted market price ofthe Company’s common shares at the date ofthe grant.

Options granted prior to 2005 have a maximum term often years with one-half of the options vesting one year after the date of the grant and a

further vesting of one-quarter of the options per year over the subsequent two years. Beginning in 2005, all options granted have a maximum

term of seven years with one-third of the options vesting each year after the date of grant.

Common shares reserved for outstanding incentive stock options at December 31, 2012 and 2011 are as follows:

OPTIONS DENOMINATED IN CAD

OPTIONS DENOMINATED IN USD

WEIGHTED WEIGHTED

NUMBER OF AVERAGE NUMBER OF AVERAGE

STOCK EXERCISE STOCK EXERCISE

OPTIONS PRICE OPTIONS PRICE

Outstanding at December 31, 2010 2,250 $ 9.56 4,574,257 $ 18.95
Granted – – 67,800 28.74
Exercised (2,250) 9.56 (613,483) 18.53
Cancelled – – (24,370) 17.16
Outstanding at December 31, 2011 – – 4,004,204 19.19
Granted – – 84,000 31.73
Exercised – – (1,062,215) 18.03
Cancelled – – (43,042) 18.13
Outstanding at December 31, 2012 – $ – 2,982,947 $ 19.97

Information regarding the stock options outstanding at December 31, 2012 is as follows:

OPTIONS EXERCISABLE AT

OPTIONS OUTSTANDING AT DECEMBER 31, 2012 DECEMBER 31, 2012

WEIGHTED
AVERAGE NUMBER OF WEIGHTED NUMBER OF WEIGHTED
REMAINING STOCK AVERAGE STOCK AVERAGE
CONTRACTUAL OPTIONS EXERCISE OPTIONS EXERCISE
Range of Exercise Prices LIFE (YEARS) OUTSTANDING PRICE EXERCISABLE PRICE

Options

$6.33 to $1.56 3.0 968,180 $ 6.52 968,180 $ 6.52
$20.76 to $25.22 1.2 1,014,777 24.17 988,177 24.14
$28.43 to $31.73 2.5 999,990 28.13 873,890 28.44
2.2 2,982,947 $ 19.97 2,830,247 $ 19.44

For the year ended December 31, 2012, compensation expense related to stock options was $0.7 million (201 =$0.8 million).

Notes to Consolidated Financial Statements

Methanex Corporation | Annual Report 2012 63

Notes to Consolidated Financial Statements

16. Segmented information:

The Company’s operations consist of the production and sale of methanol, which constitutes a single operating segment.

During the years ended December 31, 2012 and 2011, revenues attributed to geographic regions, based on the location of customers, were as fol-

lows:
LATIN
REVENUE UNITED STATES. CANADA EUROPE CHINA KOREA OTHERASIA AMERICA TOTAL
2012 $ 562510 $ 180,283 $ 712,338 $ 408,557 $ 285,963 $ 188,702 $ 274,601 $ 2,672,954
201 $ 631822 $ 175928 $ 678968 $ 431137 $ 267,058 $ 154899 $ 268,225 $ 2,608,037
As at December 31, 2012 and 2011, the net book value of property, plant and equipment and oil and gas assets by country were as follows:
NEW
UNITED STATES” CHILE TRINIDAD EGYPT ZEALAND CANADA OTHER TOTAL
2012
Property, plant and equipment $ 144,059 $ 235,925 $ 469,611 $ 899,060 $ 172,458 $ 57,900 $ 35,735 |$ 2,014,748
Oil €: gas properties – 3,019 – – 8,190 – – 11,209
$ 144,059 $ 238,944 $ 469,611 $ 899,060 $ 180,648 $ 57,900 $ 35,735 |$ 2,025,957
201
Property, plant and equipment $ 1326 $ 598,377 $ 496,055 $ 939,218 $ 103,889 $ 53,331 $ 40,827 [$ 2,233,023
Oil 8: gas properties – 42,772 – – 8,174 – – 50,946
$ 1326 $ 641,149 $ 496,055 $ 939,218 $ 112063 $ 53,331 $ 40,827 [$ 2,283,969
* Included in the United States is $69 million related to the facility being relocated from Chile to Geismar, Louisiana
17. Income and other taxes:
a) Income tax expense:
FOR THE YEARS ENDED DECEMBER 31 2012 2011
Current tax expense:
Current period $ 29,339 $ 35,000
Impact of asset impairment charge and Louisiana project relocation expenses and charges 1,349 –
Adjustments to prior years (386) 1,241
30,302 36,241
Deferred tax expense (recovery):
Origination and reversal of temporary differences 12,060 17,058
Impact of asset impairment charge and Louisiana project relocation expenses and charges (128,917) –
Adjustments to prior years 1,782 (274)
Other 1,055 2,895
(114,020) 19,679
Total income tax expense (recovery) $ (83,718) $ 55,920

b) Income tax expense included in other comprehensive income:

Included in other comprehensive income for the year ended December 31, 2012 is a deferred income tax expense of $3.3 million (2011 – recovery of

$12.8 million) related to the change in fair value of interest rate swap contracts and defined benefit pension plans where the amounts are deduc-

tible for tax purposes upon settlement.

64 Methanex Corporation | Annual Report 2012

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

c) Reconciliation of the effective tax rate:

The Company operates in several tax jurisdictions and therefore ¡ts income is subject to various rates of taxation. Income tax expense differs
from the amounts that would be obtained by applying the Canadian statutory income tax rate to net income (loss) before income taxes as
follows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Income (loss) before income taxes $ (118,293) $ 283,920
Add back: asset impairment charge and Louisiana project relocation expenses and charges 361,564
243,271 283,920

Canadian statutory tax rate 25.0% 26.5%
Income tax expense calculated at Canadian statutory tax rate $ 60,818 $ 75,239
Increase (decrease) in income tax expense resulting from:

Impact of income and losses taxed in foreign jurisdictions (755) 2,10

Taxes on asset impairment charge and Louisiana project relocation expenses and charges (127,567)

Previously unrecognized loss carryforwards and temporary differences (22,686) (29,536)

Adjustments to prior years 1,396 967

Other 5,076 6,540
Total income tax expense (recovery) $ (83,118) $ 55,920

d) Net deferred income tax liabilities:

(i) The tax effect of temporary differences that give rise to deferred income tax liabilities and deferred income tax assets are as follows:

Dec 31 Dec 31
ASAT 2012 2011
Deferred income tax liabilities:
Property, plant and equipment $ 213,096 $ 270,483
Repatriation taxes 101,690 103,822
Other 24,089 43,465
338,875 417,770
Deferred income tax assets:
Non-capital loss carryforwards 99,904 40,284
Property, plant and equipment 125 11,295
Fair value of interest rate swap contracts 7,385 10,384
Other 39,883 53,475
147,297 115,438
Net deferred income tax liabilities $ 191,578 $ 302,332

The Company recognizes deferred income tax assets to the extent that it is probable that the benefit of these assets will be realized. At
December 31, 2012, the Company had non-capital loss carryforwards and other deductible temporary differences in New Zealand of $65
million that have not been recognized. These non-capital loss carryforwards have no expiry date under current legislation. In Canada, the
Company had non-capital loss carryforwards of $91 million and other deductible temporary differences of $141 million that have not been
recognized. Of the $91 million in non-capital loss carryforwards, $1 million expire in 2014, $67 million expire in 2015 and the remainder

expire in 2031. The Company has $189 million of deductible temporary differences in the United States that have not been recognized.

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 65

Notes to Consolidated Financial Statements

(ii) Analysis of the change in deferred income tax liabilities:

2012 2011

Balance, January 1 $ 302,332 $ 295,431
Deferred income tax expense (recovery) included in net income (loss) (114,020) 19,679
Deferred income tax expense (recovery) included in other comprehensive income 3,266 (12,778)
Balance, December 31 $ 191,578 $ 302,332

e) Contingent liability:

The Board of Inland Revenue of Trinidad and Tobago issued assessments against the Company’s 63.1% owned joint venture, Atlas Methanol
Company Unlimited (“Atlas”), in respect ofthe 2005 and 2006 financial years. All subsequent tax years remain open to assessment. The assess-
ments relate to the pricing arrangements of certain long-term fixed price sales contracts that extend to 2014 and 2019 related to methanol pro-
duced by Atlas. The impact ofthe amounts in dispute for the 2005 and 2006 financial years is not significant. Atlas has partial relief from

corporation income tax until 2014.

The Company has lodged objections to the assessments. Based on the merits of the cases and legal interpretation, management believes ¡ts posi-

tion should be sustained.

18. Changes in non-cash working capital:
Changes in non-cash working capital for the years ended December 31, 2012 and 2011 are as follows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Decrease (increase) in non-cash working capital:
Trade and other receivables $ (50,773) $ (58,403)
Inventories 27,992 (51,358)
Prepaid expenses (3,849) 2,412
Trade, other payables and accrued liabilities, including long-term payables included in other long-term liabilities 46,379 119,170
19,749 11,821
Adjustments for items not having a cash effect and working capital changes relating to taxes and interest paid 5,098 31,075
Changes in non-cash working capital $ 24,847 $ 42,896
These changes relate to the following activities:
Operating $ 21,774 $ 35,388
Investing 3,073 7,508
Changes in non-cash working capital $ 24,847 $ 42,896

66 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

19. Capital disclosures:
The Company’s objectives in managing its liquidity and capital are to safeguard the Company’s ability to continue as a going concern, to provide
financial capacity and flexibility to meet its strategic objectives, to provide an adequate return to shareholders commensurate with the level of

risk, and to return excess cash through a combination of dividends and share repurchases.

Dec 31 Dec 31

ASAT 2012 2011
Liquidity:

Cash and cash equivalents $ 745,610 $ 350,711

Undrawn credit facility 400,000 200,000
Total liquidity $ 1,145,610 $ 550,711
Capitalization:

Unsecured notes $ 739,498 $ 348,762

Limited recourse debt facilities, including current portion 505,727 554,493

Total debt 1,245,225 903,255

Non-controlling interests 187,861 197,238

Shareholders’ equity 1,289,876 1,404,725
Total capitalization $ 2,722,962 $ 2,505,218
Total debt to capitalization’ 46% 36%
Net debt to capitalization? 25% 26%

*Total debt (including 100% of Egypt limited recourse debt facilities) divided by total capitalization,
Total debt (including 100% of Egypt limited recourse debt facilities) less cash and cash equivalents divided by total capitalization less cash and cash equivalents

The Company manages its liquidity and capital structure and makes adjustments to it in light of changes to economic conditions, the underlying

risks inherent in its operations and capital requirements to maintain and grow its operations. The strategies employed by the Company include
the issue or repayment of general corporate debt, the issue of project debt, the issue of equity, the payment of dividends and the repurchase of
shares.

The Company is not subject to any statutory capital requirements and has no commitments to sell or otherwise issue common shares except
pursuant to outstanding employee stock options.

During the year ended December 31, 2012, the Company entered into a $400 million revolving credit facility with a syndicate of banks that expires

in December 2016. Note 9 provides further details regarding the financial and other covenants.

20. Financial instruments:

Financial instruments are either measured at amortized cost or fair value. Held-to-maturity investments, loans and receivables and other finan-
cial liabilities are measured at amortized cost. Held-for-trading financial assets and liabilities and available-for-sale financial assets are measured
on the Consolidated Statement of Financial Position at fair value. Derivative financial instruments are classified as held-for-trading and are
recorded on the Consolidated Statement of Financial Position at fair value unless exempted. Changes in fair value of held-for-trading derivative

financial instruments are recorded in earnings unless the instruments are designated as cash flow hedges.

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 67

Notes to Consolidated Financial Statements

The following table provides the carrying value of each category of financial assets and liabilities and the related balance sheet item:

Dec 31 Dec 31
ASAT 2012 2011
Financial assets:
Financial assets held-for-trading:
Derivative financial instruments designated as cash flow hedges’ $ – $ 300
Loans and receivables:
Cash and cash equivalents 745,610 350,711
Trade and other receivables, excluding tax receivable and current portion of GeoPark financing 371,368 332,642
Project financing reserve accounts included in other assets 44,754 39,839
GeoPark financing, including current portion (note 8) 8,028 18,072
Total financial assets? $ 1,169,760 $ 741,564
Financial liabilities:
Other financial liabi
Trade, other payable and accrued liabilities, excluding tax payable $ 338,921 $ 306,455
Deferred gas payments included in other long-term liabilities 82,760 51,079
Long-term debt, including current portion 1,245,225 903,255
Financial liabilities held-for-trading:
Derivative financial instruments designated as cash flow hedges’ 32,910 41,536
Total financial liabilities $ 1,699,816 $ 1,302,325

+ The euro hedges and the Egypt interest rate swaps designated as cash flow hedges are measured at fair value based on industry-accepted valuation models and inputs obtained from active markets.
2 The carrying amount of the financial assets represents the maximum exposure to credit risk at the respective reporting periods.
At December 31, 2012, all ofthe Company’s financial instruments are recorded on the Consolidated Statement of Financial Position at amortized

cost, with the exception of derivative financial instruments, which are recorded at fair value unless exempted.

The Egypt limited recourse debt facilities bear interest at LIBOR plus a spread. The Company has interest rate swap contracts to swap the LIBOR-
based interest payments for an average aggregated fixed rate of 4.8% plus a spread on approximately 75% ofthe Egypt limited recourse debt
facilities for the period to March 31, 2015. The Company has designated these interest rate swaps as cash flow hedges. These interest rate swaps
had outstanding notional amounts of $342 million as at December 31, 2012. The notional amounts decrease over the expected repayment period.
At December 31, 2012, these interest rate swap contracts had a negative fair value of $32.7 million (201 =$41.5 million) recorded in other long-

term liabilities. The fair value of these interest rate swap contracts will fluctuate until maturity.

The Company also designates as cash flow hedges forward exchange contracts to sell euros at a fixed US dollar exchange rate. At December 31,
2012, the Company had outstanding forward exchange contracts designated as cash flow hedges to sell a notional amount of 5.8 million euros
in exchange for United States dollars and these euro contracts had a negative fair value of $0.2 million (201 = positive fair value of $0.3 million)
recorded in trade, other payables and accrued liabilites. Changes in the fair value of derivative financial instruments designated as cash flow

hedges have been recorded in other comprehensive income.

The table below shows cash outflows for derivative hedging instruments based upon contractual payment dates using LIBOR at December 31,
2012. The amounts reflect the maturity profile of the fair value liability where the instruments will be settled net and are subject to change based
on the prevailing LIBOR at each of the future settlement dates. The swaps are with high investment-grade counterparties and therefore the set-

tlement day risk exposure is considered to be negligible.

Dec 31 Dec 31

ASAT 2012 2011
Within one year $ 14,490 $ 14,178
1to 2 years 13,348 13,178
2to3 years 6,042 12,451
3to4 years – 5,036
4to5 years – –
$ 33,880 $ 44,843

68 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

The fair values ofthe Company’s derivative financial instruments as disclosed above are determined based on Bloomberg quoted market prices

and confirmations received from counterparties, which are adjusted for credit risk.

The Company ¡is exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments but does
not expect any counterparties to fail to meet their obligations. The Company deals with only highly rated counterparties, normally major finan-
cial institutions. The Company is exposed to credit risk when there is a positive fair value of derivative financial instruments at a reporting date.
The maximum amount that would be at risk ifthe counterparties to derivative financial instruments with positive fair values failed completely to

perform under the contracts was nil at December 31, 2012 (December 31, 2011 $0.5 million).

The carrying values ofthe Company’s financial instruments approximate their fair values, except as follows:

Dec 31 Dec 31
AS AT 2012 2011
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
Long-term debt $ 17245,225 $ 1,302,237 $ 903,255 $ 983n

There is no publicly traded market for the limited recourse debt facilities, the fair value of which is estimated by reference to current market
prices for debt securities with similar terms and characteristics. The fair value ofthe unsecured notes was calculated by reference to a limited

number of small transactions at the end of 2012 and 2011. The fair value of the Company’s unsecured notes will fluctuate until maturity.

21. Financial risk management:

a) Market risks:

The Company’s operations consist of the production and sale of methanol. Market fluctuations may result in significant cash flow and profit
volatility risk forthe Company. Its worldwide operating business as well as its investment and financing activities are affected by changes in
methanol and natural gas prices and interest and foreign exchange rates. The Company seeks to manage and control these risks primarily
through its regular operating and financing activities and uses derivative instruments to hedge these risks when deemed appropriate. This is not

an exhaustive list of all risks, nor will the risk management strategies eliminate these risks.

Methanol price risk
The methanol industry is a highly competitive commodity industry and methanol prices fluctuate based on supply and demand funda-
mentals and other factors. Accordingly, it is important to maintain financial flexibility. The Company has adopted a prudent approach to

financial management by maintaining a strong balance sheet including back-up liquidity.

Natural gas price risk

Natural gas is the primary feedstock for the production of methanol and the Company has entered into long-term natural gas supply con-
tracts for its production facilities in New Zealand, Trinidad, Egypt and Chile. These natural gas supply contracts include base and variable price
components to reduce the commodity price risk exposure. The variable price component is adjusted by formulas related to methanol prices
above a certain level. The Company has entered into short-term natural gas forward supply contracts at fixed prices for a portion ofthe feed-

stock requirements for its Medicine Hat operations.
Interest rate risk

Interest rate risk is the risk that the Company suffers financial loss due to changes in the value of an asset or liability or in the value offuture

cash flows due to movements in interest rates.

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 69

Notes to Consolidated Financial Statements

The Company’s interest rate risk exposure is mainly related to long-term debt obligations. Approximately one-half of its debt obligations are
subject to interest at fixed rates. The Company also seeks to limit this risk through the use of interest rate swaps, which allows the Company

to hedge cash flow changes by swapping variable rates of interest into fixed rates of interest.

Dec 31 Dec 31
ASAT 2012 2011
Fixed interest rate debt:

Unsecured notes $ 739,498 $ 348,762
Atlas limited recourse debt facilities (63.1% proportionate share) 42,842 56,599
$ 782,340 $ 405,361

Variable interest rate debt:
Atlas limited recourse debt facilities (63.1% proportionate share) $ 6,817 $ 7,798
Egypt limited recourse debt facilities 438,631 470,208
Other limited recourse debt facilities 17,437 19,888
$ 462,885 $ 497,894

For fixed interest rate debt, a 1% change in interest rates would result in a change in the fair value of the debt (disclosed in note 20) of approx-
imately $48.9 million as of December 31, 2012 (201 – $7.8 million). The fair value of variable interest rate debt fluctuates primarily with

changes in credit spreads.

For the variable interest rate debt that is unhedged, a 1% change in LIBOR would result in a change in annual interest payments of $1.2 million

as of December 31, 2012 (2011- $1.3 million).

For the Egypt variable interest rate debt that is hedged (see note 9) with a variable-for-fixed interest rate swap (note 20), a 1% change in the
interest rates along the yield curve would result in a change in fair value of the interest rate swaps of approximately $7.1 million as of
December 31, 2012 (2011 – $113 million). These interest rate swaps are designated as cash flow hedges, which results in the effective portion of
changes in their fair value being recorded in other comprehensive income.

Foreign currency risk

The Company’s international operations expose the Company to foreign currency exchange risks in the ordinary course of business. Accord-
ingly, the Company has established a policy that provides a framework for foreign currency management and hedging strategies and defines
the approved hedging instruments. The Company reviews all significant exposures to foreign currencies arising from operating and investing

activities and hedges exposures if deemed appropriate.
The dominant currency in which the Company conducts business is the United States dollar, which is also the reporting currency.

Methanol is a global commodity chemical that is priced in United States dollars. In certain jurisdictions, however, the transaction price is set
either quarterly or monthly in the local currency. Accordingly, a portion ofthe Company’s revenue is transacted in Canadian dollars, euros
and, to a lesser extent, other currencies. For the period from when the price is set in local currency to when the amount due is collected, the
Company is exposed to declines in the value of these currencies compared to the United States dollar. The Company also purchases varying
quantities of methanol for which the transaction currency is the euro and, to a lesser extent, other currencies. In addition, some ofthe
Company’s underlying operating costs and capital expenditures are incurred in other currencies. The Company is exposed to increases in the
value ofthese currencies that could have the effect of increasing the United States dollar equivalent of cost of sales and operating expenses
and capital expenditures. The Company has elected not to actively manage these exposures at this time except for a portion of the net
exposure to euro revenues, which is hedged through forward exchange contracts each quarter when the euro price for methanol is estab-
lished.

As at December 31, 2012, the Company had a net working capital asset of $94.6 million in non-US-dollar currencies (2011 – $78.4 million). Each
10% strengthening (weakening) of the US dollar against these currencies would decrease (increase) the value of net working capital and pre-
tax cash flows and earnings by approximately $9.5 million (2011 -$7.8 million).
b) Liquidity risks:
Liquidity risk is the risk that the Company will not have sufficient funds to meet its liabilities, such as the settlement of financial debt and lease
obligations and payment to its suppliers. The Company maintains liquidity and makes adjustments to it in light of changes to economic con-
ditions, underlying risks inherent in its operations and capital requirements to maintain and grow its operations. At December 31, 2012, the
Company had 5$745.6 million of cash and cash equivalents. In addition, the Company has an undrawn, unsecured revolving bank facility of $400

million provided by highly rated financial institutions that expires in December 2016.

70 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

In addition to the above-mentioned sources of liquidity, the Company constantly monitors funding options available in the capital markets, as

well as trends in the availability and costs of such funding, with a view to maintaining financial flexibility and limiting refinancing risks.

The expected cash outflows of financial liabilities from the date ofthe balance sheet to the contractual maturity date are as follows:

CARRYING CONTRACTUAL TYEAR MORE THAN

AS AT DECEMBER 31, 2012 AMOUNT CASH FLOWS OR LESS 1-3 YEARS 3-5 YEARS 5 YEARS
Trade and other payables: $ 328,627 $ 328,627 $ 328,627 $ – $ – $ –

Deferred gas payments included in

other long-term liabilities 82,760 86,485 11,916 74,569 – –
Long-term debtz 1,245,225 1,559,862 98,869 341,301 166,145 953,547
Egypt interest rate swaps 32,707 33,880 14,490 19,390 – –
$ 1,689,319 $ 2,008,854 $ 453,902 $ 435,260 $ 166,145 $ 953,547

* Excludes tax and accrued interest
2 Contractual cash flows include contractual interest payments related to debt obligations. Interest rates on variable rate debt are based on prevailing rates at December 31, 2012.

c) Credit risks:
Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost ifa counterparty defaults on its
obligations under the contract. This includes any cash amounts owed to the Company by those counterparties, less any amounts owed to the
counterparty by the Company where a legal right of offset exists and also includes the fair values of contracts with individual counterparties that
are recorded in the financial statements.
Trade credit risk
Trade credit risk is defined as an unexpected loss in cash and earnings if the customer is unable to pay its obligations in due time or ifthe
value ofthe security provided declines. The Company has implemented a credit policy that includes approvals for new customers, annual

credit evaluations of all customers and specific approval for any exposures beyond approved limits. The Company employs a variety of risk-

mitigation alternatives, including certain contractual rights in the event of deterioration in customer credit quality and various forms of bank
and parent company guarantees and letters of credit to upgrade the credit risk to a credit rating equivalent or better than the stand-alone
rating ofthe counterparty. Trade credit losses have historically been minimal and at December 31, 2012 substantially all ofthe trade receiv-
ables were classified as current.

Cash and cash equivalents

To manage credit and liquidity risk, the Company’s investment policy specifies eligible types of investments, maximum counterparty
exposure and minimum credit ratings. Therefore, the Company invests only in highly rated investment-grade instruments that have matur-
ities ofthree months or less.

Derivative financial instruments

The Company’s hedging policies specify risk management objectives and strategies for undertaking hedge transactions. The policies also
include eligible types of derivatives and required transaction approvals, as well as maximum counterparty exposures and minimum credit

ratings. The Company does not use derivative financial instruments for trading or speculative purposes.

To manage credit risk, the Company only enters into derivative financial instruments with highly rated investment-grade counterparties.

Hedge transactions are reviewed, approved and appropriately documented in accordance with company policies.

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 71

Notes to Consolidated Financial Statements

22. Retirement plans:

a) Defined benefit pension plans:
The Company has non-contributory defined benefit pension plans covering certain employees. The Company does not provide any significant

post-retirement benefits other than pension plan benefits. Information concerning the Company’s defined benefit pension plans, in aggregate, is

as follows:
Dec 31 Dec 31
ASAT 2012 2011
Accrued benefit obligations:
Balance, beginning of year $ 78,558 $ 70,072
Current service cost 2,994 2,551
Interest cost on accrued benefit obligations 3,618 3,665
Benefit payments (4,375) (5,522)
Settlements (7,673) –
Actuarial loss 2,865 11,049
Foreign exchange loss (gain) 3,510 (3,257)
Balance, end of year 79,497 78,558
Fair values of plan assets:
Balance, beginning of year 43,276 45,378
Expected return on plan assets 2,215 2,333
Contributions 13,981 4,349
Benefit payments (4,375) (5,522)
Settlements (7,673) –
Actuarial gain (loss) 963 (2,577)
Foreign exchange gain (loss) 934 (685)
Balance, end of year 49,311 43,276
Unfunded status 30,126 35,282
Minimum funding requirement – 260
Defined benefit obligation, net $ 30,126 $ 35,542

The Company has an unfunded retirement obligation of $30.9 million at December 31, 2012 (2011 – $33.3 million) for its employees in Chile that
will be funded at retirement in accordance with Chilean law. The accrued benefit forthe unfunded retirement arrangement in Chile is paid
when an employee leaves the Company in accordance with plan terms and Chilean regulations. The Company has a funded retirement asset of
$1.5 million at December 31, 2012 (2011 -funded obligation of $1.6 million) for its employees in Canada and a funded obligation of $0.7 million at
December 31, 2012 (2011 $0.6 million) for its employees in Europe. The Company estimates that it will make additional contributions relating
to its defined benefit pensions plans totalling $5.1 million in 2013.

The Company’s net defined benefit pension plan expense charged to the Consolidated Statements of Income for the years ended December 31,
2012 and 20m is as follows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011

Net defined benefit pension plan expense:

Current service cost $ 2,994 $ 2,551
Interest cost on defined benefit obligations 3,618 3,665
Expected return on plan assets (2,215) (2,333)
Cost of settlement 624 –

$ 5021 $ 3,883

72 Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

The Company’s current year actuarial losses, recognized in the Consolidated Statements of Comprehensive Income for the years ended

December 31, 2012 and 2011, are as follows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Actuarial loss $ 17278 $ 13,626
Minimum funding requirement (260) (986)
Actuarial loss, net $ 1,018 $ 12,640

The Company uses a December 31 measurement date for its defined benefit pension plans. Actuarial reports for the Company’s defined benefit
pension plans were prepared by independent actuaries for funding purposes as of December 31, 2010 in Canada. The next actuarial reports for

funding purposes for the Company’s Canadian defined benefit pension plans are scheduled to be completed as of December 31, 2013.

The actuarial assumptions used in accounting for the defined benefit pension plans are as follows:

FOR THE YEARS ENDED 2012 2011

Benefit obligation at December 31:
Weighted average discount rate 4.5% 4.6%
Rate of compensation increase 3.9% 3.2%
Net expense for years ended December 31:

Weighted average discount rate 5.2% 5.9%
Rate of compensation increase 4.6% 4.8%
Expected rate of return on plan assets 6.5% 6.1%

The expected rate of return on plan assets is determined by considering the expected returns available on the assets underlying the current
investment policy. The difference between actual return and the expected return is an actuarial gain or loss and is recorded in the Consolidated
Statements of Comprehensive Income for the year. For the year ended December 31, 2012, the Company’s actual return on plan assets was a gain

of $3.2 million (2011 -loss of $0.3 million).

The asset allocation for the defined benefit pension plan assets as at December 31, 2012 and 2011 is as follows:

Dec 31 Dec 31
ASAT 2012 2011
Equity securities 44% 46%
Debt securities 26% 28%
Cash and other short-term securities 30% 26%
Total 100% 100%

b) Defined contribution pension plans:
The Company has defined contribution pension plans. The Company’s funding obligations under the defined contribution pension plans are lim-
ited to making regular payments to the plans, based on a percentage of employee earnings. Total net pension expense for the defined con-

tribution pension plans charged to operations during the year ended December 31, 2012 was $4.6 million (201 $4.2 million).

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 73

Notes to Consolidated Financial Statements

23. Commitments and contingencies:

a) Take-or-pay purchase contracts and related commitments:
The Company has commitments under take-or-pay natural gas supply contracts to purchase feedstock supplies and to pay for transportation

capacity related to these supplies up to 2035. The minimum estimated commitment under these contracts, except as noted below, is as follows:

AS AT DECEMBER 31, 2012

2013 2014 2015 2016 2017 THEREAFTER

$ 263,101 $ 204,275 $ 16151 $ 165,592 $ 100,275 $ 1,019,796

The Company is in the process of relocating one ofits idled Chile methanol plants to Geismar, Louisiana. It is anticipated that this plant will have
a production capacity of approximately 1.0 million tonnes and commence operations by the end of 2014. Subsequent to December 31, 2012, the
Company entered into a ten-year natural gas agreement for the supply of all ofthe plant’s natural gas requirements. Contractual deliveries and
obligations under the contract commence on the first date of commercial operations. Also subsequent to December 31, 2012, the Company
entered into a natural gas supply agreement to support the restart of its 0.5 million tonne per year Waitara Valley facility in New Zealand. No

amounts have been included in the above table related to these contracts.

b) Chile and Argentina natural gas supply contracts:

The Company has supply contracts with Argentinean suppliers for natural gas sourced from Argentina for a significant portion ofthe capacity for
its facilities in Chile with expiration dates between 2017 and 2025. Since June 2007, the Company’s natural gas suppliers from Argentina have
curtailed all gas supply to the Company’s plants in Chile. Under the current circumstances, the Company does not expect to receive any further

natural gas supply from Argentina. These potential purchase obligations have been excluded from the table above.

The Company also has supply contracts with Empresa Nacional del Petroleo (ENAP) for a portion of the capacity for its facilities in Chile. Over the
last few years, deliveries from ENAP have been declining and ENAP has delivered significantly less than the full amount of natural gas that it was
obligated to deliver under these contracts. These potential purchase obligations have been excluded from the table above.

c) Operating lease commitments:

The Company has future minimum lease payments under operating leases relating primarily to vessel charter, terminal facilities, office space,

equipment and other operating lease commitments as follows:

AS AT DECEMBER 31, 2012

2013 2014 2015 2016 2017 THEREAFTER

$ 124,220 $ 96,622 $ 73,579 $ 68,798 $ 65,492 $ 281,126

For the year ended December 31, 2012, the Company recognized as an expense $141.1 million (2011 – $142.3 million) relating to operating lease

payments, including time charter vessel payments.

d) Purchased methanol:

The Company has marketing rights for 100% of the production from its jointly owned plants (the Atlas plant in Trinidad in which it has a 63.1%
interest and the plant in Egypt in which it has a 60% interest), which results in purchase commitments of an additional 1.2 million tonnes per
year of methanol offtake supply when these plants operate at capacity. At December 31, 2012, the Company also had commitments to purchase
methanol under other contracts for approximately o.5 million tonnes for 2013 and 2.6 million tonnes thereafter. The pricing under these pur-

chase commitments is referenced to pricing atthe time of purchase or sale, and accordingly, no amounts have been included above.

74. Methanex Corporation | Annual Report 2012 Notes to Consolidated Financial Statements

24. Related parties:

Notes to Consolidated Financial Statements

The Company has interests in significant subsidiaries and joint ventures as follows:

INTEREST %
COUNTRY OF DEC 31 DEC 31
NAME INCORPORATION – PRINCIPAL ACTIVITIES 2012 2011
Significant subsidiari
Methanex Asia Pacific Limited Hong Kong Marketing €: distribution 100% 100%
Methanex Europe NV Belgium Marketing €: distribution 100% 100%
Methanex Methanol Company, LLC United States Marketing €: distribution 100% 100%
Egyptian Methanex Methanol Company S.A.E. Egypt Production 60% 60%
Methanex Chile S.A. Chile Production 100% 100%
Methanex New Zealand Limited New Zealand Production 100% 100%
Methanex Trinidad (Titan) Unlimited Trinidad Production 100% 100%
Methanex U.S.A. LLC United States Production 100% –
Waterfront Shipping Company Limited Cayman Islands Shipping 100% 100%
Significant joint ventures:
Trinidad Production 63.1% 63.1%

Atlas Methanol Company Unlimited:

* Summarized financial information for the group’s share of Atlas is disclosed in note 7.

Remuneration of non-management directors and senior management, which includes the members ofthe executive leadership team, is as fol-

lows:

FOR THE YEARS ENDED DECEMBER 31 2012 2011
Short-term employee benefits $ 11,223 $ 10,808
Post-employment benefits 746 m5
Other long-term employee benefits 82 7
Share-based compensation expense (recovery) 19,690 (3,328)
Total $ 31,741 $ 8,267

Notes to Consolidated Financial Statements Methanex Corporation | Annual Report 2012 75

Executive

Leadership Team

John Floren
President and
Chief Executive Officer

Wendy Bach
Vice President, Human Resources

lan Cameron
Senior Vice President, Finance
and Chief Financial Officer

Mike Herz
Senior Vice President,
Corporate Development

Vanessa James
Senior Vice President,
Global Marketing and Logistics

Michael Macdonald
Senior Vice President,
Global Operations

Randy Milner

Senior Vice President,
General Counsel and
Corporate Secretary

Paul Schiodtz
Senior Vice President,
Latin America

Harvey Weake
Senior Vice President,
Asia Pacific

Board of Directors

Thomas Hamilton
Chairman ofthe Board
Board member since May 2007

John Floren

President and CEO of Methanex
Corporation

Board member since January 2013

Bruce Aitken

Member of the Public Policy and
Responsible Care Committees.
Board Member since July 2004

Howard Balloch

Chair of the Public Policy Committee.
Member of the Audit, Finance 8: Risk
Committee.

Board member since December 2004

Phillip Cook

Chair of the Responsible Care Committee.

Member of the Public Policy Committee.
Board member since May 2006

Robert Kostelnik

Member of the Corporate Governance
and Responsible Care Committees.
Board member since September 2008

Douglas Mahaffy

Member of the Corporate Governance
and Human Resources Committees.
Board member since May 2006

A, Terence Poole

Chair of the Audit, Finance 8: Risk Committee.
Member of the Public Policy Committee.
Board member since September 2003

and from February 1994 to June 2003

John Reid

Chair of the Human Resources Committee.
Member of the Audit, Finance 8: Risk
Committee.

Board member since September 2003

Janice Rennie

Member of the Audit, Finance 8: Risk
and Human Resources Committees.
Board member since May 2006

Monica Sloan

Chair of the Corporate Governance Committee.
Member of the Responsible Care Committee.
Board member since September 2003

[gol

Head Office

Methanex Corporation
ENE ANS
po E
Vancouver, BC V6C 3M1
Tel 604 661 2600

Fax 604 661 2676

LES
1800 661 8851
Within North America

Website
www.methanex.com

Sales Inquiries
ESCUELA

UDC
ARRIENDOS
agent and registrar for Methanex stock
INES
NIE ETAES
HABITA
changes of address or the elimination
ER ENS NR

to CIBC Mellon Trust at:

ETE SR AN a
416 682 3860 Outside North America
MIES]

Investor Relations Inquiries
Sandra Daycock
CATAN ES
Tel 604 661 2600
NECESA

Annual General Meeting

The Annual General Meeting will be
held at the Vancouver Convention
(ACNE
EIA

ION

Shares Listed
Toronto Stock Exchange – MX
SRA

Annual Information Form (AIF)
UE A A
NN SES A EL
www.sedar.com.

INIA E
DAA A SOS

MANOS

AResponsible Care* Company

2012

Link al archivo en CMFChile: https://www.cmfchile.cl/sitio/aplic/serdoc/ver_sgd.php?s567=ab2cea2c85638ae9917fd25c70724e30VFdwQmVFMTZRWHBOUkVGNVRtcG5ORTlCUFQwPQ==&secuencia=-1&t=1682366909