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(Incorporated in Hong Kong with limited liability) (Stock code: 1029)

FOURTH QUARTER TRADING UPDATE FOR THE THREE MONTHS ENDED 31 DECEMBER 2019 24.7% INCREASE IN PRODUCTION OVER THE SAME PERIOD LAST YEAR

CONFERENCE CALL

A conference call will be held tomorrow (24 January 2020) at 09h00 Hong Kong time to discuss the fourth quarter trading update. The number is +852 2112 1888 and the passcode is 6103524#. Presentation slides to accompany the call are available at www.ircgroup.com.hk. A replay call will be available from 29 January 2020 at www.ircgroup.com.hk/html/ir_call.php.

Thursday, 23 January 2020: The Board of Directors of IRC Limited (“IRC” or the “Company”, together with its subsidiaries, the “Group”) is pleased to provide the Fourth Quarter Trading Update for the three months ended 31 December 2019.

HIGHLIGHTS – 4Q2019

K&S

• 24.7% improvement in production and 15.2% improvement in sales over 4Q2018

• Achieved 100% production capacity in October; average capacity in 4Q2019 at 87% (3Q2019: 77%)

• Overcame operating issues at the ball mills

• Mitigating measures taken, while resolving the remaining bottlenecks of the Drying Unit

• Current capacities of production and shipment rates at c.85% and c.80% respectively

Kuranakh

• Care and maintenance process satisfactory

• Under administration, but available for re-opening

Corporate & Industry

• Stable 65% Fe price, price premium over 62% Fe widening

– 1 – FOURTH QUARTER TRADING UPDATE FOR THE THREE MONTHS ENDED 31 DECEMBER 2019

4Q 2019 4Q 2018 Change 3Q 2019 Change FY2019 FY2018 Change

Iron Ore concentrate – Production (tonnes) 695,431 557,855 +24.7% 617,956 +12.5% 2,576,325 2,234,517 +15.3% – Sales (tonnes) 623,335 540,940 +15.2% 601,668 +3.6% 2,464,401 2,223,945 +10.8%

K&S achieved a significant milestone in October 2019 by successfully operating at full capacity, while in 4Q2019, the plant achieved an average capacity of 87%, itself an increase of 10% points over 3Q2019. This was achieved despite issues with the ball mills which affected production in late November and early December. The ball mills issues were successfully overcome in December.

4Q2019 production volume increased by 24.7% compared to 4Q2018 with 695,431 tonnes of iron ore concentrate being produced. 4Q2019 shipment volume was, however, restrained by the capacity rate of the Drying Unit, which was limited to c.65%, and this affected the shipment volume. In spite of this, sales volume was 15.2% higher than that of 4Q2018 with 623,335 tonnes of iron ore concentrates being sold in 4Q2019.

For the full year 2019, K&S operated at an average capacity of 81%. 2,576,325 tonnes of 65% iron ore concentrate were produced and 2,464,401 tonnes were sold, an improvement of 15.3% and 10.8% respectively over 2018.

The 65% iron ore Platts price index, after dipping to US$88 per tonne in November, staged a strong recovery to close at US$104 per tonne at the end of the quarter. According to the media, the positive price movement was mainly due to high iron ore demand from the Chinese steel mills. The price spread between 65% Fe and 62% Fe widened to about US$12 per tonne at the end of the quarter. Currently, the 65% iron ore price is at c.US$110 per tonne level and the forward curve suggests that the price premium over the 62% Fe would increase.

Commenting on the performance of the fourth quarter, Yury Makarov, Chief Executive Officer of IRC said, “This was a good quarter in our multi-year journey to transform IRC. The full-capacity production at K&S in October is encouraging and it proves the operational capability of the project. I am pleased that the plant managed to achieve a high average production rate of 87% in this quarter despite encountering operating issues in November and December. The technical problems of the Drying Unit affect our shipment volume but I am confident that our experienced site team will soon be able to mitigate the related issues so as to fully unlock the value of K&S.

The recent signing of the phase 1 trade deal between the US and is a positive sign for the global economy and the iron ore market. In addition, the Belt and Road initiative encourages connectivity and cooperation between countries and is expected to attract significant investments in the region where K&S operates. We are optimistic that IRC will be one of the beneficiaries in this mega national project.”

– 2 – MARKETING, SALES AND PRICES

Iron Ore

During 4Q2019, 623,335 tonnes of iron ore concentrate were sold, an increase of 15.2% and 3.6% over 4Q2018 and 3Q2019 respectively. Sales volume would have been further increased if it was not being restrained by technical issues with the Drying Unit. Mitigating measures have been applied and it is hoped that shipment level could be back to normal level soon.

During the reporting quarter, the price of 65% Fe Platts hovered between US$88 per tonne and US$106 per tonne and averaged US$98 per tonne. In line with market expectation, stockpiles of iron ore at the Chinese ports increased by 6.4 million tonnes to 126.7 million tonnes after the Chinese national day but it was gradually being consumed down to 123.4 million tonnes at the end of November. Due to the lower stockpiles and the high iron ore demands from the Chinese steel mills, the 65% Fe Platts remained at over US$100 per tonne in December. In terms of the price premium, the price spread between the high-grade iron ore and the low-grade ones became wider. At the end of December 2019, the spread between 65% Fe and 62% Fe indices increased to about US$12 per tonne while it was about US$6 per tonne at the end of the last quarter. The forward curves of Fe prices suggest that the price premium would further increase.

Hedging

The selling price of K&S’s iron ore product is determined with reference to the international Platts spot price of iron ore concentrates. As announced previously, IRC has entered into hedging contracts to implement a partial hedge against adverse changes in the iron ore price. IRC’s strategy is to hedge no more than half of K&S’s production, with the remaining volume left unhedged. The hedging instruments, mostly in the form of protective collars, protect IRC from a significant reduction in the iron ore price. Although IRC may not be able to fully capture the upside of the market price, hedging secures a healthy margin of cashflow for IRC which is important from a risk management perspective, especially in light of the need to service the loan from Gazprombank. A majority of the hedging contracts were entered into in the earlier part of 2019, before the surge in iron ore price due to the Vale incident. Most of these contracts have matured and have been settled in 2019. The achieved selling price of IRC’s product is not published in this trading update for commercial reasons. The actual selling price in the first half of 2019 was disclosed in the 2019 interim results announcement and the full year achieved selling price will be published in the 2019 annual results announcement due for release in March 2020.

Benchmark 65% Fe: (Jan 2016 – Dec2019) Performance 65% Fe Price More Resilient High Grade Iron Ore Price Steadily Increases Greater Price Premium Over 62% Fe Expected Price per tonne $150.00 Historical and Forecast: 65% Fe VS 62% Fe

Historical Forecast 120 $130.00 120 Dec, 2019 avg. US$11.39 USD104 $110.00 (Dec 31) 80

Dec, 2021 $90.00 80 avg. US$20.74

July, 2018 40 $70.00 avg. US$27.48

$50.00 0

40 17 21 20 -19 -21 -18 -20 - -18 -18 USD45 -17 Jun-18 Jun-18 Jun-17 Jun-17 Jun Jun-21 Jun-21 Jun-20 Jun-20 Oct- Oct-21 Oct Oct Oct-19 Oct-19 Apr Apr Apr-19 Apr-19 Apr-20 Apr-20 Feb-20 Feb-21 Feb-21 Feb-19 Feb-19 Feb-18 Feb-18 Dec Dec- Dec-19 Dec-19 Dec-17 Dec-17 Dec-20 Dec-20 Aug-21 Aug Aug-18 Aug-18 Aug-19 Aug-19 $30.00 (Jan 4) Aug Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Premium on 65% Fe Platts 65% Fe Index/ SGX MB 65% Fe Index Futur e Iron Ore 65% Fe Platts 62% Fe Index/ SGX TSI 62% Fe Index Futur e * Source: Platts ( as of 31 December 2019) * Source: Bloomberg, Barchart.com Inc & CME Group (13/01/2020)

There were no sales of iron ore concentrate from Kuranakh since the mine has been moved to care and maintenance.

Ilmenite

As Kuranakh has been moved to care and maintenance, there were no sales of ilmenite product during the quarter.

Foreign Exchange

During the fourth quarter of 2019, Russian Rouble continued to be weak against the US dollar and remained at an average of RUB64 to the dollar (3Q2019: RUB65). Towards the end of the quarter, the currency slightly appreciated to RUB62 and is currently maintaining at this level. The weakness in Russian Rouble has a positive impact on the Group’s operating margins as the operating costs of the Group are mainly denominated in Russian Rouble and revenue mainly in US Dollar.

– 3 – USD/RUB Currency Chart (from July 2013 to December 2019) Depreciation of Rouble improves operating margin

85.00 USD/RUB

75.00

RUB62 (Dec 31) 65.00

55.00

45.00

35.00

RUB33 (July 1) 25.00

15 14 16 17 15 13 17 18 16 15 19 14 16 20 -17 -19 - - -18 - - - -13 - -18 - -17 Jul- Jul- Jul Jul- Jul-14 Jul-14 Jul- Jul Jan Jan Jan Jan- Jan Jan-19 Jan-15 Oct Oct-19 Oct-19 Oct Oct-14 Oct-16 Oct Oct Apr Apr- Apr Apr Apr- Apr-18 Apr-18

* Source: Bloomberg (as of 31 December 2019)

OPERATIONS

K&S (100% owned)

The K&S Mine is located in the Jewish Autonomous Region (EAO) of the . The operation is 4 kilometres from the town of Izvestkovaya, through which the Trans-Siberian Railway passes. It is also near to the federal highway connecting to the regional capital of Birobidzhan and 300 kilometres from Khabarovsk, the principal city of the Russian Far East.

K&S Ramp-Up Progress

K&S’s ramping up programme was progressing well in the fourth quarter with the plant operating at 100% production capacity in the month of October. Due to some operating issues with the ball mills in late November and early December, K&S’s production capacity was temporarily affected. Fortunately, the ball mills issues were swiftly resolved and normal production rate was resumed at the latter part of December. As winter approaches, K&S commenced the use of the Drying Unit. The Drying Unit is an essential part of the K&S production process as it removes excessive moisture from the iron ore concentrate to prevent the product from freezing in cold weather conditions, allowing all-year-round production. Due to some technical issues, the Drying Unit capacity rate was limited and it affected the shipment volume of K&S. Currently, due to minor logistic issues with the Russian railway and, to a lesser extent, limitations of the Drying Unit, shipment level is at c.80% of K&S’s capacity, although the plant has the capability to operate at a higher production rate. Production may need to slow down after the storage warehouse is full. The K&S site team is now investigating the issues and implementing different mitigating measures and it is expected that the capacity rate of the Drying Unit and shipment volume will soon increase. In addition, the need for drying will gradually be reduced from mid-March onwards with the warmer spring weather.

Mining

The mining contractors are supplying the necessary amount of feedstock to support the production of K&S. Due to the limitation on shipment volume, the level of drilling and blasting activities in the fourth quarter of 2019 reduced accordingly. A total of 2,460,300 tonnes (3Q2019: 1,846,600 tonnes) of ore were mined, 79,992 metres (3Q2019: 111,348 metres) were drilled and 1,982,650 cubic metres (3Q2019: 2,909,000 cubic metres) were blasted. 2,151,900 tonnes (3Q2019: 1,851,200 tonnes) of ore were fed to the primary processing plant and 1,440,630 tonnes (3Q2019: 1,329,039 tonnes) of pre-concentrate were produced. 695,431 tonnes of iron ore concentrate were produced and 623,335 tonnes were sold, representing an increase of 12.5% and 3.6% respectively over the last quarter.

– 4 – Production and Marketing

K&S 4Q 2019 3Q 2019 Changes

Production (tonnes) 695,431 617,956 +12.5% Sales (tonnes) 623,335 601,668 +3.6%

For the three months ended 31 December 2019, K&S produced 695,431 tonnes of iron ore concentrate, representing 87% of the designed capacity. Production rate would have been even higher if there had not been some operating issues with the ball mills in late November and early December. Production was back to normal after the site team overcame the ball mills issues in the latter part of December.

Update of Estimated Unit Cash Cost

Cost control is an important factor in maintaining and growing profitability. In 2019, K&S is aiming to control cash cost per tonne to a level which is comparable to that of last year. It is expected that further saving on transportation cost could be achieved when the Amur River Bridge is in use.

As K&S has not yet reached full production capacity, the cash cost per tonne in 4Q2019 has not yet reached an optimal level and therefore the figure may not truly represent the level of the operating cost at the time when the mine has fully ramped up. The relevant cash cost information for the full year 2019 will be analysed and disclosed in the 2019 annual results announcement.

Impact on U.S. Sanctions Against Russia

IRC is listed in Hong Kong Stock Exchange with operational mines in Russia Far East. Most of the Group’s suppliers and customers are based in China and Russia. As such, K&S has not been subject to any direct negative impact from the sanctions against Russia.

KURANAKH (100% owned)

Kuranakh is located in the north-east Tynda District of the Amur Region of the Russian Far East and comprises both the original Saikta open pit and the later established Kuranakh open pit processing facilities and an onsite railway spur connecting to the BAM and Trans-Siberian Railways.

In Care and Maintenance and under administration

Kuranakh is currently under administration but the plant is available for re-opening if the markets permit the investment decision. During the quarter, there was no production or sales.

SLAG REPROCESSING PROJECT (46% owned)

Having successfully sourced feedstock from China, IRC’s slag reprocessing project, a joint venture with Jianlong Steel, has recommenced operation and this diversifies the product mix of the Company. The joint venture was moved to care and maintenance in 2017 as the operation of this slag reprocessing plant was suspended, due to a lack of feedstock.

– 5 – CORPORATE AND INDUSTRY UPDATE

Group’s Cashflow Position and New Gazprombank Facility

IRC completed the drawdown of the Gazprombank facility in the first half of 2019 and the loan proceeds were applied in accordance with the intended use of proceeds. The Gazprombank facility is secured by charges over the assets of K&S and is guaranteed by Petropavlovsk. The repayment schedule is more closely aligned with the production plans of K&S than the ICBC loan was, and should improve the cash flow position of IRC. During the fourth quarter of 2019, c.US$10.1 million was paid to Gazprombank as principal repayment and interest in accordance with the repayment schedule.

As at 31 December 2019, the unaudited cash and deposit balance of the Group was c.US$4.3 million and the total debt outstanding was c.US$224.5 million.

Disposal of helicopter to Petropavlovsk

As announced previously, on 13 December 2019, IRC agreed to sell a helicopter to Petropavlovsk. The consideration was based on an independent valuation of the helicopter. Whilst the preliminary independent valuation was RUB304,859,166.67 (equivalent to c.US$4.9 million) (excluding VAT), the final independent valuation (excluding VAT), and therefore the consideration amount, was RUB316,666,666.67 (equivalent to approximately US$5.1 million). It has been agreed that the consideration shall be settled in two tranches, RUB83.3 million (equivalent to c.US$1.3 million) was settled in December 2019 and the balance will be settled by the end of February 2020.

The Group entered into the disposal agreement to effect the sale of the helicopter, an asset which the Board of IRC has determined is not required for the purpose of the Group’s core mining business. The disposal enabled the Group to raise capital for the purpose of funding the general working capital needs of the Group, including for the purpose of paying interest and principal amounts on loans of the Group.

Amur/ River Bridge

The project to build a railway bridge across the Amur River border between Russia and China was first launched by IRC in 2006. The project was sold to Russian and Chinese development funds in November 2014. In early June 2016, the regional government of the Jewish Autonomous Region announced that the Russian part of the Amur River Bridge would commence construction. A contractor agreement has been signed which stipulates the terms and timing of the construction of the Russian part of the Amur River Bridge.

The authorities of China’s Heilongjiang province has confirmed that the last steel beam of the Russian-Chinese railway bridge over Amur River, which is known as Heilongjiang in China, has been installed. This means that Russia has fully completed its engineer work on its side of the railway bridge. With China having completed the construction of its part in October 2018, the main span of the railway bridge has been connected. As reported by Russian local media in December 2019, the Russian official has assured that the construction of the railway bridge will be finished by the end of 2020. The railway bridge is expected to enhance the region’s economic development by providing a more efficient transportation alternative on top of the existing ferries and railway routes.

– 6 – K&S Mine is situated approximately 240 kilometres from the bridge site and IRC’s nearest customer within China is approximately 180 kilometres away from the railway bridge. Thus, IRC will benefit from the project with reduced transportation distance and shipment time. The railway bridge can not only save the transportation cost of K&S by up to US$5 per tonne for shipment to the Chinese customers but can also alleviate any railway congestion of the region. Apart from shortening the shipment time to customers from 7-10 days to 3-5 days, logistic efficiency should also be improved as the time needed to turnaround the wagons will be reduced.

* Figures in this announcement may not add up due to rounding. All tonnes of the Group unless specify refer to wet metric tonnes. All dollars refer to United States Dollar unless otherwise stated.

Production rate of K&S disclosed in this announcement is determined based on an annual production capacity of about 3.2 million wet metric tonne

By Order of the Board IRC Limited Yury Makarov Chief Executive Officer

Hong Kong, People’s Republic of China Thursday, 23 January 2020

As at the date of this announcement, the Executive Directors of the Company are Mr Yury Makarov and Mr Danila Kotlyarov. The Non-Executive Directors are Mr Peter Hambro and Mr Chi Kin Cheng. The Independent Non-Executive Directors are Mr Daniel Bradshaw, Mr Chuang-Fei Li, Mr Simon Murray, CBE, Chevalier de la Légion d’Honneur, Mr Jonathan Martin Smith and Mr Raymond Kar Tung Woo.

IRC Limited 6H, 9 Queen’s Road Central Hong Kong Telephone: +852 2772 0007 Email: [email protected] Website: www.ircgroup.com.hk

For further information, please visit www.ircgroup.com.hk or contact:

Kent Lo Manager – Communications & Investor Relations Telephone: +852 2772 0007 Mobile: +852 9688 8293 Email: [email protected]

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