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(Stock Code: 1029) FOURTH QUARTER TRADING UPDATE FOR

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(Stock Code: 1029) FOURTH QUARTER TRADING UPDATE FOR Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. The information set out below in this announcement is provided for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for shares in the Company. (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 China 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.
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