IRC Limited — Annual Report 2013

Mar 26, 2014

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.

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

IRC: 2013 ANNUAL RESULTS

Thursday 27 March 2014: IRC Limited (‘‘IRC’’ or the ‘‘Company’’, together with its subsidiaries, the ‘‘Group’’; Stock Code 1029) is pleased to announce its Annual Results for 2013.

Key Highlights

• . Iron Ore production targets at Kuranakh exceeded for third consecutive year

• . Kuranakh segmental EBITDA up 40% to US$22.8 million

• . Construction and mine development at K&S on track for first commercial production during second half of 2014

• . General Nice and Minmetals Cheerglory subscription near completion with over 70% of General Nice commitments received, with US$88.2 million of additional injections to be received in April 2014

• . Group revenue growth, and net loss narrowed, both ahead of consensus estimates

• . Cash and deposits of US$98.4 million, compared to US$24.0 million at the end of 2012

Commenting on the announcement, Jay Hambro, Executive Chairman of IRC said: ‘‘IRC has made significant progress during 2013, moving forward our existing operations, whilst growth projects have also advanced. We are pleased to announce a new milestone for both IRC and Kuranakh - we achieved over one million tonnes annual production for the first time. This level of production exceeded our own targets which is something we have now accomplished for the third year in a row. Furthermore, despite the challenges of lower ilmenite prices, we managed to increase the segmental EBITDA at Kuranakh by 40% to US$22.8 million.

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The most exciting progress we are making is development at K&S. IRC’s work on site infrastructure is racing ahead with the key rail and power connections almost complete. Construction work on the processing facilities is the key bottleneck for delivering production and we are maintaining pressure on our contractors. K&S adds low-cost tonnes to our production mix which should see our overall cost performance improve and boost earnings.

For the year as a whole we grew revenue by 15% to US$160.9 million and reduced our pre-impairment loss by 36%. Higher sales volumes and a more positive pricing environment aided the revenue increase. We are also proud of our efforts in reducing costs, notably for transportation. Despite the lower ilmenite prices, the net loss attributable to owners of the company, excluding impairments, fell to US$(19.5) million compared to US$(30.5) million in 2012. We took the prudent view to impair the value of our molybdenum project and part of Kuranakh, reflecting lower market prices for both molybdenum and ilmenite, which increased the net loss attributable to owners of the company to US$(41.6) million. Following a year of significant investment at K&S which will soon yield results, the loss had been expected, and it is pleasing to report that with a pre-impairment consensus estimate loss of US$(21.5) million, the Group did beat consensus estimates by 9%.

The outlook for 2014 is positive for IRC. We will work hard to achieve a quadrupling in production capacity at K&S and look forward to the financial rewards this will achieve. Furthermore, we will progress our Garinskoye project and hope to be in a position to offer further long-term opportunities.’’

There will be a conference call today at 10h00 Hong Kong time to discuss the 2013 Annual Results. The number is +852 2112 1700 and the passcode is 1521527#. Presentation slides to accompany the call are available at www.ircgroup.com.hk. A replay call will be available from 28 March 2014 at www.ircgroup.com.hk.

Financial Highlights

• . Revenue increased by 15% to US$160.9 million in 2013 from US$139.7 million in 2012.

• . Kuranakh Mine achieved a 40% increase in segmental EBITDA to US$22.8 million.

• . Loss attributable to owners of the company narrowed by 28% to US$41.6 million.

• . Excluding impairments, loss attributable to owners of the company narrowed by 36% to US$19.5 million.

• . Loss per share reduced 40% to 1.04 US cents.

• . US$340 million ICBC loan facility drawn by US$194.8 million; gearing ratio low at 10.5%, compared to 12.3% in 2012.

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• . At the end of the year, the company had cash and deposits of US$98.4 million (2012: US$24 million), with US$88.2 million of additional injections from General Nice and Minmetals Cheerglory to be received in April 2014.

Operating Highlights

• . Kuranakh celebrates annual iron ore production above 1 million tonnes

• . 2013 iron ore production increases 6.5% compared to 2012

• . 2013 ilmenite production 20.3% higher compared to 2012

• . Construction and mine development at K&S on track for first commercial production during second half of 2014

• . Expressions of interest to finance Garinskoye DSO operation following positive Bankable Feasibility Study results

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The Board of Directors of IRC Limited is pleased to announce the audited results of the Company and its subsidiaries (collectively referred to as the ‘‘Group’’) for the year ended 31 December 2013, which have been reviewed by the Company’s Audit Committee, comprising of independent non-executive directors.

EXECUTIVE CHAIRMAN AND CHIEF EXECUTIVE OFFICER REVIEW

Dear Shareholder,

In 2013 IRC passed a new milestone with production of over 1 million tonnes at the Kuranakh Mine. This is our highest production yet and the third consecutive time that we have exceeded our iron ore production targets. Kuranakh generated a segmental EBITDA of US$22.8 million, a 40% improvement on 2012.

This is a great achievement and demonstrates our ability to operate. Furthermore, it provides confidence for 2014 when our new K&S Mine will open and ultimately quadruple group production capacity.

Targeting a production capacity of 3.2 million tonnes, K&S will not only add new low-cost production, but also generate significant rewards that shareholders have been patiently waiting for.

In review, 2013 was a year of operational progress while 2014 and 2015 will be the years of financial transformation when we will reap the benefits of this hard work.

Mission to be a Sino-Russian Champion

With a foot in both Russia and China, IRC enjoys an enviable position on one of the world’s most promising trade borders. Sino-Russian trade has become a topic of increasing interest during 2013 as both states signed plentiful trade deals. We believe that with our experience working in both states, we are well positioned to capitalise on the new found interest in Sino-Russian trade and have a clear competitive advantage to succeed due to our experience.

Superior Insight to the World’s Most Important Iron Ore Market

Because China is the largest market for iron ore, we also benefit from a unique insight into this market. A few years ago we suggested that China was not heading for the hard landing that markets feared, and last year we highlighted that contrary to the pessimistic forecasts of many, Chinese iron ore production would grow comfortably and support the price. As it turns out, we were right on all accounts as China successfully manages a path to slower growth. Iron ore demand in 2013 hit new records growing over 10% to 800 million tonnes. Looking forward to 2014, we agree that Chinese demand growth might slow. However, it is important to understand that it will do so off a larger base and therefore even lower growth rates will require as much additional material in volume terms as the high growth witnessed times just a few years back.

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Robust Iron Ore Markets

Strong Chinese demand helps to explain why iron ore markets were good in 2013. The volatility experienced in 2012 abated and the price averaged a smooth US$136 a tonne for the year. Iron ore markets were much more robust than market commentators suggested and iron ore was one of the best performing commodities for the year as a whole.

We try to keep an eye on the longer-term trends in the iron ore market and not be distracted by the occasional volatility or seasonality that can occur. We hold our view that Chinese iron ore demand will continue to grow and iron ore supply will continue to be constrained. This will provide for a firm market and good prices, which will benefit IRC as we develop new projects at the lower end of the cost-curve.

Superior Access to Resources

Often it’s the case that some of the most attractive ore deposits are located in some of the most nonecumene geographies. Historically, our assets were untouched due to the absence of a local steel industry. And contrary to popular opinion, the Russian Far East is well connected, especially to China, where there is a large steel industry. We have access to quality people and skills in the nearby towns and cities. Power and fresh water are readily available at a reasonable cost. These are some of the most important inputs in a successful mining operation, and in many geographies the challenges of providing these render geology insignificant. Fortunately, for IRC this is not the case.

An Established Reputation and Trust

It’s over three years since we listed on the Hong Kong Stock Exchange, and in that time, we have established a reputation as a trusted mining company. We take pride in achieving our goals, and as such, it was pleasing that at Kuranakh we beat our upgraded iron ore production targets for the third consecutive year. Delivering over a million tonnes of iron ore, which is actually 15% above nameplate capacity is a rare achievement for a mining company.

In 2013 we won multiple local and international awards for our corporate reporting. This is a great endorsement for our company in Hong Kong. As we start to generate significant returns from K&S, we are confident that shareholders, old and new, will take comfort and trust in our commitments to the highest standards and a track record that we believe is unmatched.

Operational Advances in 2013

Our portfolio of assets grew on all fronts during 2013. Our producing Kuranakh Mine hit new production records. We also spent considerable time preparing for the future, notably opening up the second pit to provide additional flexibility and the installation of new ilmenite capacitors to increase production capacity. The Kuranakh Mine operation recorded a segmental EBITDA of US$22.8 million for 2013, a 40% improvement compared to 2012.

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At K&S development was rapid. The end of the year saw mining and infrastructure preparation ahead of schedule and the beneficiation plant housed and heated ready for the installation of equipment.

Garinskoye nears a decision on production with the reengineered bankable feasibility study for a DSOstyle operation. Potential funding opportunities are ongoing, with several potential project partners having been identified and a full expression of interest for project financing received from a multilateral banking institution.

Strategic Chinese Partners

Early in the year we announced our proposal to align strategically with Chinese miner-traders General Nice and Minmetals Cheerglory. Shareholders overwhelmingly supported this alliance. There are many opportunities to invest in developing iron ore projects the world over and it is encouraging that these leading Chinese players chose IRC, endorsing our geological and geographic competitive advantages and long term growth potential.

The transaction originally envisaged two stages for completion. These transactions bolster IRC’s balance sheet and will provide the initial capital needed to advance with the development of K&S Phase 2 and the Garinskoye Project. Furthermore, the alliance includes an offtake arrangement, providing IRC with a guaranteed route-to-market for its products and therefore long-term cash flow security.

The first phase of the alliance completed in April 2013 with the injection of just over US$100 million into IRC. Upon completion of the first phase, General Nice and Minmetals Cheerglory received places on IRC’s Board.

At the end of December, General Nice advised that they would not be able to complete the second subscription for new shares in full at that time. We are always monitoring the Chinese macro environment and we observed that credit availability reduced and interest rates increased. As the December deadline progressed, the liquidity situation tightened in China. Subsequently, General Nice has raised further funds and the remaining balance is now due in April 2014. Whilst the delay is regrettable, it was a victim of liquidity constraints and high interest rates that were prevailing in China. The long-term benefits of the strategic partnership however remain firm, and all the parties are committed to completing the transaction.

As we turn our attention to 2014, we have a clear set of goals that will help us deliver on our strategy, namely:

1. Achieve our production targets at Kuranakh: 900,000 tonnes of iron ore and 160,000 tonnes of ilmenite.

2. Start commercial production at K&S during the second half of 2014, ramping up to full capacity of 3.2 million tonnes in 2015.

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1. Complete the Bankable Feasibility Study and financing for K&S Phase II by the end of 2014, targeting production in 2016/2017.

2. Complete the Bankable Feasibility Study and financing for Garinskoye by the end of 2014, targeting construction in 2015.

Achieving these goals will help us deliver on our strategy and unlock the value inherent in our geology. 2014 is set to be a transformational year for IRC and we will be working hard to ensure that our shareholders are rewarded for their patience, notably with the K&S Mine entering production.

Thank you

We would like to thank and congratulate the IRC team and our contractors for their tremendous energy and hard work. Also, we wish to thank you, our shareholders, for your ongoing support in IRC. Our long construction phase will soon be completed and your patience and confidence will be rewarded.

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CFO’S STATEMENT

Dear Shareholder,

In this letter I will explain the main items from our 2013 financial results and why I believe we are in a secure financial position and why I expect we will soon start to enjoy significant positive cash flow from our investments and what this could mean for shareholder returns.

In 2013 IRC drew one step closer to the start-up of the new K&S Mine. As expected, as a consequence of the cost of building a large scale mining operation, IRC has again generated a loss for 2013. However, it is important to note that despite this significant expenditure the Group considerably narrowed its loss in 2013 and the financial position of the Company actually strengthened following subscriptions for new shares by our Chinese strategic investors.

Profit & Loss Account

The Group reported revenue of US$160.9 million, a 15.2% increase compared to 2012. This additional income is mainly derived from higher sales volume and prices for iron ore from our operating Kuranakh Mine. The volume of ilmenite sold also increased but this was not enough to offset lower realised prices.

As one would expect with higher production, total costs also increased. On a unit cost basis the Kuranakh Mine reported a cash cost of US$67.1 per tonne in 2013, this was primarily due to the increased cost of temporarily mining through lower-quality ore, and the smaller contribution from ilmenite by-product credits as explained above. On a positive note, rail freight costs for iron ore fell US$6 per tonne somewhat tempering increases elsewhere. It is pleasing to note that the Kuranakh Mine again reported a positive segmental EBITDA, increasing 40% to US$22.8 million.

The wider cost-cutting initiatives that we started in 2011 continue to help limit inflationary pressures. This is reflected in a reduction in general administrative costs for the second year in a row, reducing to US$19.0 million in 2013 from US$26.2 million in 2012, despite the sizeable business growth.

In 2013, an impairment charge of US$28.9 million was recorded. Due to the weakened molybdenum price and capital requirements for developing these greenfield projects, we decided to suspend investment of molybdenum exploration projects to preserve capital, resulting in an impairment charge of US$13.5 million, of which US$6.7 million was shared by the non-controlling interests. Furthermore, noting the sensitivity at Kuranakh to ilmenite and iron ore prices, we took the appropriate decision to take an impairment charge of US$15.4 million against the project. It’s important to understand that these are non-cash charges and therefore it is appropriate to act in a prudent and conservative manner as we manage our business on a long-term basis.

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Capital & Shareholding Structure

At the end of the year, we reported cash balances of US$98.4 million compared to US$24.0 million last year. This increase is a result of the completed subscriptions from our new Chinese strategic investor, General Nice, of which there are more to follow in 2014 in addition to an investment by Minmetals Cheerglory. The total subscription when announced in January 2013 was at HK 94 cents per share for 1,962,500,000 new shares for HK$1,844.8 million (approximately US$238.0 million). By the end of the 2013, General Nice had completed the subscription of over 60% of its commitments, and by the end of February 2014 over 70% or HK$1,160.8 million (approximately US$149.8 million), with the remaining balance, and the Minmetals Cheerglory subscription due in April 2014.

During the year we continued to draw down on the US$340 million ICBC project finance facility for the K&S Project. At the end of December 2013 a total of US$195 million had been drawn down. It is envisaged that the remaining balance will be fully drawn down by the end of 2014 according to the construction schedule. The loan repayments will begin in December 2014 and are structured to repay in full over a period of 8-years on a semi-annual basis. With operations at K&S scheduled to commence at the end of 2014, the repayment schedule is on track.

At the end of December the Company had cash and deposit balance of US$98.4 million, gross debt of US$214.8 million and the gearing ratio remained low at 10.5% and undrawn facilities totaled US$150 million. Furthermore, by the end of April 2014, the company should receive an additional US$88.2 million of funding from General Nice and Minmetals Cheerglory. This means the Group would have ample resources available for development and ongoing operations.

Looking back on 2013, while the overall operating environment was challenging and our performance affected by the falling commodity prices, we are pleased with the improvements in profitability at Kuranakh and are cautiously optimistic that performance there in 2014 will improve further if the markets for our end products strengthen.

At K&S, we have managed expenditure prudently and look forward to this operation starting to generate an earnings stream that will lift the Group into profitability.

We enter the Year of the Horse in a stronger financial position than last year, even after investing heavily in future growth. We are in an excellent position as we transform from a developer to a significant producer of quality iron ore that will provide good returns for our investors and stakeholders alike.

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2013 CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Profit or Loss

For the year ended 31 December 2013

NOTES Revenue 5 Operating expenses 6 Impairment charges 7 Share of results of an associate Share of results of a joint venture Other gains and losses and other expenses 8 Financial income 9 Financial expenses 10 Loss before taxation Taxation expense 11 Loss for the year (Loss) profit for the year attributable to: Owners of the Company Non-controlling interests Loss per share (US cents) 13 Basic Diluted	2013 US$’000 160,854 (175,181) (28,850) (43,177) — (115) (43,292) (1,475) 988 (3,319) (47,098) (677) (47,775) (41,613) (6,162) (47,775) (1.04) (1.04)	2012 US$’000 (restated) 139,687 (168,131) (27,051) (55,495) (185) (2,338) (58,018) 2,619 412 (2,210) (57,197) (168) (57,365) (57,554) 189 (57,365) (1.74) (1.74)

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Consolidated Statement of Profit or Loss and other Comprehensive Income

For the year ended 31 December 2013

Loss for the year Other comprehensive (expenses) income for the year: Item that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Total comprehensive expenses for the year Total comprehensive (expenses) income attributable to: Owners of the Company Non-controlling interests	2013 US$’000 (47,775) (1,240) (49,015) (42,465) (6,550) (49,015)	2012 US$’000 (restated) (57,365) 1,158 (56,207) (56,686) 479 (56,207)

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Consolidated Statement of Financial Position

At 31 December 2013

NOTES NON-CURRENT ASSETS Exploration and evaluation assets 14 Property, plant and equipment 15 Interests in a joint venture Other non-current assets Restricted bank deposit CURRENT ASSETS Inventories Trade and other receivables 16 Time deposits Cash and cash equivalents TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 17 Current income tax payable Loans payable to a related party 18 Bank borrowings — due within one year 19 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	2013 US$’000 53,303 613,057 4,893 224,269 6,000 901,522 55,230 46,544 2,740 89,642 194,156 1,095,678 (22,042) (274) — (41,250) (63,566) 130,590 1,032,112	2012 US$’000 (restated) 65,440 594,371 4,887 171,479 6,000 842,177 42,966 54,525 2,500 15,536 115,527 957,704 (23,913) (353) (10,260) (15,000) (49,526) 66,001 908,178

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NOTES NON-CURRENT LIABILITIES Deferred tax liabilities Provision for close down and restoration costs Bank borrowings — due more than one year 19 TOTAL LIABILITIES NET ASSETS CAPITAL AND RESERVES Share capital 20 Share premium Treasury shares Capital reserve Reserves Accumulated losses EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY NON-CONTROLLING INTERESTS TOTAL EQUITY	2013 US$’000 (1,986) (8,616) (158,672) (169,274) (232,840) 862,838 5,834 1,166,006 (12,846) 17,984 15,100 (334,302) 857,776 5,062 862,838	2012 US$’000 (restated) (1,868) (14,626) (108,491) (124,985) (174,511) 783,193 4,500 1,042,016 (43,000) 17,984 42,770 (292,689) 771,581 11,612 783,193

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2013

1. General

IRC Limited (‘‘the Company’’) is a public limited company incorporated in Hong Kong and its shares have been listed on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) since 21 October 2010. Its immediate holding company is Cayiron Limited, which was incorporated in the Cayman Islands. The directors of the Company consider that its ultimate holding company is Petropavlovsk PLC. The Company together with its subsidiaries are hereinafter referred to as the ‘‘Group’’.

The address of the registered office and principal place of business of the Company is 6H, 9 Queen’s Road Central, Hong Kong. The consolidated financial statements are presented in United States Dollars (‘‘US Dollars’’), which is also the functional currency of the Company.

The principal activity of the Company is investment holding. The Group is principally engaged in the production and development of industrial commodities products including iron ore that are used in industry across the world. The main activities of the Group are in Russia and China and the Group predominantly serves the Russian and Chinese markets.

2. Basis of Preparation of Consolidated Financial Statements

In preparing the consolidated financial statements, the directors of the Company have given consideration to the going concern status of the Group in light of the Group’s loss for the year, the Group’s capital and other commitments (see note 15), against the cash and cash equivalents and the credit facilities maintained by the Group, and its ultimate holding company’s loan covenant requirements under the ICBC Facility Agreement (as defined in note 19).

In order to ensure sufficient financial resources and maintain the Group’s banking facilities, to provide liquidity and cash flows to sustain the Group as a going concern, the directors of the Company have taken account of the following:

• (i) Under the ICBC Facility Agreement, the Company’s ultimate parent, Petropavlovsk PLC, is required to respect certain financial covenants (see note 19). It announced in a press release dated 23 January 2014 that it was reviewing refinancing options in relation to convertible bonds it has issued. As part of this refinancing exercise, it will need to obtain agreement to temporarily relax its obligation to respect the ICBC Facility Agreement covenants. Petropavlovsk PLC expects to complete this process in first half of 2014; and

• (ii) The expected cash proceeds from the remaining General Nice Further Subscription Shares (as defined in note 20) of HK$451.5 million (equivalent to approximately US$58.2 million) and share subscription by Minmetals Cheerglory Limited (‘‘Minmetals’’) for HK$232.5 million (equivalent to approximately US$30.0 million) in April 2014 (see note 20 for details).

The directors of the Company consider that after taking into account the above, the Group will have sufficient financial resources and available banking facilities to meet its financial obligations as they fall due for the foreseeable future and are satisfied that all covenant obligations will be met accordingly. Accordingly, the consolidated financial statements have been prepared on a going concern basis.

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3. Application of New and Revised Hong Kong Financial Reporting Standards (‘‘HKFRSs’’)

The Group has applied the following new and revised standards, interpretation and amendments (‘‘new and revised HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’) for the first time in the current year:

Amendments to HKFRSs Annual Improvements to HKFRSs 2009–2011 Cycle Amendments to HKFRS 7 Disclosures — Offsetting Financial Assets and Financial Liabilities Amendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements and Disclosure of HKFRS 11 and HKFRS 12 Interests in Other Entities: Transition Guidance HKFRS 10 Consolidated Financial Statements HKFRS 11 Joint Arrangements HKFRS 12 Disclosure of Interests in Other Entities HKFRS 13 Fair Value Measurement HKAS 19 (Revised 2011) Employee Benefits HKAS 27 (Revised 2011) Separate Financial Statements HKAS 28 (Revised 2011) Investments in Associates and Joint Ventures Amendments to HKAS 1 Presentation of Items of Other Comprehensive income HK(IFRIC)-Int 20 Stripping costs in the Production Phase of a Surface Mine

Except as described below, the application of the other new and revised HKFRSs in the current year has had no material impact on the Group’s and the Company’s financial performance and positions for the current and prior year and/or disclosures set out in these consolidated financial statements.

Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income

The amendments to HKAS 1 introduce new terminology for statement of comprehensive income and income statement. Under the amendments to HKAS 1, a statement of comprehensive income is renamed as a statement of profit or loss and other comprehensive income; while an income statement is renamed as a statement of profit or loss. The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements.

In addition, the amendments to HKAS 1 require items of other comprehensive income to be grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. The amendments have been applied retrospectively. The Group used the two statements method and the consolidated statement of comprehensive income is renamed as consolidated statement of profit or loss and other comprehensive income; while the consolidated income statement is renamed as consolidated statement of profit or loss. The presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to HKAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income.

HKFRS 12 Disclosure of Interests in Other Entities

HKFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of HKFRS 12 has resulted in more extensive disclosure in the consolidated financial statements.

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HK(IFRIC)-Int 20 Stripping costs in the Production Phase of a Surface Mine

HK(IFRIC)-Int 20 applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (‘‘production stripping costs’’). Under the interpretation, the costs from this waste removal activity (‘‘stripping’’) which provide improved access to ore is recognised as a non-current asset (‘‘stripping activity asset’’) when certain criteria are met, whereas the costs of normal ongoing operational stripping activities are accounted for in accordance with HKAS 2 Inventories. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part, and is subsequently charged to the profit or loss over the life of the mine on a units of production basis.

Prior to application of HK(IFRIC)-Int 20, production stripping costs are deferred based on the ratio obtained by dividing the tonnage of the waste mined by the quantity of the ore mined (‘‘stripping ratio’’). Production stripping costs incurred in the period are deferred to the extent that the current period stripping ratio exceeds the life-of-mine ratio for each mine. Such deferred costs are then amortised in subsequent periods to the extent that the period’s stripping ratio falls below the life-of-mine ratio. The life-of-mine ratio is based on the mineable reserves of the mine.

The directors of the Company have assessed the impact of the application of HK(IFRIC)-Int 20 retrospectively and considered that the effect on the financial position of the Group as 1 January 2012 is insignificant as the stripping activity prior to 1 January 2012 were substantially providing improved access to ore instead of normal ongoing operational stripping activities that should be accounted for with HKAS 2 Inventories. The Group therefore did not present a third statement of financial position as at 1 January 2012 as required by HKAS 1.

The effect on the results for the current and preceding years by line items presented in the consolidated statement of profit or loss is as follows:

Increase in site operating expenses and loss for the year	2013 US$’000 (588)	2012 US$’000 (4,322)

The effect on the financial position of the Group as at the end of the immediately preceding financial year, i.e. 31 December 2012, is as follows:

Property, plant and equipment, effect on net assets Accumulated losses, effect on equity	31 December 2012 and 1 January 2013 US$’000 (originally stated) 598,693 (288,367)	Restatement US$’000 (4,322) (4,322)	31 December 2012 and 1 January 2013 US$’000 (as restated) 594,371 (292,689)

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Impact on basic and diluted loss per share

Basic and diluted loss per share before adjustments Adjustments arising from application of HK(IFRIC)-Int 20 Reported basic and diluted loss per share	2013 US cents 1.03 0.01 1.04	2012 US cents 1.61 0.13
		1.74

The Group has not early applied any new or revised standards, amendments to standards or interpretation that have been issued at the date of these consolidated financial statements are authorised for issuance but are not yet effective. The directors do not anticipate that the application of these new or revised standards, amendments to standards or interpretation will have a material effect on the Group’s consolidated financial statements.

4. Segment Information

HKFRS 8 Operating Segments requires the Group to disclose reported segments in accordance with internal reports that are provided to the Group’s chief operating decision maker. The Group considers its Executive Committee to be the chief operating decision maker. For management purposes, the Group is organised into four operating segments, Mines in Production, Mines in Development, Engineering, and Other. These operating segments form the basis on which the Group’s Executive Committee makes decisions about resource allocation and performance assessment. No operating segments identified by the Group’s Executive Committee have been aggregated in arriving at the reportable segments of the Group. The Group has four operating and reportable segments under HKFRS 8:

• . Mines in Production segment (‘‘Mines in Production’’), comprises iron ore projects in production phase. This segment includes the Kuranakh project, which is located in the Evreyskaya Avtononnaya Oblast of the Russian Federation (‘‘EAO Region’’).

• . Mines in Development segment (‘‘Mines in Development’’), comprises iron ore projects in the exploration and development phase. This segment includes the K&S project, the Garinskoye project, the Bolshoi Seym project, the Molybdenum Exploration project as well as the Kostenginskoye and Garinskoye Flanks project which are all located in the Russia Far East region.

• . Engineering segment (‘‘Engineering’’), comprises in-house engineering and scientific expertise related to Giproruda, which is located in Russia.

• . Other segment (‘‘Other’’) primarily includes the Jiatai Titanium project (as defined in note 7) for the design and development of a titanium sponge production plant in the People’s Republic of China (‘‘PRC’’), the Group’s interests in a joint venture for the production of vanadium pentoxides and related products in the PRC as well as various other projects, which have similar economic characteristic and activities.

The accounting policies of the operating segments are the same as the Group’s accounting policies. Segment results represent the results earned by each segment without the allocation of central administration expenses, central depreciation and amortisation, other gains and losses and other expenses, financial income and financial expenses.

Segment results represents the profit (loss) generated by each segment for the purpose of monitoring segment performance.

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For the purposes of monitoring segment performances and allocating resources between segments:

• . all assets are allocated to reportable segments other than central cash and cash equivalents; and

• . all liabilities are allocated to reportable segments other than deferred tax, loans payable to a related party and bank borrowings.

For the year ended 31 December 2013

	Revenue External sales Segment revenue Site operating expenses and service costs	Mines in production US$’000 151,939 151,939 (142,431)	Mines in development US$’000 — — (2,851)	Engineering US$’000 8,915 8,915 (7,869)	Other US$’000 — — (2,991)	Total US$’000 160,854 160,854 (156,142)
	Site operating expenses and service costs include: Depreciation and amortisation	(13,284)	(7,092)	(456)	(68)	(20,900)
	Impairment charges Share of results of a joint venture Segment (loss) profit Central administrative expenses Central depreciation and amortisation Other gains and losses and other expenses Financial income Financial expenses Loss before taxation Other segment information Additions to non-current assets: Capital expenditure Exploration and evaluation expenditure capitalised Segment assets Central cash and cash equivalents Consolidated assets Segment liabilities Bank borrowings Deferred tax liabilities Consolidated liabilities	(15,395) — (5,887) 5,002 — 132,643 (11,385)	(13,455) — (16,306) 51,431 1,318 850,598 (9,673)	— — 1,046 57 — 20,451 (1,136)	— (115) (3,106) 8 — 10,786 (8,738)	(28,850) (115) (24,253) (18,826) (213) (1,475) 988 (3,319) (47,098) 56,498 1,318 1,014,478 81,200 1,095,678 (30,932) (199,922) (1,986) (232,840)

– 18 –

For the year ended 31 December 2012

	Revenue External sales Segment revenue Site operating expenses and service costs (restated)	Mines in production US$’000 128,466 128,466 (126,370)	Mines in development US$’000 — — (1,265)	Engineering US$’000 11,221 11,221 (10,610)	Other US$’000 — — (3,689)	Total US$’000 139,687 139,687 (141,934)
	Site operating expenses and service costs include: Depreciation and amortisation (restated)	(14,204)	(4,644)	(480)	(86)	(19,414)
	Impairment charges Share of results of a joint venture Share of results of an associate Segment profit (loss) (restated) Central administrative expenses Central depreciation and amortisation Other gains and losses and other expenses Financial income Financial expenses Loss before taxation (restated) Other segment information Additions to non-current assets: Capital expenditure Exploration and evaluation expenditure capitalised Exploration and evaluation assets acquired on acquisition of subsidiaries Segment assets (restated) Central cash and cash equivalents Consolidated assets (restated) Segment liabilities Bank borrowings Loans payable to a related party Deferred tax liabilities Consolidated liabilities	— — — 2,096 17,202 — — 166,226 (12,764)	(20,990) — (185) (22,440) 54,426 1,369 19,578 756,677 (16,126)	— — — 611 229 — — 20,942 (1,745)	(6,061) (2,338) — (12,088) 108 — — 11,880 (8,257)	(27,051) (2,338) (185) (31,821) (25,843) (354) 2,619 412 (2,210) (57,197) 71,965 1,369 19,578 955,725 1,979 957,704 (38,892) (123,491) (10,260) (1,868) (174,511)

– 19 –

Revenue from major products and services

Starting from July 2012, the Group determined that ilmenite, which had previously been classified as a by-product, should be a major product due to the increasing importance of ilmenite to the Group’s operations, due notably to increasing revenues derived from the product along with continuing investments in ilmenite production capacity and the significantly increased price per ton compared to prior years. The following is an analysis of the Group’s revenue from its major products and services:

Iron ore concentrate Ilmenite Engineering services Revenue by geographical location(a) Japan Russia and the Commonwealth of Independent States (‘‘CIS’’) PRC	2013 US$’000 120,390 31,549 8,915 160,854 2013 US$’000 1,416 8,915 150,523 160,854	2012 US$’000 109,953 18,513 11,221
		139,687
		2012 US$’000 — 11,297 128,390
		139,687

(a) Based on the location to which the product was shipped to or in which the services were provided.

Non-current assets by location of asset[(b)]

Russia PRC Hong Kong	2013 US$’000 889,300 5,240 982 895,522	2012 US$’000 (restated) 829,711 5,489 977
		836,177

(b) Excluding financial assets.

– 20 –

Information about major customers

The Group’s revenue included revenue arising from sales of iron ore concentrate and ilmenite and rendering engineering services to a number of individual third party customers during the years ended 31 December 2013 and 2012. Revenue from customers of the corresponding years contributing over 10% are described below.

For the year ended 31 December 2013, sales were made to Heilongjiang Jianlong Steel Company Limited (US$120,390,000) attributable to the Mines in Production segment comprising 75% of the total revenue. There were no other customers that contributed over 10% on the total revenue of the Group during the year ended 31 December 2013.

For the year ended 31 December 2012, sales were made to Heilongjiang Jianlong Steel Company Limited (US$104,684,000) and Ningbo Xinfu Titanium Dioxide Company Limited (US$17,341,000) attributable to the Mines in Production segment comprising 75% and 12% of the total revenue respectively. There were no other customers that contributed over 10% on the total revenue of the Group during the year ended 31 December 2012.

5. Revenue

An analysis of the Group’s revenue is as follows:

Revenue Sales of goods Rendering of services Operating Expenses Operating expenses Site operating expenses and service costs Central administration expenses	2013 US$’000 151,939 8,915 160,854 2013 US$’000 156,142 19,039 175,181	2012 US$’000 128,466 11,221
		139,687
		2012 US$’000 (restated) 141,934 26,197
		168,131

6. Operating Expenses

– 21 –

7. Impairment Charges

Heilongjiang Jiatai Titanium Co. Limited was a Chinese titanium sponge processing joint venture project established by the Group and a Chinese partner (‘‘Jiatai Titanium project’’). In 2011, the Group successfully acquired the remaining 35% interest in the Jiatai Titanium project from the joint venture partner and planned to proceed with the project while seeking a different joint venture partner. In June 2012, the Group was advised that the potential venture partner previously identified would not be proceeding with the investment in the Jiatai Titanium project. As a result, the directors of the Company decided to postpone the Jiatai Titanium project indefinitely. As the major long-lived assets relating to such project included land use right over a piece of land, and the usage of the parcel of land owned by Jiatai Titanium project is restricted and transfer of legal title is subject to approval by the municipal authorities, the Group’s ability to recover the land use right was call into doubt. The directors of the Company concluded that the most appropriate course of action was to recognise a full impairment charge of US$6,061,000 on the land use rights. This impairment charge was recognised in the consolidated statement of profit or loss for the year ended 31 December 2012.

In December 2012, the directors of the Company assessed that thermal coal deposits associated with K&S project does not have commercial value with the assistance of in-house geologists and the Group decided to suspend the development of such thermal coal deposits indefinitely. In addition, such thermal coal deposits are adjacent to the iron ore deposits of K&S project which cannot be disposed separately. As a result, the directors concluded that the most appropriate course of action were to provide full impairment against the carrying values of the long-lived assets in relation to the thermal coal deposits of approximately US$20,990,000 which is mainly included in mine development costs within property, plant and equipment.

In December 2013, the directors of the Company assessed that the mining licenses associated with the Molybdenum Exploration project, which were capitalized as exploration and evaluation assets, do not have commercial value as there is a number of non-compliances under the requirements of these mining licenses. Due to the funding constraints as described in note 2, the directors of the Company considered it is not cost effective to remediate these noncompliances and decided to suspend the development of this project indefinitely. In addition, taking into account these non-compliances as well as transfer of legal title of these mining licenses is subjected to approval by the municipal authorities, which may be extremely cumbersome, the Group’s ability to recover these assets through sales is uncertain. As a result, the directors of the Company recognised a full impairment charge of approximately US$13,455,000 on the exploration and evaluation assets relating to this project.

At 31 December 2013, the Group considered whether there were any indicators that further impairment or the need to reverse previously recognised impairment existed at Kuranakh project located in the Amur Region of the Russian Federation; and K&S project which is at the developing stage and is located in the EAO Region. The Group identified that a provision for impairment charge of approximately US$15,395,000 (2012: nil) was required against the Kuranakh project due to weaker forecast iron ore and ilmenite prices mainly affected by the falling commodity prices across the globe. These impairment charges are allocated to mine development costs within property, plant and equipment. On the other hand, management concluded that neither further impairment charge nor reversal of impairment charge is required for the K&S project as its recoverable value and fair value less costs of disposal is higher than its carrying value after taking into account the drop in forecast iron ore price.

– 22 –

For the purposes of testing for impairment, recoverable amounts have been determined at value in use, being estimated future cash flows discounted to their present value, based on a number of assumptions. The key assumptions are presented in the table below:

	2013	2012
Real discount rate post-tax	11.5% and 13.5%	10.6% and 13.0%
Real discount rate pre-tax	14.3% and 16.9%	13.2% and 16.3%
Average Russian inflation rate from the year-end to 2043	2.0%	2.0%
Average Russian Rouble: US dollar exchange rate from the year-end
to 2043	33.5	32.0
Average titanomagnetite concentrate prices from the year-end to 2043	US$/tonne 116.3	US$/tonne 115.0
Average ilmenite prices from the year-end to 2023	US$/tonne 165.0	US$/tonne 260.0

Forecast inflation rates and sales prices for iron ore were based on external sources and adjustments to these were made for the expected quality of the forecast production. In addition, management has estimated the long term forecast sales prices for iron ore concentrate prices which take into account their views of the market, recent volatility and other external sources of information. Judgment has then been applied by management in determining a long-term price of iron ore concentrate and ilmenite for the purpose of assessing impairments. The impairment assessments are particularly sensitive to changes in commodity prices. To put the impairment assessment model into perspective, with all other variables kept constant; a 5% drop in input average iron ore concentrate prices would result in the need to consider an additional impairment provision of approximately US$31,234,000 on Kuranakh project; while a 10% drop in input average ilmenite prices would result in the need to consider an additional impairment provision of approximately US$13,553,000 on Kuranakh project. Based on recent market volatility in average iron ore concentrate prices and ilmenite prices, the percentage change analysed represented potential downside scenarios if market volatility persists.

8. Other Gains and Losses and Other Expenses

Net foreign exchange (loss) gain Gain on disposal of property, plant and equipment 9. Financial Income Interest income on cash and cash equivalents Interest income on time deposits Others	2013 US$’000 (1,766) 291 (1,475) 2013 US$’000 853 70 65 988	2012 US$’000 1,676 943
		2,619
		2012 US$’000 296 105 11
		412

– 23 –

10. Financial Expenses

Interest expenses on bank borrowings: — wholly repayable within five years — not wholly repayable within five years Interest expenses on loan from a related party, wholly repayable within five years (note 18) Less: Interest expenses capitalised to property, plant and equipment Unwinding of discount on environmental obligation	2013 US$’000 1,899 7,249 406 (7,249) 2,305 1,014 3,319	2012 US$’000 1,537 2,475 446 (2,475) 1,983 227 2,210

11. Taxation Expense

Russia current tax Cyprus current tax Current tax expense Deferred tax (expense) credit	2013 US$’000 (412) (3) (415) (262) (677)	2012 US$’000 (580) (4) (584) 416 (168)

Russian corporation tax is calculated at a rate of 20% of the estimated assessable profit for both years.

Cypriot corporation tax is calculated at a rate of 12.5% and 10% of the estimated assessable profit for the year ended 31 December 2013 and 2012, respectively.

No Hong Kong profits tax, UK Corporation tax and PRC Enterprise Income tax was provided for as the Group had no assessable profit arising in or derived from these jurisdictions during both years ended 31 December 2013 and 2012.

12. Dividends

No dividend was paid or proposed during 2013 and 2012, nor has any dividend been proposed since the end of the reporting period.

– 24 –

13. Loss Per Share

The calculation of the basic and diluted loss/earnings per share attributable to owners of the Company is based on the following data:

Loss

Loss for the purposes of basic and diluted loss per ordinary share being loss attributable to owners of the Company Number of shares Weighted average number of ordinary shares for the purpose of basic loss per ordinary share	2013 US$’000 (41,613) 2013 Number ’000 3,996,445	2012 US$’000 (restated) (57,554) 2012 Number ’000 3,305,821

The computation of weighted average number of ordinary shares for the purposes of basic loss per ordinary share for the years ended 31 December 2013 does not take into account the Company’s 34,684,875 (2012: 116,100,000) treasury shares after vesting of 81,415,125 share-based awards.

The computation of diluted loss per share for the year ended 31 December 2013 and 2012 does not take into account of the Company’s outstanding shares awarded under the Group’s Long-term Incentive Plan (‘‘LTIP’’) and Deferred Subscription Share (as defined in note 20) since assuming their issuance would result in a decrease in loss per share.

14. Exploration And Evaluation Assets

At the beginning of the year Additions Acquired through acquisitions of subsidiaries Impairment loss recognised (note 7) At the end of the year	2013 US$’000 65,440 1,318 — (13,455) 53,303	2012 US$’000 44,493 1,369 19,578 —
		65,440

Garinskoye, the Garinskoye and Kostengiskoye Flanks, Bolshoi Seym Deposit and Molybdenum Exploration Project are classified as exploration and evaluation assets. Additions in both year 2013 and 2012 mainly related to exploration and evaluation expenses capitalised in exploration and evaluation assets.

– 25 –

15. Property, Plant and Equipment

COST At 1 January 2012 Additions Transfers Disposals Exchange adjustments At 31 December 2012 and 1 January 2013 Additions Transfers Disposals Exchange adjustments At 31 December 2013 ACCUMULATED DEPRECIATION AND IMPAIRMENT At 1 January 2012 Depreciation charge for the year (restated) Impairment charge (note 7) Eliminated on disposals Exchange adjustments At 31 December 2012 and 1 January 2013 (restated) Depreciation charge for the year Impairment charge (note 7) Eliminated on disposals Exchange adjustments At 31 December 2013 CARRYING AMOUNTS At 31 December 2013 At 31 December 2012 (restated)	Mine development costs US$’000 918,557 56,653 (3,846) (5,076) — 966,288 55,997 (5,532) — — 1,016,753 (456,262) (8,809) (20,911) 423 — (485,559) (6,600) — — — (492,159) 524,594 480,729	Mining assets US$’000 91,649 5,095 14,173 — — 110,917 — 6,151 — — 117,068 (16,009) (9,779) — — — (25,788) (13,150) (15,395) — — (54,333) 62,735 85,129	Non- mining assets US$’000 59,750 751 570 (1,062) 685 60,694 — (152) (769) (603) 59,170 (32,147) (1,996) (79) 757 (132) (33,597) (1,833) — 560 (22) (34,892) 24,278 27,097	Capital construction in progress US$’000 17,419 9,466 (10,897) — — 15,988 501 (467) — — 16,022 (14,572) — — — — (14,572) — — — — (14,572) 1,450 1,416	Total US$’000 1,087,375 71,965 — (6,138) 685 1,153,887 56,498 — (769) (603) 1,209,013 (518,990) (20,584) (20,990) 1,180 (132) (559,516) (21,583) (15,395) 560 (22) (595,956) 613,057 594,371

– 26 –

At 31 December 2013, cumulative capitalised borrowing costs of US$11,231,000 (31 December 2012: US$3,982,000) were included within mine development costs in the above table. Depreciation of US$4,706,000 relating primarily to assets used in the construction of plant in LLC Olekminsky Rudnik and LLC KS GOK was capitalised during the year ended 31 December 2013 (31 December 2012: US$819,000).

Additions to mine development costs include deferred stripping costs incurred in the development of the mine of US$2,951,000 and US$2,739,000 (restated) during each of the years ended 31 December 2013 and 2012 respectively which relates to the removal of overburden at the Kuranakh mine.

There are no restrictions on title and no property, plant and equipment were pledged as security.

At 31 December 2013 and 2012, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to US$179,118,000 and US$247,415,000 respectively. The authorised but not contracted commitments as at 31 December 2013 amounted to US$50,465,000 (31 December 2012: US$21,160,000).

16. Trade and Other Receivables

VAT recoverable Advances to suppliers Amounts due from customers under engineering contracts Trade receivables Other debtors	2013 US$’000 29,910 6,647 2,524 4,372 3,091 46,544	2012 US$’000 24,848 8,724 1,267 14,496 5,190
		54,525

Amounts due from customers under engineering contracts are expected to be billed and settled within one year, and relate to the long-term contracts in progress.

Amounts included in trade receivables at 31 December 2013 and 2012 related to iron ore concentrate and ilmenite sold and services performed under engineering contracts invoiced to those customers.

The Group has concentration of credit risk as 61.3% (31 December 2012: 80.7%) of the total trade receivables was due from the Group’s largest customer as at 31 December 2013. The Group has implemented policies that require appropriate credit checks on potential customers before granting credit. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group’s exposure and credit ratings of its counterparties are monitored by management. The maximum credit risk of such financial assets is represented by the carrying value of the asset.

Before accepting new customers, the Group uses an internal credit scoring system to assess the potential customers’ credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed once a year. 99% (2012: 97%) of the trade receivables that are neither past due nor impaired are with good credit quality based on their settlement records.

In determining recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period and no impairment is necessary for these balances which are not past due.

– 27 –

Below is an aged analysis of the Group’s trade receivables based on invoice date at the end of the reporting period.

Less than one month One month to three months Over three months to six months Over six months Total	2013 US$’000 4,267 1 53 51 4,372	2012 US$’000 11,990 2,186 — 320
		14,496

The Group allows credit periods ranging from 5 days to 45 days (2012: 10 days to 45 days) to individual third party customers. The directors of the Company considered that the carrying value of trade and other receivables is approximately equal to their fair value.

Below is an aged analysis of trade receivables based on invoice date which are past due but not impaired:

Less than one month One to three months Over three months to six months Over six months Total	2013 US$’000 12 — — 49 61	2012 US$’000 26 67 — 320
		413

The Group has not provided for impairment loss on trade receivables which are past due as there has not been a significant change in the credit quality and amounts are still considered recoverable based on historical experience.

The following shows an analysis of movements in the allowance for doubtful debts in respect of trade receivables:

At the beginning of the year Changes in allowance for doubtful debts Amounts written off as uncollectible Exchange adjustments At the end of the year	2013 US$’000 2,550 (302) (175) (293) 1,780	2012 US$’000 2,168 654 (496) 224 2,550

Included in the allowance for doubtful debts were impaired trade receivables of US$1,780,000 and US$2,550,000 as at 31 December 2013 and 2012, respectively. The amount mainly represented impairment for trade debtors at Giproruda and Olekma for the years ended 31 December 2013 and 2012 who are in severe financial difficulties and the probability for these trade debtors to settle the receivables is remote. The Group did not hold any collateral over these balances.

– 28 –

17. Trade and Other Payables

Trade creditors Advances from customers Accruals and other payables	2013 US$’000 9,349 986 11,707 22,042	2012 US$’000 10,214 819 12,880
		23,913

For related party and individual third party trade creditors, the average credit period on purchases of goods and services for the year was 38 days (2012: 39 days).

The directors of the Company consider that the carrying amount of trade creditors and other payables approximates their fair value.

Below is an aged analysis of the Group’s trade creditors based on invoice date.

Less than one month One month to three months Over three months to six months Over six months Total	2013 US$’000 6,384 275 271 2,419 9,349	2012 US$’000 5,476 192 341 4,205
		10,214

The directors of the Company consider that the carrying amount of other payables approximates their fair value.

18. Loan Payable to a Related Party

In July 2012, the Group obtained a US$15,000,000 loan facility from Peter Hambro Mining Treasury UK Limited (‘‘PHM’’), a subsidiary of Petropavlovsk PLC and drew down a loan of US$10,000,000 from such facility. The loan borne an annual interest of 10.30% and was repayable on 31 December 2012. In September 2012, the Group entered into a supplement agreement with PHM to extend the repayment date to 30 April 2013 and the loan was fully repaid during the year ended 31 December 2013. As at 31 December 2013, the Group did not have any outstanding credit facilities from PHM (31 December 2012: US$5,000,000 undrawn loan facility from PHM).

– 29 –

19. Bank Borrowings

Bank loans Asian Pacific Bank Industrial and Commercial Bank of China (‘‘ICBC’’) Total Secured Unsecured Total Carrying amount repayable Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years Total	2013 US$’000 20,000 179,922 199,922 179,922 20,000 199,922 41,250 38,864 119,808 199,922	2012 US$’000 15,000 108,491
		123,491
		108,491 15,000
		123,491
		15,000 21,258 87,233
		123,491

Bank loan from Asian Pacific Bank

In August 2012, the Group entered into US$15,000,000 term-loan facility with Asian Pacific Bank. The loan bears an annual interest of 11% which is repayable monthly. The principal of the loan is repayable on 21 August 2013. On 22 July 2013, the US$15,000,000 term-loan facility had been renewed for another 12-months period and with an annual interest of 9.0% for the period from 22 July 2013 and 10.60% for the period from 3 December 2013 to the repayment date. As at 31 December 2013, the whole loan amount was drawn down under the loan facility.

In December 2012, the Group entered into another US$10,000,000 term-loan facility with Asian Pacific Bank. The loan bears an annual interest rate of 11.22% which is repayable monthly. The principal of the loan is repayable on 25 December 2013. On 21 November 2013, the US$10,000,000 term-loan facility had been renewed for another 12months period with an annual interest of 10.60% repayable monthly and the loan principal is repayable by 20 November 2014. As at 31 December 2013, US$5,000,000 was drawn down from such facility.

As at 31 December 2013, the Group had US$5,000,000 (31 December 2012: US$10,000,000) undrawn loan facility with Asian Pacific Bank.

These facilities are primarily working capital financing the Group’s Kuranakh project. The loans are not secured against any assets of the Group or other related parties.

Bank loan from Industrial and Commercial Bank of China

On 6 December 2010, LLC KS GOK (‘‘K&S’’), a wholly owned subsidiary of the Company, had entered into an US$400 million Engineering Procurement and Construction Contract with China National Electric Engineering Corporation for the construction of the Group’s mining operations at K&S.

– 30 –

On 13 December 2010, the Group entered into a project finance facility agreement with ICBC (the ‘‘ICBC Facility Agreement’’) pursuant to which ICBC will lend US$340,000,000 (equivalent to HK$2.64 billion) to LLC KS GOK to be used to fund the construction of the Group’s mining operations at K&S in time for the start of major construction works in early 2011. Interest under the facility was charged at 2.80% above London Interbank Offering rate (‘‘LIBOR’’) per annum. The whole facility amount is repayable semi-annually in 16 installments of US$21,250,000 each, starting from December 2014 when the whole facility amount is expected to be drawn down and is fully repayable by June 2022.

On 14 December 2011, the Group made the first drawdown amounting to US$6,958,000. During the year ended 31 December 2012, the Group made further drawn downs amounting to US$112,479,000. Further, additional drawn downs amounting to US$75,332,000 were made by the Group during the current year. The loan is carried at amortised cost with effective interest rate at 5.63% per annum. The outstanding loan principals were US$194,769,000 as at 31 December 2013 (31 December 2012: US$119,437,000), which is repayable semi-annually starting from December 2014 and is expected to be fully repaid by December 2018.

As at 31 December 2013 and 2012, US$6,000,000 was deposited with ICBC under a security deposit agreement related to the ICBC Facility Agreement and is presented as restricted bank deposit under non-current assets. The deposit carries interest at prevailing market rate at around 1.0% per annum for years ended 31 December 2013 and 2012.

As at 31 December 2013, the Group had US$145,231,000 (31 December 2012: US$220,563,000) undrawn financing facility in relation to the ICBC Facility Agreement.

Guarantee arrangements

In relation to the ICBC loan, Petropavlovsk PLC has guaranteed the Group’s obligations under the ICBC Facility Agreement. Petropavlovsk PLC, the Company and LLC KS GOK have entered into an agreement setting out the terms on which Petropavlovsk PLC provides the guarantee (‘‘Recourse Agreement’’). No fee will be payable by the Group in respect of the provision of the guarantee by Petropavlovsk PLC while Petropavlovsk PLC remains the parent company of the Company under relevant financial reporting standards. In the event that Petropavlovsk PLC ceases to be the parent company of the Company under the relevant financial reporting standards as agreed with Petropavlovsk PLC, a fee of no more than 1.75% on outstanding amount will be payable by the Company to Petropavlovsk PLC in respect of the guarantee. No security will be granted by the Group to Petropavlovsk PLC in respect of the guarantee. Pursuant to the Recourse Agreement, Petropavlovsk PLC will have the obligation to inject funds into the Group by shareholder loan (on normal commercial terms at the time) in order to enable the Group to make payments under the ICBC Facility Agreement or for other working capital purposes. The Recourse Agreement also contains reporting obligations and customary covenants from the Group which require Petropavlovsk PLC’s consent as guarantor (acting reasonably and taking into account the effect upon the Group’s ability to fulfill its obligations under the ICBC Facility Agreement) for certain actions including the issuance, acquisition or disposal of securities, and entry into joint ventures.

As at 31 December 2013, Petropavlovsk PLC beneficially owns approximately 48.70% (31 December 2012: 63.13%) of the issued share capital of the Company and its shareholding in the Company is further diluted to 46.98% upon further share subscription by General Nice in February 2014 (note 20). Though Petropavlovsk PLC has less than a majority of the voting rights of the Company, its voting rights are sufficient to give it the practical ability to direct the relevant activities of the Company unilaterally and retains control over the Company. Accordingly, the Company is still considered as a subsidiary of Petropavlovsk PLC. Under the ICBC Facility Agreement, each of the following will constitute a covenant; and noncompliance with any covenant will constitute an event of default upon which the ICBC Facility Agreement will become immediately due and payable: (i) Petropavlovsk PLC must retain a not less than 30% direct or indirect interest in the Company; (ii) Petropavlovsk PLC has an obligation to maintain a minimum tangible net worth of not less than US$750,000,000, a minimum interest cover ratio of 3.5:1 and a maximum leverage ratio of 4:1; and (iii) there are also certain limited restrictions on the ability of the Petropavlovsk PLC to grant security over its assets, make disposals of its assets or enter into merger transactions. As at 31 December 2012 and 2013, the Group does not have any non-compliance on the above covenants.

– 31 –

20. Share Capital

As disclosed in note 47 to the Group’s 2012 consolidated financial statements, on 17 January 2013, the Company entered into a conditional subscription agreement with each of General Nice and Minmetals for an investment by General Nice and Minmetals in new shares of the Company up to approximately HK$1,845,000,000 (equivalent to approximately US$238,000,000) in aggregate.

A total of 851,600,000 new shares of the Company at the price of HK$0.94 (equivalent to approximately US$0.12) per share was initially subscribed by General Nice, of which 817,536,000 new shares were allotted and issued to General Nice on 5 April 2013 following approval by the shareholders and the receipt of subscription monies of approximately HK$800,504,000 (equivalent to approximately US$103,086,000) from General Nice.

The allotment and issue of the remaining 34,064,000 new shares (‘‘Deferred Subscription Share’’) is conditional upon, among other things, the further subscription by General Nice within six months after the completion date of initial share subscription by General Nice. On 4 October 2013, the Company received an irrevocable notice from General Nice for exercising its right to further subscribe for 863,600,000 new shares of the Company (‘‘General Nice Further Subscription Shares’’) for a cash consideration of approximately HK$811,800,000 (equivalent to approximately US$104,700,000) (‘‘General Nice Further Subscription Right’’). Following the exercise of the General Nice Further Subscription Right, Minmetals would subscribe for 247,300,000 new shares of the Company for a cash consideration of HK$232,500,000 (equivalent to approximately US$30,000,000). The completion of the General Nice and Minmetals subscriptions was expected to take place on 18 November 2013.

As the exercise of the General Nice Further Subscription Right was after three months but within six months from the initial share subscription by General Nice, pursuant to the conditional subscription agreement with General Nice, 8,516,000 (25%) Deferred Subscription Shares were forfeited and the associated amount of approximately HK$8,005,000 (equivalent to approximately US$1,032,000) received was retained by the Company for its benefit. The remaining 25,548,000 Deferred Subscription Shares, amounting to approximately HK$24,015,000 (equivalent to approximately US$3,096,000) would be allotted and issued to General Nice at the same time as the allotment and issue of all the new shares of the Company upon completion of General Nice Further Subscription Shares. These amounts are included in share premium of these consolidated financial statements.

On 18 November 2013, the Company agreed with General Nice that the General Nice Further Subscription Shares shall be deferred and taken place on or before 30 December 2013. As completion of the Minmetals subscription could only take place after completion of General Nice Further Subscription Shares, the Company also agreed that the Minmetals subscription shall take place on or before 30 December 2013.

On 30 December 2013, General Nice informed the Company that it is not in a position to complete the General Nice Further Subscription Shares in full. Instead, General Nice subscribed 218,340,000 new shares of the Company for approximately HK$205,200,000 (equivalent to approximately US$26,469,000) as partial subscription of the General Nice Further Subscription Shares. Consequently, Minmetals subscription did not take place as planned.

On 29 January 2014, the Group signed a supplemental agreement to the conditional share subscription agreements dated 17 January 2013 with General Nice that the remaining General Nice Further Subscription Shares will be completed as follows:

• (a) a payment of at least HK$155.1 million (equivalent to approximately US$20.0 million) on or before 24 February 2014; and

• (b) the balance, being HK$606.6 million (equivalent to approximately US$78.2 million) less the amount paid in (a) above, on or before 22 April 2014.

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Further, in light of the arrangements between the Company and General Nice as described above, the Company and Minmetals have agreed that the Minmetals subscription shall complete upon full completion of General Nice Further Subscription Shares taking place as described above.

On 26 February 2014, pursuant to the aforesaid arrangement albeit a little delayed, the Group received subscription monies of HK$155.1 million (equivalent to approximately US$20.0 million) from General Nice and accordingly has allotted and issued 165,000,000 new shares of the Company to General Nice as a further partial subscription of General Nice Further Subscription Shares.

Transaction costs of approximately US$4,231,000 directly attributable to the issuance of new shares to General Nice were charged to the share premium account.

Details of allotment and issuance of ordinary shares by the Company during the year ended 31 December 2013 are as follows:

Authorised Ordinary shares of HK$0.01 each at 31 December 2012 and 2013 Allotted, called up and fully paid At 1 January 2012 Issued during the year for acquisition of LLC Uralmining Issued during the year for acquisition of Caedmon Limited At 31 December 2012 and 1 January 2013 Issued to General Nice during the year At 31 December 2013	Number 10,000,000,000 3,362,000,000 74,681,360 57,352,941 3,494,034,301 1,035,876,000 4,529,910,301	US$’000 12,820
		4,330 96 74
		4,500 1,334
		5,834

Details of the ordinary shares of the Company issued during the year ended 31 December 2012 and 2013, and ordinary shares of the Company in issue at the end of 31 December 2013 and 2012 are given in the table below.

Date Description 1 January 2012 Issued share capital 11 July 2012 Issue of share capital 24 July 2012 Issue of share capital 5 April 2013 Issue of share capital 30 December 2013 Issue of share capital 31 December 2013 Number of ordinary shares in issue at the end of the reporting period	Price HK$ 0.01 0.01 0.01 0.01 0.01 0.01	No. of shares 3,362,000,000 57,352,941 74,681,360 817,536,000 218,340,000
		4,529,910,301

21. Events After the Reporting Period

On 26 February 2014, 165,000,000 new shares of the Company was allotted and issued to General Nice after the Group received subscription monies of HK$155.1 million (approximately US$20.0 million) from General Nice. Please refer to note 20 for details.

On 28 February 2014, the Group has renewed the US$15,000,000 and US$10,000,000 term loan facilities from Asian Pacific Bank and extended both repayment dates to 31 December 2015. Further, the annual interest rate of the US$15,000,000 term loan facility is reduced to 9.0% while the annual interest rate for the US$10,000,000 term loan facility remains at 10.6%.

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RESULTS OF OPERATIONS

Revenue

Iron ore concentrate

Sales volumes for iron ore in 2013 set new records at 1,012,817 tonnes, a 3.3% increase compared to 980,543 tonnes in 2012. The average selling price of iron ore marginally improved from US$112.1 per tonne in 2012 to US$118.9 per tonne in 2013, representing a 6.1% increase. Total revenue from the sales of iron ore increased by US$10.4 million from US$110.0 million to US$120.4 million, an increase of 9.5%.

Ilmenite

Approximately 141,644 tonnes of ilmenite were sold in 2013, an increase of 16.8% as compared to 121,238 tonnes in 2012. The price of ilmenite was, however, weaker during the year, falling 19.5% to US$222.7 per tonne for 2013 compared to the same period in 2012. Since the second half of 2012, we considered ilmenite, which had previously been classified as a by-product, a more significant product due to the increase in its sales volume after the ramping up of ilmenite production circuit. As such, all ilmenite sales in 2013 were recognised as revenue while in the first half of 2012, ilmenite sales of US$15.2 million were treated as a by-product credit, netted off the cost of iron ore production.

Engineering services

Engineering service revenue from Giproruda, the Group’s complementary mine design business, was marginally lower at US$8.9 million for 2013 compared to US$11.2 million 2012.

Site operating expenses and service costs

In 2013, production volumes of both iron ore and ilmenite ramped up at Kuranakh. Consequently the site operating expenses, including the production and transportation costs of iron ore and ilmenite, also increased accordingly. Total site operating expenses and service costs for Kuranakh in 2013 amounted to US$142.4 million (2012: US$126.4 million) which includes railway tariffs and related transportation costs for iron ore of US$35.7 million (2012: US$40.5 million).

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During 2013, we produced 1,032,615 tonnes of iron ore concentrate for a cash cost of US$69.3 million. In accordance with general market practice and for presentation and analysis purposes, the table below details ilmenite sales as a by-product credit by treating the sales revenue as an offsetting item in the production cash cost of iron ore (similar to the first half of 2012). The details of the key cash cost components are as follows:

Mining Processing Transportation to plant Production overheads Site administration and related costs Contribution from sales of ilmenite* and others Production cash cost	2013 Total Cash Cost Cash cost per tonne US$ million US$/t 38.7 37.5 19.0 18.4 7.3 7.0 9.6 9.3 13.4 13.1 (18.7) (18.2) 69.3 67.1	2012 Cash cost per tonne US$/t 31.1 18.7 8.0 10.8 12.6 (25.2) 56.0

• net of tariff and other railway charges for ilmenite

The increase in production cash cost to US$67.1 per tonne is mainly due to the reduction in contribution from ilmenite sales by-product credits, following the softening of ilmenite market price in 2013; and the temporary rise in mining costs, as efforts were focussed on mining through lower-grade ore in order to increase the face availability of the potential higher-grade ore for the future in accordance with the mining plan.

Segmental information

Despite the significant drop in ilmenite selling prices achieved in 2013 and the rising mining costs, the Group’s two income generating segments, ‘‘Mine in production’’ and ‘‘Engineering’’ segments, increased their segmental profits before impairment charges to US$9.5 million (2012: US$2.1 million) and US$1.0 million (2012: US$0.6 million) respectively. Segmental loss of the Group narrowed from US$31.8 million in 2012 to a loss of US$24.3 million in 2013.

Central administration expenses

In light of the challenging operating environment and reduction of ilmenite price, special attention was paid to controlling administrative costs. In 2013, administration expenses decreased by 27.3% from US$26.2 million in 2012 to US$19.0 million in 2013, primarily due to the implementation of certain cost savings initiatives.

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Impairment charges

In 2013, a non-cash impairment charge of US$28.9 million was recorded (2012: US$27.1 million) relating to the write down carrying values of two of our projects. In 2013, we assessed the mining licenses and assets associated with the Molybdenum exploration project, which were capitalised as exploration and evaluation assets. Due to the overall depressed molybdenum price and the increasing costs that need to be incurred to ensure compliance with the mining licenses, we decided to suspend any further investment and development of the project in order to preserve capital. As a result, the Group’s Molybdenum assets amounting to US$13.5 million are fully impaired (of which US$6.7 million was shared by the non-controlling interests). Further, when performing the impairment assessments, we are noting that the business model for the Kuranakh project is particularly sensitive to ilmenite and iron ore prices, especially after taking into consideration the weakened ilmenite prices in 2013. We considered a provision for impairment charge of US$15.4 million was sensible against the Kuranakh project.

Net operating loss

As a result of the above, the net operating loss before impairments in 2013 reduced by 53.4% from US$31.0 million to US$14.4 million, mainly resulted from the increase in production and sales volume of iron ore and ilmenite and a reduction of administrative costs. Taking into account the impairment provisions, net operating loss decreased by US$14.7 million to US$43.3 million.

Share of results of joint venture and associate

Share of loss of joint venture and associate narrowed from US$2.5 million in 2012 to US$0.1 million primarily due to the improved performance of the vanadium joint venture after the improved recovery rates of vanadium.

Other gains and losses and other expenses

In 2013, we recorded other losses of US$1.5 million, primarily attributable to net foreign exchange loss of US$1.8 million due to the depreciation of Russian Roubles against USD. In 2012, gains of US$2.6 million were booked, primarily due to a one-off gain on disposal of equipment and net foreign exchange gain attributable to appreciation of Russian Roubles.

Net financial expense

The Group reported a net financial expense of US$2.3 million in 2013, as compared to US$1.8 million in 2012, due to the increased drawdown of short-term working capital facilities for Kuranakh project.

Loss for the year attributable to the owners of the Company

Consequently, the Group recorded a loss of US$41.6 million attributable to the owners of the Company in 2013, a fall of 27.7% compared to the loss of US$57.6 million reported for last year.

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Liquidity, Financial and Capital Resources

Share capital

On 5 April 2013, General Nice subscribed a total of 851,600,000 new shares of the Company at a price of HK$0.94 (equivalent to approximately US$0.12) per share. Pursuant to the subscription agreement, the Company allotted and issued to General Nice 817,536,000 new shares and received subscription money of approximately HK$800.5 million (equivalent to approximately US$103.1 million). The allotment and issuance of the remaining 34,064,000 new shares is conditional upon, among other things, the allotment and issuance of the further subscription shares to General Nice. On 4 October 2013, we received an irrevocable notice from General Nice for exercising its right to further subscribe for 863,600,000 new shares of the Company for a cash consideration of approximately HK$811.8 million (equivalent to approximately US$104.7 million). Following the exercise and full completion of the General Nice further subscription, Minmetals would subscribe for 247,300,000 new shares of the Company for a cash consideration of HK$232.5 million (equivalent to approximately US$30 million).

As the exercise of the General Nice Further Subscription Right was after three months but within six months from the initial share subscription by General Nice, pursuant to the conditional subscription agreement with General Nice, 8,516,000 (25%) Deferred Subscription Shares were forfeited and the associated amount of approximately HK$8.0 million (equivalent to approximately US$1.0 million) received was retained by the Company for its benefit. The remaining 25,548,000 Deferred Subscription Shares, amounting to approximately HK$24.0 million (equivalent to approximately US$3.1 million) would be allotted and issued to General Nice at the same time as the allotment and issue of all the new shares of the Company upon full completion of General Nice Further Subscription Shares.

On 30 December 2013, General Nice subscribed 218,340,000 new shares of the Company for approximately HK$205.2 million (equivalent to approximately US$26.5 million) as partial subscription of the General Nice Further Subscription Shares. On 26 February 2014, the Group received subscription monies of HK$155.1 million (approximately US$20.0 million) from General Nice and accordingly has allotted and issued 165,000,000 new shares of the Company to General Nice as a further partial subscription of General Nice Further Subscription Shares.

It is expected that the remainder of General Nice Further Shares Subscription of HK$451.5 million (equivalent to approximately US$58.2 million); and share subscription in the Company by Minmetals for HK$232.5 million (equivalent to approximately US$30.0 million) will be completed by 22 April 2014.

Transaction costs of approximately US$4,231,000 directly attributable to the issuance of new shares in 2013 to General Nice were charged to the Share premium account.

The share placements not only provided a strong strategic Chinese investment partners, but also solidified our financial strength and derisked our offtake process.

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Cash position and capital expenditure

As 31 December 2013, the carrying amount of the Group’s cash and bank balances was approximately US$98.4 million (31 December 2012: US$24.0 million), of which US$6.0 million is under restricted cash deposit. It represents an increase of US$74.4 million, primarily due to the investment proceeds from General Nice, net of expenditure to fund K&S development and administrative costs. It is anticipated that most of the future capital expenditure for the development of the K&S project would be funded by the undrawn loan facility from ICBC of approximately US$145.2 million (2012: US$220.6 million).

Exploration, Development and Mining Production Activities

During 2013, US$245.3 million (2012: US$255.9 million) was incurred on exploration, development and mining production activities, details of which are set out below:

The following table details the capital and operating expenditures in 2013 (US$’ million):

Kuranakh, primarily sustaining capital expenditure K&S development Exploration projects and others	Operating expenses US$’m 129.3 0.9 2.0 132.2	Capital expenditure US$’m 5.2 107.2 0.7 113.1	For the year ended 31 December 2013 Total US$’m 134.5 108.1 2.7 245.3	For the year ended 31 December 2012 Total US$’m 128.1 123.7 4.1
				255.9

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While CNEEC remains as the main contractor for the construction and purchase of major equipment for K&S project under the US$400 million EPC contract, the below are the details of material new contracts and commitments entered into during the year on a by-project basis.

Projects Nature Kuranakh Purchase of property, plant and equipment K&S Sub-contracting for mining works Sub-contracting for railways and related works Sub-contracting for excavation related works Purchase of property, plant and equipment Others Other contracts and commitments	For the year ended 31 December 2013 US$’m 1.6 7.0 2.8 4.0 0.8 0.3 16.5	For the year ended 31 December 2012 US$’m 2.0 — 0.1 — — —
		2.1

Borrowings and Charges

As 31 December 2013, the Group had a gross borrowing of US$214.8 million (31 December 2012: US$144.7 million). All of the Group’s borrowings were denominated in US dollars. Of the gross borrowings, US$20.0 million is unsecured bank borrowing repayable within one year while the remaining US$194.8 million represents long term borrowing drawn from the US$340 million ICBC loan facility which is guaranteed by Petropavlovsk. The Group has kept its borrowing costs at market level, with its weighted average interest rate at approximately 6.2% per annum. As of 31 December 2013, gearing, expressed as the percentage of net borrowings to the total of net borrowings and net assets, is 10.5% (31 December 2012: 12.3%).

Risk of Exchange Rate Fluctuation

The Group undertakes certain transactions denominated in foreign currencies, principally Russian Roubles and is therefore exposed to exchange rate risk associated with fluctuations in the relative values of US Dollars. Exchange rate risks are mitigated to the extent considered necessary by the Board of Directors, primarily through holding the relevant currencies. At present, the Group does not undertake any foreign currency transaction hedging. In light of the political instability in Ukraine, Russian Roubles recently depreciated. As almost all of our income is denominated in US dollars while a major portion of our operating costs are in Russian Roubles, it is expected that the Group would

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benefit from a weaker Roubles on operational front. However, the depreciation in Roubles would result in unrealised foreign exchange loss arising from the mark-to-market effect of translating Roubles denominated assets to US dollars.

Employees and Emolument Policies

As at 31 December 2013, the Group employed a total of 2,492 employees (2012: 2,140 employees). The total staff costs excluding share based payments incurred were approximately US$54.0 million for 2013 (2012: US$55.2 million). Despite the fact that the headcounts increased in 2013, the Group managed to control staff cost at a comparable level to that of 2012. The emolument policy of the employees of the Group is set up by the Executive Committee on the basis of their merit, qualifications and competence.

EXTRACT FROM THE INDEPENDENT AUDITORS’ REPORT

The following is an extract of the independent auditors’ report on the Group’s audited financial statements for the year ended 31 December 2013 which has included an emphasis of matter, but without qualification:

‘‘Opinion

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2013, and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance.

Emphasis of Matter

Without qualifying our opinion, we draw attention to note 2 to the consolidated financial statements which indicates, the Group incurred loss for the year ended 31 December 2013, and the Group had significant capital and other commitments against the cash and cash equivalents and the credit facilities maintained by the Group. As a consequence, a series of measures are being taken which are disclosed in note 2 to the consolidated financial statements to ensure the Group’s financing needs. Further, the Group’s ability to continue as a going concern is also dependent on the ongoing availability of the financing under the existing ICBC Facility Agreement (as defined in note 33 to the consolidated financial statements) under which the Group’s ultimate holding company is the guarantor and required to respect the relevant covenant obligations. The directors of the Company consider that, provided that (i) the Group’s ultimate holding company is able to successfully obtain a temporary relaxation of the relevant covenant obligations under the ICBC Facility Agreement; and (ii) the additional financing measures of the Group are effective, the Group will have sufficient working capital to finance its operations and to pay its financial obligations as and when they fall due in the foreseeable future. The sufficiency of working capital is dependent on the Group’s and its ultimate holding company’s ability to successfully implement the measures as set out in note 2 to the consolidated financial statements. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern.’’

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The aforesaid ‘‘note 2 to the consolidated financial statements’’ and ‘‘note 33 to the consolidated financial statement’’ in the extract form the independent auditors’ report are disclosed as note 2 and note 19 respectively to this results announcement.

OTHER INFORMATION

Resources and Reserves information

In conjunction with rule 18.14 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’), IRC has updated its Resources and Reserves information and further details are set out in IRC’s 2013 annual report.

Corporate Governance

The Board of Directors (the ‘‘Board’’) of IRC is committed to promoting good corporate governance to safeguard the interests of the shareholders and to enhance the Group’s performance. Throughout the year, the Company was in compliance with the code provisions set out in the Corporate Governance Code (the ‘‘CG Code’’) as stated in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Model Code for Securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Listing Rules (the ‘‘Model Code’’). The Company has also adopted the Model Code as the Code for Securities Transactions by Relevant Employees to regulate dealings in securities of the Company by certain employees of the Company, or any of its subsidiaries and the holding companies who are considered to be likely in possession of unpublished price sensitive information in relation to the Company or its securities.

Purchase, Sale or Redemption of the Company’s Listed Securities

During the year, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities.

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PUBLICATION OF FINAL RESULTS AND ANNUAL REPORT

This results announcement is published on the websites of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and of the Company (www.ircgroup.com.hk). The annual report of the Company for the year ended 31 December 2013 containing all the information required by the Listing Rules will be despatched to the Company’s shareholders and published on the above websites in due course.

By Order of the Board G. Jay Hambro Executive Chairman

Hong Kong, People’s Republic of China Thursday, 27th March 2014

As at the date of this announcement, the Executive Directors of the Company are Mr G. Jay Hambro, Mr Yury Makarov, and Mr Raymond Kar Tung Woo. The Non-Executive Directors are Mr Simon Murray, CBE, Chevalier de la Légion d’honneur, Mr Cai Sui Xin and Mr Liu Qingchun. The Independent Non-Executive Directors are Mr Daniel Bradshaw, Mr Jonathan Martin Smith and Mr Chuang-Fei Li.

For further information, please contact:

Nicholas Bias Head of Communications Telephone: +852 2772 0007 Mobile: +852 9088 1029 Email: nb@ircgroup.com.hk

Shirly Chan (中文查詢) Investor Relations Co-Ordinator Telephone: +852 2772 0007 Mobile: +852 6623 3450 Email: sc@ircgroup.com.hk

Registered Office IRC Limited 6H, 9 Queen’s Road Central Hong Kong Office: +852 2772 0007 Fax: +852 2772 0329 Website: www.ircgroup.com.hk

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