IRC Limited - Capital/Financing Update 2013

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.

This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

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(a company incorporated in Hong Kong with limited liability)

(Stock code: 1029)

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General Nice Development Limited Minmetals Cheerglory Limited

JOINT ANNOUNCEMENT

(1) SUBSCRIPTION OF NEW SHARES BY GENERAL NICE AND MINMETALS CHEERGLORY (2) APPLICATION FOR WHITEWASH WAIVER (3) CONTINUING CONNECTED TRANSACTIONS AND

(4) SPECIAL DEALS

Financial adviser to IRC Limited

Financial advisers to Financial adviser to General Nice Development Limited Minmetals Cheerglory Limited

Independent Financial Adviser to the Independent Board Committee

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STRATEGIC INVESTMENT BY GENERAL NICE AND MINMETALS CHEERGLORY

On 17 January 2013, the Company entered into conditional subscription agreements with each of General Nice and Minmetals Cheerglory for an investment by General Nice and Minmetals Cheerglory in new Shares for up to approximately HK$1,844.8 million (approximately US$238.0 million) in aggregate. The Company has also entered into a long-term offtake arrangement with General Nice and Minmetals Cheerglory in respect of the Group’s products.

The strategic investment by General Nice and Minmetals Cheerglory into the Company forms a partnership with the Company that bolsters the trading of industrial commodities between Russia and China and strengthens the Company’s mission to be a Sino-Russian industrial commodities champion as the proceeds will be applied to fund IRC’s growth projects and provide long-term offtake assurance. Proceeds from the strategic investment will be used for development of the flagship K&S Mine and other exploration projects. The Offtake Arrangement with General Nice and Minmetals Cheerglory, who are experienced Chinese iron ore traders, will provide sales volume and cash-flow security to the Group.

SHARE ISSUE TRANSACTION

General Nice Subscription

On 17 January 2013, General Nice entered into the General Nice Subscription Agreement with the Company pursuant to which General Nice has conditionally agreed to subscribe for a total of 851,600,000 new Shares at the price of HK$0.94 (approximately US$0.12) per new Share, of which 817,536,000 new Shares (the General Nice Initial Subscription Shares) will be allotted and issued upon General Nice Initial Subscription Completion and the remaining 34,064,000 new Shares (the General Nice Deferred Subscription Shares) will be allotted and issued upon, among other things, the allotment General Nice Further Subscription Shares.

Assuming Total Investment Completion occurs, the General Nice Subscription Shares will, in aggregate, represent approximately 31.43% of the issued share capital of the Company as enlarged by the Share Issue Transaction (assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares between the date of the Investors’ Subscription Agreements up to Total Investment Completion and there is no adjustment to the number of General Nice Deferred Subscription Shares).

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Minmetals Cheerglory Subscription

On 17 January 2013, Minmetals Cheerglory entered into the Minmetals Cheerglory Subscription Agreement with the Company pursuant to which Minmetals Cheerglory has conditionally agreed to subscribe for a total of 247,300,000 new Shares at the price of HK$0.94 (approximately US$0.12) per new Share. The Minmetals Cheerglory Subscription Completion is conditional upon, among other things, the completion of the General Nice Further Subscription.

Assuming Total Investment Completion occurs, the Minmetals Cheerglory Subscription Shares will represent approximately 4.53% of the issued share capital of the Company as enlarged by the Share Issue Transaction (assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares between the date of the Investors’ Subscription Agreements up to Total Investment Completion and there is no adjustment to the number of General Nice Deferred Subscription Shares).

An application will be made by the Company for the listing of, and permission to deal in, the Subscription Shares.

PARTIES ACTING IN CONCERT AND APPLICATION FOR WHITEWASH WAIVER

Upon Total Investment Completion, General Nice will hold approximately 31.43% of the issued share capital of the Company as enlarged by the Share Issue Transaction (assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares between the date of the Investors’ Subscription Agreements up to Total Investment Completion and there is no adjustment to the number of General Nice Deferred Subscription Shares). Minmetals Cheerglory is a party acting in concert with General Nice and will (on the same assumptions) hold a further 4.53% of the issued share capital of the Company upon Total Investment Completion.

Upon Total Investment Completion, General Nice and Petropavlovsk will both hold greater than 20% of the issued share capital of the Company at that time and will be associated companies of the Company and of each other. As a result of this and certain provisions contained in the Shareholders’ Agreement, General Nice and Petropavlovsk will be deemed to be acting in concert under the Takeovers Code.

Under Rule 26.1 of the Takeovers Code, General Nice would be obliged to make a mandatory general offer to the Shareholders for all the issued Shares and other securities of the Company not already owned or agreed to be acquired by it and parties acting in concert with it unless the Whitewash Waiver is obtained from the Executive. In this regard, General Nice and Minmetals Cheerglory (as a party acting in concert with General Nice) will make an application to the Executive for the Whitewash Waiver in respect of the allotment and issue of the General Nice Subscription Shares and the Minmetals Cheerglory Subscription Shares. The Whitewash Waiver, if granted by the Executive, will be subject to, among other things, the approval of the Independent Shareholders at the EGM by way of a poll. If the Whitewash Waiver is not granted, the Share Issue Transaction and the Offtake Arrangement will not proceed.

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OFFTAKE ARRANGEMENT

Under the Offtake Arrangement, which applies to all of the existing and future iron ore projects of the Group (other than the Kuranakh project and other specified types of projects) and in respect of products with an iron content of 32% or greater, (i) the Company shall sell and the Investors shall purchase Product which is nominated by the Company to be sold through the seaborne market (Seaborne Product); and (ii) the Investors shall assist the Group in developing its sales and marketing capacity in the dry port market (i.e. Product to be exported by rail crossing rather than by sea) and in the identification of customers for its Products which are not sold through the seaborne market to the Investors (Dry Port Product), for which the Company shall pay the Investors a marketing commission.

Upon General Nice Initial Subscription Completion, General Nice will become a connected person of the Company as it will be a substantial Shareholder. Accordingly, although Minmetals Cheerglory will not be a connected person of the Company, the Offtake Arrangement (which will take effect upon General Nice Initial Subscription Completion) will constitute continuing connected transactions of the Company under the Listing Rules.

Since the relevant ratios (as defined under the Listing Rules) in respect of the proposed Offtake Arrangement Annual Caps exceed 5%, the Offtake Arrangement is subject to the announcement, reporting and independent shareholders’ approval requirements under the Listing Rules.

EFFECT OF SHARE ISSUE TRANSACTION ON PETROPAVLOVSK

As a result of the Share Issue Transaction, upon Total Investment Completion, the shareholding of Petropavlovsk, the controlling Shareholder, will be diluted from 63.13% of the existing issued share capital of the Company to 40.43% of the issued share capital of the Company as enlarged by the Share Issue Transaction (assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares between the date of the Investors’ Subscription Agreements up to Total Investment Completion and there is no adjustment to the number of General Nice Deferred Subscription Shares).

As from Total Investment Completion, it is expected that the Company will cease to be treated as a subsidiary of Petropavlovsk and will no longer be consolidated in Petropavlovsk’s consolidated financial statements. Such dilution of Petropavlovsk’s shareholding in the Company requires the approval of Petropavlovsk’s shareholders under the UK Listing Rules.

As a result of the deconsolidation, under the Recourse Agreement, a fee will become payable by the Company to Petropavlovsk in respect of the provision by Petropavlovsk of a guarantee in favour of ICBC Bank under the Company’s ICBC Facility Agreement. This Guarantee Fee per annum is proposed to be an amount not exceeding 1.75% of the principal amount outstanding under the ICBC Facility Agreement.

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Petropavlovsk and the Investors have entered into the Shareholders’ Agreement, to take effect only upon General Nice Further Subscription Completion, pursuant to which Petropavlovsk on the one hand and the Investors on the other will give and receive mutual undertakings with respect to the exercise of their voting rights and certain other aspects in relation to their shareholdings in the Company.

In December 2010, Petropavlovsk granted a guarantee in favour of ICBC Bank under the ICBC Facility Agreement. The ICBC Guarantee currently covers the entire amount outstanding under the facility notwithstanding that Petropavlovsk holds, as at the date of this announcement, only 63.13% of the issued share capital of the Company. Petropavlovsk and General Nice have also entered into the Deed of Indemnity, to take effect only upon General Nice Further Subscription Completion, pursuant to which General Nice will indemnify Petropavlovsk for certain obligations as guarantor under the ICBC Facility Agreement or loans made in accordance with the Recourse Agreement, and payments or repayments to Petropavlovsk under the ICBC Facility Agreement or the Recourse Agreement will be shared by Petropavlovsk with General Nice, in proportion to their respective shareholdings in IRC.

The agreement of the amount and payment of the Guarantee Fee and the entry into the Deed of Indemnity constitute special deals under notes 4 and 5 to Rule 25 of the Takeovers Code and therefore require the consent of the Executive. Such consent, if granted, will be subject to (i) the Independent Financial Adviser publicly stating that in its opinion, the terms of the Special Deals are fair and reasonable and (ii) the approval of the Special Deals by the Independent Shareholders by way of poll at the EGM. If the Special Deals are not approved by the Independent Shareholders or if consent to either of the Special Deals is not granted by the Executive, the Share Issue Transaction and the Offtake Arrangement will not proceed.

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GENERAL

An Independent Board Committee has been established by the Company to advise the Independent Shareholders on, among other things, (i) the terms of the Investors’ Subscription Agreements and the transactions contemplated thereunder, (ii) the Whitewash Waiver, (iii) the terms of the Offtake Arrangement and the transactions contemplated thereunder and (iv) the Special Deals. No member of the Independent Board Committee has any interest or involvement in the transactions contemplated under the Investors’ Subscription Agreements, the Whitewash Waiver, the Offtake Arrangement or the Special Deals. The EGM will be held to consider and, if thought fit, pass the EGM Resolutions. The Investors, their respective ultimate beneficial owners and parties acting in concert with any of them do not currently hold any shares in the Company and accordingly will not vote on the EGM Resolutions. Only the Independent Shareholders will be entitled to vote on the EGM Resolutions.

Due to their involvement in negotiations regarding the Share Issue Transaction, the Executive Directors, Petropavlovsk and parties acting in concert with any of them shall abstain from voting at the EGM in respect of the EGM Resolutions.

The Independent Board Committee has appointed Somerley Limited as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders (as the case may be) on (i) the terms of the Investors’ Subscription Agreements and the transactions contemplated thereunder, (ii) the Whitewash Waiver, (iii) the terms of the Offtake Arrangement and the transactions contemplated thereunder and (iv) the Special Deals.

The Circular containing, among other things: (i) details of the Share Issue Transaction and the Investors’ Subscription Agreements; (ii) details of the Whitewash Waiver; (iii) details of the Offtake Arrangement; (iv) details of the Deed of Indemnity; (v) details of the Guarantee Fee; (vi) a letter of recommendation from the Independent Board Committee; (vii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Investors’ Subscription Agreements and the transactions contemplated thereunder, the Whitewash Waiver, the Offtake Arrangement and the transactions contemplated thereunder and the Special Deals; (viii) a notice of the EGM; and (ix) other information as required under the Listing Rules and the Takeovers Code, will be despatched by the Company to the Shareholders as soon as practicable and in compliance with the Takeovers Code.

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Shareholders are reminded that the Share Issue Transaction is conditional upon the conditions of the Investors’ Subscription Agreements being fulfilled or waived as set out under the sections headed ‘‘Conditions of the General Nice Subscription’’ and ‘‘Conditions of the Minmetals Cheerglory Subscription’’ in this announcement and the Share Issue Transaction may or may not proceed. In particular, the Executive may or may not grant the Whitewash Waiver or consent to the Special Deals and the Independent Shareholders may or may not approve the Investors’ Subscription Agreements, the Whitewash Waiver or the Special Deals and/or the approval of Petropavlovsk’s shareholders may not be obtained. Further, the Minmetals Cheerglory Subscription and the General Nice Further Subscription is subject to General Nice exercising, in its discretion, the General Nice Further Subscription Right, which it may or may not exercise. The Offtake Arrangement is also conditional upon General Nice Initial Subscription Completion. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

1. INTRODUCTION

On 17 January 2013, the Company entered into the General Nice Subscription Agreement and the Minmetals Cheerglory Subscription Agreement with General Nice and Minmetals Cheerglory, respectively, in respect of a strategic investment in the Company by the Investors and the Offtake Arrangement with General Nice and Minmetals Cheerglory. The strategic investment by General Nice and Minmetals Cheerglory into the Company forms a partnership with the Company that bolsters the trading of industrial commodities between Russia and China and strengthens the Company’s mission to be a Sino-Russian industrial commodities champion.

The Share Issue Transaction is expected to raise up to approximately HK$1,844.8 million (approximately US$238.0 million) for the Company which would provide capital resources for use by IRC in the development of the flagship K&S Mine and other exploration projects. The Offtake Arrangement with General Nice and Minmetals Cheerglory, who are experienced Chinese iron ore traders, will provide sales volume and cash-flow security to the Group over the long-term.

2. THE SHARE ISSUE TRANSACTION

(a) General Nice Subscription

(i) General Nice Subscription Agreement

Date

17 January 2013

Parties (a) General Nice (as subscriber); and

(b) the Company (as issuer).

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Number of General Nice Initial Subscription Shares 817,536,000 new Shares Maximum number of General Nice Deferred Subscription Shares 34,064,000 new Shares Number of General Nice Further Subscription Shares 863,600,000 new Shares Maximum number of Shares to be issued to General Nice 1,715,200,000 new Shares

Pursuant to the General Nice Subscription Agreement, General Nice has conditionally agreed to subscribe for a total of 851,600,000 new Shares at the price of HK$0.94 (approximately US$0.12) per new Share, of which 817,536,000 new Shares (the General Nice Initial Subscription Shares) will be allotted and issued upon General Nice Initial Subscription Completion. The allotment and issue of the remaining 34,064,000 new Shares (the General Nice Deferred Subscription Shares) is conditional upon, among other things, the allotment and issue of the General Nice Further Subscription Shares. General Nice will pay to the Company a subscription amount upon General Nice Initial Subscription Completion of approximately HK$800.5 million (approximately US$103.3 million), being the total consideration for all the 851,600,000 new Shares at the Subscription Price.

Under the General Nice Subscription Agreement, the Company has also granted General Nice a right to subscribe for 863,600,000 new Shares (the General Nice Further Subscription Shares), which may be exercised at General Nice’s discretion within six months after the General Nice Initial Subscription Completion Date. General Nice will pay to the Company a subscription amount upon General Nice Further Subscription Completion of approximately HK$811.8 million (approximately US$104.7 million), being the total consideration for these 863,600,000 new Shares at the Subscription Price.

In order to incentivise General Nice to exercise the General Nice Further Subscription Right, if the General Nice Further Subscription Right is exercised within three months after the General Nice Initial Subscription Completion Date, the Company shall allot and issue all of the General Nice Deferred Subscription Shares at the same time as the allotment and issue of the General Nice Further Subscription Shares. If the General Nice Further Subscription Right is exercised in the period commencing three months after the General Nice Initial Subscription Completion Date but on or before the General Nice Further Subscription Expiry Date, the Company shall allot and issue only three-quarters of the General Nice Deferred Subscription Shares at the same time as the allotment and issue of the General Nice Further Subscription Shares, and the Subscription Price paid for the remaining one-quarter of the General Nice Deferred Subscription Shares which have

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not been allotted and issued shall be retained by the Company for its benefit. If the General Nice Further Subscription Right is not exercised by the General Nice Further Subscription Expiry Date, the Company shall not issue any General Nice Deferred Subscription Shares and the entirety of the Subscription Price paid for the General Nice Deferred Subscription Shares shall be retained by the Company for its benefit. The maximum number of General Nice Deferred Subscription Shares will also be allotted and issued to General Nice in the event of a material breach by IRC of the terms of the General Nice Subscription Agreement such that General Nice does not exercise the General Nice Further Subscription Right within six months after the General Nice Initial Subscription Completion Date.

The percentage of issued share capital of the Company represented by the General Nice Initial Subscription Shares as at General Nice Initial Subscription Completion and the percentage of issued share capital of the Company represented by the General Nice Further Subscription Shares and the General Nice Deferred Subscription Shares at General Nice Further Subscription Completion and Total Investment Completion are set out in detail in the section headed ‘‘7. Shareholding structure of the Company’’ below.

(ii) Conditions of the General Nice Subscription

General Nice Initial Subscription Completion is conditional upon, inter alia:

(a) the granting of the Whitewash Waiver;
(b) the Executive having granted its consent in relation to the Special Deals;
(c) the Shareholders having approved the EGM Resolutions;
(d) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Subscription Shares (and such listing and permission not subsequently being revoked prior to the delivery of definitive share certificate(s) representing the General Nice Initial Subscription Shares);
(e) the shareholders of Petropavlovsk having approved the Share Issue Transaction as required pursuant to the UK Listing Rules in a general meeting of Petropavlovsk; and

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(f) none of the specified exploration, extraction and/or production licences of the Group having been revoked nor any governmental authority having notified the Group that the licences will be revoked.

The General Nice Initial Subscription Conditions listed above, other than General Nice Initial Condition (f), cannot be waived. In the event that any of the General Nice Initial Subscription Conditions have not been fulfilled or waived by the General Nice Initial Subscription Long Stop Date in accordance with the General Nice Subscription Agreement, the General Nice Subscription Agreement shall terminate with immediate effect except for the Surviving Clauses, and the parties shall be released from all liabilities and obligations thereunder, except for any accrued rights or obligations of a party at the date of termination.

Save for the exercise of the General Nice Further Subscription Right, there are no conditions to the completion of the General Nice Further Subscription.

An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the General Nice Subscription Shares.

(iii) Completion of the General Nice Initial Subscription and General Nice Further Subscription

Subject to fulfillment and/or waiver of the General Nice Initial Subscription Conditions, General Nice Initial Subscription Completion shall take place on the date that is 15 Business Days following the date on which the last of those conditions precedent has been fulfilled or waived.

General Nice Further Subscription Completion shall take place 10 Business Days following the date on which the General Nice Further Subscription Right is exercised.

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(b) Minmetals Cheerglory Subscription

(i) Minmetals Cheerglory Subscription Agreement

Date

17 January 2013

Parties (a) Minmetals Cheerglory (as subscriber); and
(b) the Company (as issuer).

Number of Minmetals Cheerglory Subscription Shares

247,300,000 new Shares

Pursuant to the Minmetals Cheerglory Subscription Agreement, Minmetals Cheerglory has conditionally agreed to subscribe for a total of 247,300,000 new Shares at the price of HK$0.94 (approximately US$0.12) per new Share. Minmetals Cheerglory will pay to the Company a subscription amount upon Minmetals Cheerglory Subscription Completion of approximately HK$232.5 million (approximately US$30.0 million), being the total consideration for all the 247,300,000 new Shares at the Subscription Price.

(ii) Conditions of the Minmetals Cheerglory Subscription

Minmetals Cheerglory Subscription Completion is conditional upon, inter alia:

(a) the granting of the Whitewash Waiver;
(b) the Shareholders having approved the EGM Resolutions;
(c) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Minmetals Cheerglory Subscription Shares (and such listing and permission not subsequently being revoked prior to the delivery of definitive share certificate(s) representing the Minmetals Cheerglory Subscription Shares);

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(d) the shareholders of Petropavlovsk having approved the Share Issue Transaction as required pursuant to the UK Listing Rules in a general meeting of Petropavlovsk;
(e) Minmetals Cheerglory having completed all registration and filing processes with the National Development and Reform Commission (國家發展和改革委員會) (‘‘NDRC’’) and the State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會) (‘‘SASAC’’) in relation to the Minmetals Cheerglory Subscription, and having received the certificate of registration from the NDRC and neither NDRC nor SASAC having raised any objection to the Minmetals Cheerglory Subscription within 25 Business Days after completion of such registration and filing processes;
(f) General Nice having exercised the General Nice Further Subscription Right; and
(g) none of the specified exploration, extraction and/or production licences of the Group having been revoked nor any governmental authority having notified the Group that the licences will be revoked.

The Minmetals Cheerglory Subscription Conditions listed above, other than Minmetals Cheerglory Subscription Condition (f) and (g), cannot be waived. In the event that any of the Minmetals Cheerglory Subscription Conditions have not been fulfilled or waived by the Minmetals Cheerglory Subscription Long Stop Date in accordance with the Minmetals Cheerglory Subscription Agreement, the Minmetals Cheerglory Subscription Agreement shall terminate with immediate effect except for the Surviving Clauses, and the parties shall be released from all liabilities and obligations thereunder, except for any accrued rights or obligations of a party at the date of termination.

An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Minmetals Cheerglory Subscription Shares.

(iii) Completion of the Minmetals Cheerglory Subscription

Subject to fulfillment and/or waiver of the Minmetals Cheerglory Subscription Conditions and General Nice Further Subscription Completion, Minmetals Cheerglory Subscription Completion shall take place on the date that is 10 Business Days following the date on which the last of those conditions precedent has been fulfilled or waived.

(c) Subscription Price for the Subscription Shares

The Subscription Price for each Subscription Share is HK$0.94 (approximately US$0.12). This represents:

(i) a discount of approximately 33.8% to the closing price of HK$1.42 per Share as quoted on the Stock Exchange on the Last Trading Day;

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(ii) a discount of approximately 27.2% to the average closing price of HK$1.29 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to and including the Last Trading Day;
(iii) a discount of approximately 25.3% to the average closing price of HK$1.26 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days immediately prior to and including the Last Trading Day;
(iv) a discount of approximately 13.9% to the average closing price of HK$1.09 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days immediately prior to and including the Last Trading Day; and
(v) a discount of approximately 46.5% to the Group’s published consolidated net asset per Share (excluding minority interest) as at 30 June 2012 of approximately HK$1.76 (based on a total of 3,494,034,301 Shares as at the date of the Investors’ Subscription Agreements).

The Subscription Price was determined after arm’s length negotiation between the Company and the Investors with reference to a number of factors, including, among others, the recent trading prices of the Shares on the Stock Exchange and the assets, financial and business condition of the Company.

The total amount payable for the General Nice Subscription Shares is approximately HK$1,612.3 million (approximately US$208.0 million) and will be financed from a combination of internal cash resources, and external financing made available to General Nice.

The total amount payable for the Minmetals Cheerglory Subscription Shares in the sum of approximately HK$232.5 million (approximately US$30.0 million) will be financed from Minmetals Cheerglory’s internal cash resources.

(d) Ranking of Subscription Shares

The Subscription Shares, when issued and fully paid, will rank pari passu in all respects among themselves and with all the Shares in issue at the respective dates of allotment and issue of the Subscription Shares, including the right to any dividends or distributions made or declared on or after the date of their respective allotment.

(e) Restrictions on issue of new Shares by Company and disposals by the Investors

The Company has undertaken to the Investors that for the Company Lock-up Period, it will not, without the prior written consent of the Investors, (i) allot or issue or offer to allot or issue or grant any option, right or warrant to subscribe (either conditionally or unconditionally, or directly or indirectly, or otherwise) any Shares or any interests in Shares or any securities convertible into or exercisable or exchangeable for or substantially similar to any Shares or interest in Shares or (ii) agree (conditionally or unconditionally) to enter into or

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effect any such transaction described in (i) above or any transaction with the same economic effect or (iii) announce any intention to enter into or effect any such transaction described in (i) or (ii) above, except for:

(a) the General Nice Initial Subscription Shares;
(b) the General Nice Further Subscription Shares and the General Nice Deferred Subscription Shares (if the General Nice Further Subscription Right is exercised);
(c) the Minmetals Cheerglory Subscription Shares; and
(d) up to 57,352,941 Shares to be issued as consideration payable by the Company if it decides to exercise the Caedmon Option pursuant to the Caedmon Agreement.

Subject to certain exceptions, which shall be set out in further detail in the Circular, each of the Investors has undertaken to the Company that it shall not, without prior written consent of the Company, during the Investors’ Lock-Up Period, (i) dispose of (A) any Shares or any direct or indirect interest therein (including, without limitation, by granting or creating any option, mortgage, pledge, charge or other security interest or encumbrance) or (B) any securities convertible into or exercisable or exchangeable for any Shares, (ii) enter into any swap or other derivative transaction or other arrangement that transfers, in whole or in part, any economic consequence of ownership of any Shares or any securities convertible into or exercisable or exchangeable for any Shares, (iii) dispose of any direct or indirect interest in any company or entity holding any Shares or any securities convertible into or exercisable or exchangeable for any Shares or (iv) announce any intention to enter into or effect any such transaction described in (i), (ii) or (iii) above.

(f) Proposed change of Board composition

Under the General Nice Subscription Agreement, upon General Nice Initial Subscription Completion, General Nice shall have the right to nominate two non-executive Directors to the Board.

Please also refer to paragraphs ‘‘(d) Side Letter with General Nice’’ and ‘‘(e) Shareholders’ Agreement’’ of the section headed ‘‘6. Effect of the Share Issue Transaction on Petropavlovsk’’ for further details.

3. REASONS AND BENEFITS FOR THE SHARE ISSUE TRANSACTION AND USE OF PROCEEDS

Raising up to approximately HK$1,844.8 million (approximately US$238.0 million) for the Company, the Share Issue Transaction will strengthen the Company’s mission to be a Sino-Russian industrial commodities champion as the proceeds will be applied to fund the Company’s growth projects.

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The Share Issue Transaction would also expand and diversify the shareholder base of the Company with the inclusion of General Nice, a Chinese resources mining and trading group and Minmetals Cheerglory, a subsidiary of one of the largest State-owned resource focussed conglomerates in China. The investment into the Company by General Nice and Minmetals Cheerglory would raise the profile of the Company in Hong Kong and China and also give the Company scope for further future cooperation with General Nice and Minmetals Cheerglory in the Chinese and international markets.

The Company is currently implementing a substantial development programme for its projects. It is currently envisaged that the proceeds from the Share Issue Transaction of approximately HK$1,844.8 million (approximately US$238.0 million) will be used for the development of the K&S Project and Garinskoye Project, and for general working capital purposes, in the following manner:

(a) no less than 90% of the proceeds to be used for the development of the K&S Project and Garinskoye Project, by first applying the proceeds to the on-going development of the K&S Project (including but not limited to the development of Stage 2 of the K&S Project), and the remaining balance to the expansion of Garinskoye Project; and
(b) no more than 10% of the proceeds as general working capital of the Group.

If only General Nice Initial Subscription Completion occurs, the General Nice Initial Subscription would raise approximately HK$800.5 million (approximately US$103.3 million) for the Company, and such proceeds would be used towards the development of the K&S Project.

4. PARTIES ACTING IN CONCERT AND APPLICATION FOR WHITEWASH WAIVER

Upon Total Investment Completion, General Nice will hold approximately 31.43% of the issued share capital of the Company as enlarged by the Share Issue Transaction (assuming that no additional Shares other than the Subscription Shares will be issued between the date of the Investors’ Subscription Agreements up to Total Investment Completion and the General Nice Further Subscription Right is exercised within three months of General Nice Initial Subscription Completion) or approximately 31.33% of the issued share capital of the Company as enlarged by the Share Issue Transaction (assuming that no additional Shares other than the Subscription Shares will be issued between the date of the Investors’ Subscription Agreements up to Total Investment Completion and the General Nice Further Subscription Right is not exercised within three months of General Nice Initial Subscription Completion). Minmetals Cheerglory is a party acting in concert with General Nice and will (on the same assumptions) hold a further 4.53% of the issued share capital of the Company upon Total Investment Completion.

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Upon Total Investment Completion, General Nice and Petropavlovsk will both hold greater than 20% of the issued share capital of the Company at that time and will be associated companies of the Company and of each other. As a result of this and certain provisions contained in the Shareholders’ Agreement, General Nice and Petropavlovsk are deemed to be acting in concert under the Takeovers Code.

As General Nice will hold more than 30% of the issued share capital of the Company as enlarged by the Share Issue Transaction, General Nice would be obliged to make a mandatory general offer under Rule 26 of the Takeovers Code for all the Shares and other securities of the Company not already owned or agreed to be acquired by General Nice and parties acting in concert with it unless the Whitewash Waiver is obtained from the Executive. In this regard, General Nice and Minmetals Cheerglory (as a party acting in concert with General Nice) will make an application to the Executive for the Whitewash Waiver in respect of the allotment and issue of the General Nice Subscription Shares and the Minmetals Cheerglory Subscription Shares. The Whitewash Waiver, if granted, would be subject to, among other things, the approval of the Independent Shareholders at the EGM by way of poll. If the Whitewash Waiver is not granted, the Share Issue Transaction and the Offtake Arrangement will not proceed.

Only the Independent Shareholders will be entitled to vote on the EGM Resolutions at the EGM. Due to their involvement in negotiations regarding the Share Issue Transaction, the Executive Directors, Petropavlovsk and parties acting in concert with any of them are considered to be ‘‘involved in’’ the Share Issue Transaction under Note 1 on dispensations from Rule 26 of the Takeovers Code. Accordingly, the Executive Directors and Petropavlovsk will abstain from voting at the EGM in respect of the EGM Resolutions.

5. INVESTORS’ DEALING AND INTEREST IN THE COMPANY’S SECURITIES

As at the date of this announcement, General Nice and parties acting in concert with it (other than Petropavlovsk) do not hold, control or have direction over the voting rights in the Company or rights over the Shares; Petropavlovsk (which is considered to be acting in concert with General Nice) controls approximately 63.13% of the issued share capital of the Company. As at the date of this announcement, General Nice and parties acting in concert with it have not received any irrevocable commitment from any Shareholders to vote in favour of the EGM Resolution.

Each of the Investors has confirmed that neither it nor any persons acting in concert with it (including Petropavlovsk):

(a) has acquired or disposed of or entered into any agreement or arrangement to acquire or dispose of any voting rights in the Company within the six months prior to the date of the Investors’ Subscription Agreements and up to the date of this announcement;
(b) owns any outstanding options, warrants, or any securities that are convertible into Shares or any derivatives in respect of Shares nor has entered into any outstanding derivative in respect of securities in the Company;

– 16 –

(c) has any arrangement referred to in Note 8 to Rule 22 of the Takeovers Code (whether by way of option, indemnity or otherwise) in relation to the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or shares of General Nice and which might be material to the transactions contemplated under the Investors’ Subscription Agreements or the Whitewash Waiver with any other persons;
(d) has any agreements or arrangements to which it/he/she is a party which relate to the circumstances in which it/he/she may or may not invoke or seek to invoke a pre-condition or a condition to the transactions contemplated under the Investors’ Subscription Agreements or the Whitewash Waiver, nor any such agreements or arrangements the consequences of its/his/ her so invoking or seeking to invoke a precondition or a condition to such transactions would result in any break fees being payable; and
(e) has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

Save for the entering into of the Investors’ Subscription Agreements, none of General Nice or any party acting in concert with it (including Minmetals Cheerglory and Petropavlovsk) has dealt in the Shares or convertible securities, warrants or options (or outstanding derivatives) in respect of the Shares for the six months period prior to the date of this announcement.

6. EFFECT OF THE SHARE ISSUE TRANSACTION ON PETROPAVLOVSK

As a result of the Share Issue Transaction, upon Total Investment Completion, the shareholding of Petropavlovsk, the controlling shareholder of the Company, will be diluted from 63.13% to 40.43% of the issued share capital of the Company (assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares between the date of the Investors’ Subscription Agreements up to Total Investment Completion and there is no adjustment to the number of General Nice Deferred Subscription Shares). If only General Nice Initial Subscription Completion occurs and General Nice Further Subscription Completion does not occur, Petropavlovsk’s shareholding will be diluted to 51.16% (assuming that there is no change in the issued share capital of the Company other than the issue of the General Nice Initial Subscription Shares between the date of the Investors’ Subscription Agreements up to General Nice Initial Subscription Completion).

(a) Petropavlovsk shareholder approval

As from Total Investment Completion, it is expected that the Company will cease to be treated as a subsidiary of Petropavlovsk and will no longer be consolidated in Petropavlovsk’s consolidated financial statements. The dilution of Petropavlovsk’s shareholding in the Company requires the approval of Petropavlovsk’s shareholders under the UK Listing Rules. If approval of Petropavlovsk’s shareholders is not obtained, the Share Issue Transaction and the Offtake Arrangement will not proceed.

– 17 –

(b) Recourse Agreement

As disclosed in the CNEEC EPC Circular of the Company dated 24 December 2010, the terms on which Petropavlovsk was prepared to provide the ICBC Guarantee are set out in the Recourse Agreement entered into between Petropavlovsk, the Company and K&S. Pursuant to the Recourse Agreement, Petropavlovsk will have the right 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. Under the Recourse Agreement, a monthly fee (the Guarantee Fee) based on normal commercial rates is payable by the Company to Petropavlovsk if Petropavlovsk ceases to be the parent company of the Company. Upon Total Investment Completion, the Company would no longer be considered a subsidiary of Petropavlovsk and the Guarantee Fee would become payable by the Company to Petropavlovsk. It is proposed that the Guarantee Fee per annum would be an amount not exceeding 1.75% of the principal amount outstanding under the ICBC Facility Agreement. The ICBC Guarantee coupled with the Recourse Agreement (including payment of the Guarantee Fee thereunder) constitutes an exempt continuing connected transaction pursuant to Listing Rule 14A.65(4). The agreement of the amount and payment of the Guarantee Fee constitutes a special deal under Note 4 to Rule 25 of the Takeovers Code — please refer to paragraph ‘‘(f) Specials Deals’’ below for further details.

(c) Deed of Indemnity

The ICBC Guarantee described in paragraph ‘‘(b) Recourse Agreement’’ above currently covers the entire amount outstanding under the facility notwithstanding that Petropavlovsk holds, as at the date of this announcement, only 63.13% of the issued share capital of the Company. General Nice and Minmetals Cheerglory have agreed to use their best efforts and reasonable efforts, respectively, to assist Petropavlovsk in procuring the release of the ICBC Guarantee or the amendment of the ICBC Guarantee so that it becomes a several obligation of each of Petropavlovsk and General Nice in proportion to their respective shareholdings in the Company.

Until such time, Petropavlovsk and General Nice have agreed to enter into the Deed of Indemnity under which General Nice has granted an indemnity in favour of Petropavlovsk, to take effect upon General Nice Further Subscription Completion, to share part of any liability of Petropavlovsk under the ICBC Guarantee and any loans made to the Company or K&S under the Recourse Agreement. The Deed of Indemnity would cover such percentage of Petropavlovsk’s obligations under the ICBC Guarantee or loans made by Petropavlovsk under the Recourse Agreement as represented by General Nice’s shareholdings in the Company as a proportion of the combined shareholdings of Petropavlovsk and General Nice in the Company. It is also contemplated under the Deed of Indemnity that payments or repayments to Petropavlovsk under the ICBC Facility Agreement or the Recourse Agreement and the Guarantee Fee payable by the Company to Petropavlovsk as described in ‘‘(b) Recourse Agreement’’ above will be shared by Petropavlovsk with General Nice in the same proportion.

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The entry into the Deed of Indemnity constitutes a special deal under note 5 to Rule 25 of the Takeovers Code — please refer to paragraph ‘‘(f) Specials Deals’’ below for further details.

(d) Side Letter with General Nice

On 17 January 2013, Petropavlovsk and General Nice entered into a side letter which shall be effective from General Nice Initial Subscription Completion and until the expiry of the General Nice Further Subscription Exercise Period or, if the General Nice Further Subscription Right is exercised, General Nice Further Subscription Completion, under which (i) Petropavlovsk will support the appointment of two representatives nominated by General Nice to serve as non-executive Directors to the Board; (ii) Petropavlovsk undertakes to General Nice not to dispose of Shares held by it; and (iii) General Nice undertakes to Petropavlovsk to use its best endeavours, at the request of Petropavlovsk, to assist Petropavlovsk to procure the release of the ICBC Guarantee.

(e) Shareholders’ Agreement

Under the terms of the Shareholders’ Agreement, entered into on 17 January 2013, in accordance with the shareholdings of Petropavlovsk and the Investors in the Company calculated using a prescribed formula, Petropavlovsk, on the one hand, and the Investors, on the other, may nominate up to three representatives to serve as Director of the Company. Petropavlovsk and the Investors each agree to, among other things: (i) exercise their respective voting rights so as to support the appointment of representatives nominated by the other party to serve as a Director of the Company; and (ii) procure that their nominated Directors, subject to fiduciary duties and other relevant restrictions under law, also support the appointment. The Investors shall also be entitled to nominate one person to the Company’s Executive Committee.

Petropavlovsk has undertaken to the Investors to exercise its voting rights so as to support the Offtake Arrangement and any renewal of the Offtake Arrangement, if any, subject to fiduciary duties and other relevant restrictions under law.

If General Nice or an affiliate of General Nice proposes to sell any interest in mineral assets to the Company, Petropavlovsk has undertaken to procure that the Board will consider such a proposal in good faith, and the Investors have undertaken that their nominated Directors will abstain from voting in any resolutions of the Board relating to such a proposal if required by law or regulations or the Company’s articles of association.

Petropavlovsk has undertaken, so far as it is not required by the Listing Rules to abstain from voting, to support any such asset sale proposal provided that any independent financial adviser appointed by the Company for such purpose opines that the terms of the proposal are fair and reasonable in so far as the independent shareholders of the Company are concerned.

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Petropavlovsk and the Investors have given mutual undertakings not to, and will procure that parties acting in concert with it will not, acquire voting rights in the Company which would result in an obligation to make a mandatory general offer by any or all of Petropavlovsk and the Investors in accordance with the Takeovers Code.

The Shareholders’ Agreement contains no restrictions on the disposal of Shares save for (i) an undertaking from Petropavlovsk to the Investors not to dispose of any Shares held by it for a period of 12 months following Total Investment Completion; and (ii) mutual undertakings from each of Petropavlovsk, General Nice and Minmetals Cheerglory to give each other notice of any dealings in Shares.

(f) Special Deals

The agreement of the amount and payment of the Guarantee Fee referred to in paragraph ‘‘(b) Recourse Agreement’’ above and the entry into the Deed of Indemnity referred to at ‘‘(c) Deed of Indemnity’’ above constitute special deals under note 4 and note 5 to Rule 25 of the Takeovers Code, respectively. Accordingly, the agreement of the amount of the Guarantee Fee and entry into the Deed of Indemnity (the Special Deals) require the consent of the Executive. Such consent, if granted, will be subject to (i) the Independent Financial Adviser publicly stating that in its opinion, the terms of the Special Deals are fair and reasonable and (ii) the approval of the Special Deals by the Independent Shareholders by way of poll at the EGM.

The Company has made an application to the Executive for consent under note 4 and note 5 to Rule 25 of the Takeovers Code in relation to the Special Deals.

If the Special Deals are not approved by the Independent Shareholders or if consent to either of the Special Deals is not granted by the Executive, the Share Issue Transaction and the Offtake Arrangement will not proceed.

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7. SHAREHOLDING STRUCTURE OF THE COMPANY

(a) Shareholding structure immediately after General Nice Initial Subscription Completion

GENERAL NICE AND PARTIES ACTING IN CONCERT WITH IT General Nice and its concert parties1 Minmetals Cheerglory2 Petropavlovsk4 Total shareholdings of General Nice and parties acting in concert with it OTHER SHAREHOLDINGS Directors George Jay Hambro Contingent beneficial interest3 Beneficial interest Yury Makarov Contingent beneficial interest3 Beneficial interest Raymond Kar Tung Woo Contingent beneficial interest3 Beneficial interest Independent Shareholders Total other shareholdings TOTAL	As at the date of this announcement No. of Shares Approx. % 0.00 0.00 0.00 0.00 2,205,900,000 63.13 2,205,900,000 63.13 23,220,000 0.66 352,000 0.01 20,317,500 0.58 238,000 0.01 14,512,500 0.42 120,000 0.00 58,760,000 1.68 1,229,374,301 35.18 1,288,134,301 36.87 3,494,034,301 100.00	Immediately after General Nice Initial Subscription Completion No. of Shares Approx. % 817,536,000 18.96 0.00 0.00 2,205,900,000 51.16 3,023,436,000 70.12 23,220,000 0.54 352,000 0.01 20,317,500 0.47 238,000 0.01 14,512,500 0.34 120,000 0.00 58,760,000 1.36 1,229,374,301 28.51 1,288,134,301 29.88 4,311,570,301 100.00	Immediately after General Nice Initial Subscription Completion No. of Shares Approx. % 817,536,000 18.96 0.00 0.00 2,205,900,000 51.16 3,023,436,000 70.12 23,220,000 0.54 352,000 0.01 20,317,500 0.47 238,000 0.01 14,512,500 0.34 120,000 0.00 58,760,000 1.36 1,229,374,301 28.51 1,288,134,301 29.88 4,311,570,301 100.00
			70.12
			0.54 0.01 0.47 0.01 0.34 0.00
			1.36
			28.51
			29.88
			100.00

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(b) Shareholding structure immediately after Total Investment Completion (assuming General Nice Further Subscription Right is exercised within 3 months of General Nice Initial Subscription Completion)

GENERAL NICE AND PARTIES ACTING IN CONCERT WITH IT General Nice and its concert parties1 Minmetals Cheerglory2 Petropavlovsk4 Total shareholdings of General Nice and parties acting in concert with it OTHER SHAREHOLDINGS Directors George Jay Hambro Contingent beneficial interest3 Beneficial interest Yury Makarov Contingent beneficial interest3 Beneficial interest Raymond Kar Tung Woo Contingent beneficial interest3 Beneficial interest Independent Shareholders Total other shareholdings TOTAL	Immediately after General Nice Initial Subscription Completion No. of Shares Approx. % 817,536,000 18.96 0.00 0.00 2,205,900,000 51.16 3,023,436,000 70.12 23,220,000 0.54 352,000 0.01 20,317,500 0.47 238,000 0.01 14,512,500 0.34 120,000 0.00 58,760,000 1.36 1,229,374,301 28.51 1,288,134,301 29.88 4,311,570,301 100.00	Immediately after Total Investment Completion (assuming General Nice Further Subscription Right is exercised within 3 months of General Nice Initial Subscription Completion) No. of Shares Approx. % 1,715,200,000 31.43 247,300,000 4.53 2,205,900,000 40.43 4,168,400,000 76.39 23,220,000 0.43 352,000 0.01 20,317,500 0.37 238,000 0.00 14,512,500 0.27 120,000 0.00 58,760,000 1.08 1,229,374,301 22.53 1,288,134,301 23.61 5,456,534,301 100.00	Immediately after Total Investment Completion (assuming General Nice Further Subscription Right is exercised within 3 months of General Nice Initial Subscription Completion) No. of Shares Approx. % 1,715,200,000 31.43 247,300,000 4.53 2,205,900,000 40.43 4,168,400,000 76.39 23,220,000 0.43 352,000 0.01 20,317,500 0.37 238,000 0.00 14,512,500 0.27 120,000 0.00 58,760,000 1.08 1,229,374,301 22.53 1,288,134,301 23.61 5,456,534,301 100.00
			76.39
			0.43 0.01 0.37 0.00 0.27 0.00
			1.08
			22.53
			23.61
			100.00

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(c) Shareholding structure immediately after Total Investment Completion (assuming General Nice Further Subscription Right is exercised later than 3 months after General Nice Initial Subscription Completion)

GENERAL NICE AND PARTIES ACTING IN CONCERT WITH IT General Nice and its concert parties1 Minmetals Cheerglory2 Petropavlovsk4 Total shareholdings of General Nice and parties acting in concert with it OTHER SHAREHOLDINGS Directors George Jay Hambro Contingent beneficial interest3 Beneficial interest Yury Makarov Contingent beneficial interest3 Beneficial interest Raymond Kar Tung Woo Contingent beneficial interest3 Beneficial interest Independent Shareholders Total other shareholdings TOTAL	Immediately after General Nice Initial Subscription Completion No. of Shares Approx. % 817,536,000 18.96 0.00 0.00 2,205,900,000 51.16 3,023,436,000 70.12 23,220,000 0.54 352,000 0.01 20,317,500 0.47 238,000 0.01 14,512,500 0.34 120,000 0.00 58,760,000 1.36 1,229,374,301 28.51 1,288,134,301 29.88 4,311,570,301 100.00	Immediately after Total Investment Completion (assuming General Nice Further Subscription Right is exercised later than 3 months after General Nice Initial Subscription Completion) No. of Shares Approx. % 1,706,684,000 31.33 247,300,000 4.54 2,205,900,000 40.49 4,159,884,000 76.36 23,220,000 0.43 352,000 0.01 20,317,500 0.37 238,000 0.00 14,512,500 0.27 120,000 0.00 58,760,000 1.08 1,229,374,301 22.57 1,288,134,301 23.64 5,448,018,301 100.00	Immediately after Total Investment Completion (assuming General Nice Further Subscription Right is exercised later than 3 months after General Nice Initial Subscription Completion) No. of Shares Approx. % 1,706,684,000 31.33 247,300,000 4.54 2,205,900,000 40.49 4,159,884,000 76.36 23,220,000 0.43 352,000 0.01 20,317,500 0.37 238,000 0.00 14,512,500 0.27 120,000 0.00 58,760,000 1.08 1,229,374,301 22.57 1,288,134,301 23.64 5,448,018,301 100.00
			76.36
			0.43 0.01 0.37 0.00 0.27 0.00
			1.08
			22.57
			23.64
			100.00

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Notes to tables at (a), (b) and (c):

Note 1: Does not include the holdings of Minmetals Cheerglory.
Note 2: Although Minmetals Cheerglory is a party acting in concert with General Nice in respect of the Whitewash Waiver and for the purposes of the Takeovers Code, Minmetals Cheerglory will not be a substantial shareholder or a connected person of the Company under the Listing Rules after Total Investment Completion. As such, for the purposes of Rule 8.24(2) of the Listing Rules, Minmetals Cheerglory is a member of the public.
Note 3: Subject to the fulfillment of certain performance conditions, and subject to a three-year bullet vesting period.
Note 4: Petropavlovsk owns 100% of the issued share capital of Cayiron Limited, which in turn directly holds shares in the Company.

As at the date of this announcement, the Company does not have any options, warrants or convertible securities in issue other than the Caedmon Option.

8. THE OFFTAKE ARRANGEMENT

(a) Offtake Arrangement

Date 17 January 2013

Parties (a) the Investors (as offtakers), and

(b) the Company (as seller).

Term From General Nice Initial Subscription Completion Date until the date falling 15 years from the commencement of commercial production of iron ore concentrate from the Group’s K&S Project (i.e. greater than 1 million tonnes over a 12 month period).

Under the Offtake Framework Agreement and the Seaborne Offtake Agreement, which shall each take effect from General Nice Initial Subscription Completion and subject as provided under ‘‘Pro Rata Adjustments’’ below, in respect of the Group’s Projects and Products (i) the Company shall sell and the Investors shall purchase Product which is nominated by the Company to be Seaborne Product; and (ii) the Investors shall assist the Group in developing its sales and marketing capacity in the dry port market (i.e. Product to be exported by rail crossing rather than by sea) and in the identification of customers for Dry Port Product, for which the Company shall pay the Investors the Dry Port Marketing Commission.

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(i) Seaborne Product

Under the Offtake Arrangement, the Company may nominate, in its absolute discretion, an amount in tonnes of its Product to be sold to the Investors as Seaborne Product in any year. For each month of the year, the Company shall be entitled to adjust the tonnage to be sold as Seaborne Product within agreed parameters. The Investors shall have the right and obligation to purchase that monthly tonnage of Seaborne Product (Take or Pay Quantity). For each year, the Company may nominate up to the entirety of its Product as Seaborne Product, but is not required to nominate a minimum amount of Product as Seaborne Product. Assuming that Total Investment Completion has occurred, the Investors shall have the exclusive right to purchase 100% of the Group’s Product which is sold as Seaborne Product (and the Company shall not be entitled to sell any Seaborne Product to third parties).

The obligations of the Investors to purchase the Take or Pay Quantity shall be joint and several, save that in respect of each specific shipment, the Investors may notify the Company which of them shall be the Specified Investor in respect of that shipment, in which case that Specified Investor shall be solely responsible for taking delivery of, and making payment for, that shipment (or, if it nominates another entity to do so, guaranteeing the obligations of that other entity). The price for each shipment of Seaborne Product will be the average relevant Platts IODEX iron ore fines price for the 20 days prior to the bill of lading date which such index has been published less 7% of such price, based upon the dry weight and the iron content of such Product, with further agreed adjustments for certain impurities. The Seaborne Product price has been determined after arms’ length negotiation between the Company and the Investors with reference to industry practice and recent trading prices of iron ore concentrate.

If the Company fails to deliver a shipment of Seaborne Product to the Specified Investor within the agreed period, or delivers Seaborne Product with an iron content which permits the Specified Investor to reject the Product, the Company may be required (without prejudice to any other rights which that Specified Investor may have) to pay that Specified Investor an amount of 7% of the total price of that shipment of Seaborne Product.

(ii) Dry Port Marketing Commission

Under the Offtake Arrangement, the Company will pay a Dry Port Marketing Commission to the Investors in consideration for the Investors agreeing to use reasonable efforts to assist the Company in developing its sales and marketing capacity and in the identification of customers for the export of Products via a dry port railway border crossing. The Company has undertaken to indemnify the Investors against any losses, liabilities, costs and/or expenses in connection with any claim or alleged claim by any third parties against the Investors as a result of or arising out of the proper performance of these services.

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The Dry Port Marketing Commission payable in aggregate to the Investors each year shall be the amount of sales revenue from all Dry Port Products multiplied by a commission of 5% save that, if the total tonnage of Dry Port Products exceeds the Dry Port Product Cap, no commission whatsoever shall be payable in respect of dry port product sales in excess of the Dry Port Product Cap. The Dry Port Marketing Commission has been determined after arms’ length negotiation between the Company and the Investors.

(iii) Pro rata adjustments

As stated above, assuming that Total Investment Completion has occurred, the Investors shall have the exclusive right to purchase 100% of the Group’s Product which is sold as Seaborne Product. Such percentage, and the Dry Port Product Cap, shall be adjusted, on the basis set out in the relevant agreements, to reflect the proportionate aggregate shareholdings of the Investors in the Company at General Nice Initial Subscription Completion, General Nice Further Subscription Completion and Total Investment Completion, and shall be further adjusted to reflect certain reductions in the Investors’ shareholdings in the Company in future. Further details of the pro rata adjustments shall be set out in the Circular.

(b) Term

The term of the Offtake Arrangement is proposed to commence from the General Nice Initial Subscription Completion Date until the date falling 15 years from the first day of the first 12month period after first commercial delivery of iron ore concentrate from the Group’s Projects where the aggregate production volume of Product for that 12-month period is equal to or greater than 1 million tonnes. This date is expected to occur in 2014. The Company believes that the nature of the Group’s business and the market in which it operates requires that the terms of the Offtake Arrangement exceed three years and the Independent Financial Adviser will, among other things, confirm in the Circular that it is normal business practice for contracts of this type to be of such duration.

(c) Annual Caps

The Company proposes to apply annual caps to the Offtake Arrangement as follows:

Year				2014	2015	2016 to 2029
Annual	cap	(in	mt*)	3.5	7.6	12.1

mt means million tonnes

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The above proposed annual caps, which are subject to approval by the Independent Shareholders, have been determined with reference to the expected annual production capacity of the Group’s Projects over the term of the Offtake Arrangement (based on the K&S Project and Garinskoye Project), with a 10% buffer in the event of over-production. The proposed Offtake Arrangement Annual Caps apply to the term of the Offtake Arrangement and to the Offtake Arrangement as a whole, and reflects the expected transaction volumes of all Seaborne Product and Dry Port Product under the Offtake Arrangement.

The Company is seeking a waiver from strict compliance with Listing Rule 14A.35(2) so as to allow the proposed Offtake Arrangement Annual Caps to be expressed as a fixed quantum, being the maximum expected transaction volume of Products under the Offtake Arrangement, rather than in terms of monetary value, on the condition that sufficient disclosure illustrating how the change in assumptions outside the control of the Company will affect the monetary value of the transactions contemplated under the Offtake Arrangement will be included in the Circular.

(d) Conditions of the Offtake Arrangement

The Offtake Arrangement is conditional upon General Nice Initial Subscription Completion and approval of the EGM Resolutions by the Independent Shareholders at the EGM.

(e) Reasons and benefits of the Offtake Arrangement

General Nice is one of the largest private iron ore importers in China and Minmetals Cheerglory is one of the largest PRC state-owned iron ore traders in China. The Company’s partnership with General Nice and Minmetals Cheerglory in sales of its Products will bolster the trading of industrial commodities between Russian and China and reinforces the Company’s position as a Sino-Russian champion.

By entering into the Offtake Arrangement with the Investors, the Group is able to leverage the considerable experience of the Investors in the seaborne market, which the Group has less experience in. The Group will also be assisted by the Investors in further developing its understanding of the dry port market.

The Group’s K&S Project is expected to commence first commercial production in 2014 and, as is common practice amongst mining companies and resources and minerals producers, the Group is seeking long-term customers for the iron ore concentrate and other products to be produced from the K&S Project and its other projects when they enter into production. The Offtake Arrangement provides for the Investors to commit to the purchase on agreed terms of up to the entirety of the Group’s Products if such Product is nominated by the Company to be sold as Seaborne Product, whilst preserving flexibility for the Company to sell Product in the dry port market. Accordingly, it will ensure that the Group has a stable customer base for its Products and thus reduce future risks of being unable to sell its Products in an adverse iron ore market and will provide the Company assistance from the Investors in marketing its Products.

– 27 –

The Board believes that the terms of the Offtake Arrangement are fair and reasonable and in the interests of the Company and Shareholders as a whole.

(f) Listing Rules Implications

Prior to the entry into the Investors’ Subscription Agreements and the Offtake Arrangement, each of General Nice and Minmetals Cheerglory and its respective ultimate beneficial owners are third-parties independent of the Company and connected persons of the Company. However, upon General Nice Initial Subscription Completion, General Nice will become a connected person of the Company as it will be a substantial holder of the Company. Accordingly, the transactions under the Offtake Arrangement will constitute continuing connected transactions of the Company under the Listing Rules.

9. FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

The Company has not raised funds on any issue of equity securities during the 12 months immediately preceding the date of this announcement.

10. GENERAL

No member of the Independent Board Committee has any interest or involvement in the transactions contemplated under the Investors’ Subscription Agreements, the Whitewash Waiver or the Offtake Arrangement.

The EGM will be held to consider, if thought fit, pass the EGM Resolutions. The Investors, their respective ultimate beneficial owners and parties acting in concert with any of them (other than Petropavlovsk and its subsidiaries) do not currently hold any shares in the Company and accordingly will not vote on the EGM Resolutions. Petropavlovsk and its subsidiaries will abstain from voting on the EGM Resolutions in respect of Shares in the Company held by them.

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At the EGM, only the Independent Shareholders will be entitled to vote on the EGM Resolutions.

The Circular containing, among other things: (i) details of the Share Issue Transaction and the Investors’ Subscription Agreements; (ii) details of the Whitewash Waiver; (iii) details of the Offtake Arrangement; (iv) details of the Deed of Indemnity; (v) details of the Guarantee Fee; (vi) a letter of recommendation from the Independent Board Committee; (vii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Investors’ Subscription Agreements and the transactions contemplated thereunder, the Whitewash Waiver, the Offtake Arrangement and the transactions contemplated thereunder and the Special Deals; (viii) a notice of the EGM; and (ix) other information as required under the Listing Rules and the Takeovers Code, will be dispatched by the Company to the Shareholders as soon as practicable and in compliance with the requirements of the Takeovers Code.

Shareholders are reminded that the Share Issue Transaction is conditional upon the conditions of the General Nice Subscription and the Minmetals Cheerglory Subscription being fulfilled and/or waived as set out under the sections headed ‘‘Conditions of the General Nice Subscription’’ and ‘‘Conditions of the Minmetals Cheerglory Subscription’’ in this announcement and the Share Issue Transaction may or may not proceed. In particular, the Executive may or may not grant the Whitewash Waiver or consent to the Special Deals and the Independent Shareholders may or may not approve the Investors’ Subscription Agreements, the Whitewash Waiver or the Special Deals and/or the approval of Petropavlovsk’s shareholders may not be obtained. Further, the Minmetals Cheerglory Subscription and the General Nice Further Subscription is subject to General Nice exercising, in its discretion, the General Nice Further Subscription Right, which it may or may not exercise. The Offtake Arrangement is also conditional upon General Nice Initial Subscription Completion. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

11. INFORMATION ON GENERAL NICE AND MINMETALS CHEERGLORY

General Nice is a company incorporated in Hong Kong. It is the holding company for a group of companies which trades in and produces, among others, iron ore, coking coal and coke, with operations in China, South Africa, Singapore, India and other parts of the world and is a member of a group which collectively is one of the largest importers of coking coal and one of the largest exporters of coke in China. The ultimate controlling shareholder of General Nice is Mr. Cai Sui Xin.

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Commenting on the announcement, Cai Sui Xin, Chairman of General Nice said: ‘‘We have been in the iron ore business for many years. It is a commodity that we are passionate about because it is the foundation of industrial growth in China. We have grown to be one of the largest iron ore traders in China. The unique insight we have gained from this position has given us a firm view that ongoing increases in domestic iron ore demand, coupled with global supply constraints, suggest a positive outlook for the iron ore business. With this in mind, we have chosen to invest in IRC. General Nice will work with IRC to develop their excellent portfolio of iron ore projects and through our new off-take relationship, assist them to market the iron ore they sell outside of Russia. We look forward to a long and fruitful partnership with IRC which will bring benefits to all parties.’’

Minmetals Cheerglory, incorporated in Hong Kong, is a wholly-owned subsidiary of China Minmetals Corporation, which is one of the largest state-owned international metals and mining corporations primarily engaging in exploration, mining, smelting, processing and trading for metals and minerals and also in finance, real estate, and mining and metallurgic technology.

Commenting on the announcement, Liu Qingchun, Managing Director of Minmetals Cheerglory added: ‘‘Established more than 60 years ago, China Minmetals is one of China’s largest international corporations engaged in the mining of base metals and commodities, smelting, production and trading and is committed to provide international services. Aiming to be the nation’s biggest iron ore supplier, China Minmetals is constantly on the lookout to develop overseas iron ore assets. Our long-standing relationship with General Nice has been a mutuallybeneficial one, and that’s why we decided to co-invest in this exciting opportunity. As we look for new supplies of iron ore for our customers in China, IRC’s business model, developing high quality assets on the Sino Russia border stands out. We are delighted to participate in this transaction and look forward to supporting IRC’s future growth plans.’’

Rothschild (Hong Kong) Limited has been appointed as the financial adviser to the Investors in connection with the Share Issue Transaction and the Offtake Arrangement. CCB International Capital Limited has been appointed as a financial adviser to General Nice in connection with the Share Issue Transaction.

12. INFORMATION ON THE GROUP

IRC is headquartered in Hong Kong and listed on the Stock Exchange. It is an established explorer, developer and producer of iron ore and other industrial commodities products in the Russian Far East, taking advantage of superior road infrastructure to deliver its projects and products quickly and at lower cost to its customer base, predominantly in China. In 2010, IRC commissioned the Kuranakh Mine, Russia’s first vertically-integrated titanomagnetite operation. IRC is currently developing the world-class K&S Mine, which is expected to quadruple the Group’s production capacity when it is commissioned in mid-2014. IRC is also developing a third iron ore project called Garinskoye; a downstream vanadium processing plant in China’s Heilongjiang Province; and complementary logistics infrastructure.

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Commenting on the announcement, Jay Hambro, Executive Chairman of IRC said: ‘‘I am delighted that we have agreed a transaction that confirms our position as the leading Sino-Russian industrial commodities champion. I have long said that IRC benefits from the combined competitive advantages of geology, geography and infrastructure, which position us well to be a preferred supplier of quality industrial commodities to China and Far East Russia. Our current production profile will see us grow from just under 1 million tonnes of iron ore per annum from Kuranakh in 2012, to a production capacity of approximately 4.2 million tonnes per annum when K&S comes into production in the first half of 2014. Today’s transaction with our new partners will allow us to unlock further value and enable us to continue to deliver on our ambitious growth aspirations; notably the potential to expand annual production capacity at K&S to 6.3 million tonnes per annum in total and bring the 2.1 million tonnes per annum Garinskoye DSO style operation into production. I would like to welcome General Nice and Minmetals Cheerglory as new shareholders in a new IRC.’’

Deutsche Bank AG, Hong Kong Branch has been appointed as the financial adviser to IRC in connection with the Share Issue Transaction and the Offtake Arrangement.

DEFINITIONS

‘‘acting in concert’’ has the meaning ascribed to it under the Takeovers Code
‘‘Board’’ the board of the Directors
‘‘Business Days’’ any day (other than a Saturday or a Sunday) on which commercial banks are open for ordinary banking business in Hong Kong
‘‘Caedmon Agreement’’ the agreement dated 6 April 2012 between the Company, Sangritta Limited and Lania Consulting Limited for the acquisition of a controlling 50% plus one share stake in Caedmon Limited by the Company
‘‘Caedmon Option’’ the option under the Caedmon Agreement for the Company to acquire the remaining shares in Caedmon Limited not already owned by the Company
‘‘Circular’’ the circular to be sent to Shareholders in respect of, among other things, the Share Issue Transaction, the Whitewash Waiver, the Offtake Arrangement and the Special Deals, and including a notice of the EGM and other information as required under the Listing Rules and the Takeovers Code
‘‘CNEEC EPC Circular’’ the circular of the Company dated 24 December 2010 in relation to the Company’s entry into an Engineering, Procurement and Construct Contract with China National Electric Equipment Corporation

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‘‘Company’’
IRC Limited, a company incorporated in Hong Kong whose Shares are listed on the main board of the Stock Exchange
‘‘Company Lock-Up Period’’ the period commencing from the date of the Investors’ Subscription Agreements up to the expiry of six months following (i) the General Nice Initial Subscription Completion Date or (ii) if the General Nice Further Subscription Right is exercised, the General Nice Further Subscription Completion Date
‘‘Deed of Indemnity’’ the deed of indemnity dated 17 January 2013 between General Nice and Petropavlovsk
‘‘Director(s)’’ the director(s) of the Company
‘‘Dry Port Marketing the commission payable by the Company (or any of its subsidiary) to Commission’’ the Investors in respect of the Dry Port Product Sales, which shall be calculated as 5% multiplied by the amount of Dry Port Product Sales save that in any year in which the total tonnage of Dry Port Products exceeds the Dry Port Product Cap, no commission whatsoever shall be payable in respect of Dry Port Product Sales in excess of the Dry Port Product Cap
‘‘Dry Port Product’’ means Product comprising the Dry Port Quantity
‘‘Dry Port Product Cap’’ for a relevant year, 65% of the total tonnage of Product for the relevant year (unless otherwise specified or adjusted)
‘‘Dry Port Product Sales’’ for a relevant year, the revenue received by IRC in respect of the sale of Dry Port Product during that year
‘‘Dry Port Quantity for a relevant year, the total tonnage of Product for that relevant year less (i) Seaborne Product sold to the Investors under the Seaborne Offtake Agreement for that relevant year; and (ii) any Seaborne Product sold during that relevant year to parties other than the Investors
‘‘EGM’’ the extraordinary general meeting of the Company to be convened for the purpose of considering, and if thought fit, approving the EGM Resolutions

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‘‘EGM Resolutions’’
the resolutions to approve: (A) (i) the issuance of Shares to the Investors under the Investors’ Subscription Agreements and other transactions contemplated thereunder; (ii) the Whitewash Waiver; and (iii) the Offtake Arrangement and the transactions contemplated thereunder; and (B) the Special Deals, in accordance with the applicable requirements of the Listing Rules and the Takeovers Code
‘‘Executive’’
the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong from time to time and any delegate of such Executive Director
‘‘Garinskoye Project’’
the project to explore, develop and/or exploit iron ore product at the Garinskoye mine (which includes the areas currently the subject of production licence number BLG 14123 TE and combined licence for exploration and production number BLG 14664 TR) located in the Amur region of the Russian Federation
‘‘General Nice’’ General Nice Development Limited, a limited liability company incorporated under the laws of Hong Kong
‘‘General Nice Deferred (a) if the General Nice Further Subscription Right is exercised within Subscription Shares’’ three months of the General Nice Initial Subscription Completion Date, 34,064,000 new Shares to be issued to General Nice or its nominee; or (b) if the General Nice Further Subscription Right is exercised after three months from the General Nice Initial Subscription Completion Date but before the expiry of the General Nice Further Subscription Exercise Period, 25,548,000 new Shares to be issued to General Nice or its nominee, or (c) if the Company breaches the General Nice Subscription Agreement in any material respects, and the General Nice Further Subscription Right is not exercised within the General Nice Further Subscription Exercise Period, 34,064,000 new Shares to be issued to General Nice or its nominee
‘‘General Nice Further the subscription by General Nice or its nominee of the General Nice Subscription’’ Further Subscription Shares and the General Nice Deferred Subscription Shares pursuant to the terms of the General Nice Subscription Agreement
‘‘General Nice Further the completion of the subscription for and issuance of the General Nice Subscription Completion’’ Further Subscription Shares and General Nice Deferred Subscription Shares

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‘‘General Nice Further the date on which General Nice Further Subscription Completion Subscription Completion occurs Date’’
‘‘General Nice Further the period commencing on the General Nice Initial Subscription Subscription Exercise Completion Date and ending on the date which is six months after the Period’’ General Nice Initial Subscription Completion Date
‘‘General Nice Further the date which is six months after the General Nice Initial Subscription Subscription Expiry Date’’ Completion Date
‘‘General Nice Further the right to subscribe for the General Nice Further Subscription Shares, Subscription Right’’ granted by the Company to General Nice under the General Nice Subscription Agreement
‘‘General Nice Further the 863,600,000 new Shares to be issued to General Nice or its Subscription Shares’’ nominee pursuant to the General Nice Subscription Agreement
‘‘General Nice Initial the subscription by General Nice or its nominee of the General Nice Subscription’’ Initial Subscription Shares pursuant to the General Nice Subscription Agreement
‘‘General Nice Initial completion of the subscription for and issuance of the General Nice Subscription Completion’’ Initial Subscription Shares
‘‘General Nice Initial the date on which General Nice Initial Subscription Completion occurs Subscription Completion Date’’
‘‘General Nice Initial the conditions to completion of the General Nice Initial Subscription Subscription Conditions’’
‘‘General Nice Initial 30 April 2013 Subscription Long Stop Date’’
‘‘General Nice Initial the 817,536,000 new Shares to be issued to General Nice or its Subscription Shares’’ nominee pursuant to the General Nice Subscription Agreement
‘‘General Nice Subscription’’ General Nice Initial Subscription and General Nice Further Subscription
‘‘General Nice Subscription the conditional subscription agreement dated 17 January 2013 entered Agreement’’ into between General Nice and the Company relating to the General Nice Subscription

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‘‘General Nice Subscription	the General Nice Initial Subscription Shares, the General Nice Deferred
Shares’’	Subscription Shares and the General Nice Further Subscription Shares
‘‘Governmental Authority’’	any government in Hong Kong, the Russian Federation, the PRC or
	elsewhere or political subdivision thereof, any department, agency or
	instrumentality of any government or political subdivision thereof; any
	court or arbitral tribunal; and the governing body of any securities
	exchange, including but not limited to the Stock Exchange
‘‘Group’’	the Company and its subsidiaries
‘‘Guarantee Fee’’	a monthly fee payable by the Company to Petropavlovsk under the
	Recourse Agreement, which is proposed to be an amount, on a per
	annum basis, not exceeding 1.75% of the principal amount outstanding
	under the ICBC Facility Agreement
‘‘HK$’’	Hong Kong dollars, the lawful currency of Hong Kong
‘‘Hong Kong’’	the Hong Kong Special Administrative Region of the PRC
‘‘ICBC Bank’’	Industrial and Commercial Bank of China Ltd.
‘‘ICBC Facility Agreement’’	the US$340,000,000 credit facility agreement entered into between,
	inter alia, ICBC Bank (as facility agent), K&S (a wholly-owned
	subsidiary of the Company, as borrower) and Petropavlovsk (as
	guarantor)
‘‘ICBC Guarantee’’	the guarantee granted by Petropavlovsk in favour of ICBC Bank in
	relation to obligations and liabilities of K&S under the ICBC Facility
	Agreement
‘‘Independent Board	a committee of the Board comprising all the non-executive and
Committee’’	independent non-executive Directors established for the purposes of
	advising the Independent Shareholders in relation to the issuance of
	Shares to the Investors under the Investors’ Subscription Agreements
	and the transactions contemplated thereunder and the Whitewash
	Waiver and the Special Deals and, in respect of the Offtake
	Arrangement and the transactions contemplated thereunder, shall
	comprise only the Independent Non-Executive Directors

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‘‘Independent Financial Somerley Limited, an independent financial adviser to the Independent Adviser’’ Board Committee and the Independent Shareholders (as the case may be) on (i) the terms of the Investors’ Subscription Agreements and the transactions contemplated thereunder, (ii) the Whitewash Waiver, (iii) the terms of Offtake Arrangement and the transactions contemplated thereunder and (iv) the Special Deals
‘‘Independent Shareholders’’ Shareholders other than Petropavlovsk and the Executive Directors, any parties acting in concert with any of them and any Shareholders who are involved in, or interested in the Investors’ Subscription Agreements and the transactions contemplated thereunder, the Whitewash Waiver, the Offtake Arrangement and the transactions contemplated thereunder and the Special Deals
‘‘Investors’’ General Nice and Minmetals Cheerglory
‘‘Investors’ Lock-Up Period’’
in respect of General Nice, the period commencing from the General Nice Initial Subscription Completion Date up to the expiry of twelve months following (a) the General Nice Initial Subscription Completion Date or (b) if the General Nice Further Subscription Shares are issued, the General Nice Further Subscription Completion Date; and in respect of Minmetals Cheerglory, the period commencing from the Minmetals Cheerglory Subscription Completion Date up to the expiry of twelve months following the Minmetals Cheerglory Subscription Completion Date
‘‘Investors’ Subscription the General Nice Subscription Agreement and the Minmetals Agreements’’ Cheerglory Subscription Agreement
‘‘K&S’’ Kimkano-Sutarsky Mining and Beneficiation Plant LLC, a whollyowned subsidiary of the Company
‘‘K&S Mine’’ the Company’s Kimkan mine and Sutara mine located in the Jewish Autonomous Region of the Russia Federation
‘‘K&S Project’’ the projects to explore, develop and/or exploit iron ore product at the Kimkan mine (the areas currently the subject of production licence number BIR 14037 TE) and the Sutara mine (the areas currently the subject of combined licence for exploration and production number BIR 14038 TE) located in the Jewish Autonomous Region of the Russia Federation

‘‘Last Trading Day’’ 16 January 2013, being the last trading day of the Shares on the Stock Exchange prior to the publication of this announcement

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‘‘Listing Rules’’ the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
‘‘Minmetals Cheerglory’’ Minmetals Cheerglory Limited, a limited liability company incorporated under the laws of Hong Kong
‘‘Minmetals Cheerglory the subscription by the Minmetals Cheerglory or its nominee of the Subscription’’ Minmetals Cheerglory Subscription Shares pursuant to the Minmetals Cheerglory Subscription Agreement
‘‘Minmetals Cheerglory the conditional subscription agreement dated 17 January 2013 entered Subscription Agreement’’ into between Minmetals Cheerglory and the Company relating to the Minmetals Cheerglory Subscription
‘‘Minmetals Cheerglory completion of the subscription for and issuance of the Minmetals Subscription Completion’’ Cheerglory Subscription Shares
‘‘Minmetals Cheerglory the date on which Minmetals Cheerglory Subscription Completion Subscription Completion occurs Date’’
‘‘Minmetals Cheerglory the conditions to completion of the Minmetals Cheerglory Subscription Subscription Conditions’’
‘‘Minmetals Cheerglory the date falling six months after the General Nice Initial Subscription Subscription Long Stop Completion Date Date’’
‘‘MinmetalsMinmetals Cheerglory Subscription Shares’’’’
‘‘MinmetalsMinmetals Cheerglory the 247,300,000 new Shares to be issued to Minmetals Cheerglory or Subscription Shares’’’’ its nominee pursuant to the Minmetals Cheerglory Subscription Agreement
‘‘Offtake Arrangement’’ the arrangements between the Company and the Investors in respect of sales of Product as contemplated under the Offtake Framework Agreement and Seaborne Offtake Agreement
‘‘Offtake Arrangement the annual caps applicable to the transactions under the Offtake Annual Caps’’ Arrangement in accordance with Chapter 14A of the Listing Rules
‘‘Offtake Framework the agreement dated 17 January 2013 between the Company and the Agreement’’ Investors in respect of, among other things, sales of Dry Port Product Sales and the Dry Port Marketing Commission

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‘‘Petropavlovsk’’ Petropavlovsk plc, a public company incorporated under the laws of England and Wales with registered number 04343841 and listed on the Main Market of the London Stock Exchange
‘‘PRC’’ the People’s Republic of China, which for the purpose of this announcement excludes Hong Kong
‘‘Product’’ any product containing Fe content of 32% or above from the Projects but excluding (i) products from Projects acquired by the Company or any member of the Group after the date of the Seaborne Offtake Agreement and which are covered by an offtake arrangement existing at the time of such acquisition; and (ii) product sold by any member of the Group to another member of the Group
‘‘Projects’’ all existing and future projects of the Group, including the K&S Project and Garinskoye Project, but (i) excluding the Kuranakh project; (ii) excluding projects to be acquired by the Group in China; and (iii) excluding projects acquired by the Group which have offtake arrangements in place at the time of acquisition for 100% of their production
‘‘Recourse Agreement’’ the recourse agreement dated 13 December 2010 between Petropavlovsk, the Company and K&S
‘‘Seaborne Offtake the agreement dated 17 January 2013 between the Company and the Agreement’’ Investors in respect of sales of Seaborne Product
‘‘Seaborne Product’’ Product sold by way of seaborne delivery ‘‘Share(s)’’ ordinary share(s) of HK$0.01 each in the share capital of the Company ‘‘Share Issue Transaction’’ the General Nice Subscription and the Minmetals Cheerglory Subscription
‘‘Shareholder(s)’’ registered holder(s) of Share(s) ‘‘Shareholders’ Agreement’’ the voting undertakings agreement entered into on 17 January 2013 between the Investors and Petropavlovsk with respect to the exercise of their voting rights and certain other aspects in relation to their shareholdings in the Company
‘‘Special Deals’’ the agreement of the amount and payment of the Guarantee Fee as a special deal under note 4 to Rule 25 of the Takeovers Code and the entry into the Deed of Indemnity as a special deal under note 5 to Rule 25 of the Takeovers Code, each being a ‘‘Special Deal’’

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‘‘Specified Investor’’ the Investor which shall take delivery of, and make payment for, the specific shipments of Seaborne Product and as notified to the Company
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Subscription Price’’ HK$0.94 (approximately US$0.12) per Subscription Share
‘‘Subscription Share(s)’’ the General Nice Subscription Shares and the Minmetals Cheerglory Subscription Shares
‘‘Surviving Clauses’’ clauses with respect to interpretation, announcements, confidentiality, notices, waiver of immunity, costs, general provisions, governing law and dispute resolution as stated in the Investors’ Subscription Agreements
‘‘Take or Pay Quantities’’ the amount of Seaborne Product (in tonnes) specified for each month in a vessel loading schedule agreed by the Company and the Investors
‘‘Takeovers Code’’
The Code on Takeovers and Mergers issued by the Securities and Futures Commission of Hong Kong
‘‘Total Investment General Nice Initial Subscription Completion, General Nice Further Completion’’ Subscription Completion and Minmetals Cheerglory Subscription Completion
‘‘UK Listing Rules’’ the Listing Rules made by the Financial Services Authority of the United Kingdom pursuant to Financial Services and Markets Act 2000, as amended, governing, inter alia, admission of securities to the Official List of the Financial Services Authority
‘‘Whitewash Waiver’’ the waiver by the Executive under Note 1 of the Notes on Dispensations from Rule 26 of the Takeovers Code of the obligation on the part of General Nice and parties acting in concert with it (including Minmetals Cheerglory) to make a general offer to the Shareholders for all issued shares and other securities of the Company not already owned or agreed to be acquired by General Nice and parties acting in concert with it as a result of the exercise of the General Nice Further Subscription Right and the issue and allotment of the General Nice Deferred Subscription Shares, General Nice Further Subscription Shares and Minmetals Cheerglory Subscription Shares
‘‘%’’

per cent.

– 39 –

For the purpose of this announcement, conversion of US$ into HK$ is calculated at the conversion rate of US$1.00 to HK$7.75. This conversion rate is for purpose of illustration only and does not constitute a representation that any amounts have been, could have been, or may be, converted at this or any other rates at all.

By order of By order of the By order of the the Board board of directors of board of directors of G. Jay Hambro General Nice Minmetals Cheerglory Limited Executive Chairman Development Limited Liu Qingchun Cai Sui Xin Managing Director Director

Hong Kong, 17 January 2013

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 Director is Mr Simon Murray, CBE, Chevalier de la Légion d’Honneur. The Independent Non-Executive Directors are Mr Daniel Bradshaw, Mr Chuang-Fei Li and Mr Jonathan Martin Smith.

The Directors jointly and severally accept full responsibility for the accuracy of the information in this announcement (other than information relating to General Nice, Minmetals Cheerglory and parties acting in concert with any of them apart from Petropavlovsk) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than opinions expressed by General Nice, Minmetals Cheerglory and parties acting in concert with either of them apart from Petropavlovsk) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statements in this announcement misleading.

The directors of General Nice namely Mr Cai Sui Xin 蔡穗新, Ms Cai Suirong 蔡穗榕, Mr Tsoi Ming Chi 蔡明志 and Ms Chan Chuen Yi 陳存宜 jointly and severally accept full responsibility for the accuracy of the information in this announcement (other than information relating to the Group, Minmetals Cheerglory and parties acting in concert with any of them) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than opinions expressed by the Company or the Directors or by Minmetals Cheerglory) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statements in this announcement misleading.

The directors of Minmetals Cheerglory namely Mr Liu Qingchun 劉青春, Mr Zou Yunchang 鄒運昌 and Mr Gao Mingzheng 高明政 jointly and severally accept full responsibility for the accuracy of the information in this announcement (other than information relating to the Group, General Nice and parties acting in concert with any of them) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than opinions expressed by the Company or the Directors or General Nice) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statements in this announcement misleading.

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