IRC Limited — Capital/Financing Update 2015

Dec 13, 2015

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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

KURANAKH MINE – CARE & MAINTENANCE PROCESS

Monday, 14 December 2015: The Board of Directors (the “ Board ”) of IRC Limited (“ IRC ” or the “ Company ”, together with its subsidiaries, the “ Group ”, Stock Code 1029) advises that, despite considerable works to reduce costs of the Kuranakh mine that have yielded significant savings, the current low iron ore and ilmenite price environment and the higher operating costs in winter have rendered the mine uneconomic. It has therefore been decided to commence moving the operation to temporary care and maintenance, pending better prices or a potential sale to a third party.

It is incumbent on the Board to monitor trading conditions and safeguard the business and assets of the Company. As stakeholders are aware, the Kuranakh operation has been under review since the second quarter of 2014, in addition to the Board implementing a significant cost cutting measures at the corporate level including: personnel and salary reductions; office closure and relocation; site specific cost optimisations; and a process of investigating the sale of all non-core assets. Recently the Board has agreed to a further 10% reduction in salaries for all Directors and Senior Managers which is in addition to the significant reductions already enacted and announced earlier in the year.

In the trading update for the quarter ended 30 September 2015, IRC reported that one of Kuranakh’s leading customers offered to use a pricing formula which would allow the mine to operate in a cashflow breakeven position. However in light of the current weak commodity market, the use of this pricing formula has been suspended. The Board continues to be of the view that the bulk commodity markets are in an abiding surplus due to excessive supply growth from the key producers of Western Australia and South America. As a result iron ore prices are likely to remain stagnant for some time, and margins will remain under severe pressure across the industry.

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Given the above, the Board continues to conclude that the only defensible strategy for any iron ore producer is to cut all non-essential capital expenditure, place non-contributing assets on care and maintenance while optimising profitable operations for maximum contribution in the current low price environment. As the current sale arrangements would not allow the Kuranakh mine to operate at a cashflow breakeven position, and it is not likely for Kuranakh to turn around with profit and positive cash flows in the near future, the Board is of the view that placing the operation on temporary care and maintenance is in the interest of the Company and its shareholders as a whole.

In keeping with the policies of the Company, the business plan of the group is focused on creating value for the shareholders of the Company through profit generation, cash conservation and the preservation of the Company’s reserves and resources until economic circumstances merit their extraction. In line with this policy IRC continues the development of the larger and less complicated K&S mine. IRC expects that the K&S mine, which is scheduled to commence commercial production in the first half of 2016, will generate an operating margin even in the current depressed pricing environment for iron ore, by delivering into a local market that requires a high grade product using its bespoke advantages in geology and geography. IRC’s contractor’s at K&S recently reconfirmed their ability to complete works to the current commissioning schedule.

Further updates will be released as appropriate.

Commenting on the news, Jay Hambro, Executive Chairman of IRC said:

“On behalf of all the Board of Directors, I would like to thank the operations team at Kuranakh for an excellent period of production at record low costs. I believe we have done our best to lengthen the economic life of Kuranakh but current prices mean continued operations will be detrimental to the deposit and to IRC. As we wind down operations at Kuranakh it is planned that some employees will be offered new roles at K&S.

It is sad that Russia’s first vertically integrated titanomagnetite plant is suspending operations due to the depressed global markets. However as this door closes, there is a bright light on the horizon for the Russian Far East, North-East China and all IRC stakeholders from the ongoing commissioning of IRC’s K&S mine which we believe should be one of the lowest cost iron ore mines in the world.”

The Kuranakh Project

The Kuranakh Mine, 100% owned by IRC, is located in the Amur Region of the Russian Far East, located near the town of Olekma, a principal stop on the BAM Railway providing direct rail access to customers in the north-east of China and to the Russian Pacific ports. Although enjoying good access to infrastructure, the operation is located in a remote part of the Russian Far East.

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The revenue of Kuranakh for the six months ended 30 June 2015 amounted to US$42.0 million, representing 98% of the Group’s revenue. Kuranakh reported a segmental loss of US$1.4 million in the first half of 2015. Due to the weak iron ore and ilmenite markets, Kuranakh was fully impaired in 2014 and the aggregate carrying amounts of mining rights and production assets attributable to the operation as at 30 June 2015 was not material. It is expected that the processing and sale of inventories, with the sale of equipment, could generate sufficient funds to pay down the working capital facilities of Kuranakh. During the first nine months of 2015, Kuranakh has produced 830,767 tonnes of iron ore and 144,005 tonnes of ilmenite, 23% and 20% ahead of their respective annualised 2015 production targets.

Kuranakh has been supplying raw materials to the Steel Slag Reprocessing Plant, a joint venture 46% owned by IRC; and suspending Kuranakh could affect the operation of the joint venture. The Company is assessing the impact on the joint venture and will update shareholders of any decision made with regards to the joint venture at a later stage.

By Order of the Board IRC Limited G. Jay HAMBRO Executive Chairman

Hong Kong, People’s Republic of China Monday, 14 December 2015

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

IRC Limited

6H, 9 Queen’s Road Central Hong Kong Tel: +852 2772 0007 Email: ir@ircgroup.com.hk Website: www.ircgroup.com.hk

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

Shirly Chan

Manager – Communications & Investor Relations Telephone: +852 2772 0007 Mobile: +852 9688 8293 Email: sc@ircgroup.com.hk

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