IRC Limited — Interim / Quarterly Report 2012

Jan 15, 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.

==> picture [154 x 79] intentionally omitted <==

(a company incorporated in Hong Kong with limited liability)

(Stock code: 1029)

FOURTH QUARTER TO 31ST DECEMBER 2012 TRADING UPDATE: KURANAKH BEATS 2012 PRODUCTION TARGETS FOR SECOND CONSECUTIVE YEAR

Wednesday, 16th January 2013 — Hong Kong: IRC Limited (‘‘IRC’’ or the ‘‘Company’’, together with its subsidiaries, the ‘‘Group’’; Stock Code 1029) announced today its Trading Update for the Fourth Quarter of 2012, to 31st December 2012.

SUMMARY

The Company is pleased to announce that it delivered both a record quarterly production and exceeded its production targets for the second consecutive year. Production at the Company’s first operation, the Kuranakh Mine, was 969,436 tonnes of iron ore concentrate, 18% above the 820,000 target. Production of ilmenite concentrate doubled to 125,095 tonnes, marginally above the 125,000 target.

At the K&S Project, the year ended with almost all construction activities completed to schedule and the timetable to first commercial production in the first half 2014 is on track.

Group highlights

• . Iron ore production targets exceeded at Kuranakh Mine by 18%

• . K&S Project construction and operations on track

• . 2013 production targets set significantly higher at 900,000 tonnes for iron ore (10% increase yearon-year) and 160,000 tonnes for ilmenite (28% increase year-on-year)

Commenting on the performance in the fourth quarter, Jay Hambro, Executive Chairman of IRC said: ‘‘I am delighted to report that during IRC’s second full year of production, we have once again beaten our production targets. The fourth quarter represents our best performance yet, and it is pleasing to note that as we delivered more production than ever, the iron ore price rallied into the year-end and has continued to rise in the first weeks of 2013.

– 1 –

At IRC’s K&S Project construction activities advanced toward our expected timetable of commissioning next year. We have made revisions to our timetable seeing certain activities being re-arranged and optimised, and it is pleasing to report that our contractors confirm that completion is on track for first commercial production in the first half of 2014.

Looking ahead to 2013, the year has started well with a recovery in the iron ore price. A strong uptick in demand combined with supply constraints has pushed prices above levels seen in 2012 already. We have again set ourselves ambitious production targets of a 10% increase in our iron ore production targets and a 28% increase in our ilmenite production target. I trust that the market will share my confidence that these can be achieved as we continue to deliver on our growth promises.’’

Conference Call

A conference call will be held today at 09h30 Hong Kong time to discuss the Fourth Quarter Trading Update. The number is +852 3027 5500 and the passcode is 559904#. Presentation slides to accompany the call are available at www.ircgroup.com.hk. A replay call will be available from 17th January 2013 at +852 3027 5520 with the passcode 168779#.

Full Year 2012 Financial Results and the accompanying Annual Report will be released in March 2013. The release date and conference call details will be announced in due course.

MARKETING

Iron ore concentrate shipments continued to IRC’s expanded customer base throughout East Asia. A strengthening in demand, notably in steel related construction, bode well for iron ore in the fourth quarter as new enquiries for supplies were received from both China and the wider region. Despite the global volatility in prices and supplies, customers appear to recognise the advantages of purchasing concentrates from IRC. Our infrastructural and geographical advantages allow for more frequent deliveries in lower volumes, thereby reducing transportation times and costs for our customers. In turn, this means that IRC is helping its customers to better manage their inventories, costs and working capital requirements.

Shipments of ilmenite concentrate are ongoing to an expanding and diverse customer base. Due to the high quality of IRC’s ilmenite concentrate, the expansion of production has been well received by the market, both by certain existing customers looking to increase their purchases from IRC, and also by new customers that have been waiting patiently for IRC to increase production. The marketing team is encouraged by the demand and continues to report a positive outlook for both prices and offtake in the near and long-term.

Marketing discussions with regard to a K&S offtake have advanced. Due to the high grade and low impurities of the K&S concentrate, there are a number of potential opportunities to market this superior product. Management is encouraged by the interest from third parties to participate in offtake supply. IRC is reviewing opportunities to use this offtake for internal funding needs and is confident of securing attractive terms.

– 2 –

Sales Volumes

Iron ore sales were above expectations and set new records at 296,489 tonnes for the quarter (2011 Q4: 192,810 tonnes) and 980,543 tonnes for the year (2011 full year: 770,088 tonnes). Ilmenite sales are in line with expectations at 43,928 tonnes for the quarter (2011 Q4: 18,187 tonnes) and 121,238 tonnes for the year (2011 full year: 51,737 tonnes). Sales volumes typically lag production volumes by approximately one month. Consequently, the increased ilmenite production volumes following the upgrade announced in October only started to be felt in the fourth quarter, and will not be fully reflected in ilmenite sales volumes until the first quarter of 2013.

Prices

Iron ore prices for delivery to China staged a strong recovery in the fourth quarter 2012 following a weak third quarter. Bucking market pessimism, China actually entered a restocking cycle following a drawdown on inventories throughout the entire supply chain. This upturn in demand pushed the spot market and futures higher and into a small contango as the year ended. Recovering from a low of US$90 a tonne in the third quarter 2012, the Tianjin CFR price (62% Fe iron ore fines) increased 60% to close the year at US$144.90 tonne and has risen further into 2013, presently at a level higher than at any time during 2012.

Figure 1: Tianjin Iron Ore Spot Price, January 2012 to December 2012

==> picture [475 x 210] intentionally omitted <==

Source: Bloomberg

Note: This is an indicative market price for iron ore and not the actual price achieved by IRC.

The average achieved selling price (ASP) for IRC was US$100 per tonne compared to US$110 per tonne in the previous quarter. Prices for iron ore concentrate are secured under a long-term offtake agreement and are calculated on the INCOTERM ‘‘DAP’’ (Delivered at Place) basis. The ASP calculation for Kuranakh concentrates is based on a formula which takes into account the spot price and

– 3 –

the prices in preceding months. Consequently, the actual ASP received lags the market price and therefore the higher market prices seen in December 2012 will be reflected in the actual ASP for IRC in the first quarter of 2013.

During the quarter, the price for ilmenite concentrate (a titanium dioxide product) remained firm averaging US$263 tonne, and closing marginally above the average at US$264 tonne in December. The marketing team reports January prices are higher suggesting a positive short-term outlook.

Foreign Exchange

The rouble was stable through the quarter, opening at 31.25 to the US Dollar and closing at 30.37. The currency was a strong performer over 2012 largely due to high oil prices, though towards the end of the year, ongoing concerns over high domestic inflation and an increase in interest rates have started to weigh on sentiment.

Figure 2: Dollar Rouble Exchange Rate, January 2012 to December 2012

Source: Bloomberg

Outlook

During 2012 destocking and restocking of the iron ore and steel supply chains were the principal driver of iron ore prices rather than any real changes in demand. Indeed, Chinese demand continued to increase, demonstrating the ability to manage a soft-landing, yet, in a market where the price is set by marginal volume trades on the spot market, the price volatility is exaggerated. Positive policy pronouncements following the Party Congress in November combined with an improved outlook for the global economy at present have helped to lift sentiment for Chinese and global growth and consequently the outlook for iron ore. Presently, unusually low inventories at a time restocking ahead of the Chinese New Year in February are driving prices. This is exacerbated by ongoing supply constraints. The outlook for 2013 is positive, however, the ability to sustain the current high prices will be tested following the Chinese New Year.

– 4 –

OPERATIONS

Kuranakh (100% owned)

Mining

Mining activities at Kuranakh continued to operate ahead of plan. The operation comprises two pits, namely Kuranakh and Saikta. Both operated at their full complementary capacities during the quarter, resulting in optimal production rates. Improved stripping ratios and marginally higher recoveries provided good tonnage volumes and quality.

A total of 971,064 tonnes of ore was removed during the quarter, an improvement compared to the fourth quarter 2011. For the year, a record 3,549,731 tonnes was mined, considerably above plan.

As part of the ongoing optimisation process at Kuranakh, the operations team has found that the ore stockpiles mined during the summer months permitted a temporary downscale of winter-mining operations without affecting the processing plant throughput. This commenced in mid-December and will continue through January 2013. Without affecting production targets, this temporary downscale is expected to generate cost savings during the higher cost winter months.

Crushing, Screening & Processing

For the quarter, the Kuranakh Crushing and Screening Plant processed 805,800 tonnes of iron ore with marginally higher grades of 27.1% Fe and 8.3% TiO2, producing 422,969 tonnes of pre-concentrate with a higher grade of 48% Fe and a stable grade of 14% TiO2. Stockpiles at the end of the quarter totaled an estimated 514,737 tonnes, equal to a forecast 58-days feed for the Processing Plant and sufficient for the plant to operate through the mining downscale and provide a stockpile into February 2013 when mining operations will resume.

At the Olekma Processing Plant during the quarter, 484,387 tonnes of pre-concentrate was processed, resulting in record production of 275,921 tonnes of titanomagnetite with a grade of 62.5% Fe and 36,383 tonnes of ilmenite concentrate with a grade of 48%.

Production

Consequently, for the second full year of production at Kuranakh the mine exceeded its production targets. The mine produced 969,436 tonnes of iron ore concentrate, 18% higher than the target of 820,000 tonnes and 21% higher than the 800,291 tonnes produced in 2011. By-product ilmenite concentrate production was 125,095 tonnes, in line with the target of 125,000 tonnes and 97% higher than the 63,490 tonnes produced in 2011.

– 5 –

For the fourth quarter, production of iron ore concentrate increased 18% to 275,921 tonnes (2011 Q4: 233,908 tonnes) and for ilmenite by 56% to 36,383 compared to the fourth quarter 2011 (2011 Q4: 23,371 tonnes).

Production Targets 2013

Production targets for 2013 reflect IRC’s conservative approach to forecasting and proven track-record of delivery. As iron ore and ilmenite production are now both operating at full capacity, production targets for 2013 are 900,000 tonnes of iron ore concentrate at 62.5% Fe grade content and 160,000 tonnes for ilmenite with a 48% grade.

Costs

Production costs at Kuranakh were in line with internal forecasts. The rouble has remained stable to the US Dollar, yet the Russian Producer Price Index for the quarter has shown an above average seasonal increase as the wider Russian economy battles high inflation and since December 2012 higher interest rates.

Consequently, 2012 saw labour rate fluctuations, though without the need to increase the labour complement relative to production increases they are manageable. In line with concerns noted in the third-quarter report, input costs, such as fuel saw increases in the third quarter sustain through the fourth quarter. Management continues to seek opportunities to optimise the rail transportation costs that it can. Rail wagon leasing rates, have been stable so far with some minor decreases due to the overall economic downturn and increased competition in the railway transportation market after the privatisation of the largest wagon owner at the end of 2011. The Group is operating a significant number of leased wagons and management is focusing on optimising wagon usage in view of the current transportation costs and the heavy winter season traffic on the Russian railway network. Also the wagon usage efficiency, namely the turnover, has improved closer to year-end reflecting the decreased loading of the railways. The Group believes that rail tariffs are too high for its operations and is working to find ways to reduce them.

As highlighted in the previous quarter, in line with on-mine inflation across the global mining sector, cost pressures remain. IRC is working hard to optimise costs, notably mining costs which represent a significant portion of total production costs. Many operating costs are semi-fixed, and consequently subcontractors are being introduced to undertake certain production processes, such as site transportation, to save on maintenance and production overheads. IRC’s engineers are also implementing certain actions to optimise drilling and blasting cost per unit that represents as significant portion of the mining costs per cubic meter.

– 6 –

Figure 3: Kuranakh Production and Sales for 2012

				2012			2011	Change
		Q1	Q2	Q3	Q4	Full Year	Full Year	%
IRON ORE
Concentrate Produced	t	228,830	203,481	261,204	275,921	969,436	800,291	+21%
Concentrate Sold	t	217,689	206,332	260,033	296,489	980,543	770,088	+27%
Average Price
(Fe 62.5%)	$/t	117	127	110	100	112	143	-22%
ILMENITE
Concentrate Produced	t	26,751	28,694	33,267	36,383	125,095	63,490	+97%
Concentrate Sold	t	25,970	26,996	24,344	43,928	121,238	51,737	+134%
Average Price
(TiO2 48%)	$/t	293	280	284	263	277	215	+29%

K&S (100% owned)

Mining

Overburden stripping continued to intensify into the fourth quarter. A total 865,600 m[3] of material was removed in the fourth quarter, resulting in total material moved for 2012 of 3,046,900 million m[3] and to date of more than 7 million m[3] . This is more than a half of total required 12.2 million m[3] of overburden required, comfortably in line with the mine schedule at this stage.

In line with plan, minimal ore was mined as the work programme is to fully expose the ore bodies first by removal of overburden. Efforts in 2013 will be specifically aimed at the mining of the now exposed ore bodies and the 3 million tonnes required ahead of the operation start-up.

Infrastructure

The concrete batching plants have been well utilised during 2012, allowing CNEEC to complete the initial site foundation works, including the main process factory and peripheral buildings.

The 22kv transformer site is now complete and is ready to be connected to the main cross-country overhead power supply, before switching over to full national grid power as scheduled.

At the end of the fourth quarter, approximately 95% of all site foundation works are complete and the erection of a good percentage of the initial steel structures has commenced.

– 7 –

Processing Plant

The steel stanchions for the factory have started to arrive on site with approximately 60% being available at the end of December 2012. Steel construction products, such as columns and reinforcing bars continue to be imported ensuring adequate supplies for construction activities which have started to be placed. Work has also started on machine foundations.

The detailed drawings and finalisation of mechanical items is progressing, ensuring that the project will keep moving forward to plan.

IRC is still working closely with its contractors to enhance the implementation of the design procedures. An updated selection of photos showing the progress at the K&S Project at the end of the quarter is available at: http://www.ircgroup.com.hk/en/Media/photographs/index.html.

Figure 4: K&S Project Timeline

==> picture [483 x 275] intentionally omitted <==

----- Start of picture text -----

K&S Milestones
Optimisation ICBC finance Electric Processing Plant Processing Plant
study to double facility transmission Steel frame equipment equipment Sign off and
CNEEC EPC signed production commenced to substation work installation commissioning hand over
2010 2011 2012 2013 2014 2015
Threefold First Processing K&S rail Main factory Machine Infrastructure Railway Hot Full production
reserves increase Plant Brick bridge foundations foundations buildings infrastructure commissioning
works and first
production
STRIPPING 25% 50% 100%
MINING 10% 10% 100%
ICBC FACILITY 55% 100%
PROCESSING PLANT 30% 75% 100%
PROJECT COMPLETE 40% 60% 90% 100%
----- End of picture text -----

Outlook

CNEEC continue to provide comfort to IRC in their ability to deliver works to schedule. At the end of the fourth quarter construction remains on track with no evident delays. IRC and CNEEC are working on site and at their respective offices in Birobidzhan and Beijing to ensure the continuous progress of the works. This includes working together on large and small items: from the selection and importation of materials and equipment; transportation; licensing and testing certification; and immigration and

– 8 –

customs practicalities. The cooperative working relationship between IRC and CNEEC has been strengthened further during the quarter and this is reflected in the excellent progress that has been achieved on site.

Garinskoye (99.58% owned)

Earlier in 2012 IRC announced the results of a positive scoping study for the production of low-cost direct shipment ore (DSO) from its large Garinskoye Deposit. The study, based on JORC reserves and resources, proposes a DSO style opportunity. IRC considers this to be an attractive option as it has a low start-up cost and short-build period using existing technologies with innovative transportation solutions which suggests an attractive capital intensity rate. The study suggests production potential of 2.4 million tonnes of ore per annum, beneficiated to 2.1 million tonnes of 60% Fe iron ore fines concentrate. The simple production facilities would provide low operating costs and the proximity to the Chinese border suggests low transportation costs.

Since announcing the DSO opportunity progress has continued over the summer season, notably during the period the DSO processing flowsheet development was completed. Several semi-industrial test works were conducted at the Ural Mining Institute of Russian Academy of Science. Test results were positive, demonstrating high recovery of magnetite from the final concentrate with good reductions in sulfur and phosphorus content from the initial high-grade ore. High recoveries may permit the introduction of additional lower grade ores thereby potentially increasing the DSO mineable reserves. It is anticipated that the final DSO reserves and production figures will be completed during the first half of 2013.

IRC is continuing discussions with a range of potential financial providers to advance the Garinskoye DSO project. Its position at one of the lowest points on both the operational and capital cost curves has provided for financing interest and the provision of indicative termsheets from a variety of sources even in the currently constrained equity capital and debt markets.

SRP (46% Owned)

The Steel Slag Reprocessing Plant in North-Eastern China continued to make improvements in recovery rates and consequently production during the fourth quarter; ramping up to near-full capacity. Stable production output has resulted in an improvement in production efficiencies and production costs per tonne of final product. With some improvements in the final product market and selling price, and the product quality in line with new PRC requirements, management is optimistic that the margin will improve in 2013.

CORPORATE DIARY

IRC will report Full Year Financials and the accompanying Annual Report for 2012 in March 2013. IRC will provide an advisory in due course with details for the conference call and webcast along with information and the date of the AGM.

– 9 –

RISK FACTORS

The Group is exposed to a variety of risks and uncertainties which could significantly affect its business and financial results. The Group’s view of the principal risks that could impact it for the remainder of the current financial year are substantially unchanged from the ones set out in the 2011 Annual Report. A summary of these key risks is set out below:

• . Operational risks such as delay in supply of/or failure of equipment/services and adverse weather conditions.

• . Financial risks such as commodity prices, exchange rate fluctuations, funding and liquidity and capital programme controls.

• . Health, safety and environmental risks such as health and safety issues, legal and regulatory risks, licences and permits, restatement of reserves and resources, and non- compliance with applicable legislation.

• . Legal and Regulatory risks such as country-specific risks.

• . Human Resources risks such as the ability to attract key senior management and potential lack of skilled labour.

This should not be regarded as a complete or comprehensive list of all potential risks that the Group may experience. In addition, there may be additional risks currently unknown to the Group and other risks, currently believed to be immaterial, which could turn out to be material and significantly affect the Group’s business and financial results.

By Order of the Board G. JAY HAMBRO Executive Chairman

Hong Kong, People’s Republic of China

Wednesday, 16th January 2013

As at the date of this announcement, the Executive Directors of the Company are Mr G. Jay Hambro, Mr Yuri 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 Jonathan Martin Smith and Mr Chuang-Fei Li.

– 10 –

For further information, please contact:

Investors

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

Media (Racepoint Limited)

Summer Jia Office: +852 3111 9926 Mobile: +852 5425 5233 Email: sjia@racepointgroup.com

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

– 11 –