IRC Limited — Proxy Solicitation & Information Statement 2016

Dec 12, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action you should take, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your Shares in IRC Limited , you should at once hand this circular together with the accompanying form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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

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

(a company incorporated in Hong Kong with limited liability)

(Stock code: 1029)

(1) SUBSCRIPTION OF NEW SHARES BY TIGER CAPITAL FUND SPC – TIGER GLOBAL SP AND GRANT OF SHARE OPTIONS AND (2) NOTICE OF EGM

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed “Definitions” in this circular.

A letter from the Board is set out on pages 6 to 19 of this circular.

A notice convening the EGM to be held at the Admiralty Conference Centre, 1804A, 18/F, Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong on 29 December 2016 at 10:00 a.m. is set out on pages 20 to 21 of this circular. Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Hong Kong share registrar of the Company, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, no later than 48 hours before the time fixed for holding the EGM or any adjournment thereof. Completion and delivery of the form of proxy will not prevent you from attending, and voting at, the EGM or any adjournment thereof if you so wish.

12 December 2016

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**LETTER FROM **	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		20

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

• “AGM”

• the annual general meeting of the Company held on 29 June 2016 at which, among other things, the General Mandate was granted to the Directors

• “Announcement” the announcement published by the Company on 1 December 2016 in relation to, among other things, the Subscription

• “Board” the board of directors of the Company

• “Business Day” any day (excluding a Saturday or Sunday) on which banks are generally open for business in Hong Kong

• “CNEEC”

• China National Electric Equipment Corporation, a major Chinese state-owned contractor

• “Company”

• IRC Limited, a company incorporated in Hong Kong whose Shares are listed on the main board of the Stock Exchange

• “Completion”

• the completion of the subscription for and issuance of the Subscription Shares in accordance with the Subscription Agreement

• “Completion Date”

• the Business Day after the date upon which the last of the conditions set out in the section headed “Conditions precedent to the Subscription Agreement” shall have been satisfied or such later time and/or date as the Company and the Investor may agree in writing

• “Delay Penalties”

• potential claims against CNEEC under the EPC Contract including liquidated damages relating to a delay in completing the works

• “Deposit”

• an amount in the sum of HK$19,687,500, which is equal to 10% of the aggregate Subscription Price

• “Directors”

the director(s) of the Company

– 1 –

DEFINITIONS

• “EGM”

• “EPC Contract”

• “Exercise Condition”

• “Exercise Price(s)”

• “Further Announcement”

• “General Mandate”

• “General Nice”

• “General Nice Subscription Agreement”

• “Group”

• “HK$”

• “Hong Kong”

• “ICBC”

• the extraordinary general meeting of the Company to be convened for the purpose of considering, and if thought fit, approving the ordinary resolution in respect of (i) the Subscription Agreement and the transactions contemplated thereunder; and (ii) the allotment of the Subscription Shares and the grant of the right to subscribe for the Option Shares under the Specific Mandate

• the agreement entered into between K&S and CNEEC for the construction of the mining and processing operations at its principal mine, known as the “K&S Mine”

• the Investor holding, at the time of grant of the Tranche 2 Option (being the first anniversary of the Completion Date), at least 10% of the total issued Shares of the Company

• the Tranche 1 Exercise Price and/or the Tranche 2 Exercise Price, as the context requires

• the announcement published by the Company on 2 December 2016 in relation to the Company’s application to the Stock Exchange for a waiver from Listing Rule 13.36(5)

• the general mandate granted to the Directors by the Shareholders at the AGM to allot, issue or deal with up to 20% of the issued share capital of the Company as at the date of AGM

• General Nice Development Limited, a limited liability company incorporated under the laws of Hong Kong

• the subscription agreement dated 17 January 2013 entered into between General Nice and the Company

• the Company and its subsidiaries

• Hong Kong dollars, the lawful currency of Hong Kong

• the Hong Kong Special Administrative Region of the People’s Republic of China

Industrial and Commercial Bank of China Ltd

– 2 –

DEFINITIONS

• “Investor”

• “K&S”

• “Last Trading Day”

• “Latest Practicable Date”

• “Listing Rules”

• “Lock-Up Period”

• “Long Stop Date”

• “New Securities Issue”

• “Option(s)”

• “Option Shares”

• “Participating Shareholders”

• Tiger Capital Fund SPC – Tiger Global SP, an exempted company incorporated with limited liability and registered as a segregated portfolio company under the laws of the Cayman Islands participating in Tiger Global SP, a segregated portfolio of Tiger Capital Fund SPC

• Kimkano-Sutarsky Mining and Beneficiation Plant LLC, a wholly-owned subsidiary of the Company

• 30 November 2016, being the last trading day of the Shares on the Stock Exchange prior to the publication of the Announcement

• 8 December 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular

• the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• the period commencing on the date of the Subscription Agreement to the date which is 90 days from the Completion Date 16 January 2017 or such later date as may be agreed between the parties

• the allotment, issue or grant of Shares, securities convertible into Shares, or options, warrants or similar rights to subscribe for Shares or securities convertible into Shares, in circumstances other than a pro rata offer made to all eligible Shareholders

• the Tranche 1 Option and/or the Tranche 2 Option, as the context requires

• Shares to be issued pursuant to the Tranche 1 Option, or the Tranche 2 Option, as the context requires

• Shareholder(s) (including the Investor) who is/are offered securities under the New Securities Issue by the Company

– 3 –

DEFINITIONS

• “Petropavlovsk”

• “Project Finance Facility”

• “Proposed Director” or “Mr Cheng”

• “Recourse Agreement”

• “SFO”

• “Share(s)”

• “Shareholder(s)”

• “Specific Mandate”

• “Stock Exchange”

• “Subscription”

• “Subscription Agreement”

• “Subscription Price”

• “Subscription Share(s)”

• “Tranche 1 Exercise Price”

• Petropavlovsk PLC, a public company incorporated in England and Wales with registered number 04343841 and listed on the Main Market of the London Stock Exchange

• the US$340,000,000 facility to be made available to the Group pursuant to an agreement between K&S and ICBC dated 13 December 2010

Mr Cheng Chi Kin

• the agreement entered into between the Company and Petropavlovsk around the time of the original Project Finance Facility

• the Securities & Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• ordinary share(s) of the Company

• registered holder(s) of the Share(s)

• the specific mandate to be granted to the Directors to issue, allot and deal with the Subscription Shares and to grant the right to subscribe for the Option Shares

• The Stock Exchange of Hong Kong Limited

• the subscription by the Investor of the Subscription Shares pursuant to the Subscription Agreement

• the subscription agreement dated 30 November 2016 entered into between the Company and the Investor in respect of the Subscription

• HK$0.21 per Subscription Share

• 937,500,000 new Shares to be issued to the Investor pursuant to the Subscription Agreement

• the price which is 110% of the closing price for a Share on the first day of the 60-month period commencing on the Completion Date (or, if that date is not a trading day, the closing price for the Shares on the trading day immediately prior to that date)

– 4 –

DEFINITIONS

• “Tranche 2 Exercise Price”

• the price which is 110% of the closing price for a Share on the first day of the 60-month period commencing on the first anniversary of the Completion Date (or, if that date is not a trading day, the closing price for the Shares on the trading day immediately prior to that date)

• “Tranche 1 Option”

• the right to subscribe for up to 30,000,000 Shares at the price which is 110% of the closing price for a Share on the first day of the 60-month exercise period commencing on the Completion Date (or, if that date is not a trading day, the closing price for the Shares on the trading day immediately prior to that date), exercisable by the Proposed Director at any time during the period of 60 months commencing on the Completion Date

• “Tranche 2 Option”

• the right to subscribe for up to 30,000,000 Shares at the price which is 110% of the closing price for a Share on the first day of the 60-month exercise period commencing on the first anniversary of the Completion Date (or, if that date is not a trading day, the closing price for the Shares on the trading day immediately prior to that date), exercisable by the Proposed Director at any time during the period of 60 months commencing on the first anniversary of the Completion Date

• “%” per cent.

• Note: The figures in US$ are converted into HK$ at the rate of US$1 = HK$7.75 throughout this circular for indicative purposes only.

– 5 –

LETTER FROM THE BOARD

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

(a company incorporated in Hong Kong with limited liability)

(Stock code: 1029)

Board of Directors: Executive Directors Mr Yury Makarov Mr Danila Kotlyarov

Registered Office:

6H, 9 Queen’s Road Central Hong Kong

Non-Executive Directors

Mr Jay Hambro Mr Cai Sui Xin Mr Raymond Woo

Independent Non-executive Directors

Mr Daniel Bradshaw Mr Simon Murray, CBE, Chevalier de la Légion d’honneur Mr Jonathan Martin Smith Mr Chuang-fei Li

Alternate Director

Mr Benjamin Ng (Alternate Director to Mr Cai Sui Xin)

Company Secretary:

Mr Johnny Yuen

12 December 2016

Dear Shareholder,

SUBSCRIPTION OF NEW SHARES BY TIGER CAPITAL FUND SPC – TIGER GLOBAL SP AND GRANT OF SHARE OPTIONS

INTRODUCTION

Reference is made to the Announcement and the Further Announcement issued by the Company on 1 December 2016 and 2 December 2016, respectively, in relation to, among other things, the Subscription and proposed grant of the Options.

– 6 –

LETTER FROM THE BOARD

It was announced that on 30 November 2016 (after trading hours), the Company entered into the Subscription Agreement with the Investor, pursuant to which the Investor has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue 937,500,000 new Shares in the amount of HK$196,875,000 at the Subscription Price of HK$0.21 per Subscription Share.

It was also announced that in consideration for the Subscription, subject to Completion occurring, the Company has also agreed to grant to the Investor (who has nominated that this be assigned to the Proposed Director to exercise in his own name) a right to subscribe for a maximum of 60,000,000 Shares under the Options.

An application was made by the Company to the Stock Exchange for a waiver from Listing Rule 13.36(5) to permit the Company to create, allot and issue securities under the General Mandate without obtaining the consent of Shareholders in an extraordinary general meeting for the issue of the Subscription Shares and the Option Shares at a price which represents a discount of greater than 20% to the benchmarked price of its Shares, on the grounds that the Company is in a serious financial position. However, as disclosed in the Further Announcement, the Stock Exchange did not grant its consent pursuant to Listing Rule 13.36(5). Accordingly, the allotment and issue of the Subscription Shares and, if required by the Stock Exchange, the grant of the right to subscribe for the Option Shares, will be subject to Shareholders’ approval at the EGM.

The purpose of this circular is to provide Shareholders with further information in relation to the proposed transactions outlined above and to seek Shareholders’ approval of the resolution set out in the notice of the EGM at the end of this circular.

THE SUBSCRIPTION AGREEMENT

Date: 30 November 2016 Parties: (i) the Company as issuer; and (ii) the Investor as subscriber. Number of Subscription Shares: 937,500,000 new Shares Number of Option Shares: 60,000,000 new Shares Maximum number of Shares to be 997,500,000 new Shares issued to the Investor or its nominee:

Pursuant to the Subscription Agreement, the Investor has conditionally agreed to subscribe for a total of 937,500,000 new Shares at the Subscription Price of HK$0.21 per Subscription Share. The Investor will pay to the Company a subscription amount of HK$196,875,000 in cash upon Completion, being the total consideration for all the 937,500,000 new Shares at the Subscription Price. The Investor was also required to pay the Deposit to the Company in respect of its obligation to pay the aggregate Subscription Price on Completion no later than five Business Days following the date of the Subscription Agreement. Please refer to the section headed “Deposit” below for further details.

– 7 –

LETTER FROM THE BOARD

The Subscription Shares represent 15.23% of the existing issued share capital of the Company as at the Latest Practicable Date and approximately 13.22% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming no other new Shares are issued).

Under the Subscription Agreement, in consideration for the Subscription, the Company has also agreed to grant to the Investor (who has nominated that this be assigned to the Proposed Director to exercise in his own name) a right to subscribe for a maximum of 60,000,000 Shares, subject to Completion occurring. Please refer to the section headed “Option Shares” below for further details.

The allotment and issue of the Subscription Shares is conditional upon the satisfaction of certain conditions precedent. Please refer to the section headed “Conditions precedent to the Subscription Agreement” below for further details.

The percentage of issued share capital of the Company represented by the Subscription Shares as at Completion is set out in detail in the section headed “Change of Shareholding Structure” below.

SUBSCRIPTION PRICE

The Subscription Price for each Subscription Share is HK$0.21. This represents:

• (a) a discount of approximately 37.3% to the closing price of HK$0.335 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (b) a discount of approximately 44.7% to the closing price of HK$0.380 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (c) a discount of approximately 44.0% to the average closing price of HK$0.375 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to and including the Last Trading Day;

• (d) a discount of approximately 36.6% to the average closing price of HK$0.331 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days immediately prior to and including the Last Trading Day;

• (e) a discount of approximately 12.1% to the average closing price of HK$0.239 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days immediately prior to and including the Last Trading Day;

• (f) a discount of approximately 0.5% to the average closing price of HK$0.211 per Share as quoted on the Stock Exchange for the last 60 consecutive trading days immediately prior to and including the Last Trading Day;

• (g) a premium of approximately 7.1% to the average closing price of HK$0.196 per Share as quoted on the Stock Exchange for the last 90 consecutive trading days immediately prior to and including the Last Trading Day;

– 8 –

LETTER FROM THE BOARD

• (h) a premium of approximately 17.3% to the average closing price of HK$0.179 per Share as quoted on the Stock Exchange for the last 6 months immediately prior to and including the Last Trading Day;

• (i) a premium of approximately 28.8% to the average closing price of HK$0.163 per Share as quoted on the Stock Exchange for the last year immediately prior to and including the Last Trading Day; and

• (j) a premium of approximately 46.9% to the Company’s published consolidated net asset per Share (excluding non-controlling interests) as at 30 June 2016 of approximately HK$0.143 per Share (based on a total of 6,155,886,381 Shares as at the date of the Subscription Agreement).

As can be seen from the above, the market price of the Shares has consistently been below the Subscription Price for most of the last year, and the closing price of the Shares did not exceed the Subscription Price at any time from 10 December 2015 until 11 November 2016.

The Subscription Price was determined after arm’s length negotiations between the Company and the Investor, taking into consideration the market price of the Shares over the previous 12 months. In particular, given the fact that the Share price has been below HK$0.21 for almost all of the last 12 months and has only recently increased, the Investor informed the Company that it was not prepared to invest at a subscription price representing a discount of less than 20% to the current Share price.

Accordingly, the Subscription Price, while representing a discount of greater than 20% to the Share price on the Last Trading Day and the average of the last ten consecutive trading days immediately prior to and including the Last Trading Day, is at a discount of less than 20% to the average closing price for the last 60 consecutive trading days and is at a premium to the average closing price for the last 12 months immediately prior to and including the Last Trading Day. The Company is not aware of any reason behind the unusual market movements in the last three weeks prior to the Last Trading Day which have led to an unexpectedly high market price for the Shares.

OPTION SHARES

The Investor takes a long term view on its investment in the Company and has requested for a right to subscribe for the Option Shares. As noted above, under the Subscription Agreement, in consideration for the Subscription, the Company has agreed to grant to the Investor (who has nominated that this be assigned to the Proposed Director to exercise in his own name) a right to subscribe for the Option Shares, subject to Completion occurring.

The first tranche of 30,000,000 Option Shares will be exercisable at the Tranche 1 Exercise Price immediately on the Completion Date for a period of five years (“ Tranche 1 Option ”).

– 9 –

LETTER FROM THE BOARD

The second tranche of 30,000,000 Option Shares will be exercisable at the Tranche 2 Exercise Price from the first anniversary of the Completion Date for a period of five years (“ Tranche 2 Option ”), provided that the Tranche 2 Option will only be granted by the Company if, on the date which is the first anniversary of the Completion Date, the Investor holds at least 10% of the total issued Shares of the Company (“ Exercise Condition ”). Other than the Exercise Condition, the ability to exercise the Option Shares will not be subject to other performance conditions. For the avoidance of doubt, the Investor is only required to hold at least 10% of the total issued share capital of the Company on the first anniversary of the Completion Date and is not required to maintain this holding in order to exercise the Tranche 2 Option once granted.

The Option Shares (if issued) represent 0.97% of the existing issued share capital of the Company as at the Latest Practicable Date, and approximately 0.85% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and approximately 0.84% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Option Shares in full (in each case assuming no other new Shares are issued).

The percentage of issued share capital of the Company represented by the Option Shares as at completion of the subscription for and issuance of the Option Shares is set out in detail in the section headed “Change of Shareholding Structure” below.

Save as disclosed in this circular, there are no other arrangements between the Investor, the Proposed Director and the Company and its connected persons and, so far as the Company is aware, neither the Investor nor the Proposed Director is currently in possession of potential deals or information about the Company that might crystallize over the exercise periods in respect of the Option Shares.

EXERCISE PRICE OF OPTIONS

The Tranche 1 Option will have an exercise price set at a 10% premium to the closing price on the Completion Date (“ Tranche 1 Exercise Price ”). Tranche 2 Option will have an exercise price set at a 10% premium to the closing price on the first anniversary of the Completion Date (“ Tranche 2 Exercise Price ”).

The Exercise Prices were arrived at after arm’s length negotiations between the Company and the Investor with reference to the recent trading performance of the Shares and taking into consideration the market price of the Shares over the previous 12 months.

CONDITIONS PRECEDENT TO THE SUBSCRIPTION AGREEMENT

Completion is conditional upon and subject to the fulfilment of the following:

• (a) the Listing Committee of the Stock Exchange granting listing of and permission to deal in the Subscription Shares and, when issued, the Option Shares;

• (b) the Stock Exchange approving the grant of the right to subscribe for the Option Shares pursuant to Listing Rule 15.02; and

– 10 –

LETTER FROM THE BOARD

• (c) either:

• (i) the Shareholders having approved at the EGM by ordinary resolution:

  • (A) the issue of the Subscription Shares at the Subscription Price pursuant to the Subscription Agreement in accordance with applicable requirements of the Listing Rules; and

  • (B) if required by the Stock Exchange, the grant of the right to subscribe for the Option Shares at the relevant Exercise Price pursuant to the Subscription Agreement; or

• (ii) the Stock Exchange granting a waiver from Listing Rule 13.36(5) permitting the Company to create, allot and issue the Subscription Shares at the Subscription Price and to grant the right to subscribe for the Option Shares without obtaining the consent of Shareholders in general meeting prior to issuing the Subscription Shares or granting the right to subscribe for the Option Shares.

None of the conditions precedent listed above can be waived. In the event that any of the conditions of the Subscription Agreement listed above have not been fulfilled by the Long Stop Date in accordance with the Subscription Agreement, the Subscription Agreement shall terminate and, save as set out below under the heading “Deposit”, neither party shall have any claim against the other for costs, damages, compensation or otherwise.

Save for the Exercise Condition, there are no other conditions to the completion of the subscription for the Option Shares if the Options are exercised.

An application was made by the Company to the Stock Exchange for a waiver from Listing Rule 13.36(5) to permit the Company to create, allot and issue securities under the General Mandate without obtaining the consent of Shareholders in an extraordinary general meeting for the issue of the Subscription Shares and the Option Shares at a price which represents a discount of greater than 20% to the benchmarked price of its Shares, on the grounds that the Company is in a serious financial position. However, as disclosed in the Further Announcement, the Stock Exchange did not grant its consent pursuant to Listing Rule 13.36(5). Accordingly, the condition precedent referred to in paragraph (c)(ii) above has not been fulfilled and the allotment and issue of the Subscription Shares and the grant of the right to subscribe for the Option Shares will be subject to Shareholders’ approval at the EGM.

An application will also be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares and, when issued, the Option Shares.

– 11 –

LETTER FROM THE BOARD

DEPOSIT

No later than five Business Days following the date of the Subscription Agreement, the Investor was required to pay an amount equal to HK$19,687,500 to the Company as a deposit (“ Deposit ”) in respect of its obligation to pay the aggregate Subscription Price on Completion. The Deposit was paid by the Investor on 6 December 2016, within the required time frame.

In the event that the Investor does not fulfil its obligations in respect of Completion pursuant to the terms of the Subscription Agreement, it shall forfeit the Deposit and, without prejudice to the Company’s other rights and remedies in respect of the failure by the Investor to comply with its obligations under the Subscription Agreement, the Company shall be entitled to retain the Deposit.

In the event that the conditions to Completion listed in the section headed “Conditions precedent to the Subscription Agreement” above are not fulfilled on or before the Long Stop Date, and the Subscription Agreement terminates as a result thereof, the Company shall return the Deposit to the Investor.

In addition, if the Company had not recommended to the Shareholders in this circular that they should vote in favour of the Subscription and/or the Company fails to use reasonable endeavours to fulfil the conditions precedent to the Subscription Agreement, then the Company would be required to pay an amount equal to the Deposit (in addition to the repayment of the Deposit) to the Investor. Please refer to the section headed “Recommendation” for the Board’s recommendation.

COMPLETION

Subject to the fulfilment of the conditions precedent to the Subscription Agreement listed in the section headed “Conditions precedent to the Subscription Agreement” above, Completion shall take place on the Completion Date, which is the Business Day following the date of the EGM.

Upon Completion, the Subscription Shares will, in aggregate, represent approximately 13.22% of the issued share capital of the Company as enlarged by the Subscription (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 Subscription Agreement up to Completion).

Completion of the issue of the relevant Option Shares shall take place on the date that is 10 Business Days following the date on which the Proposed Director delivers an exercise notice, or such other time and/or date as the Company and the Proposed Director may agree.

The Company will make appropriate adjustments (if any) to outstanding and unexercised share options granted under the Company’s share option scheme in accordance with its terms as a result of the issue of the Subscription Shares to the Investor and any subsequent issue of any Option Shares to the Proposed Director.

– 12 –

LETTER FROM THE BOARD

RANKING OF SUBSCRIPTION SHARES AND OPTION 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 date 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 allotment.

If and to the extent the Options are exercised by the Proposed Director, the Option 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 Option Shares, including the right to any dividends or distributions made or declared on or after the date of their respective allotment.

RESTRICTIONS ON ISSUE OF NEW SHARES BY COMPANY AND DISPOSALS BY THE INVESTOR

The Company has undertaken to the Investor that from the date of the Subscription Agreement to the date which is 90 days from the Completion Date (the “ Lock-Up Period ”), it will not, without prior written consent of the Investor (such consent not to be unreasonably withheld), issue any Shares or any interests in Shares except for:

• (a) the Subscription Shares to be allotted and issued pursuant to the Subscription Agreement;

• (b) the grant of the right to subscribe for and issue of the Option Shares; and

• (c) the grant of any options and/or the issue of any Shares pursuant to any employee share option scheme of the Company.

The Investor has undertaken to the Company that during the Lock-Up Period, it will not sell, transfer, grant options over or otherwise dispose of (either conditionally or unconditionally, or directly or indirectly, or otherwise) any Subscription Shares or any interests therein without the prior written consent of the Company.

The undertaking by the Company and the 90-day Lock-Up Period was determined after arm’s length negotiations between the Company and the Investor based on commercial negotiations, taking into account the mutuality of the undertakings and the period of similar undertakings by other listed companies in Hong Kong. Taking into consideration that the Investor has also undertaken not to dispose of the Subscription Shares during the same 90-day period commencing on the Completion Date and the view of the Company and the Investor that the length of the Lock-Up Period is appropriate to show each other’s commitment to such strategic partnership, the Company considers that, since the transaction is an attractive opportunity to form a strategic partnership with the Investor and a way to secure the funding necessary to meet its financial obligations, the undertaking granted by the Company, when taken together with all other terms of the Subscription Agreement and the transactions contemplated under the Subscription Agreement, is fair and reasonable.

PROPOSED CHANGE OF BOARD COMPOSITION

Pursuant to the terms of the Subscription Agreement, after Completion, the Company shall take all necessary steps to invite the Proposed Director to become a

– 13 –

LETTER FROM THE BOARD

non-executive director of the Board as soon as possible, subject to the approval of the Company’s nomination committee. The appointment of the Proposed Director, if approved, shall be in accordance with the Company’s articles of association and the corporate governance code as stated in Appendix 14 of the Listing Rules. It is noted that there is no obligation on the Company to procure the appointment of the Proposed Director.

The Proposed Director, if appointed, shall receive a fee of US$79,560 per annum, and which may be varied from time to time by the Company’s remuneration committee having regard to the level of remuneration being paid to other non-executive directors of the Company from time to time.

The invitation by the Company to the Proposed Director to become a non-executive director of the Board is subject to the Investor holding at least 10% of the total issued Shares of the Company after Completion.

The biographical details of the Proposed Director are as follows:

Mr Cheng Chi Kin (“ Mr Cheng ”), aged 48, is the chief executive officer of an investment management company. Mr Cheng is a certified public account and a fellow member of the Association of International Accountants. Mr Cheng has 25 years of experience in corporate finance, accountancy, and investment banking, with investment experience in the real estate, infrastructure and natural resources industries.

Mr Cheng, if appointed, shall hold office until the next following annual general meeting of the Company and will then be eligible for re-election.

As noted in the section headed “Option Shares” above, the Company has agreed to grant to the Investor a right to subscribe for the Option Shares, and the Investor has nominated that this right be assigned to Mr Cheng to exercise in his own name. Accordingly, upon Completion, for the purposes of Part XV of SFO, Mr Cheng will be interested in 60,000,000 Shares in respect of the Options. Please refer to the section headed “Option Shares” above for further details.

Save as disclosed herein, (i) Mr Cheng does not hold any directorship in other listed public companies in Hong Kong or overseas in the last three years; (ii) Mr Cheng does not hold any position in the Company or its subsidiaries; (iii) Mr Cheng does not have any relationship with any Directors, senior management or substantial or controlling Shareholders of the Company; (iv) Mr Cheng does not have any other interest in the Shares within the meaning of Part XV of the SFO as at the Latest Practicable Date; and (v) there are no other matters relating to the proposed appointment of Mr Cheng as a director of the Company that need to be brought to the attention of the Shareholders nor is there any other information that is required to be disclosed pursuant to Rule 13.51(2) of the Listing Rules.

RIGHT OF FIRST REFUSAL

For so long as the Investor holds at least 10% of the issued shares of the Company, pursuant to the terms of the Subscription Agreement, the Company has agreed that if it

– 14 –

LETTER FROM THE BOARD

proposes to allot, issue or grant Shares, securities convertible into Shares, or options, warrants or similar rights to subscribe for Shares or securities convertible into Shares, in circumstances other than a pro rata offer made to all eligible Shareholders (“ New Securities Issue ”), the securities to be issued by the Company pursuant to the New Securities Issue must be offered to the Investor in at least its Pro-Rata Portion with the other Shareholder(s) who is/are offered securities under the New Securities Issue by the Company (“ Participating Shareholders ”).

For these purposes, the Investor’s Pro-Rata Portion is calculated as follows:

Pro-Rata Portion = A ÷ B

Where

• A = the number of Shares held by the Investor immediately prior to the New Securities Issue.

• B = the number of Shares held by all Participating Shareholders (including the Investor) immediately prior to the New Securities Issue.

For example, if the Investor held 100 Shares immediately prior to the New Securities Issue, and the Participating Shareholders (including the Investor) in aggregate held 500 Shares immediately prior to the New Securities Issue, the Investor’s Pro-Rata Portion = 100 ÷ 500 = 0.2 (20%). Accordingly, for every security offered to any other Participating Shareholder, the Investor must be offered at least 0.2 securities (rounded to the nearest whole security).

For so long as the Investor is entitled to exercise the right of first refusal described above, the Investor shall abstain from voting on any resolution approving the issue of Shares, including any proposed general mandate of the Company.

REASONS AND BENEFITS FOR THE SUBSCRIPTION AND USE OF PROCEEDS

With reference to the 2016 Third Quarter Trading Update of the Company announced on 25 October 2016 and as stated in the Announcement on 1 December 2016, K&S is required to make payments of principal and interest on 20 December 2016 in the amount of approximately US$26 million under the Project Finance Facility. The Group’s current cash balance is not adequate to service the Project Finance Facility. Accordingly, in the absence of either an amendment to or waiver in respect of the Project Finance Facility or alternative fundraising, K&S will be unable to service the Project Finance Facility on a timely basis and ICBC will be able to accelerate the facility as a result of such event of default. If ICBC accelerates the Project Finance Facility in full, the entire principal amount of the Project Finance Facility plus accrued interest will become repayable immediately, which the Group has no means of servicing its obligations.

The Company would also note that, if K&S were to breach the Project Finance Facility due to a failure to service the Project Finance Facility in a timely manner, even if ICBC called on the guarantee granted by Petropavlovsk under the Project Finance Facility and such payment was subsequently made, any breach of the Project Finance Facility by

– 15 –

LETTER FROM THE BOARD

K&S which gave rise to the need to call on the guarantee granted by Petropavlovsk would already have resulted in an event of default under the Project Finance Facility. Accordingly, unless a waiver is granted by ICBC at the time a subsequent payment is made, ICBC would still be able to accelerate the payment of the entire principal amount of the Project Finance Facility plus accrued interest.

As set out in the Announcement, the Company has, during the latter half of 2016, been exploring a number of possibilities to avoid default under the Project Finance Facility, including negotiations with ICBC to agree to a restructuring, amendment or waivers under the Project Finance Facility which are currently still on-going and discussions with a number of separate interested parties on potential fundraisings which did not give rise to any binding agreements.

In respect of the Delay Penalties and other possible claims under the EPC Contract with CNEEC and the performance bond in place with ICBC which K&S may call on, the Company is of the view that making a claim under the performance bond while it is still in discussions with CNEEC and ICBC may adversely affect those discussions. Further, even if the Company makes a claim under the performance bond, there is no certainty that the payment would be made before 20 December 2016. Accordingly, the Company is of the view that it is currently not in its interests or the interests of its Shareholders to make such a claim under the performance bond, but continues to consider its options in this regard prior to the expiry of the performance bond on 31 December 2016.

The Investor, on the other hand, is willing to make a strategic long-term investment in the Company, assisting the Company to overcome its present cashflow issues and provide extra working capital to K&S as it ramps up its mining project to full commercial production. The Subscription therefore represents the most attractive and viable option to secure financing in the time available and an opportunity to form a strategic partnership with the Investor.

As at the date of the Last Trading Day, the market capitalisation of the Company amounted to approximately US$302 million and the size of the fundraising represents approximately 8% of that market capitalisation. The Company has limited the fundraising size with a view of minimising the dilution effect to the existing Shareholders while taking into consideration the going concern position of the Group.

Upon Completion, the Subscription will raise HK$196,875,000 for the Company, and such proceeds would be used towards servicing the Project Finance Facility if either amendments to or a waiver in respect of the Project Finance Facility is not granted in a timely manner, and funding the working capital for K&S as it ramps up to full capacity. The net proceeds of the allotment of the Option Shares (if issued) will be used for general working capital purposes.

SPECIFIC MANDATE

The Subscription Shares and the Option Shares (if exercised) will be allotted and issued under the Specific Mandate to be sought at the EGM.

APPLICATION FOR LISTING

Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares and, when issued, the Option Shares.

– 16 –

LETTER FROM THE BOARD

CHANGE OF SHAREHOLDING STRUCTURE

The changes of the shareholding structure of the Company as a result of the Subscription and the issue of the Option Shares are as follows:

Substantial Shareholders Petropavlovsk2 General Nice Total Substantial Shareholders Directors3 George Jay Hambro Yury Makarov Raymond Kar Tung Woo Total Directors The Investor Other public shareholders Total	At the Latest Practicable Date and immediately before Completion Number of Shares Approximate percentage 2,205,900,000 35.83% 1,263,174,000 20.52% 3,469,074,000 56.35% 34,732,405 0.56% 30,911,505 0.50% 7,435,360 0.12% 73,079,270 1.19% – 0.00% 2,613,733,111 42.46% 6,155,886,381 100.00%	Immediately after Completion and immediately before the issue of Option Shares under Tranche 1 Option Number of Shares Approximate percentage 2,205,900,000 31.10% 1,263,174,000 17.81% 3,469,074,000 48.91% 34,732,405 0.49% 30,911,505 0.44% 7,435,360 0.10% 73,079,270 1.03% 937,500,000 13.22% 2,613,733,111 36.85% 7,093,386,381 100.00%	Immediately after the completion of the issue of the Option Shares (if exercised in full)	Immediately after the completion of the issue of the Option Shares (if exercised in full)
	Number of Shares 2,205,900,000 1,263,174,000 3,469,074,000 34,732,405 30,911,505 7,435,360 73,079,270 – 2,613,733,111 6,155,886,381	Number of Shares 2,205,900,000 1,263,174,000 3,469,074,000 34,732,405 30,911,505 7,435,360 73,079,270 937,500,000 2,613,733,111 7,093,386,381	Number of Shares Approximate percentage 2,205,900,000 30.84% 1,263,174,000 17.66% 3,469,074,000 48.50% 34,732,405 0.49% 30,911,505 0.43% 7,435,360 0.10% 73,079,270 1.02% 997,500,000 13.94% 2,613,733,111 36.54% 7,153,386,381 100.00%
				48.50%
				0.49% 0.43% 0.10%
				1.02%
				13.94%
				36.54%
				100.00%

Notes:

1. Certain figures included in the table have been subject to rounding adjustments. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

2. These Shares are held by Cayiron Limited, a wholly owned subsidiary of Petropavlovsk.

3. The table does not include the interests of Mr Cai Sui Xin, who is deemed to be interested in the Shares held by General Nice under Part XV of the SFO. The table also does not include the effect of the conversion of share options granted by the Company on 20 November 2015.

– 17 –

LETTER FROM THE BOARD

FUNDRAISING ACTIVITIES IN THE PAST 12 MONTHS

The Company has not raised funds by any issue of equity securities during the 12 months immediately preceding the date of the Last Trading Day.

INFORMATION ON THE INVESTOR

The Investor is an exempted company incorporated with limited liability and registered as a segregated portfolio company under the laws of the Cayman Islands participating in Tiger Global SP, a segregated portfolio of such company. The Investor is wholly owned by A Plus Capital Management Limited (an exempted company incorporated in the Cayman Islands), which itself is wholly owned by an individual, Chi Yung Wan.

To the best of the Company’s knowledge and belief, the Investor and its ultimate beneficial owners are third parties independent of the Company and not connected persons (as defined in the Listing Rules) of the Company, and not acting in concert with any of the Company’s connected persons.

INFORMATION ON THE GROUP

The Company 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.

RECOMMENDATION

The Directors consider that the Subscription Price, the Exercise Prices in respect of the Option Shares and the terms of the Subscription Agreement are fair and reasonable, as a whole, and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Subscription and the transactions contemplated under the Subscription Agreement.

THE EGM

A notice convening the EGM at which the ordinary resolution will be proposed to the Shareholders to consider and, if thought fit, to approve (i) the Subscription Agreement and the transaction contemplated thereunder; and (ii) the allotment of the Subscription Shares and the grant of the right to subscribe for the Option Shares under the Specific Mandate. The voting in respect of the approval of the resolution will be conducted by way of a poll.

To the best of the Company’s knowledge and belief having made all reasonable enquiries, no Shareholder has a material interest in the Subscription. As such, no Shareholder is required to abstain from voting on the resolution approving the Subscription at the EGM.

– 18 –

LETTER FROM THE BOARD

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding such meeting (or any adjournment thereof). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM (or any adjourned meeting thereof) should you wish to do so.

An announcement will be made by the Company following the conclusion of the EGM to inform you of the results of the EGM.

Completion of the Subscription is subject to the satisfaction of the conditions precedent to the Subscription Agreement. As the Subscription may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

By Order of the Board IRC Limited Yury Makarov Chief Executive Officer

– 19 –

NOTICE OF EGM

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

(a company incorporated in Hong Kong with limited liability)

(Stock code: 1029)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (“ EGM ”) of shareholders of IRC Limited (the “ Company ”) will be held at the Admiralty Conference Centre, 1804A, 18/F, Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong on 29 December 2016 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

1. “ THAT :

2. (i) the conditional agreement dated 30 November 2016 (“ Subscription Agreement ”) entered into between the Company as issuer and Tiger Capital Fund SPC – Tiger Global SP as subscriber (“ Investor ”) in relation to the subscription of 937,500,000 new shares in the share capital of the Company (the “ Subscription Share(s) ”) at the subscription price of HK$0.21 per Subscription Share and the grant of the right to subscribe for a maximum of 60,000,000 shares in the share capital of the Company (the “ Option Share(s) ”) at the exercises prices set out therein, a copy of which has been produced to the EGM marked “A” and initialled by the chairman of the EGM for the purpose of identification, and the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified;

3. (ii) subject to the fulfillment of the conditions set out in the Subscription Agreement, the allotment and issue of the Subscription Shares and the Option Shares (if exercised) to the Investor (who has nominated that the Option Shares be assigned to Mr Cheng Chi Kin to exercise in his own name) pursuant to the Subscription Agreement be and is hereby approved; and

4. (iii) the directors of the Company (the “ Directors ”) be and are hereby authorised to execute such all other documents, do all other acts and things and take such action as may in the opinion of the Directors be necessary, desirable or expedient to implement and give effect to the Subscription Agreement, the issue and allotment of the Subscription Shares and the Option Shares (if exercised) and any other transactions contemplated thereunder.”

   • By Order of the Board IRC Limited

   • Yury Makarov

   • Chief Executive Officer

Hong Kong, 12 December 2016

– 20 –

NOTICE OF EGM

This document is available for reference at the Company’s website, www.ircgroup.com.hk and at the website of the Stock Exchange of Hong Kong at www.hkexnews.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

IRC Limited

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

Notes:

• (1) Pursuant to the Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll. The Chairman of the forthcoming EGM will therefore put the resolution to be proposed at the EGM to be voted by way of poll pursuant to the Company’s Articles of Association.

• (2) The register of shareholders will be closed from 28, December 2016 to 29, December 2016, both days inclusive. In order to qualify for attending and voting at the EGM, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 4:30 p.m. on 23, December 2016.

• (3) A shareholder of the Company entitled to attend and vote at the above EGM is entitled to appoint one or more proxies to attend and on a poll, to vote instead of him. A proxy need not be a member. Forms of proxy must be lodged with the Company’s Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, no later than 48 hours before the time fixed for holding the EGM. Completion and lodging of a form of proxy will not preclude a member from attending and voting at the EGM (or any adjournment thereof) should the member so wish.

• (4) The EGM is expected to be held for less than half a day. Shareholders who intend to attend the EGM shall arrange and bear their own transportation and accommodation expenses.

• (5) As at the date of this document, the Executive Directors of the Company are Mr Yury Makarov and Mr Danila Kotlyarov. The Non-Executive Directors are Mr George Jay Hambro, Mr Cai Sui Xin and Mr Raymond Kar Tung Woo. The Independent Non-Executive Directors are Mr Daniel Bradshaw, Mr Simon Murray, CBE, Chevalier de la Légion d’Honneur, Mr Chuang-Fei Li and Mr Jonathan Martin Smith.

– 21 –