Investment Case

A Clear strategy for Growth

IRC is a vertically integrated
producer of industrial
commodities, notably...

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24 December 2018

Message to IRC shareholders.

I am very pleased and honoured that your board of directors has chosen me to act as Chairman and delighted that this could happen at the same time that the financing uncertainties that have weighed on the IRC share price have been removed by the new Gazprombank facility announced on 19 December 2018.

Since IRC started the iron ore mining and concentrate production project at K&S, the principal funding has been provided by a mixture of China’s largest bank, ICBC and Sinosure, supported by a guarantee from our parent company, Petropavlovsk. It was always our intent, once the project was in production, that this financing package would be replaced. However, a combination of misfortunes at both the IRC and Petropavlovsk levels has meant that the intended replacement did not work out as planned; even though the K&S project itself is already working at 80% of its designed capacity. This success has enabled the company to generate substantial EBITDA, but not yet enough to meet the full repayment schedule that was set before the delays in the construction and commissioning of the K&S project were encountered. It is expected that this shortfall will disappear once full production is achieved and earnings will be augmented by the opening of the new Amur River crossing.

The new financing, which is subject to the approval of Petropavlovsk plc’s shareholders, fits well with both our and our guarantor’s plans, since it takes the strain off both repayment schedules. In the new environment IRC is well placed to take advantage of this relaxation, which also suits Petropavlovsk’s development programme as well.

As a mark of my confidence in the future, I have purchased 15,330,000 of IRC share in the market at an average price of HK$0.0545 per share on 20 December 2018.

I should like to thank ICBC and Sinosure for the help and assistance that IRC has received in the past and I look forward to a successful relationship with Gazprombank going forward.

May I take this opportunity of wishing all the shareholders all the very best for the festive season and thank the executives of both IRC and Petropavlovsk for the hard but successful work in achieving the refinancing?

Peter Hambro