IRC : Announcements and Notices - 2019 Interim Results 63% Increase in Ebitda of the Mine in Production Segment

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(Incorporated in Hong Kong with limited liability)

(Stock code: 1029)

2019 INTERIM RESULTS

63% INCREASE IN EBITDA OF THE MINE IN PRODUCTION SEGMENT

CONFERENCE CALL

A conference call will be held today at 9am Hong Kong time to discuss the interim results. The number is [phone] and the passcode is 5148030#. Presentation slides to accompany the call are available at www.ircgroup.com.hk. A playback of the teleconference will be available from 2 September 2019 at www.ircgroup.com.hk/html/ir_call.php.

Friday, 30 August 2019: The Board of Directors of IRC Limited ("IRC" or the "Company", together with its subsidiaries, the "Group") is pleased to provide the interim results of the Company for the six months ended 30 June 2019.

KEY HIGHLIGHTS

Financials

• Revenue increased by 27% to US$89.2 million (30 June 2018: US$70.2 million)
• EBITDA of the mine in production segment increased 63% to US$23.7 million (30 June 2018: US$14.6 million)
• Write-offof unamortised loan costs, a non-recurring item, of US$11.5 million due to refinancing of the ICBC loan
• Loss for the period of US$25.2 million (30 June 2018: US$15.6 million)
• Underlying loss, excluding non-recurring items and foreign exchange, improved to US$8.2 million (30 June 2019: US$9.3 million)

Operations

• K&S - Production and sales volumes increased:
• • Production volume up 16% to 1,262,938 tonnes (30 June 2018: 1,084,602 tonnes)
  • Sales volume up 18% to 1,239,398 tonnes (30 June 2018: 1,046,649 tonnes)
• K&S - operated at record-breaking 93% capacity in June; average production capacity of about 80% in 1H 2019
• Kuranakh - Care and maintenance process satisfactory

Commenting on the results, Peter Hambro, Chairman of IRC said:

"IRC's principal objectives are to increase production capacity, improve financial performance, manage corporate risks and, above all, increase value and returns to our shareholders. In the first half 2019, we produced 16% more iron ore concentrate than in the same period last year and the EBITDA of the mine in production segment improved by 63% to US$23.7 million. This good operating result is also attributable to tight cost-controls and, despite general inflation, our cash cost reduced by 3.5% to US$49.9 per tonne in 2019. Production in August 2019 was affected by torrential rain, but it is expected that the weather would soon improve to allow production to be back to normal level.

Since K&S commenced operation, it has always been our intention to refinance the ICBC loan and we are excited to have Gazprombank as our new finance provider. The repayment schedule of the Gazprombank facility is more closely aligned with the K&S's production plan and should improve the cashflow position of the Group. However, the costs of the ICBC facility that were hitherto spread over its life now have to be recognised and this non-cash item accounts for almost half of the reported loss for the period.

While we have a portfolio of undeveloped projects, at present, IRC is essentially a single product company and our financial performance is very dependent on the market iron ore price. To manage this concentration of risk, IRC hedges the iron ore price to reduce the risks of adverse price movements. This is important from a risk management perspective, especially in light of the need to service the Gazprombank facility.

We remain cautiously optimistic about the outlook of the iron ore market. The growing demand for iron ore as a critical element in Chinese infrastructure projects and the massive developments on Belt-Road Initiative look to be here to stay and represent strong new sources of demand, which we believe will help offset the continued global trade disputes. With growing production and an attractive portfolio of future projects, IRC is well positioned to meet this market demand of iron ore. We would like to finish by thanking all of our employees and shareholders for their continuous support."

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The board of directors of IRC Limited hereby announces the unaudited consolidated results of the Company and its subsidiaries (collectively referred to as the "Group") for the six months ended 30 June 2019 which have been reviewed by the Company's Audit Committee, comprising of independent non-executive directors, and by the external auditors.

INTERIM FINANCIAL REPORT

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Six Months Ended 30 June 2019

		Six months ended 30 June
		2019	2018
	NOTES	US$'000	US$'000
		(unaudited)	(unaudited)
Revenue	3	89,244	70,185
Operating expenses	5	(71,042)	(61,352)
Depreciation and amortisation	5	(14,919)	(9,132)
Other income, gains and losses		(5,012)	2,976
Allowance for financial assets measured at amortised cost	12	-	(7,548)
Financial costs	6	(24,203)	(10,430)
Loss before taxation		(25,932)	(15,301)
Income tax credit (expense)	7	708	(336)
Loss for the period		(25,224)	(15,637)
Loss for the period attributable to:
Owners of the Company		(25,204)	(15,619)
Non-controlling interests		(20)	(18)
		(25,224)	(15,637)
Loss per share (US cents)	9
Basic		(0.36)	(0.22)
Diluted		(0.36)	(0.22)

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Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (continued)

For the Six Months Ended 30 June 2019

		Six months ended 30 June
		2019	2018
		US$'000	US$'000
		(unaudited)	(unaudited)
	Loss for the period	(25,224)	(15,637)
	Other comprehensive income (expense) for the period
	Items that may be reclassified subsequently to profit or loss:
	Exchange differences on translation of foreign operations	630	(547)
	Fair value (loss)/gain on cash flow hedge instruments	(31,815)	2,026
	Release of fair value loss on hedging instruments in cash flow hedges	10,660	-
	Total comprehensive expense for the period	(45,749)	(14,158)
	Total comprehensive (expense) attributable to:
	Owners of the Company	(45,854)	(14,025)
	Non-controlling interests	105	(133)
		(45,749)	(14,158)

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Condensed Consolidated Statement of Financial Position

At 30 June 2019

		As at	As at
		30 June	31 December
		2019	2018
	NOTES	US$'000	US$'000
		(unaudited)	(audited)
NON-CURRENT ASSETS
Exploration and evaluation assets	10	19,689	19,497
Property, plant and equipment	10	521,884	533,446
Right-of-use assets	10	11,445	-
Inventories		10,926	10,926
Interest in a joint venture		-	-
Other non-current assets		60	3,282
Restricted bank deposit		-	977
		564,004	568,128
CURRENT ASSETS
Inventories		27,945	23,168
Trade and other receivables	11	18,254	11,027
Time deposits		682	-
Bank balances		7,604	7,637
		54,485	41,832
TOTAL ASSETS		618,489	609,960
CURRENT LIABILITIES
Trade and other payables	13	(63,465)	(54,788)
Income tax payable		(272)	(292)
Lease liabilities		(3,350)	-
Borrowings - due within one year	14	(20,710)	(111,954)
Other financial liabilities	15	(21,155)	-
		(108,952)	(167,034)
NET CURRENT LIABILITIES		(54,467)	(125,202)
TOTAL ASSETS LESS CURRENT LIABILITIES		509,537	442,926
NON-CURRENT LIABILITIES
Deferred tax liabilities		(2,914)	(3,565)
Provision for close down and restoration costs		(11,503)	(10,026)
Construction costs payable		-	(8,910)
Lease liabilities		(9,509)	-
Borrowings - due more than one year	14	(211,113)	(100,915)
		(235,039)	(123,416)
TOTAL LIABILITIES		(343,991)	(290,450)
NET ASSETS		274,498	319,510

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Condensed Consolidated Statement of Financial Position (continued)

At 30 June 2019

		As at	As at
		30 June	31 December
		2019	2018
	NOTE	US$'000	US$'000
		(unaudited)	(audited)
CAPITAL AND RESERVES
Share capital	16	1,285,158	1,285,158
Capital reserve		17,984	17,984
Reserves		(2,697)	17,216
Accumulated losses		(1,025,756)	(1,000,552)
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY		274,689	319,806
NON-CONTROLLING INTERESTS		(191)	(296)
TOTAL EQUITY		274,498	319,510

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