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(a company incorporated in Hong Kong with limited liability)

(Stock code: 1029)

ANNOUNCEMENT

CONTINUING CONNECTED TRANSACTIONS

On 20 November 2015, IRC entered into the Equipment Leasing Framework Agreement with Petropavlovsk for a term of three years and subject to the Annual Caps. The Equipment Leasing Framework Agreement represents an additional source of revenue for the Group through the leasing of underutilised equipment and the Board considers that it is in the interests of the Company and its shareholders as a whole.

Petropavlovsk is a substantial shareholder of IRC, and accordingly the Equipment Leasing Framework Agreement is a continuing connected transaction of IRC.

As one or more of the relevant ratios exceed 0.1% but none exceed 5%, the Equipment Leasing Framework Agreement is subject to the reporting, announcement and annual review requirements but is exempt from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

On 20 November 2015, IRC entered into the Equipment Leasing Framework Agreement with Petropavlovsk to lease certain mining equipment owned by the Group to the Petropavlovsk Group. The relevant Group Company and the relevant Petropavlovsk Group Company will enter into separate leasing agreements for the relevant equipment in accordance with the principal terms set out in the Equipment Leasing Framework Agreement.

Parties

IRC

Petropavlovsk

Term

Three years commencing from 1 October 2015 and ending on 30 September 2018

Leasing fee

The leasing fees payable by the relevant Petropavlovsk Group Company under each leasing agreement shall be determined by arm's length negotiations between the relevant Group Company and the relevant Petropavlovsk Group Company with reference to the prevailing market price of the comparable mining equipment to be leased thereunder.

Historical figures

The historical amounts paid by Petropavlovsk Group Companies to the Group in connection with the leasing of mining equipment are US$454,000 (approximately HK$3,518,500) for the 9 months ended 30 September 2015.

Annual caps

The parties have agreed that the aggregate leasing fees payable by Petropavlovsk Group Companies to the Group under all leasing agreements entered into pursuant to the Equipment Leasing Framework Agreement will not exceed US$875,000 (approximately HK$6,781,250) for the period 1 October 2015 to 31 December 2015; US$3,500,000 (approximately HK$27,125,000) for each of the two years ending 31 December 2016 and 31 December 2017 respectively; and US$2,625,000 (approximately HK$20,343,750) for the period 1 January 2018 to 30 September 2018.

The Annual Caps have been calculated based on:

• The historical equipment leasing needs of the Petropavlovsk Group and its anticipated needs over the term of the Equipment Leasing Framework Agreements;

  
  

• The anticipated needs of the Group for mining equipment and availability of mining equipment for leasing to the Petropavlovsk Group;

  
  

• A buffer amount to cater for unexpected leasing needs and foreign exchange movements between the Rouble and US dollars.

REASONS FOR AND BENEFITS OF THE EQUIPMENT LEASING FRAMEWORK AGREEMENT

As previously reported, with the Kuranakh mine adopting a revised mining plan and the K&S mine appointing an external mining contractor, certain mining equipment owned by the Group are currently underutilised and certain subsidiaries of IRC have leased mining equipment to certain subsidiaries of Petropavlovsk.

Petropavlovsk wishes to lease equipment from the Group due to the proximity of the Group's operations with certain of Petropavlovsk's operations. As compared to other potential lessors of equipment, leasing equipment from the Group would result in a faster delivery time to site of the leased equipment for Petropavlovsk.

As the leasing needs of the Petropavlovsk Group has grown, IRC and Petropavlovsk have decided to enter into the Equipment Leasing Framework Agreement. The Equipment Leasing Framework Agreement represents an additional source of revenue for the Group through the leasing of underutilised equipment, and will improve the Group's cash flows. The Equipment Leasing Framework Agreement is entered into in the ordinary course of business and the Company considers that it is on normal commercial terms, fair and reasonable, and in the interests of the Company and its shareholders as a whole.

LISTING RULE IMPLICATIONS

As Petropavlovsk is a substantial shareholder of IRC, Petropavlovsk is a connected person of IRC and accordingly the Equipment Leasing Framework Agreement is a continuing connected transaction of IRC.

As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in relation to the Equipment Leasing Framework Agreement, exceed 0.1% but all are less than 5%, the Equipment Leasing Framework Agreement is exempt from the independent shareholders' approval requirement, and will be subject only to the reporting, announcement and annual review requirements in respect of continuing connected transactions set out in Chapter 14A of the Listing Rules.

None of the Directors have a material interest in the entry into the Equipment Leasing Framework Agreement or have abstained from voting on the resolution of the Directors of the Company in relation to the approval of the entry into the Equipment Leasing Framework Agreement.

GENERAL INFORMATION

IRC 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. Petropavlovsk is a London-listed mining and exploration company with its principal assets located in Russia.

DEFINITIONS

In this announcement, unless otherwise indicated in the context, the following expressions have the same meanings set out below:

'Annual Caps' the agreed caps on payments from the Petropavlovsk Group

to the Group under the Equipment Leasing Framework Agreement

'Board' the board of Directors

'Company' or 'IRC' IRC Limited, a company incorporated in Hong Kong with

limited liability

'Directors' the directors of the Company

'Equipment Leasing

Framework Agreement'

the agreement between IRC with Petropavlovsk to lease certain mining equipment owned by the Group to the Petropavlovsk Group

'Group' the Company and its subsidiaries

'Group Company' a member of the Group

'Hong Kong' the Hong Kong Special Administrative Region of the PRC

'K&S' a magnetite development project in the Company's portfolio consisting of the Kimkan deposit and the Sutara deposit

'Kuranakh' the Group's titanomagnetite and ilmenite project currently in production, consisting of the Saikta deposit and the Kuranakh deposit, which is situated in the Amur Region of the Russian Federation

'Petropavlovsk' 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

'Petropavlovsk Group' Petropavlovsk and its subsidiaries

'Petropavlovsk Group Company'

a member of the Petropavlovsk Group

'Rouble' Russian rouble, the lawful currency of Russia