Web Proof Information Pack ofProject Deposit Cut-off grade** Mineral Resources (Mt) Resource...

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Web Proof Information Pack of

IRC Limited(a company incorporated in Hong Kong with limited liability)

WARNING

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CONTENTS

This Web Proof Information Pack contains the following information relating to IRC Limited:

SUMMARY

DEFINITIONS

GLOSSARY OF THE COMPANY’S SUBSIDIARIES

CLASSIFICATION OF GEOLOGICAL RESOURCES AND RESERVES

GLOSSARY OF TECHNICAL TERMS

FORWARD-LOOKING STATEMENTS

RISK FACTORS

DIRECTORS AND PARTIES INVOLVED

CORPORATE INFORMATION

HISTORY AND RESTRUCTURING

INDUSTRY OVERVIEW

LAWS AND REGULATIONS APPLICABLE TO THE INDUSTRY

BUSINESS

RELATIONSHIP WITH PETROPAVLOVSK

CONNECTED TRANSACTIONS

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

CORNERSTONE INVESTORS

FINANCIAL INFORMATION

FUTURE PLANS

APPENDIX I ACCOUNTANTS’ REPORT

APPENDIX II INTENTIONALLY LEFT BLANK

APPENDIX III LOSS FORECAST

APPENDIX IV PROPERTY VALUATION

APPENDIX V COMPETENT PERSON’S REPORT

APPENDIX VI SUMMARY OF THE ARTICLES OF THE COMPANY AND HONG KONG COMPANYLAW

APPENDIX VII INTENTIONALLY LEFT BLANK

APPENDIX VIII STATUTORY AND GENERAL INFORMATION

APPENDIX IX INTENTIONALLY LEFT BLANK

APPENDIX X OVERVIEW OF COST BENCHMARKING CONDUCTED BY CRU

YOU SHOULD READ THE SECTION HEADED “WARNING” ON THE COVER OF THISWEB PROOF INFORMATION PACK.


SUMMARY

OVERVIEW

The Group comprises a mining business which is focused on exploring for, developing andoperating industrial commodity projects in the Russian Far East and the north-eastern regionof the PRC. The Group has successfully developed the Kuranakh Project from a greenfieldsite through to initial production of titanomagnetite and ilmenite concentrate. The Group isalso implementing other projects in the Russian Far East for sale and distribution of itsproducts into the Russian and adjacent PRC industrial markets. The Group’s objective is tobecome a profitable Industrial Commodities Business. The Group’s portfolio is diversified byproject size, stage of development and location. The Group benefits from flexibleinfrastructure options (including the ability to transport its products by rail or by rail and sea),established relationships in Russia and the PRC, and the ability to deliver its productsefficiently to the PRC (currently the world’s largest importer of iron ore). The Directors believethese factors provide the Group with a platform for future growth.

The Group benefits from a combination of a resource base as described below, a skilledworkforce, the proximity of its operations to the key growth markets of the PRC and Asia andwell-developed local infrastructure. It has good access to the local road network, two majorstate-owned railways and the national electricity grid. This infrastructure supports secondaryprocessing activities and bulk product delivery and which the Directors believe providesignificant advantages over many competing industrial commodity mining groups.

As at the date of the Competent Person’s Report, the Group had, in aggregate,JORC-Compliant Mineral Resources of approximately 1.1 billion tonnes comprising, 195.7MtMeasured, 638.5Mt Indicated and 304.61Mt Inferred Resources. For a description of thecategories of JORC-Compliant Measured, Indicated and Inferred Mineral Resources, and thelevel of confidence attributable to each category, please refer to the sub-section headed“Cautionary Note Concerning Measured, Indicated and Inferred Resources” of the sectionheaded “Classification of Geological Resources and Reserves” of this document.

The Group’s present priority is the development of mines and the production and processingof iron ore and ilmenite at the sites within its diversified portfolio of projects, which includes:

Š the Kuranakh Project (consisting of the Kuranakh and Saikta deposits), atitanomagnetite and ilmenite project, located in the Amur Region, which iscurrently the Group’s only producing project. The crushing and screening plantoperated briefly in 2008 and ceased operations in the same year due to thedownturn in the market for iron ore. In May 2010, the Olekma processing plantwas commissioned and ore production re-commenced in June 2010. InSeptember 2010, the first sale of titanomagnetite concentrate was made pursuantto the Offtake Agreement;

Š K&S, a magnetite project, which is at the development stage and is located in theEAO;

Š Garinskoye, a magnetite project, which is at an advanced stage of exploration andis located in the Amur Region;

Š Kostenginskoye, located in the EAO, and the Garinskoye Flanks, which surroundGarinskoye and (through the Group’s 49 per cent. interest in LLC Uralmining)

1


SUMMARY

Bolshoi Seym (located in the Amur Region), all of which are iron ore explorationprojects; and

Š the Vanadium JV, a downstream development joint venture project, located in thePRC, relating to vanadium pentoxide.

The Group has considerable in-house technical expertise. The Group’s management teamhas a track record of implementing iron ore and ilmenite projects, including the successfuldevelopment of the Kuranakh Project. The Group’s project implementation team also hasextensive experience in both constructing and operating industrial commodity projects inRussia and the PRC. In addition, the Group has a 70.3 per cent. interest in Giproruda, aRussian mining engineering institute.

Principal mining interests

The following map shows the location of the Group’s principal mining interests:

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SUMMARY

The following tables summarise the Mineral Resources and Ore Reserves in respect of theGroup’s principal assets as at the date of the CPR. The figures have been extracted withoutmaterial adjustment from the sub-section headed “Executive Summary” of Appendix V —“Competent Person’s Report” to this document.

Summary of Principal IRC Mineral Resources by Project*In accordance with the Guidelines of the JORC Code (2004)

Project DepositCut-offgrade** Mineral Resources (Mt) Resource Category Fe(Total) (%)

Kuranakh Saikta 17% 21.70.01

IndicatedInferred

30.822.2

Kimkan& Sutara

KimkanCentral

25% 99.715.0

IndicatedInferred

34.333.3

Kimkan West 25% 51.143.0

IndicatedInferred

33.533.6

Maisky 25% 15.120.7

IndicatedInferred

32.031.9

Sovkhozniy 25% 4.4 Inferred 30.2

Sutara 18% 195.7231.065.5

MeasuredIndicatedInferred

32.432.231.0

Garinskoye Garinskoye 20% 219.9156.0

IndicatedInferred

32.029.3

Total 834.2 Measured+Indicated 32.5

Total 304.6 Inferred*** 30.6

* The above Mineral Resources are presented as of the date of the CPR in Appendix V—“Competent Person’s Report” to thisdocument.

** Cut-off grade (“C.O.G.”) means the lowest grade of mineralised material considered economic that is used in the calculationof Mineral Resources and Ore Reserves.

*** For a description of the categories of JORC-Compliant Measured, Indicated and Inferred Mineral Resources, and the level ofconfidence attributable to each category, please refer to the sub-section headed “Cautionary Note Concerning Measured,Indicated and Inferred Resources” of the section headed “Classification of Geological Resources and Reserves” in thisdocument.

Summary of Ore Reserves in accordancewith the guidelines of the JORC Code (2004)*

Project DepositProbable**

Ore Reserves Fe TiO2 Fe TiO2Mt % % Mt Mt

Garinskoye . . . . . . . . . . . . . Garinskoye 211.7 36.0 n/a 76.2 n/aTotal . . . . . . . . . . . . . . . . 211.7 36.0 76.2

* Ore Reserves are presented as at the date of the CPR in Appendix V — “Competent Person’s Report” to this document.** For a description of the categories of Proven and Probable JORC-Compliant Ore Reserves, and the level of confidence

attributable to each category, please refer to the sub-section headed “Cautionary Note Concerning Measured, Indicated andInferred Resources” of the section headed “Classification of Geological Resources and Reserves” in this document.

The Vanadium JV does not hold any mineral interests.

This document contains JORC-Compliant data in relation to the Group’s mining assets inaccordance with the Rules.

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SUMMARY

The Group has historically produced reserve and resource data for its operations in Russia inaccordance with the Russian System in order to satisfy relevant Russian regulatoryrequirements and for its own internal geological purposes. This information is publiclyavailable, having been disclosed to the market in accordance with UK requirements whichapplied to the Group from time to time. It has not been included in the document as RussianSystem data does not meet current requirements of the Rules.

The following table summarises the Group’s principal assets and their current status:

Asset Product Region Current statusGroup

interest Control

Kuranakh Project(Kuranakh and Saiktadeposits) . . . . . . . . . . . Titanomagnetite and

ilmeniteAmur, Russia In production 100% Yes

K&S (Kimkan andSutara deposits) . . . . . Magnetite iron ore EAO, Russia Under

development100% Yes

Garinskoye . . . . . . . . . Magnetite iron ore Amur, Russia In exploration 99.58% YesKostenginskoye . . . . . Magnetite iron ore EAO, Russia In exploration 100% YesGarinskoye Flanks . . . Magnetite iron ore Amur, Russia In exploration 100% Yes

The following table provides a summary of the Group’s principal non-subsidiary owned assetsand their current status:

Associate or joint venture Product Region Current statusGroup

interest

Bolshoi Seym . . . . . . . . . . Titanomagnetite Amur, Russia In exploration 49%Vanadium JV . . . . . . . . . . . Vanadium pentoxide Heilongjiang

Province, PRCUnder development 46%

The Kuranakh Project is in production.

The Group’s current development programme for K&S and Garinskoye comprises threestages:

Stage 1

Stage 1 comprises the construction of a 10Mtpa mining operation at K&S with a processingplant with a capacity to produce 3.22Mtpa of 65 per cent. iron ore concentrate. The Group hasestimated that this stage will cost approximately US$400 million and is in the process ofnegotiating project financing and an EPC contract for this work with ICBC and CNEECrespectively. A non-binding indicative term sheet has been entered into with ICBC in relationto the ICBC Facility and the Group has entered into a co-operation agreement with CNEECand ICBC.

If definitive documentation for the ICBC Facility cannot be agreed and made available in atimely manner, the Group will be required to find alternative sources of financing for Stage 1or modify the development programme for Stage 1. Alternative sources of financing may

4


SUMMARY

include: alternative debt financing, in respect of which other non-binding debt proposals havebeen received; reallocation of the Group’s existing cash resources and/or the raising ofadditional equity finance. If the ICBC Facility is completed, the Group intends to utilise thefinancing in connection with Stage 1.

Stage 2

Stage 2 involves the construction of a mine, a crushing and screening plant at Garinskoyeand the expansion of the K&S processing plant to process the pre-concentrate to beproduced at Garinskoye and associated transport infrastructure.

Stage 3

Stage 3 contemplates the construction of a facility to upgrade part of the Group’s concentrateproduction to a metallised product. This facility would be constructed adjacent to theprocessing plant at K&S. There are a number of other development options for theconstruction of a mining and beneficiating facility at K&S which the Group could pursue whichinclude altering the size of the facility and equipment options.

Further details are set out in the sub-section headed “Financing of the Group’s developmentprogramme” of the section headed “Business” in this document. See also the sub-sectionheaded “The Group may not be able to finance its future planned capital expenditure” of thesection headed “Risk Factors” in this document.

Further information in relation to the current status of the Kuranakh Project and the Group’splans for Bolshoi Seym and the Garinskoye Flanks is set out in the section headed “Business”and in Appendix V — “Competent Person’s Report” to this document.

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SUMMARY

The table below sets out a timeline for the development of the projects stated below on thebasis of current expectations and current financing plans (including reaching agreement onthe ICBC Facility).

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2022

2023

2024

2025

2026

2036

2049

2050

Kura

nakh

K&S

(Sta

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)

Gar

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(Sta

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6


SUMMARY

The table below sets out key dates in relation to the development of the projects on the basisof current expectations (including reaching agreement on the ICBC Facility).

DatesKuranakh project K & S

GarinskoyeSaikta

depositKuranakhdeposit Kimkan Sutara

Licence valid until 01/06/2026 30/12/2025 30/12/2025 31/12/2026

Design, Construction to be completed by completed 12/2012 2023 2015

Mining to start started 2018 01/2012 2023 2014

Production of concentrate to start started* 2013 2023 2015**

Mine depleted 2018 2024 2023 2050 2036

* Ore from both Saikta and Kuranakh deposits is or will be processed at the Olekma processing plant** Pre-concentrate is to be produced at Garinskoye, and further beneficiated at the Kimkan processing plant

The current anticipated capital expenditure requirement for each of the Group’s miningprojects is set out in the sub-section headed “Capital and Operating Costs” of their respectivesections of Appendix V — “Competent Person’s Report” to this document.

Principal Products

The Group’s current production at the Kuranakh Project is mined at Saikta, a medium-sizedtitanomagnetite deposit. The Kuranakh Project produces both titanomagnetite and ilmeniteconcentrates which are the products currently sold or stockpiled by the Group. It is intendedthat the ilmenite will be sold either on a spot contract basis or under medium- to long-termcontracts. The titanomagnetite will be sold to Jianlong for steel production and the Directorsintend that, assuming the construction of the Vanadium JV’s proposed processing plantproceeds, the resultant slag will be sold to and processed by the Vanadium JV’s proposedprocessing plant in order to produce vanadium pentoxide.

The main product of the Group, subject to financing, is intended to be magnetite concentrate(a different product to titanomagnetite concentrate) produced at K&S from the proposedmines at K&S and Garinskoye.

It is also intended that in due course, and subject to arranging financing, the major part of theiron ore concentrate that is intended to be produced from the predominantly magnetite ores atthe K&S and Garinskoye projects will (once production commences and if the proposed newprocessing facility is constructed at the Kimkan site) be processed at the Kimkan site toproduce higher value iron ore nuggets using ITmk3 technology, that will be produced and soldto steel mills. These end products have higher value-in-use than magnetite or ilmeniteconcentrates, which would allow the Group to maximise value from the iron ore concentratesit intends to produce at these projects. Further information on these processes, is set out inthe sub-section headed “Mining and operations” of the section headed “Business” in thisdocument.

Iron ore concentrate is feedstock for the production of steel. Ilmenite is an iron titanium oxideand the primary ore of titanium. It is used in the manufacture of titanium dioxide for paintpigments and can be further processed to titanium sponge or titanium ingots. Titanium is usedto manufacture a wide variety of metal parts where light weight and very high strength are

7


SUMMARY

needed. Examples include: aircraft parts, artificial joints for humans and sporting equipment.Titanium is also used in a number of high-performance alloys.

COMPETITIVE ADVANTAGES

The Directors believe that the key competitive advantages of the Group include:

Š Attractive diversified portfolio of production, development and exploration assets

Š Favourable location and logistics

Š Technical expertise and skilled workforce

Š Relationships in the PRC and Russia

Š Experienced management team

STRATEGY

The Group intends to capitalise on its competitive advantages set out above by pursuing thefollowing core strategies:

Š Develop a strong and balanced portfolio of high quality assets providing a base forsuccess for the Group’s long-term operations

Š Maximise returns on the Group’s mining assets by focusing on downstream stagesof production

Š Capitalise upon the Group’s geographical advantages by developing transportinfrastructure projects

Š Leverage in-house technical expertise to develop and improve projects andidentify new assets

Š Selectively augment its portfolio with value-enhancing acquisitions in the areasadjacent to the Group’s operations or regions in which it operates

RESOURCES COMPARISON

Please refer to the table titled “Resources Comparison” in the sub-section headed“Competition” of the section headed “Business” in this document for a comparison betweenthe resources of the Group’s K&S project and deposits owned by other international iron oremining companies that are at a similar stage of development and that will serve a similarmarket.

Relationship with Petropavlovsk

Following a reorganisation of the Petropavlovsk Group, the Group has formed its ownseparate and independently functioning business. The Group is independent of and separateto the Petropavlovsk Group as the Group will concentrate on the exploration for, and

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SUMMARY

development and production of bulk and industrial commodities, while the PetropavlovskGroup will focus on the exploration for, development and production of precious metals.

While Petropavlovsk will remain a controlling shareholder of the Company of the managementof the Group as well as the administration, operations and finances of the Group will beindependent of the Petropavlovsk Group. The Group and Petropavlovsk have entered intovarious documents detailing the terms of the independence (such as the tax indemnity andDeed of Non-Competition), which are described in further detail in the section headed“Relationship with Petropavlovsk”, starting on page 226 in this document.

SUMMARY HISTORICAL FINANCIAL INFORMATION

The summary historical financial information set out below should be read in conjunction withthe Group’s combined financial information set out in Appendix I — “Accountants’ Report” tothis document.

The tables below provide a summary of the results of operations for the Group prepared on aconsistent basis for the three years ended 31 December 2007, 2008 and 2009 and the sixmonths ended 30 June 2010 and a summary of the state of affairs of the Group as at31 December 2007, 2008 and 2009 and 30 June 2010. The information has been extractedfrom Appendix I — “Accountants’ Report” to this document and has been prepared on thebasis described in the notes to the combined historical financial information of the Group inAppendix I — “Accountants’ Report” to this document.

Combined Income Statements

Year ended 31 December

6 monthsended

30 June

2007 2008 2009 2010

US$’000 US$’000 US$’000 US$’000Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,938 9,674 8,260 5,198Net operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,664) (36,956) (40,555) (22,074)Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (386,450) (97,371) (34,511)

(18,726) (413,732) (129,666) (51,387)Share of results of an associate . . . . . . . . . . . . . . . . . . . . . . . . (59) 850 — —Share of results of joint ventures . . . . . . . . . . . . . . . . . . . . . . . — (444) (90) —

Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,785) (413,326) (129,756) (51,387)Other gains and losses and other expenses . . . . . . . . . . . . . . 2,305 (21,223) (13,552) 1,539Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,197 14,119 15,145 10,743Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (602) (588) (10,337) (11,269)

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,885) (421,018) (138,500) (50,374)Taxation credit/(expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,996 (5,582) (637) (1,315)

Profit/(loss) for the year/period . . . . . . . . . . . . . . . . . . . . . . 111 (426,600) (139,137) (51,689)

Profit/(loss) for the year/period attributable to:Equity holder of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 1,040 (427,377) (139,291) (51,905)Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (929) 777 154 216

111 (426,600) (139,137) (51,689)

Earnings/(loss) per share (US cents)Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.24 (68.92) (21.68) (7.84)Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.24 (68.92) (21.68) (7.84)

9


SUMMARY

Combined Statements of Financial Position

As at 31 DecemberAs at

30 June

2007 2008 2009 2010

US$’000 US$’000 US$’000 US$’000Non-current assetsGoodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 — — —Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427 613 28,690 28,540Property, plant and equipment . . . . . . . . . . . . . . . . . . . . 561,438 442,610 404,741 445,218Interest in an associate . . . . . . . . . . . . . . . . . . . . . . . . . . 2,854 3,704 — —Interests in joint ventures . . . . . . . . . . . . . . . . . . . . . . . . — 20,387 22,692 8,911Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,879 — — —Amount owed by an associate . . . . . . . . . . . . . . . . . . . . 4,288 6,368 — —Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . 10,934 13,737 4,173 11,362

584,878 487,419 460,296 494,031Current assetsInventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,015 8,481 13,033 17,050Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . 13,967 24,960 19,739 31,808Loans due from related parties . . . . . . . . . . . . . . . . . . . . 65,111 — 375,384 —Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . 91,791 — — —Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . 406,687 257,822 18,415 25,865

579,571 291,263 426,571 74,723

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,164,449 778,682 886,867 568,754

Current liabilitiesTrade and other payables . . . . . . . . . . . . . . . . . . . . . . . . (12,728) (14,993) (16,437) (27,473)Current income tax payable . . . . . . . . . . . . . . . . . . . . . . (446) (1,182) (270) (320)Derivative financial instruments . . . . . . . . . . . . . . . . . . . — — (1,711) —

(13,174) (16,175) (18,418) (27,793)

Net current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566,397 275,088 408,153 46,930

Total assets less current liabilities . . . . . . . . . . . . . . . 1,151,275 762,507 868,449 540,961

Non-current liabilitiesDeferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,014) (2,422) (1,961) (1,834)Provision for close down and restoration costs . . . . . . . (2,294) (2,108) (2,990) (2,916)Loans due to a related party . . . . . . . . . . . . . . . . . . . . . . — — (264,158) —Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . (1,571) (111) — —

(8,879) (4,641) (269,109) (4,750)Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,053) (20,816) (287,527) (32,543)

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,142,396 757,866 599,340 536,211

EquityShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,147 2,265 2,265 2,457Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,130,638 1,183,520 1,183,520 697,637Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 6,908 12,241Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,256) (24,801) — —Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,247 28,179 21,983 24,904Accumulated losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,307) (435,623) (619,700) (205,471)

Equity attributable to equity holder of theCompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,126,469 753,540 594,976 531,768

Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . 15,927 4,326 4,364 4,443

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,142,396 757,866 599,340 536,211

10


SUMMARY

For the last three years, save for US$0.5 million of revenue which was generated from thesale of iron ore pre-concentrate from the Kuranakh Project in 2008, the Group’s revenue hasbeen derived from the Group’s engineering services company, Giproruda, which wasconsolidated as a subsidiary from 14 July 2007. Going forward, the Group intends to derive itsrevenues principally from the sale of magnetite, titanomagnetite and ilmenite mined at theGroup’s deposits. To date, the Group has progressed only one of its projects, the KuranakhProject, from the exploration to production stage. The crushing and screening plant operatedbriefly in 2008 and ceased operations in the same year due to the downturn in the market foriron ore. The Group commenced production at the Kuranakh Project in June 2010 andsubsequent sales of titanomagnetite concentrate began in September 2010.

Further details in relation to revenue for the last three years are set out in the sub-sectionheaded “5 Segmental Information” of the section headed “Appendix I — Accountants’ Report”to this document on pages I-34 to I-41.

LOSS FORECAST

The Directors estimate that, on the bases and assumptions set out in Appendix III — “LossForecast” to this document and in the absence of unforeseeable circumstances, the lossattributable to equity holders of the Company for the year ending 31 December 2010 willamount to no more than US$95.0 million.

Sensitivity analysis on average selling price

The following table illustrates the sensitivity of the loss attributable to equity holders of theCompany for the year ending 31 December 2010 to the average selling price fortitanomagnetite and ilmenite concentrate produced from the Kuranakh mine from 1 August2010 to 31 December 2010.

% change in average selling price per tonne . . . . . . . . . . . . -30% -20% -10% +10% +20% +30%Impact on loss attributable to equity holders of the Company

for the year ending 31 December 2010 (US$ million)Titanomagnetite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.0) (3.3) (1.7) 1.7 3.3 5.0Ilmenite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.2) (0.8) (0.4) 0.4 0.8 1.2Combined impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6.2) (4.1) (2.1) 2.1 4.1 6.2

The sensitivity range has been selected with reference to historical movements in commodityprices. Given that ilmenite prices are set through buyer-seller negotiations without referenceto a benchmark price, the sensitivity range has been set with reference to historicalmovements in iron ore prices. The period from 2005 – 2009 saw substantial volatility in ironore prices with prices for benchmark Hamersley Fines increasing approximately 19.0 percent. from 2005 – 2006, increasing approximately 9.5 per cent. from 2006 – 2007, increasingapproximately 80.0 per cent. from 2007 – 2008, before decreasing approximately 33.0 percent. from 2008 to 2009. It is important to note that the increase from 2007 – 2008 wasunusually large due to extremely strong market demand for iron ore and tight supply. Thecurrent range used for the price sensitivity analysis is +/-30 per cent. for the period 1 August2010 to 31 December 2010. On an annualised basis, this equates to a range of +/-87.7 percent. which is greater than the largest annual move since 2005. Taking into account thehistorical volatility of iron ore prices, this sensitivity appears to be sufficiently broad so as toproperly capture historical price volatility.

11


SUMMARY

Sensitivity analysis on exchange rate

The following table illustrates the sensitivity of the loss attributable to equity holders of theCompany for the year ending 31 December 2010 to fluctuations in the RUR:US$ exchangerate for the period 1 August 2010 to 31 December 2010.

% change in RUR:US$ exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10% -5% +5% +10%Impact on loss attributable to equity holders of the Company for the year

ending 31 December 2010 (US$ million) . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.0) (1.9) 1.7 3.3

The sensitivity range for the RUR:US$ exchange rate analysis has been set with reference tothe historical movement in the exchange rate since 2005. The spot exchange rate is currentlyRUR30.6:US$1.00. Since January 2005, the exchange rate has varied fromRUR23.1:US$1.00 (appreciation of 24.6 per cent. from current exchange rate) toRUR36.4:US$1.00 (depreciation of 18.9 per cent. from current exchange rate). The currentsensitivity analysis considers a range of +/-10 per cent. for the period 1 August 2010 to31 December 2010. On an annualised basis this equates to a sensitivity range of +/-25.7 percent., which is in excess of the range seen since 2005.

The income statement is impacted in two ways by fluctuations in the exchange rate throughthe retranslation of RUR denominated costs into the US$ functional currency at the rate rulingat the transaction date, and at the month end through gains and losses arising onretranslation into US$ of RUR denominated working capital balances held in US$ functionalcurrency entities. The above sensitivity considers the impact on the RUR denominatedoperating expenses balances only, as the management believes that the effect on workingcapital balances is immaterial to the loss estimate.

DIVIDEND POLICY

Save for the dividend declared as part of the Group’s restructuring earlier this year, the Grouphas not paid any dividends on its outstanding Shares since incorporation and does notanticipate that it will do so in the near future. As the business of the Group develops, andsubject to the availability of distributable reserves, the Directors intend to pursue a dividendpolicy which reflects the Group’s cash flow and earnings, while maintaining an appropriatelevel of dividend cover and having regard to the need to further fund development of theGroup’s activities.

RISK FACTORS

The Group believes that there is a range of risks involved in its operations. They can bebroadly categorised into: (i) risks relating to the Group’s operations in the Russian Federationand the PRC; (ii) risks relating to commodity prices, demand for the Group’s products andother economic risks; (iii) environmental risks and hazards and risks relating to compliancewith environmental laws and regulations; (iv) risks relating to licences, concessions, permitsand other regulatory risks; (v) risks relating to the international operations of the Group; and(vi) risks relating to the separation of the Group from the Petropavlovsk Group. Set out belowis a summary of the risks referred to above. For further details, please refer to the sectionheaded “Risk Factors” in this document.

12


SUMMARY

Risks relating to the Group’s operations in the Russian Federation and the PRC

Š The Group may not be able to finance its future planned capital expenditure

Š The Group’s stated Ore Reserves, Mineral Resources and mineralised potentialare only estimates based on a range of assumptions and there can be noassurance that the anticipated tonnages or grades will be achieved

Š Exploration and development are highly speculative activities and involvecommercial risks and uncertainties

Š The Group is currently dependent on revenue from Giproruda, its miningengineering services institute, and its sole operating, and smallest, mine at theKuranakh Project, and the Group may not ever generate revenue from its otherprojects

Š If the Group is unable to attract, retain and train key personnel, the Group’sbusiness and results of operations could be materially and adversely affected

Š Potential local opposition to mining could lead to disruption of the Group’s existingoperations, mine development projects and exploration prospects

Š The Group’s operations are exposed to risks in relation to the mishandling ofdangerous articles

Š The operations of the Group are exposed to safety risks and the occurrence ofindustrial accidents

Š The infrastructure on which the Group relies may prove to be inadequate orsubject to constraints, or the Group may face difficulties with state-ownedinfrastructure

Š The availability and cost of the Group’s production inputs, such as utilities,equipment, spare parts and labour, could materially and adversely affect itsprofitability

Š Labour disputes and disruptions could affect the Group’s business, results ofoperations, financial condition and prospects

Š The Group faces competition for mineral interests from other mining companies

Š The Group may undertake strategic acquisitions or investments, which may provedifficult to integrate and manage successfully

Š The Group’s joint venture arrangements may not be successful

13


SUMMARY

Risks relating to commodity prices, demand for the Group’s products and othereconomic risks

Š The Group’s financial performance is dependent on, inter alia, the global prices of,and demand for, iron ore, ilmenite, titanium, steel making composites, steel andsteel products, which have recently been, and may continue to be, volatile

Š The Group is vulnerable to adverse changes in the PRC economy

Š The Group currently operates at a loss and there can be no assurance that it willachieve profitability or generate positive cash flow from operations in the future

Š Titanomagnetite concentrate produced at the Kuranakh Project is not suitable foruse by all steel producers

Š Adverse capital and credit market conditions and worldwide financial instabilitymay adversely affect the Group’s ability to raise new debt or equity financing and/or to refinance existing or future indebtedness

Š An oversupply of minerals in the future could adversely affect the Group’sprofitability

Š The Group could be adversely affected by changes in the exchange rates betweenthe currencies in which it operates and restrictions on conversion of thosecurrencies

Š Uncertainties in relation to the application of taxation laws and regulations tomining profits could materially affect the Group’s profitability

Š The Group is exposed to risks relating to deposits held in banks

Environmental risks and hazards and risks relating to compliance with environmentallaws and regulations

Š The Group’s operations are subject to a number of risks and hazards associatedwith the exploration for, and development and production of, mineral projects(many of which are outside of the Group’s control), not all of which are fullycovered by insurance

Š Iron ore mining produces a significant amount of wastewater and tailings, whichcould expose the Group to material liabilities

Š The Group is subject to significant environmental risks and issues arising fromcompliance with environmental regulations and permitting requirements

Š The Group is subject to significant costs associated with environmentalcompliance and rehabilitation

14


SUMMARY

Š The Group may be subject to adverse publicity from consumer and environmentalgroups which could have an adverse effect on the reputation and financial positionof the Group

Risks relating to licences, concessions, permits and other regulatory risks

Š The Group is subject to a significant number of laws and government regulations,and the costs of compliance or changes to relevant laws may adversely affect theGroup’s business

Š The Group is required to obtain, retain and renew governmental concessions,permits, authorisations, licences, property rights and other approvals in connectionwith its operations

Š The Group’s title to properties and mineral licences may be challenged orterminated

Š The Group may be subject to risks associated with litigation

Š The Group may not own certain of the intellectual property it uses or is likely touse as part of its operations

Š The Group may be unable to utilise the ITmk3 technology in the processing of ironore from K&S and Garinskoye

Risks relating to the international operations of the Group

Š The Group is subject to risks relating to the general economic, regulatory, legal,social and political environment in the jurisdictions in which the Group operates

Š The Group is subject to risks relating to the economic system in Russia

Š The Group is subject to risks relating to the political system in Russia

Š The Group is subject to risks relating to social instability in Russia

Š The Group is subject to risks relating to the Russian tax system

Š The Group is subject to risks relating to the Russian legal system and Russianlegislation

Š The Group is subject to risks relating to interested party transactions

Š Russian foreign investment legislation may impact transactions by, andinvestments in, the Group

Š From time to time some of the Russian companies in the Group may havenegative net assets (as defined under RAS)

Š Risks relating to the Group’s operations in the PRC

15


SUMMARY

Risks relating to the separation of the Group from the Petropavlovsk Group

Š The Group is being separated from the Petropavlovsk Group

Š The Group relies on the Petropavlovsk Group for a number of services andindemnification in respect of certain potential tax liabilities

Š The Petropavlovsk Group will remain the biggest shareholder of the Group. Theinterests of Petropavlovsk may differ from those of other Shareholders

16


DEFINITIONS

In this document, unless the context otherwise requires, the following expressions have thefollowing meanings:

affiliate in relation to a company, any entity of, over or in whichthe company, alone or acting with others in concert,holds at least 30 per cent. of the issued share capitalor exercises or controls the exercise of at least 30 percent. of the voting power or has the power to elect amajority of the board of directors or otherwiseexercises control

AIM the AIM Market of the London Stock Exchange

American Appraisal American Appraisal China Limited, a companyincorporated in Hong Kong, with registrationnumber 04415398-000-03-09-5, an independent thirdparty company

Amur Region or Amur Oblast a federal subject of the Russian Federation, situated inthe Russian Far East

Aricom Aricom Limited, a limited company incorporated inEngland and Wales with registered number 04897906and an indirect wholly-owned subsidiary of theCompany

Aricom Cypriot Companies the following companies, each incorporated in Cyprus:Lucilius Investments Limited, Kapucius ServicesLimited, Lapwing, Russian Titan Company Limited,Brasenose Services Limited, Tenaviva Limited,Esimanor Limited, Metellus Limited, DardaniusLimited, Rumier Holdings Ltd, Guiner Enterprises Ltd,Expokom (Cyprus) Limited and Arfin Limited, whichare all indirect subsidiaries of the Company

Aricom Group Aricom and its subsidiaries

Aricom Russian Companies the following companies, each incorporated in Russia:LLC Garinskaya Infrastructure, LLC KS GOK, LLCGMMC, LLC Olekminsky Rudnik, LLC Uralmining,LLC Petropavlovsk-lron Ore, LLC Amursnab, CJSCSGMTP, LLC TOK, OJSC Giproruda, LLCKostenginskiy GOK, LLC Orlovsko-SokhatinskiyRudnik and LLC Karier Ushumunskiy, which are allindirect subsidiaries of the Company

17


DEFINITIONS

Articles the articles of association of the Company asamended from time to time

associate(s) has the meaning ascribed to such term in the Rules

BAM Railway the Baikal-Amur Mainline railway line whichtransverses Eastern Siberia and the Russian Far East

Board or Board of Directors the board of Directors

BOCI BOCI Asia Limited

British pound, £ or GBP the lawful currency for the time being of the UnitedKingdom

Business Day a day that is not a Saturday, Sunday or public holidayin Hong Kong

Chinalco Aluminium Corporation of China Limited ( ),a company incorporated in the PRC with its legaladdress at No. 62, Xizhimen North Avenue, 100082,Beijing, the PRC, that is primarily engaged in theprocessing of non-ferrous metals

CEF CEF Holdings Limited, a company incorporated inHong Kong and 50% owned by Cheung Kong(Holdings) Limited and 50% owned by CanadianImperial Bank of Commerce (“CIBC”)

CIS the Commonwealth of Independent States, a regionalassociation of countries that were formerly part of theformer Soviet Union

CJSC closed joint-stock company

CJSC SGMTP Closed Joint Stock Company “Soviet HarbourMaritime Trade Port”

CNEEC China National Electric Equipment Corporation( ), an independent third partycompany and one of PRC’s leading engineering andenergy contractors, acting as EPC contractors forstages 1, 2 and 3 of the K&S project and theGarinskoye project

Companies Ordinance the Companies Ordinance (Chapter 32 of the Laws ofHong Kong), as amended from time to time

Company IRC Limited , a company incorporatedin Hong Kong on 4 June 2010 with registration number1464973

18


DEFINITIONS

connected person(s) has the meaning ascribed to such term in the Rules

connected transaction has the meaning ascribed to such term in the Rules

Controlling Shareholders the controlling shareholders of the Company under themeaning ascribed to such term in the Rules, which asat the date of this document are Cayiron Limited, awholly owned subsidiary of Petropavlovsk andimmediate controlling shareholder of the Company,and Petropavlovsk

CRU CRU Strategies Ltd, a company incorporated inEngland and Wales with registration number03165164, an independent third party company

Director(s) the director(s) of the Company

EAO the Evreyskaya Avtonomnaya Oblast or the JewishAutonomous Region of the Russian Federation,situated in the Russian Far East

EPC contract or contractor engineering, procurement and construction contract orcontractor

Equator Principles a voluntary set of standards, based on theInternational Finance Corporation performancestandards on social and environmental sustainability,for determining, assessing and managing social andenvironmental risk in project financing

Euro or € Euro, the lawful currency of the relevant memberstates of the European Union that have adopted theEuro as their currency

FAS the Russian Federal Anti-monopoly Service

Garinskoye Garinskoye, a magnetite exploration project in theGroup’s portfolio, which is situated in the Amur Region

Giproruda OJSC Giproruda, an indirect subsidiary of theCompany, which carries out mining engineeringservices

GKZ the Russian State Commission (or Committee) ofResources and Reserves

Group the Company and/or any of its subsidiaries or, prior toimplementation of the Restructuring, any of suchcompanies in existence at the relevant time

HKFRS Hong Kong Financial Reporting Standardspromulgated by the HKICPA

19


DEFINITIONS

HKICPA Hong Kong Institute of Certified Public Accountants

Hong Kong the Hong Kong Special Administrative Region of thePRC

Hong Kong dollars or HK$ Hong Kong dollars, the lawful currency of Hong Kong

ICBC the Industrial and Commercial Bank of China, anindependent third party company

ICBC Facility the proposed facility to be provided by ICBC to theGroup for the funding of Stage 1 of its K&S project,details of which are set out in the sub-section headed“Financing of the Group’s development programme” ofthe section headed “Business” in this document

IFC International Finance Corporation, an independentthird party company

IFRS International Financial Reporting Standards

industrial commodity orcommodities

non-precious metals and bulk commodities, includingiron ore assets located in the Russian Far East

Industrial Commodities Business a business which relates directly to the exploration,mining, development and production of industrialcommodities

Jianlong Heilongjiang Jianlong Steel Company Limited( ), a joint venture partner of theVanadium JV

Jiatai Titanium Heilongjiang Jiatai Titanium Co., Ltd( ), a limited liability companyincorporated under the laws of the PRC

JORC Code the Australasian Code for Reporting of ExplorationResults, Mineral Resources and Ore Reserves (2004edition), published by the Joint Ore ReserveCommittee of the Australian Institute of Mining andMetallurgy, for reporting of mineral resources and orereserves which sets out the minimum standards,recommendations and guidelines for the publicreporting of exploration results, mineral resources andore reserves

K&S a magnetite development project in the Group’sportfolio consisting of the Kimkan deposit and Sutaradeposit, which is situated in the EAO

20


DEFINITIONS

Kuranakh Project a titanomagnetite and ilmenite project currently inproduction, consisting of the Saikta deposit and theKuranakh deposit, which is situated in the AmurRegion

Kuranakii Kuranakii Investment Co., Limited, a joint venturepartner of the Group

Land Code Land Code of the Russian Federation No. 136-FZdated 25 October 2001, as amended

Lapwing Lapwing Limited, an indirect subsidiary of theCompany

LLC limited liability company

London Stock Exchange London Stock Exchange plc

Memorandum the memorandum of association of the Companyadopted on 30 September 2010, as amended fromtime to time

MHL Marbella Holdings Limited, a company incorporated inthe British Virgin Islands which is a wholly ownedsubsidiary of Asia Resources Fund (“ARF”), asubsidiary of General Enterprise ManagementServices (International) Limited (“GEMS”)

Moody’s Bank Financial StrengthRating

the Moody’s Credit Rating which concerns a bank’sintrinsic safety and soundness as classified under thefollowing designations:

“A” Banks rated A possess superior intrinsic financialstrength. Typically, they will be institutions with highlyvaluable and defensible business franchises, strongfinancial fundamentals, and a very predictable andstable operating environment.

“B” Banks rated B possess strong intrinsic financialstrength. Typically, they will be institutions withvaluable and defensible business franchises, goodfinancial fundamentals, and a predictable and stableoperating environment.

“C” Banks rated C possess adequate intrinsic financialstrength. Typically, they will be institutions with morelimited but still valuable business franchises. Thesebanks will display either acceptable financialfundamentals within a predictable and stable operatingenvironment, or good financial fundamentals within aless predictable and stable operating environment.

21


DEFINITIONS

“D” Banks rated D display modest intrinsic financialstrength, potentially requiring some outside support attimes. Such institutions may be limited by one or moreof the following factors: a weak business franchise;financial fundamentals that are deficient in one ormore respects; or an unpredictable and unstableoperating environment.

“E” Banks rated E display very modest intrinsicfinancial strength, with a higher likelihood of periodicoutside support or an eventual need for outsideassistance. Such institutions may be limited by one ormore of the following factors: a weak and limitedbusiness franchise; financial fundamentals that arematerially deficient in one or more respects; or ahighly unpredictable or unstable operatingenvironment.

Note: Where appropriate, a “+” modifier will beappended to ratings below the “A” category and a “-”modifier will be appended to ratings above the “E”category to distinguish those banks that fall in thehigher and lower ends, respectively, of the genericrating category.

Moody’s Credit Ratings the various credit ratings published by Moody’sInvestors Service as set out and defined in thedocument published by Moody’s Investors Serviceentitled “Rating Symbols and Definitions”, which ispublicly available at http://www.moodys.com

Moody’s Long Term Rating the Moody’s Credit Rating which concerns the relativecredit risk of financial obligations with an originalmaturity of one year or more as classified under thefollowing designations:

“Aaa” Obligations rated Aaa are judged to be of thehighest quality, with minimal credit risk.

“Aa” Obligations rated Aa are judged to be of highquality and are subject to very low credit risk.

“A” Obligations rated A are considered upper-mediumgrade and are subject to low credit risk.

“Baa” Obligations rated Baa are subject to moderatecredit risk. They are considered medium grade and assuch may possess certain speculative characteristics.

22


DEFINITIONS

“Ba” Obligations rated Ba are judged to havespeculative elements and are subject to substantialcredit risk.

“B” Obligations rated B are considered speculativeand are subject to high credit risk.

“Caa” Obligations rated Caa are judged to be of poorstanding and are subject to very high credit risk.

“Ca” Obligations rated Ca are highly speculative andare likely in, or very near, default, with some prospectof recovery of principal and interest.

“C” Obligations rated C are the lowest rated class andare typically in default, with little prospect for recoveryof principal or interest.

Moody’s appends numerical modifiers 1, 2, and 3 toeach generic rating classification from Aa throughCaa. The modifier 1 indicates that the obligation ranksin the higher end of its generic rating category; themodifier 2 indicates a mid-range ranking; and themodifier 3 indicates a ranking in the lower end of thatgeneric rating category.

Moody’s National ScaleLong-Term Rating

the Moody’s Credit Rating which assigns nationalscale ratings in certain local capital markets in whichthe global rating scale provides inadequatedifferentiation among credits or is inconsistent with arating scale already in common use in the country. Forthe purposes of Russia the following designationsapply:

“Aaa.ru” Russian issuers rated Aaa.ru demonstratethe strongest creditworthiness relative to otherRussian issuers.

“Aa.ru” Russian issuers rated Aa.ru demonstrate verystrong creditworthiness relative to other Russianissuers.

“A.ru” Russian issuers rated A.ru present above-average creditworthiness relative to other Russianissuers.

“Baa.ru” Russian issuers rated Baa.ru representaverage creditworthiness relative to other Russianissuers.

23


DEFINITIONS

“Ba.ru” Russian issuers rated Ba.ru demonstratebelow-average creditworthiness relative to otherRussian issuers.

“B.ru” Russian issuers rated B.ru demonstrate weakcreditworthiness relative to other Russian issuers.

“Caa.ru” Russian issuers rated Caa.ru are speculativeand demonstrate very weak creditworthiness relativeto other Russian issuers.

“Ca.ru” Russian issuers rated Ca.ru are highlyspeculative and demonstrate extremely weakcreditworthiness relative to other Russian issuers.

“C.ru” Russian issuers rated C.ru are extremelyspeculative and demonstrate the weakestcreditworthiness relative to other Russian issuers.

Note: Moody’s appends numerical modifiers 1, 2, and3 to each generic rating classification from Aa throughCaa. The modifier 1 indicates that the obligation ranksin the higher end of its generic rating category; themodifier 2 indicates a mid-range ranking; and themodifier 3 indicates a ranking in the lower end of thatgeneric rating category.

Moody’s Short Term Rating the Moody’s Credit Rating which concerns the abilityof issuers to honour short-term financial obligations asclassified under the following designations:

P-1 Issuers (or supporting institutions) rated Prime-1have a superior ability to repay short-term debtobligations.

P-2 Issuers (or supporting institutions) rated Prime-2have a strong ability to repay short-term debtobligations.

P-3 Issuers (or supporting institutions) rated Prime-3have an acceptable ability to repay short-termobligations.

NP Issuers (or supporting institutions) rated Not Primedo not fall within any of the Prime rating categories.

OJSC open joint stock company

24


DEFINITIONS

Offtake Agreement the iron ore concentrate offtake agreement betweenthe Group and Jianlong, pursuant to which all of thetitanomagnetite concentrate produced at the KuranakhProject is sold to Jianlong

Petropavlovsk Petropavlovsk PLC, a public company incorporated inEngland and Wales with registered number 04343841and listed on the Main Market of the London StockExchange and the Company’s ultimate parentcompany

Petropavlovsk Group Petropavlovsk and its subsidiaries, which include theGroup

PRC the People’s Republic of China, excluding (for thepurposes of this document only) Hong Kong, theMacau Special Administrative Region of the PRC andTaiwan

Pre-IPO Investment Agreement the agreement dated 17 June 2010, entered intobetween the Pre-IPO Investors, Petropavlovsk, theCompany and Cayiron Limited, the material terms ofwhich are set out in the sub-section headed “Pre-IPOInvestment” of the section headed “History andRestructuring” in this document

Pre-IPO Investors Marbella Holdings Limited and CEF Holdings Limited,strategic investors in the Company and independentthird party companies

Pre-IPO Supplemental Agreement the agreement dated [20 September 2010], enteredinto between the Pre-IPO Investors, Petropavlovsk,the Company and Cayiron Limited, the material termsof which are set out in the sub-section headed “Pre-IPO Investment” of the section headed “History andRestructuring” in this document

Property Valuer American Appraisal

RAS Russian Accounting Standards

Renminbi the lawful currency of the PRC

Restructuring the restructuring of the Petropavlovsk Group such thatthe businesses and operations comprising itsIndustrial Commodities Business were transferred tothe Company and/or the Group, as set out in moredetail in the sub-section headed “Restructuring of theGroup” of the section headed “History andRestructuring” in this document

25


DEFINITIONS

Retained Group the group of companies comprising Petropavlovsk andits subsidiaries following completion of theRestructuring

Rosprirodnadzor the Russian environmental regulator responsible forimplementation and supervision of Russianenvironmental regulatory requirements

Rouble or RUR the lawful currency of Russia

Rubicon Bridge Project the project governed by the Sino Russianintergovernmental agreement between the ChineseState Committee of Development and Reforms andthe Russian Government and Russian Railways, onthe joint construction, operation and maintenance of anew railway bridge over the Amur River signed inOctober 2008

Russia or the Russian Federation the Russian Federation, its territories, its possessionsand all areas subject to its jurisdiction

Russian Far East refers to the Far Eastern Federal district of theRussian Federation, which covers the area of Russiabetween Lake Baikal in Siberia and the Pacific Ocean.The Far Eastern Federal district includes the AmurRegion, EAO, Kamchatka Krai, Magadan Region,Primorsky Krai, Sakha Republic (Yakutia), SakhalinRegion, Khabarovsk Krai, and Chukotka AutonomousDistrict

Russian System the system for the classification and reporting ofresources and reserves, administered by GKZ, amethod of resource and reserve calculation which isdifferent from the JORC Code

Russian Railways Joint-stock company “Russian Railways”

Shareholder(s) holder(s) of the Share(s)

Share(s) ordinary share(s) in the issued capital of the Companywith a nominal value of HK$0.01 each

subsidiary has the meaning ascribed to such term in the Rules

Takeovers Code Hong Kong Codes on Takeovers and Mergers andShare Repurchases

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DEFINITIONS

Trans-Siberian Railway the network of railways connecting Moscow andWestern Russia with the Russian Far East, Mongolia,the PRC and the Sea of Japan. For the purposes ofthis document, this term includes the Trans-Manchurian and Trans-Mongolian Railways andassociated railways

UK Listing Rules the rules relating to admission to the Official List of theUK Listing Authority, made in accordance withs.73A(2) of the Financial Services and Markets Act2000

United States or U.S. the United States of America, its territories, itspossessions and all areas subject to its jurisdiction

U.S. dollars, USD or US$ United States dollars, the lawful currency of the UnitedStates

Vanadium JV or JianlongVanadium

Heilongjiang Jianlong Vanadium Industries Co., Ltd( ), a limited liability companyincorporated under the laws of the PRC, which is 46per cent. owned by the Group

WAI Wardell Armstrong International Limited, mining,mineral and alternative energy consultants and theproviders of a Competent Person’s Report

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Name of company

Equity interest attributableto the Group at30 June 2010 Principal activities

CyprusArfin Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Provision of financing services

for the GroupBrasenose Services Limited . . . . . . . . . . . . . . 100% Investment holdingDardanius Limited . . . . . . . . . . . . . . . . . . . . . . 100% Investment holdingEsimanor Limited . . . . . . . . . . . . . . . . . . . . . . . 100% Investment holdingExpokom Limited . . . . . . . . . . . . . . . . . . . . . . . 100% Investment holdingGuiner Enterprises Ltd . . . . . . . . . . . . . . . . . . 100% Investment holdingKapucius Services Limited . . . . . . . . . . . . . . . 100% Investment holdingLapwing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.58% Investment holdingLucilius Investments Limited . . . . . . . . . . . . . . 100% Investment holdingMetellus Limited . . . . . . . . . . . . . . . . . . . . . . . . 100% Investment holdingRumier Holdings Ltd . . . . . . . . . . . . . . . . . . . . 100% Investment holdingRussian Titan Company Limited . . . . . . . . . . . 100% Investment holdingTenaviva Limited . . . . . . . . . . . . . . . . . . . . . . . 100% Investment holding

United KingdomAricom Limited . . . . . . . . . . . . . . . . . . . . . . . . . 100% Investment holdingAricom UK Limited . . . . . . . . . . . . . . . . . . . . . . 100% Investment holding

Hong KongAriti HK Limited . . . . . . . . . . . . . . . . . . . . . . . . 100% DormantAriva HK Limited . . . . . . . . . . . . . . . . . . . . . . . 100% Investment holding

Cayman IslandsThorholdco Limited . . . . . . . . . . . . . . . . . . . . . 100% Investment holdingThorrouble Limited . . . . . . . . . . . . . . . . . . . . . . 100% Provision of financing services

for the GroupThordollar Limited . . . . . . . . . . . . . . . . . . . . . . 100% Provision of financing services

for the Group

RussiaLLC Petropavlovsk Iron Ore (formerly LLC

Aricom) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100% Business services for the

GroupLLC KS GOK . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Exploration and mining —

K&SLLC Olekminsky Rudnik . . . . . . . . . . . . . . . . . 100% Exploration and mining —

Kuranakh ProjectLLC Rubicon . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Development of bridge and

other infrastructure projectsfor the Group

LLC TOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% DormantLLC GMMC . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.58% Exploration and mining —

GarinskoyeLLC Kostenginskiy GOK . . . . . . . . . . . . . . . . . 100% Exploration and mining —

KostenginskoyeLLC Orlovsko-Sokhatinsky Rudnik . . . . . . . . . 100% Exploration and mining —

Garinskoye FlanksLLC Garinskaya Infrastructure . . . . . . . . . . . . 100% Transportation services for

Garinskoye projectLLC Amursnab . . . . . . . . . . . . . . . . . . . . . . . . . 100% Procurement servicesLLC Karier Ushumunskiy . . . . . . . . . . . . . . . . 100% Coal productionCJSC SGMTP . . . . . . . . . . . . . . . . . . . . . . . . . 100% Development of seaport

project for the GroupOJSC Giproruda . . . . . . . . . . . . . . . . . . . . . . . 70.28% Engineering services

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On 10 June 2010, the following entities were sold to Petropavlovsk PLC, the ultimate holdingcompany, as part of the Restructuring. For further information on the Restructuring, refer tothe section headed “History and Restructuring” in this document.

Name of company

Equity interest attributableto the Group at30 June 2010

Principal activitiesprior to the

restructuring

Aricom B Finance plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Investment holdingAricom B Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — DormantAricom B Roubles Treasury Limited . . . . . . . . . . . . . . . . . — DormantAricom Finance UK Limited . . . . . . . . . . . . . . . . . . . . . . . . — Provision of

financing servicesfor the Group

Aricom Roubles Treasury UK Limited . . . . . . . . . . . . . . . . — Provision offinancing servicesfor the Group

Aricom Services Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . — Business servicesfor the Group

Aricom Treasury UK Limited . . . . . . . . . . . . . . . . . . . . . . . — Provision offinancing servicesfor the Group

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Classification of Mineral Resources and Ore Reserves in accordance with the JORCCode

Mineral Resource concentration or occurrence of material of intrinsiceconomic interest in or on the Earth’s crust in such aform that there are reasonable prospects for theeventual economic extraction. The location, quantity,grade, geological characteristics and continuity of amineral resource are known, estimated or interpretedfrom specific geological evidence and knowledge.Mineral Resources are sub-divided into Inferred,Indicated and Measured categories.

Inferred Resource that part of a Mineral Resource for which the tonnageand grade and mineral content can be estimated witha low level of confidence. It is inferred from thegeological evidence and has assumed but not verifiedgeological and/or grade continuity. It is based oninformation gathered through the appropriatetechniques from locations such as outcrops, trenches,pits, workings and drill holes which may be limited orof uncertain quality and reliability.

Indicated Resource that part of a Mineral Resource which has beensampled by drill holes, underground openings or othersampling procedures at locations that are too widelyspaced to ensure continuity but close enough to give areasonable indication of continuity and wheregeoscientific data are known with a reasonable degreeof reliability. An Indicated Resource will be based onmore data and therefore will be more reliable than anInferred Resource estimate.

Measured Resource that part of a Mineral Resource for which the resourcehas been intersected and tested by drill holes,underground openings or other sampling proceduresat locations which are spaced closely enough toconfirm continuity and where geoscientific data arereliably known. A measured resource estimate will bebased on a substantial amount of reliable data,interpretation and evaluation which allows a cleardetermination to be made of the shapes, sizes,densities and grades.

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Ore Reserve economically mineable part of a Measured orIndicated Mineral Resource only. It includes dilutingmaterials and allowances for losses which may occurwhen the material is mined. Appropriate assessments,which may include feasibility studies, have beencarried out, and include consideration of andmodification by realistically assumed mining,metallurgical, economic, marketing, legal,environmental, social and governmental factors.These assessments demonstrate at the time ofreporting that extraction could be reasonably justified.Ore Reserves are sub-divided in order of increasingconfidence into Probable and Proven.

Note: Inferred Resources are not included in anyestimation of an Ore Reserve under the JORCCode.

Probable Ore Reserve the economically mineable part of an Indicated, and insome circumstances Measured Mineral Resource. Itincludes diluting materials and allowances for losseswhich may occur when the material is mined.Appropriate assessments, which may includefeasibility studies, have been carried out, and includeconsideration of and modification by realisticallyassumed mining, metallurgical, economic, marketing,legal, environmental, social and governmental factors.These assessments demonstrate at the time ofreporting that extraction could reasonably be justified.

Proven Ore Reserve the economically mineable part of a Measured MineralResource. It includes diluting materials andallowances for losses which may occur when thematerial is mined. Appropriate assessments, whichmay include feasibility studies, have been carried out,and include consideration of and modification byrealistically assumed mining, metallurgical, economic,marketing, legal, environmental, social andgovernmental factors. These assessmentsdemonstrate at the time of reporting that extractioncould reasonably be justified.

Standards to which Mineral Resources have been reported in this document

JORC-Compliant Mineral Resources and Ore Reserves that have beenmodelled and classified in accordance with the“Guidelines of the JORC Code (2004)”.

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CAUTIONARY NOTE CONCERNING MEASURED, INDICATED AND INFERREDRESOURCES

This document uses the terms “Measured”, “Indicated” and “Inferred” Resources, includingcategories thereof, which are terms used under the JORC Code for reporting MineralResources. “Inferred Resources” have a great amount of uncertainty as to their existence andas to whether they can be mined legally or economically. It cannot be assumed that all or anypart of the “Inferred Resources” will ever be upgraded to a higher category. InferredResources are considered too speculative geologically to have economic considerationsapplied to them that would enable them to be categorised as mineral reserves. Therefore, youare cautioned not to assume that all or any part of these resources exist, or that they can bemined legally or economically.

In addition, in this document Indicated Resources and Measured Resources are only includedin any economic analyses where: (a) the basis on which they are considered to beeconomically extractable is explained and they are appropriately discounted for theprobabilities of their conversion to Ore Reserves, and (b) all assumptions have been clearlydisclosed.

NOTE CONCERNING PREVIOUSLY PUBLISHED RUSSIAN SYSTEM DATA

This document contains JORC-Compliant data in relation to the Group’s mining assets.

The Group has historically produced reserve and resource data for its operations in Russia inaccordance with the Russian System in order to satisfy relevant Russian regulatoryrequirements and for its own internal geological purposes. This information is publiclyavailable, having been disclosed to the market in accordance with UK requirements whichapplied to the Group from time to time.

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GLOSSARY

acid an igneous or volcanic rock containing more thanabout 60% silica (SiO2) by weight

alteration changes in the chemical or mineralogical compositionof a rock, generally produced by weathering orhydrothermal solutions

auger tool designed for boring holes into soil or soft/weakrock

basalt fine-grained igneous rock dominated by dark-colouredminerals, consisting of plagioclase feldspars (over50%) and ferromagnesian silicates

beneficiate or beneficiation to improve the grade by removing associatedimpurities; preparation of ores for smelting by drying,flotation or magnetic separation

biotite ranging in colour from dark brown to green. Rock-forming ferromagnesian silicate mineral withtetrahedra in sheets; monoclinic mineral (mica),K2Mg6(Si6Al2O20)(OH,F)2; mica group

borehole hole with a drill, auger, or other tool for exploring strata

breccia clastic rock made up of poorly sorted angularfragments of such size that an appreciable percentageof rock volume consists of particles of granule size orlarger

clastic consisting of fragments of minerals, rocks or organicstructures that have been moved individually fromtheir place of origin

concentrate the clean product recovered from a treatment plant

concession a grant of mining rights especially by a government inreturn for services or for a particular use

cut-off grade or C.O.G lowest grade of mineralised material consideredeconomic, used in the calculation of ore resources

deposit mineral deposit or ore deposit is used to designate anatural occurrence of a useful mineral, or an ore, insufficient extent and degree of concentration

Direct Reduction or DR an alternative route of iron making developed toovercome some of the difficulties of conventional blastfurnaces

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DRI an abbreviation of “Direct Reduced Iron”, being ironproduced using the DR method

drill hole hole in rock or other material made by a rotational anddownward force, to recover a sample of the material

EPCM Engineering, Procurement and Construction Management

exploration method by which ore deposits are evaluated

fault surface of rock fracture along which has beendifferential movement

feasibility study an extensive technical and financial study to assessthe commercial viability of a project

feldspar most important group of rock forming silicate minerals,with end-members, alkali feldspar KAlSi2O8, sodiumfeldspar NaAlSi2O8 and calcium feldspar CaAlSi2O8

fines finely crushed or powdered material; term for particlesless than 0.074mm

flotation a mineral proce

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