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Dear Shareholders,

On behalf of the Board, I would like to present to the shareholders the annual report of the Group for the year ended 31 December 2020 and to report to the shareholders on the financial performance and operation of the Group for the year under review.

The unexpected COVID-19 pandemic in 2020 brought a catastrophic hit to the whole world. Our life and work style were forced to change. The global economy suffered heavy losses accordingly. Fortunately, China took decisive measures when the pandemic just began to spread and effectively contained the spreading of the virus on a larger scale, and thereafter China’s economy quickly rebounded from the bottom. The annual GDP grew was 2.3%, exceeded one hundred trillion RMB for the first time, and became the only country among all the major economies to achieve positive growth.

The annual growth rate of national investment in fixed assets increased by 2.9%, of which investment in infrastructure construction increased by 0.9% YoY. In the post-pandemic period, new fiscal policies have been continuously rollout to ensure economic growth, various major construction investment plans were launched in many cities. Despite the lagging impact of floods in the middle of 2020, both annual traditional and new infrastructure grew together. The growth rate of national real estate investment increased by 7.0% YoY and continued to be the leader in promoting economic growth. However, as China started to focus on regulating the real estate sector in the middle of 2020, the land market showed signs of cooling down. In addition, following the domestic economic recovery, the automobile industry has begun to show vitality, especially for alternative fuel vehicles in which the production and sales volume hit a historic high level.

Although the pandemic abroad has had a significantly negative impact on China’s steel exports in 2020, The quick recovery in China’s economy has led to the quick rebound in domestic steel industry demand after a steep decline in February. The annual production and sales volume rose again. The annual output of crude steel has exceeded 1.05 billion tonnes, with a YoY increase of 5.2%; the annual output of pig iron was almost 890 million tonnes, which increased by 4.3% YoY. For coking coal supply, according to the statistic from, the effective domestic supply of clean coking coal in 2020 was 485 million tonnes, with a YoY increase of 1%. Import of coking coal firstly rose and then fell in 2020 due to geopolitics and the pandemic. The total import volume of coking coal was 72.56 million tonnes, with a YoY decrease of 2.8%. The overall supply growth was almost flat. The annual coking coal price showed a trend of low to high in 2020, which was also closely related to the development of pandemic, re-opening of overseas steel mills in September, and reduction of seaborne coal imports in October, although the overall coking coal market price for the year was still about 15% lower than the previous year.

At the beginning of the Lunar New Year holiday in 2020, the outbreak of COVID-19 forced all industries to suspend their work and production. Under the national policy for resumption to work and production, our Group’s three mines in Liulin were the first batch local enterprises to pass the inspection and resumed normal production under the premise of comprehensive anti-epidemic measures and we adjusted our production plan in response to the new situation. In this extraordinary year, all employees joined forces to overcome the difficulties. The Group has pleasure to report to shareholders: For the year under review, the output of raw coking coal was 4.95 million tonnes, with a YoY increase of 12%; the production and sales volume of the self-produced clean coking coal was 3.16 million tonnes and 3.10 million tonnes respectively, both increased by 15% YoY. In addition, the volume of coal purchased for processing from outsiders was 0.16million tonnes. The average selling price (VAT included) of clean coking coal was RMB1,218/tonne, with a YoY decrease of 13% which was in line with the change of the market price. For the year ended 31 December 2020, the Group’s revenue was approximately HK$4 billion, increased by 3% YoY; the gross profit margin reached 47%. The Group’s net profit for the year was HK$1.187 billion, increased by 1% YoY in which the profit attributable to shareholders was HK$1.08 billion, a slight decrease of 5% YoY. Our Group has worked hard to reach production targets and implemented several measures to improve product quality and efficiency. We have overcame the negative impact of the pandemic and the decline in coking coal market prices and achieved our operation goals. It is believed that the current healthy financial position and sufficient funding will provide strong support for our operations and investments in the foreseeable future.

At the moment, COVID-19 vaccination has started around the world. People’s life is expected to return to normal gradually. The pace of the V-shaped recovery of the world economy is more certain. Central Government Economic Panel has set 2021 macroeconomics: continuity, stability and sustainability. We believe that the real estate and infrastructure industries will continue to grow steadily. In 2021, the demand for steel will continue to grow also, especially in the first half of 2021, demand for coking coal will remain prosperous; domestic restrictions on coal imports will continue in the short to medium term. Under the circumstance that domestic supply will not increase significantly, the price of coking coal is expected to stay at the high level.

Looking forward to 2021, the Group will continue to further increase the annual production volume on the premise of safe production, and increase revenue and reduce expenditure in response to market changes. The Group also clearly sees that the rising global requirements for environmental protection. China’s “Double Carbon” goal has further promoted us to speed up the development of smart and green mining. Of course, COVID-19 vaccination rate and inflation induced by US excessive quantitative easing etc. may still bring lots of uncertainties to the full recovery of the economy. We will monitor closely and adjust the production and operation plan accordingly and flexibly.

I would like to express my sincere thanks to the management team and all the staff for their hard work and contributions. As a token of our appreciation for the continued support and kindness of our shareholders, the Board has proposed a final dividend of HK 9 cents per Share. Once more, I would like to express my heartfelt gratitude again to our shareholders, management team, employees and business partners for their support. We are looking forward to create fruitful returns for shareholders, society and all employees!

Ding Rucai


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