Dear shareholders:

On behalf of the Board of Directors, I would like to present to you the Group’s annual report for the year ended 31 December 2024 and to report on the Group’s performance in 2024 as well as its outlook for 2025.

In 2024, the Chinese economy experienced a phased recovery amid complex and evolving challenges. Although export trade saw marginal improvement, the compounded impact of structural contradictions and cyclical pressures continued to significantly influenced economic operations. The reshaping of global supply chains, coupled with rising geopolitical tensions and trade barriers, constrained China’s export growth potential. Domestically, the manufacturing sector faced the dual pressures of technological iteration and production capacity optimisation during its transformation and upgrading. Meanwhile, the prolonged adjustment in the real estate market continued to experience balance sheet contraction, while fluctuations in the international energy market further increased the complexity of macroeconomic control. The combined effect of these factors not only limited the pace of the current economic recovery but also posed profound challenges to achieving high-quality economic development.

The Chinese government has implemented a series of measures to stabilise growth and promote high-quality economic development. In terms of fiscal policy, a proactive fiscal policy was adopted, optimising the government expenditure structure and strengthening support for residents and small-to-medium enterprises. On the monetary policy front, a moderately loose stance was maintained to ensure reasonable and ample market liquidity, utilising tools such as reserve requirement ratio cuts and interest rate reductions employed to meet the financing needs of the real economy. Concurrently, efforts were made to boost growth in manufacturing and infrastructure investments. Notably, manufacturing investment rebounded significantly, becoming a key engine of investment growth, while infrastructure investment maintained a steady upward trend, providing strong support for high-quality economic development. The implementation of these policies laid a solid foundation for China’s steady economic growth in 2024, effectively boosting market confidence and ultimately enabling the country to achieve its gross domestic product (“GDP”) growth target of 5.0%.

Under this macroeconomic environment, the domestic steel industry faced new development patterns and challenges. From the perspective of demand structure, steel demand in the traditional construction industry showed a clear downward trend, while the proportion of steel used in manufacturing steadily increased from approximately 42% in 2020 to about 50% in 2024. Affected by factors such as weak overall domestic demand, the deepened implementation of production capacity reduction and replacement policies, and the accelerated transition to green and low-carbon development, China’s crude steel output in 2024 reached 1.005 billion tonnes, marking a 1.7% year-onyear decline, while pig iron production fell to 852 million tonnes, down 2.3% from the previous year. Steel prices also continued their downward trend. On the other hand, China’s steel exports amounted to 111 million tonnes in 2024, reflecting a 22.7% year-on-year increase; though export prices declined by 19.4%. As a result, the overall profit margins of steel enterprises were significantly compressed, with the industry’s average profit margin dropping below 1%. The weakening downstream demand and declining profitability also had a ripple effect on the upstream coking coal industry. In 2024, structural mismatches in supply and demand emerged in the coking coal market, leading to price fluctuations and a continued downward trend throughout the year.

Faced the severe situation of the macroeconomic environment and a declining coking coal market, the Group has consistently adhered to achieving budget targets as the guiding principle, resolutely implemented the established development strategy, and comprehensively promoted key measures such as improving quality and efficiency, reducing staff and enhancing productivity, and increasing output and efficiency, ensuring the smooth realisation of various operating targets. Through the collective efforts of the entire Group, the lower seam project of Xingwu Coal Mine successfully passed safety acceptance and commenced operations in mid-2024. Since then, all three of the Group’s operating mines have transitioned to lower seam production. Due to the conversion between upper and lower seam coal and the joint trial production at Xingwu Coal Mine in the first half of the year, production volume in the first half was impacted, resulting in the Group achieving raw coking coal output of 4.96 million tonnes for the whole year, down 6% from the previous year. The output of clean coking coal reached 3.16 million tonnes, slightly down 3% from the prior year, while the sales volume of clean coking coal increased by about 1% to 3.13 million tonnes. Affected by market conditions and declining coal quality, the average realised selling price (including VAT) of the Group’s primary product, clean coking coal was decreasing by 14% to RMB1,666/tonnes, For the year ended 31 December 2024, the Group’s sales revenue amounted to HK$5.06 billion, a decrease of 14% year-on-year primarily due to falling coal prices. The gross profit margin was 51%, down 8 percentage points from 2023. The Group’s net profit was HK$1.81 billion, with net profit attributable to shareholders amounted to HK$1.49 billion, a decrease of 21% from the previous year. The Group’s financial position remains sound, with ample capital, laying a solid foundation for the future development.

In 2025, the global macroeconomic environment is marked by turbulence and rapid changes, with a once-in-a-century transformation accelerating and the external environment growing increasingly complex and challenging. The external environment is likely to become even more complex and severe. With changes in U.S. policies, breakthroughs in AI profoundly influencing the global political and economic landscape, rising in tariff and trade barriers, along with additional high tariffs imposed by multiple countries on Chinese export products, including steel products, the international trade situation has become increasingly tense.

According to the latest government work report, in 2025, China will implement a more proactive fiscal policy, planning to issue 1.3 trillion yuan in ultra-long-term special treasury bonds, 500 billion yuan in special treasury bonds, and arrange 4.4 trillion yuan in local government special bonds. Once these funds are allocated and translate into actual expenditures, they are expected to effectively stimulate demand for infrastructure investment. The GDP growth target for 2025 is set at around 5%, maintaining confidence in stable growth and providing fundamental support for coal demand. The International Monetary Fund (IMF) has also raised its latest forecast for China’s economic growth by 0.1 percentage points.

From an industry perspective, it is expected that the accommodative fiscal policy will boost downstream demand, and the steel industry is likely to maintain stable operations under the dual support of a stabilised real estate and construction sector and the steady improvement of the manufacturing sector. Regarding the coking coal market, domestic supply is currently relatively sufficient, with limited room for production growth. Although the long-term supply of high-quality coking coal remains tight, downstream industries generally adopt a strategy of purchasing on demand, with a strong wait-and-see sentiment in the market. Based on the above, the Group maintains a cautious outlook on coking coal price trend for the year.

In 2025, all three operating coal mines of our Group have entered a stable production stage. We will always prioritise safe production, accurately seize market opportunities under the premise of ensuring safety and strive to improve operational efficiency. At the same time, the Group will continue to advance efforts to improve quality and efficiency, accelerate the construction of intelligent coal mines, closely monitor the development of AI technology both domestically and internationally, and explore innovative application scenarios in coal mine production and operations, using technology to empower and drive industrial upgrading.

I hereby express my heartfelt appreciation to the management team and all employees for their dedication to the Group as well as to our shareholders for their unwavering care and support to the Group. The Board of Directors proposes a 2024 final dividend of 21 Hong Kong cents per ordinary share, sharing the Group’s operating achievements over the past year with our shareholders. We will continuously strive to create long-term and stable value returns for our shareholders, society, and all employees!

Ding Rucai
Chairman