Speech by Chairman of the Board

We are committed to becoming a respected world-class mining giant. Although there is a long way to go, we swear an oath not to change mind. In 2019, the Company exerted it efforts internally, stayed a sharp state to the outside world, kept watching the original mission and held the dreams, and moved forward with the solid footprints step by step towards the ambitious goal.

▸Financial Performance

In 2019, the Company realized operating income of 68.7 billion yuan, of which IXM PTE. LTD began to merge financially from the end of July, contributing 49.2 billion yuan. The Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) was 8.1 billion yuan in the whole year, and 39% in the mining sector, which was lower than that in the same period of last year, it was mainly affected by the sharp decline in cobalt prices and the continuous decline in copper prices; The operating net cash flow of the mining sector was 6.2 billion yuan; by the end of 2019, the Company’s asset-liability ratio was 57.65% (51.36% after the removal of the IXM PTE. LTD) and the net interest-bearing liability ratio was 25.34% (17.36% after the removal of the IXM PTE. LTD). The Company’s net profit attributable to the Parent Company was 1.857 billion yuan. The board of directors recommended distributing the annual dividend to shareholders, totaling RMB 929 million yuan (tax inclusive), accounting for 50% of the net profit attributable to the Parent Company.

▸Safety and EGS

Security First is the core value of the Company. “Zero Harm” is always the goal pursued by the whole Group. In 2019, the Company’s global operations achieved zero deaths and zero major environmental events. The recordable work-related accident rate TRIR was 1.62 throughout 2019, which was superior to the global mining average published by ICMM. With the outbreak of COVID-19 epidemic in China first, the Company established the Working Leading Group for Epidemic Prevention and Control on January 26, 2020, and then established the Emergency Team and formulated the emergency plan in each operating unit, strictly implemented the epidemic prevention and control work and provided support for the Company to ensure the normal production and operation.

Under the unified deployment of the Board of Directors and the Strategy and Sustainable Development Committee, in 2019, the Company established a cross-sectoral Executive Committee on Sustainable Development to review and revise eight compliance and sustainable development policies such as the Group Level’s Business Code of Conduct. According to the definition range of Global Reporting Initiative (GRI), the total amount of “Key Economic Contributions” of the Company exceeded RMB 26 billion yuan in 2019 on a global scale.

▸Operations Management

  We firmly believe that one of the core competitiveness of mining comes from high-efficient and low-cost operation management and from the pursuit of excellence for continuous improvement. In 2019, the Company comprehensively Restructured the management structure of Congo (DRC) Tenke Mining and Phoenix, USA and completed a series of major personnel adjustments, and realized the compression of management level and the improvement of management efficiency. We hold that this “big operation” will benefit the entire organization and the long-term development in the future. The Company’s each operating unit has begun to implement a series of vigorous reform measures to reduce cost and increase efficiency, with a total cash cost reduction of 1.47 billion yuan compared with the same standard in 2018, of which Congo (DRC) Tenke has achieved a total cost reduction and cost savings of 130 million US dollars in mining, mining separation, smelting, administrative logistics and logistics.

The domestic molybdenum-tungsten business maintains the stability of various indicators of production and operation throughout the year when it faces the extremely harsh and variable policy environment, and continues to maintain the leading cost competitiveness in the industry. A breakthrough has been made in the technical research of niobium business in Brazil. The two key projects of Australian copper gold business is making smooth progress.

We completed the smooth and steady integration of IXM PTE. LTD and began to play the synergistic effect of trade and mining. IXM PTE. LTD completed 5.11 million tons of physical trade in 2019, with a total profit of 100 million US dollars throughout the year, which was the best performance since its establishment in 2006 and reflected the anti-cyclical characteristics of the business model of IXM PTE. LTD.

We insist on technological innovation. As the leader of domestic smart mines, the Company took the lead in applying 5G technology in the field of domestic smart mines, accelerated to improve the use of more pure electric unmanned mining trucks for mining business, and established a benchmark for the industry.

▸ Balance Sheet Management

Maintaining sufficient liquidity is always the bottom line for the Company to stick to. The epidemic situation must have caused harm to operational cash flow. The stress test assumes not just a varying drop in the price of each product, but also a period of suspension in global business activity. The Company is prepared in advance for liquidity and has been evaluated to withstand extreme circumstances.

We focus on balance sheet management and optimization. In 2019, the Company completed the financing of overseas bonds and banking consortium totaling US $1 billion, while the financing of domestic ultra-short financing and corporate bonds totaling RMB 4 billion, so as to further optimize the debt structure and reduce financial expenses. In 2019, the Company’s average financing cost was 4%, which was at a relatively superior level in the industry.

▸Combination

The Company has established a resource varieties portfolio. They are closely related to improving people’s daily life quality. The Company has a number of unique, long-life, low-cost high-quality capital with full development potential. We closely center on the main business to diversify. Cross-regional, cross-border product and business diversification make the markets and customers diversified, income and cash flow diversified. At the same time, the Company maintains the assets and liabilities of RMB and US dollars in a reasonable structure. The Company has long been bullish on the value and development of this portfolio and believes that it can enhance the Company’s risk resistance.

▸Business Development

Based on the follow-up investigation of the Tungsten Industry and long-term optimism, the Company acquired 28,300 tons of Ammonium paratungstate through judicial auction. Through this alternative investment, the Company increased tungsten resource reserves, further consolidating the leadership position in the Tungsten Industry. The Company has participated to invest in the Indonesian nickel-cobalt mine hydrometallurgy project, and we expect the Company to obtain at least 15,000 tons of products with nickel metal content each year after the project is completed in the future.

▸ Looking Forward to the Future

The Company has initiated the formulation of the Group’s five-year strategic development plan. The Company’s mining assets have very good opportunities for endogenous growth, and we will fully dig the great potential of the existing portfolio. For example, Tenke Mines have huge reserves, it has the full potential to grow into a world-class mine with an annual output of more than 400,000 tons of copper and more than 30,000 tons of cobalt.

IXM PTE. LTD shoulders different missions: to take advantage of traders to assist the Group to expand its layout and influence in the field of resources; more importantly, IXM PTE. LTD should cooperate with the Mining Industry Sector and the Group’s investment and financing capacity to create a brand-new profit growth point.

The recent continued sharp market shock and decline reflect people’s deep concerns about the global recession caused by the epidemic situation. However, opportunities exist in the danger. On the premise of surviving well, the Company will strive to distinguish and work hard for seizing some opportunities. Value creation, capital efficiency, shareholder returns, and contributing to the long-term sustainable development of the Company will always be our practical consideration and criterion for the selection of endogenous growth projects and external investment opportunities.

▸ Heartfelt Thanks

 I sincerely thank our shareholders, customers and suppliers, partners and communities, and the Company's progress is inseparable from your trust and support as always. I would also like to extend my heartfelt thanks to all the board members, domestic and oversea management team and all the staff for their hard work.

The outbreak of COVID-19 epidemic has had an unprecedented impact on the world, which has not occurred throughout a century. Whether it is national/social governance, or commercial economic activities, whether it is the behavior pattern of each family, or everyone’s thoughts and minds, it will bring a profound impact. Now, the epidemic situation is spreading rapidly worldwide. The Company will work with all interested parties to overcome unprecedented challenges. We believe that those that didn’t beat us will eventually make us stronger.

　　　Chairman of the Board: Li Chaochun

　　2019