"Striving for success - a new blueprint for the Company¡¦s business development with a dual-driver model"

Dear Shareholders,

In 2023, we have witnessed a diverse global landscape, heightened geopolitical tension and continued military conflicts, putting energy supply around the world under the spotlight with subdued global GDP growth and moderate demand. The Group faced with a challenging environment amid increased volatility in commodity prices and rising cost of capital due to the Fed¡¦s rate hikes. I had been lucky enough to join CITIC Resources in April 2023 as the Chairman and Chief Executive Director. We have carried forward a meaningful year in the history of the Group. During the year, under the leadership of the Board, the management and all employees sticked together to deal with and mitigate major risks, improve the overall standards of work quality and efficiency, explore investment opportunities in areas such as resources and energy, expand into the crude oil trading business and move towards the dual-driver ¡§investment + trade¡¨ development goal.

In 2023, despite the significant decrease in the crude oil, aluminum ingot and coal prices, the Group managed to navigate, explore and finally reach the target for the year with strict cost control, achieving a consolidated revenue and net profit of approximately HK$3,825.6 million and HK$551.8 million, respectively. In addition, we had declared a dividend of HK$6 cents per share, which was the highest level in the Company history. Overall, we have achieved one of the best financial positions in recent years with a relatively low gearing ratio and good liquidity.

On behalf of the Board, I would like to express my heartfelt gratitude and appreciation to the fellow management and all staff for their dedication and achievements for the year. On behalf of the Group, I would also like to express my sincere gratitude to all shareholders, customers, suppliers, financial institutions and business partners.

Business Layout

In 2023, in response to the changes and challenges in the external and operating environment, the Group was committed to promoting the organizational structure and functional system, and creating a business layout that helps us navigate the market environment in a sustainable manner. Based on the sales of crude oil and taking into account our existing business portfolio, the Group improved the existing crude oil sales channels, sought to expand third-party crude oil trades, and completed the construction of the trading platform and the preliminary preparation for the crude oil trade business. We have strengthened the capability of the investment department, focused on the improvement of industry and project research capabilities, improved the management system before, during and after investment, strengthened the input in project research, and identified resources and energy as an investment direction. The Group has also made efforts to improve investor relations and strengthen communication with the market through analyst meetings, media interviews with senior management of the Group, etc. Our market recognition continued to improve. The Company received the ¡§ListCo Excellence Awards 2023¡¨ in Hong Kong. In addition, we also took the initiative to promote the efficient use of funds, repayment and novation of loans, effectively reducing the cost of working capital.

Through unremitting efforts, the Group¡¦s ¡§investment + trade¡¨ dual-driver business model has taken shape. We will accelerate the building and enhancement of our core competitiveness, strive to be a leading listed resources and energy company, and continue to create value for the shareholders as a whole.

Project Management

In 2023, the Group continued to stick to the principle of ¡§controlling risks and stabilizing principal business¡¨, focus on operational risk mitigation, expanding the resource base by raising reserves and production, stabilizing the profitability of various businesses and enhancing asset value.

For oil and gas business, the staff of KBM Oilfield sticked together and planned scientifically. Through trial production and the application of acid treatment, we have increased the proved oil reserves and it is expected that the annual working interest output could reach up to 65,000 tons/year, which supports the long-term development of the oilfield. Meanwhile, the amount of the tax dispute in respect of a tax payment, penalties and late charges of approximately US$83.19 million has been substantially reduced. Well D1 of Hainan Block 20 in Yuedong Oilfield currently under evaluation has achieved industrial oil ouput standard and commenced operation with steady production and promising future prospects. The Seram Oilfield has completed the Lofin gas trial at 19 million cubic feet per day, which will be followed by a pilot commercial development. In 2023, the Group¡¦s oil and gas operation production and equity production were stable and operating at a high level. The overall work safety profile was stable and manageable.

For non-oil-and-gas businesses, the subsidiary of the Company in Australia has effectively fulfilled its shareholder obligations and adopted a multi-pronged approach in promoting the performance of our investments to create value. We worked closely with AWC¡¦s business partners to resolve the license approval issue and avoid the potentially significant loss. The Portland Aluminium Smelter signed a new electricity hedging agreement with the term extended to 2035, effectively locking in future electricity costs and extending the useful life of the aluminum smelter. Through researches and investigations into coal mine projects, the local management has effectively promoted the implementation of cost reduction and efficiency improvement measures. In 2023, the Group achieved a sales volume of 67,000 tons of aluminum smelting in Portland Aluminum Smelter and 659,000 tons of coal in CMJV, with production and operation continuing to optimize and improve. Meanwhile, the Group is conducting analysis of the proposed transaction of AWC by way of scheme of arrangement and will update the market in due course, while fully enchancing the interests of the Company and its shareholders.

Environmental, Social and Governance ("ESG")

Over the years, the Group has spared no effort in the pursuit of sustainable development, and the fulfillment of the Company¡¦s social responsibility. The Group is deeply aware of the society¡¦s expectations on green energy and industry. We will contribute to the collective economic, environmental and social development through business layout, technological innovation and management. In 2023, the Group implemented the concept of safety, environmental protection and health in areas such as energy structure adjustment, environmental protection, new technology application, energy conservation and emission reduction, and community welfare, and further enhance its sustainable development.

The Group emphasizes the development of employees¡¦ personal strength and qualities, promotes employees¡¦ long-term career path, optimizes employees welfare and training, implements production and office safety systems, strives to safeguard the legitimate rights and interests of employees, integrates the personal development of employees into the long-term development of the Company, and strengthens the organizational foundation for sustainable development. We have implemented a comprehensive anti-corruption policy and strengthened anti-corruption training and supervision. We have established a healthy and efficient cooperation mechanism with suppliers and contractors to cooperate for mutual benefits, encouraging them to become responsible stakeholders. We actively participated in community activities, contributed to community relief, volunteer service, environmental cleaning, public governance and other causes, and established a good corporate image. The Group has published the Environmental, Social and Governance Report for nine years in a row to openly and transparently explain to the community and stakeholders what the Company has done and achieved in promoting sustainable development.

Looking forward to 2024, the Group is expected to face a difficult business environment, together with the weak global GDP growth, continuing geopolitical conflicts, structurally volatile commodity prices, unbalanced demand and supply in the resources and energy sectors, and considerable uncertainty in the supply chain. For new beginning, we must not only see difficulties, but more importantly, endeavor to address, keep striding forward, be down-to-earth and strive for success. Under the guidance of ¡§changing your thinking, scientific operation and dual-driver model¡¨, we will explore and continue to innovate, optimize the Company¡¦s resource allocation, improve the ability of business operation, business development and value creation, and promote the Company¡¦s high-quality development in compliance with laws and regulations, and provide shareholders and investors with better returns.