Dear shareholders:
The year 2025 marks the final year of the “14th Five-Year Plan”. It also represents my first year serving as Chairman of the Board of Shougang Fushan Resources Group Limited (“Shougang Resources”) amid fluctuations in the industry cycle, and a pivotal year for the Group to maintain strategic focus and consolidate its development foundation during a period of industry adjustment. This is the first report I present to you in my capacity as Chairman of the Board of Shougang Resources.
During the “14th Five-Year Plan” period, the Group adhered to its mission of “driving enterprise development, delivering returns to shareholders, enhancing employee well-being, and contributing to society.” Guided by development and centred on returns, we upheld the operating philosophy of “safety, efficiency, innovation, intelligence, and harmony.” Centred on long-term value creation, we continuously advanced operational optimization and capability building centred on long-term value creation, progressively refining an operating system anchored in resource quality, cost control, and cash flow generation, thereby laying a solid foundation for navigating industry cycles. Amid cyclical fluctuations in the industry, we have gained a deeper understanding that, for resource-based enterprises, long-term value depends not only on performance at price peaks, but more importantly, on the ability to continuously generate profits and cash flow during market downturns.
In 2025, faced with the dual pressures of a 30% year-on-year decline in market prices for similar coking coal products and adjustments to the coal quality structure of our three operating mines. Shougang Resources fought to break through in adversity and sought progress while maintaining stability under pressure, achieving remarkable operating results. These achievements would not have been possible without the long-term trust and support of our shareholders. The Company has adhered to a stable and high dividend payout policy, which is underpinned not only by solid operating performance and a sound financial foundation, but also reflects our deep appreciation to all shareholders and our firm commitment to creating long-term value for you.
1. FORGING AHEAD WITH DEDICATION DURING THE “14TH FIVE-YEAR PLAN”, ACHIEVING INDUSTRY-LEADING VALUE CREATION
Looking back on the past five years, the Group has experienced a glorious period of operational excellence and value creation, as well as a pivotal important phase of management transformation and significant capability leaps. During the “14th Five-Year Plan” period, the Group achieved a cumulative production of over 25 million tonnes of raw coking coal and approximately 16 million tonnes of clean coking coal. And recorded aggregate revenue for the period of over HK$31.0 billion, aggregate profit before tax exceeding HK$15.0 billion, and net profit attributable to shareholders of over HK$9.2 billion. Among these, the Group recorded consecutive record-high profits in 2021 and 2022, while maintaining industry-leading positions in gross profit margin and cost control throughout the period.
In terms of shareholder returns, the Group has consistently adhered to a high dividend payout policy to reward investors for their long-term support. During the “14th Five-Year Plan” period, Shougang Resources distributed aggregate dividends of over HK$7.7 billion, with an overall average dividend payout ratio of 83%, ranking among the leading listed coal companies, and an average annual dividend yield of 12%.
2. MAINTAINING RESILIENCE AMID INDUSTRY ADJUSTMENT, WITH A ROCK-SOLID OPERATING FOUNDATION
The coal industry experienced significant volatility over the past year. Prices came under pressure in the first half of the year, while supply contraction in the second half brought about a recovery. A year-on-year decrease in the volume of imported coal also provided a certain degree of support to the domestic supply-demand balance.Facing the challenges of industry fluctuations, the Group has consistently adhered to prudent operations as its core. Under the premise of ensuring operational safety, we have moved forward in an orderly manner with various management tasks, focusing on improving quality and efficiency. Following the completion of the transition from upper-seam to lower-seam mining at Xingwu Coal Mine, all three of the Group’s operating coal mines have entered a relatively stable stage of production. Annual output reached 5.25 million tonnes of raw coking coal and 3.15 million tonnes of clean coking coal. Affected by the downward shift in the market price levels, the average selling price of clean coking coal decreased by approximately 36% year-on-year. The Group remained focused on strengthening its internal operations and responded to external uncertainties with the certainty of its own execution, recording revenue of HK$5.06 billion, net profit of HK$740 million, and profit attributable to shareholders of HK$630 million for the year. Total dividends for the year amounted to HK12 cents per share, representing a high dividend payout ratio of 97%. The Group maintained a robust financial position, with zero interest-bearing debt and ample cash reserves, which served as the Group’s “ballast stone” for navigating industry cycles.
3. DRIVING QUALITY IMPROVEMENT AND COST REDUCTION, UNLOCKING PROFIT POTENTIAL THROUGH LEAN MANAGEMENT
In 2025, faced with the challenging environment of declining market prices and rising cost pressures, Shougang Resources consistently adhered to its operating and management philosophy of “ultra-low cost”. We prioritized cost reduction and efficiency enhancement as strategic imperatives to bolster our core competitiveness. A dedicated task force for tapping potential and enhancing efficiency was established, and cost reduction targets were formulated and assigned. Through lean management, the Company further unlocked profit potential, thereby achieving a virtuous cycle of cost control and efficiency improvement. In 2025, the production cost per tonne of raw coking coal decreased by 13% year-on-year.
In terms of management innovation, Shougang Resources has developed distinct strengths. The rapid-response mechanism of “Integrated Production and Economic Management” operated efficiently, with a focus on profitability, enabling timely production adjustments and price adjustments, and bridging the “last mile” between production and the market to ensure maximization of benefits. Business and finance were deeply integrated, with finance taking the lead and providing a scientific basis for business decisions in advance. The Company also continued to improve management efficiency, actively advanced reform and enhancement initiatives, implemented flat management and operated under a “Broad-based departmental system”. In 2025, the labour productivity of raw coal reached 1,293 tonnes per person per year, representing an increase of 26% during the “14th Five-Year Plan” period.
4. ADVANCING INTELLIGENT EMPOWERMENT, LEADING MINE TRANSFORMATION AND UPGRADING THROUGH TECHNOLOGY
During the “14th Five-Year Plan” period, the Group steadfastly advanced the construction of smart mines, empowering safety through technology and enhancing efficiency through intelligence.
In the area of technological innovation, the Group established an innovation leadership structure to coordinate and advance innovation initiatives in an integrated manner and set up a dedicated innovation fund to provide sufficient financial support for innovation projects. Guided by eight innovation studios, the Group focused on bottlenecks and difficult issues in safe production and operational management, carried out project-based research and breakthroughs, and achieved major progress in a number of key technologies, including the “110 Working Method”, comprehensive utilization of low-concentration gas, and intelligent mining of thin coal seams. At the same time, the Group encouraged innovation by all employees and cumulatively carried out more than 900 “Five-Small” innovations, winning more than 50 awards at provincial and municipal levels.
Intelligence is the essential path for the high-quality development of coal mines. Currently, the Group’s intelligent mining system has achieved the automated operation of core equipment at fully mechanized mining faces and end-to-end interconnection of data throughout the entire process. This has effectively reduced the number of on-site personnel while significantly improving mining control efficiency and safe production standards. Through unremitting efforts, all three mines passed official authoritative acceptance, reaching the standards of one intermediate-level and two primary-level intelligent mines. The Group’s smart mine development has reached a new level, laying a solid foundation for the Company’s sustainable development.
5. LED BY ESG AND FULFILLING SOCIAL RESPONSIBILITIES THROUGH GREEN AND LOW-CARBON DEVELOPMENT
The Group remains committed to the philosophy of green development and integrated ESG into the entire process of its business operations. While pursuing economic benefits, the Group has actively fulfilled its social responsibilities and achieved coordinated development among the enterprise, the environment and society. Focusing on green and low-carbon development, the Group vigorously advanced its comprehensive gas utilization projects. All three producing mines have established gas-fired power stations, and by the end of 2025, the cumulative power generation from comprehensive utilizations of full-concentration gas exceeded 235 million kWh, reducing carbon dioxide emissions by more than 2.25 million tonnes. The Group was awarded one of the Top 10 ESG Cases among Beijing Municipal State-owned Enterprises (2025), and was awarded the First Prize of the Innovation Award for Energy Conservation and Emission Reduction Science and Technology Progress (in the field of carbon neutrality) by the China Energy Conservation Association, becoming a benchmark for green and low-carbon development in the coal industry.
The Group continue to advance ecological restoration and community-enterprise partnerships, actively carrying out vegetation restoration, soil and water conservation and other initiatives to improve the ecological environment of the mining areas. The Group’s three operating mines also continued to implement village relocation and resettlement arrangements, successfully releasing suppressed coal under residential areas. Meanwhile, the Group actively promoted and applied new coal mining technologies such as the “110 Working Method” and gob-side entry etc. to maximize resource recovery. Also achieved coordinated development between resource exploitation and social responsibility.
In terms of corporate governance, the Group upheld the philosophy of “compliance-based, risk-preemptive, and empowering the whole,” continuously refining our compliance management system, optimizing the Group’s governance structure, and strengthening risk prevention and control. In May 2025, Shanxi Fushan Resources Group Co., Ltd., a wholly-owned subsidiary of the Group, successfully obtained Compliance Management System Certification from the China Classification Society (CCS). This marked that Shougang Resources’ compliance system development had reached an internationally recognized standard and providing solid governance support for the Company’s sustainable development.
6. ANCHORING THE “15TH FIVE-YEAR PLAN” STRATEGY AND CHARTING A LONG-TERM DEVELOPMENT BLUEPRINT
What’s past is prologue. At present, the international geopolitical landscape continues to evolve, and conflicts among the United States, Israel and Iran have introduced new uncertainties to the global energy market. Energy security has become a cornerstone of economic stability for countries worldwide, with its strategic importance continuing to rise. Against this backdrop, premium coking coal, as an indispensable raw material for the steel industry, is becoming increasingly prominent in terms of both resource value and strategic significance.
Returning to industry fundamentals, the Group maintains a cautious optimism regarding the coking coal market in 2026. Growth on the supply side remains constrained by policy and safety regulations, while demand for premium coking coal remains solid. It is expected that the market price level will remain stable amid tight supply-demand balance.
In order to proactively respond to external market changes and the high-risk nature of the industry in which Shougang Resources operates, and to better reward shareholders, the Group will continue to place safe production and compliant operations as top priorities. It will comprehensively enhance the standardization, normalization and refinement of safety production and risk prevention and control, resolutely prevent and curb various potential risks and hazards, and ensure the safe and stable operation of the enterprise. By closely monitoring market dynamics, we will optimize our production and sales rhythm, actively carry out dedicated initiatives for cost reduction and efficiency enhancement, and, building on the results achieved in 2025, further upgrade its cost management framework to ensure the effective achievement of its 2026 operating targets and maximized benefits. The Group will also accelerate the development of smart mines and actively explore the application of artificial intelligence in areas such as safety monitoring, production management and equipment maintenance, continuously enhancing operational efficiency and core competitiveness through technological empowerment. In the ESG, the Group will continue to promote the “110 Working Method”, deepen comprehensive gas utilization and expand the application of photovoltaic green power, striving to become a benchmark enterprise for green and low-carbon development in the coal industry. In addition, the Group will continue to adhere to a high dividend payout policy, delivering sustained and stable returns to shareholders and enabling them to share in the Company’s operating results and value growth.
Standing at the starting point of the “15th Five-Year Plan”, Shougang Resources has established a clear strategic path: in the short term, to maintain its industry-leading advantages and ensure steady progress in operating performance; in the medium to long term, to continuously optimize production and operations, expand its leading edge, and actively explore new drivers of growth, with the goal of building Shougang Resources into a world-class, internationally influential premium coking coal resource operator. Regarding to development strategy, the Company will prudently evaluate the feasibility of scale expansion based on industry cycles and market conditions, while placing emphasis on its ability to continuously generate cash flow and deliver stable returns across different cycle environments.
Finally, on behalf of the Board, I would like to express my sincerest gratitude to the management team and all employees for their hard work and unremitting efforts over the past year, and my heartfelt thanks to all shareholders for the trust, support and companionship you have given us over the long term. Looking ahead, we hope that Shougang Resources will gradually develop operating characteristics that are resource-based, cash flow-centred and return-oriented, with sustained and strong profitability as its pursuit, and become an investment target with long-term allocation value. To this end, we will remain committed to the philosophy of steady development and value creation. Staying true to our original purpose and embracing our mission, we will cultivate our strengths with dedication and forge ahead with steady steps. We are fully committed to creating long-term, sustainable, and high-quality value returns for our shareholders, society, and all employees, as we strive to write a brilliant new chapter in corporate development!
Chairman of the Board
Chen Yi
26 March 2026