首钢资源(00639) - 2019 - 年度财报

Corporate Information Board of Directors and Committees Outlines the company's basic governance structure and key contact information, including board members, committee compositions, company secretary, auditor, share registrar, and registered address - The Board of Directors comprises 5 executive directors, 2 non-executive directors, and 4 independent non-executive directors[7] - Key committees (Executive, Audit, Nomination, Remuneration), their chairpersons, and member lists are specified[7][8] - The company's auditor is PricewaterhouseCoopers, and the share registrar is Tricor Tengis Limited[8] Main Operational Structure Group Operational Structure Briefly describes the Group's main operational structure as of December 31, 2019 - The Group's main operational structure is as of December 31, 2019[9] Financial Highlights Key Financial Data Overview Provides an overview of the company's key financial data from 2017 to 2019, showing growth in revenue, profit, EPS, and dividends, alongside a robust balance sheet Key Financial Data for FY2019 (Consolidated Statements) | Metric | 2019 (Thousand HKD) | 2018 (Thousand HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 3,869,308 | 3,686,176 | +5% | | Gross Profit | 1,988,743 | 1,900,542 | +5% | | Profit for the Year | 1,176,141 | 1,151,928 | +2% | | Profit Attributable to Owners | 1,140,413 | 1,100,488 | +4% | | Adjusted EBITDA | 2,220,589 | 2,028,196 | +9% | | Basic Earnings Per Share (HK cents) | 21.51 | 20.76 | +4% | | Dividend Per Share (HK cents) | 17.2 | 16.8 | - | | Total Assets | 21,472,710 | 21,251,042 | +1% | | Total Liabilities | (4,426,398) | (4,475,236) | -1% | | Total Equity | 17,046,312 | 16,775,806 | +2% | | Current Ratio (times) | 2.61 | 2.58 | +1% | | Gearing Ratio | 0% | 0% | - | - Gross profit margin was 51% in 2019, compared to 52% in 2018[13] - As of December 31, 2019, cash and cash equivalents and fixed deposits with original maturity over three months totaled HKD 4,761,884 thousand, an 11% increase from 2018[14] Operating Mines Mine Operations Overview Details the geographical location, operational history, approved capacity, coal washing plant status, and main coal characteristics of the Group's three key coking coal mines (Xingwu, Jinjiazhuang, Zhaiyaodi) - Xingwu Coal Mine is located 6 kilometers south of Liulin County, commenced operations in 1968, has an approved annual raw coking coal production capacity of 1.75 million tonnes, and primarily produces hard coking coal[19][20] - Jinjiazhuang Coal Mine is located 14 kilometers south of Liulin County, ceased production in H2 2017 due to engineering works, officially resumed production in H2 2019, has an approved annual raw coking coal production capacity of 1.75 million tonnes, and primarily produces semi-hard coking coal[22][23] - Zhaiyaodi Coal Mine is located 16 kilometers southwest of Liulin County, commenced operations in 1988, has an approved annual raw coking coal production capacity of 1.75 million tonnes, and primarily produces semi-hard coking coal[24][25] Coal Characteristics and Reserves Introduces the Group's high-quality coking coal and updates resource and reserve data as of December 31, 2019 - The Group's coking coal is located in the Liliu mining area of Hedong Coalfield, one of China's main high-quality hard coking coal reserve areas, known as "Panda Coal" for its superior quality, suitable for producing coke and steel[27][28] Resources and Reserves (As of December 31, 2019) | Metric | Xingwu (Million tonnes) | Jinjiazhuang (Million tonnes) | Zhaiyaodi (Million tonnes) | Total (Million tonnes) | | :--- | :--- | :--- | :--- | :--- | | In-situ Resources | 42.56 | 48.49 | 51.84 | 142.89 | | Recoverable Reserves | 25.67 | 28.11 | 25.71 | 79.49 | Chairman's Statement 2019 Economic and Industry Review The Chairman's statement reviews the challenges in the global and Chinese economies in 2019, including trade frictions and slowing economic growth, as well as supply and demand in the steel and coking coal industries - Global economic growth in 2019 was the lowest since the 2008 financial crisis, with the spread of populism and protectionism, and escalating trade frictions and geopolitical tensions[35][36] - China's economic growth slowed to 6.1%, but real estate investment exceeded expectations, steel production hit a new high, coking coal supply and demand were largely balanced, and prices showed a trend of higher in the first half and lower in the second half of the year[37][38] - The RMB exchange rate against HKD depreciated year-on-year, negatively impacting the Group's 2019 performance[37][38] Group Performance and Operational Highlights Reports the Group's performance growth in a challenging market, including significant increases in raw and clean coking coal production and sales, as well as the resumption of Jinjiazhuang Coal Mine and optimized operational efficiency - In 2019, the Group's raw coking coal production was 4.41 million tonnes, a year-on-year increase of 8%; clean coking coal production was 2.75 million tonnes, and sales volume was 2.70 million tonnes, representing year-on-year increases of 30% and 29%, respectively[39] - The average selling price of clean coking coal (including VAT) was RMB 1,396 per tonne, a 4% year-on-year decrease[39] - Group sales revenue was HKD 3.87 billion, a 5% year-on-year increase; full-year gross profit margin reached 51%; profit attributable to shareholders was HKD 1.14 billion, maintaining growth momentum[39] - Jinjiazhuang Coal Mine obtained its safety production license in August 2019, gradually resuming normal production, and enhanced production efficiency through optimized labor organization, coal blending, and automated centralized control of conveyor belts[40] 2020 Outlook and Strategic Focus Looking ahead to 2020, despite COVID-19 uncertainties, China's economic stimulus policies are expected to support the steel and coking coal industries; the Group will continue to strengthen safety, innovation, and cost control, leveraging its robust financial position to seek business opportunities - The COVID-19 pandemic in 2020 cast a shadow over the Chinese and global economies, but the Chinese government will gradually introduce economic stimulus measures, emphasizing proactive fiscal policies, with expected increases in infrastructure investment and domestic demand[41][42][43] - China's steel industry is expected to experience an initial downturn followed by an upturn in 2020, with the coking coal industry remaining relatively stable, though overseas pandemic developments still pose uncertainties[43] - The Group's three Liulin mines resumed production in mid-February 2020, fully implementing epidemic prevention measures, adjusting production plans, and aiming to further increase annual output[44][45] - The Group will leverage its robust financial position and strong cash flow to overcome difficulties, seek business opportunities, advance towards smart mining, and continue its journey towards safe, environmentally friendly, and sustainable development[44][45] - The Board recommends a final dividend of 8.7 HK cents per ordinary share[46] Management Discussion and Analysis Business Review Provides a detailed review of the Group's coal production and sales in 2019, with raw coking coal output up 8% year-on-year, and clean coking coal production and sales significantly increasing by 30% and 29% respectively, aligning with the company's long-term strategy of focusing on clean coking coal sales; the average selling price of clean coking coal decreased due to market factors, but an increased proportion of hard raw coking coal sales boosted the average selling price of raw coking coal Key Operating Data for 2019 | Metric | 2019 | 2018 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Raw Coking Coal Production (Million tonnes) | 4.41 | 4.07 | +0.34 | +8% | | Clean Coking Coal Production (Million tonnes) | 2.75 | 2.12 | +0.63 | +30% | | Raw Coking Coal Sales (Million tonnes) | 0.12 | 0.74 | -0.62 | -84% | | Clean Coking Coal Sales (Million tonnes) | 2.70 | 2.10 | +0.60 | +29% | | Average Selling Price of Raw Coking Coal (RMB/tonne) | 864 | 786 | +78 | +10% | | Average Selling Price of Clean Coking Coal (RMB/tonne) | 1,396 | 1,451 | -55 | -4% | - The significant increase in clean coking coal production and sales was primarily due to increased raw coking coal output, a substantial reduction in raw coking coal sales, enhanced mining technology, and the resumption of Jinjiazhuang Coal Mine[52] - In 2019, raw coking coal and clean coking coal sales accounted for 3% and 97% of the Group's turnover, respectively, compared to 16% and 84% in 2018, indicating a greater focus on clean coking coal sales[53] - The average selling price of clean coking coal decreased by 4% year-on-year, slightly above the market decline, mainly due to a reduced proportion of higher-priced No. 1 clean coking coal sales[55][56] Financial Review The financial review shows the Group's turnover increased by 5% to HKD 3.869 billion in 2019, with growth in gross profit and net profit; despite negative impacts from RMB depreciation and a one-off non-cash write-off of Jinjiazhuang Coal Mine's upper seam underground mine buildings, the Group maintained a robust financial position and strong cash flow through effective cost control, fund management, and increased byproduct sales - Turnover in 2019 was approximately HKD 3.869 billion, a 5% year-on-year increase, primarily driven by overall sales volume growth of coal products[58] - The top five customers accounted for 74% of the Group's total turnover (2018: 72%), with the largest customer, Shougang Group, accounting for 31% (2018: 24%)[58] - Gross profit margin was 51% in 2019 (2018: 52%), with gross profit increasing by 5% year-on-year to HKD 1.989 billion[59][75] - Net profit in 2019 was approximately HKD 1.176 billion, and profit attributable to owners was approximately HKD 1.140 billion; the average RMB exchange rate depreciated by approximately 4% year-on-year, negatively impacting net profit and profit attributable to owners by approximately HKD 45 million and HKD 44 million, respectively[60] - A one-off non-cash write-off of the net book value of Jinjiazhuang Coal Mine's upper seam underground mine buildings amounted to approximately HKD 129 million[60][85] - Excluding the impact of exchange rates and the one-off write-off, net profit and profit attributable to owners increased by approximately HKD 166 million and HKD 147 million, respectively[61] - Interest income increased by 10% year-on-year to HKD 137 million, primarily due to effective cash management[78] - Other income and net gains significantly increased by 178% to HKD 100 million, mainly due to a 107% increase in byproduct sales revenue and a 51% increase in dividend income from financial assets[79][81] - Cost of sales increased by 5% year-on-year to HKD 1.881 billion, primarily due to an increase in the actual quantity of raw coking coal used for sales and a rise in per-tonne raw coking coal production costs, partially offset by the depreciation of the average RMB exchange rate[69] - Unit production cost of raw coking coal increased by 4% year-on-year, mainly because Jinjiazhuang Coal Mine only resumed production in August 2019, resulting in lower output and temporarily higher per-tonne production costs than usual[73] - Clean coking coal processing fees also decreased by 13% year-on-year, primarily due to effective cost control and a 30% year-on-year increase in clean coking coal production[74] - Adjusted EBITDA in 2019 was approximately HKD 2.221 billion, with positive cash flow from operating activities of approximately HKD 1.922 billion[66] - As of December 31, 2019, bank balances and cash were approximately HKD 4.762 billion, and free funds were approximately HKD 5.760 billion, maintaining a robust financial position[67][98] - As of December 31, 2019, the Group had no borrowings, and the gearing ratio was 0%[94][102] - RMB depreciation resulted in an exchange loss of approximately HKD 330 million from the translation of net assets of overseas operations, recognized in other comprehensive income[96] Employees As of December 31, 2019, the Group had 4,902 employees (20 in Hong Kong, 4,882 in mainland China), providing competitive remuneration, benefits, training, and development opportunities, while strictly adhering to labor laws to ensure equal opportunities and anti-discrimination - As of December 31, 2019, the Group employed 20 Hong Kong employees and 4,882 mainland Chinese employees[103] - Employee remuneration is reviewed annually, with mandatory and voluntary provident fund schemes for Hong Kong employees, and local government-managed defined contribution retirement schemes for mainland Chinese employees[103][106] - The Group has a share option scheme, but no share options were granted or exercised during the review period[103] Safety Production and Environmental Protection The Group highly prioritizes safety production and environmental protection, strictly adhering to relevant regulations, and is committed to building a safe and environmentally friendly enterprise through measures such as optimizing production processes, eliminating waste emissions, and protecting vegetation; in 2019, Jinjiazhuang Coal Mine's lower seam infrastructure and engineering passed inspection, resuming normal production in August, with all coal mines operating well - The Group has always highly valued production safety and environmental protection, striving to promote safety standard management and strengthen environmental protection measures, aiming to become a safety-oriented and environmentally conscious enterprise[104][107] - The Group strictly complies with relevant environmental laws and regulations, implementing energy saving, emission reduction, and environmental protection through strict control of production processes, elimination of wastewater and exhaust gas emissions, and protection of mine vegetation[104][107] - All of the Group's coal mines have obtained the necessary licenses and approvals from relevant Chinese regulatory authorities[107] - Jinjiazhuang Coal Mine's lower seam infrastructure and engineering were undergoing acceptance in H1 2019, and gradually resumed normal production in August 2019, with all Group coal mines operating well[105] Compliance with Laws and Regulations The Group and its subsidiaries strictly comply with relevant laws and regulations in Hong Kong and mainland China, with no non-compliance identified as of the report date - The Group's business is primarily conducted by its mainland subsidiaries, and as the Company is listed on the Main Board of the Stock Exchange, it must comply with relevant mainland Chinese and Hong Kong laws and regulations[110] - For the year ended December 31, 2019, and up to the date of this report, the Group has complied with relevant mainland Chinese and Hong Kong laws and regulations[110] Principal Risks and Uncertainties The Group primarily faces financial risks (market, credit, liquidity), market price risks, and operational risks; coking coal prices fluctuate with downstream steel demand and supply, while operational risks include coal reserve estimation, mining right renewals, and potential increases in future mining costs - The Group faces various principal risks, including financial risks (market risk, credit risk, and liquidity risk), market price risk, and operational risk[111] - Coking coal market prices are based on demand from the downstream steel industry and coking coal supply; if coal prices are under pressure, the Group's performance will be directly affected[112] - Operational risks include assessing remaining coal reserves, renewing mining rights, and mining operations; mine life is based on reserve estimates and the likelihood of mining right renewals, while future mining difficulties and environmental requirements may increase, leading to higher mining costs[114] Relationships with Key Stakeholders The Group's success relies on close communication and cooperation with key stakeholders, including employees, customers, suppliers, and shareholders; the Group is committed to protecting employee rights, providing quality products and services, optimizing procurement processes, and maximizing shareholder value - The Group's success depends on the support of key stakeholders, including employees, customers, suppliers, and shareholders[115] - Major customers are steel manufacturers; for the year ended December 31, 2019, the top five customers accounted for 74% of the Group's total turnover, with the largest customer, Shougang Group, accounting for 31%[116][117] - Key suppliers are material suppliers and contractors; the Group achieves cost-effectiveness through bidding, negotiation, improving procurement systems, and developing new suppliers[118][119] - Maximizing shareholder value is one of the Group's corporate objectives; the Group will continue to strengthen production management, cost control, and strive to increase production capacity, resources, and reserves through acquisitions to enhance profitability[120][122] Future Prospects Looking ahead to 2020, despite global economic uncertainties from COVID-19, China's proactive fiscal policies and infrastructure investment will support steel and coking coal demand; the Group's Jinjiazhuang Coal Mine has resumed production, with overall raw coking coal output expected to increase; the Group will continue to enhance safety, introduce advanced technology, improve environmental standards, and seek investment opportunities to create greater value - In 2019, China's GDP growth was 6.1%, and real estate development investment increased by 9.9%, but a significant surge in coking coal imports led to a noticeable price decline in the second half of the year[121][123] - Looking ahead to 2020, the COVID-19 outbreak and global spread increased uncertainty, but the Chinese government will accelerate investment and adopt more proactive fiscal measures to boost economic growth, which will benefit demand for steel and coking coal products[125][126] - Coking coal product prices are expected to remain stable, but factors such as the pandemic, progress in US-China trade negotiations, and the US election still bring uncertainty and significant pressure[127][128] - Jinjiazhuang Coal Mine officially commenced production in August 2019, and all three of the Group's coking coal mines passed inspection and resumed production in mid-February 2020, with overall raw coking coal output expected to further increase this year[129][130] - The Group will continue to strengthen production safety, introduce advanced technology, improve environmental standards, and leverage its robust financial position and cash flow advantages to timely adjust operating strategies and identify potential investment opportunities[130][131] Environmental, Social and Governance Report Scope of the Report This report aims to comprehensively present the Group's environmental, social, and governance (ESG) efforts to shareholders, investors, and the public, covering the period from January 1 to December 31, 2019, primarily focusing on the operations of coking coal mines and washing plants in Liulin County, Shanxi Province - The report covers the Group's coking coal mining, production, and sales operations of its main subsidiaries in Liulin County, Shanxi Province[136] - The reporting period is from January 1, 2019, to December 31, 2019[136] - The report is prepared in accordance with Appendix 27 "Environmental, Social and Governance Reporting Guide" of the Listing Rules[137] Management Objective and Actions The Group believes an effective ESG system contributes to sustainable development, integrating sustainability goals into daily operations through measures like enhancing resource efficiency, reducing pollution, and strengthening safety production, while actively participating in public welfare activities to give back to society; the Group identified 15 material social responsibility issues through a four-stage approach - The Group firmly believes that maintaining an effective environmental, social, and governance system will help achieve its sustainable development goals and enable sharing of sustainable value with stakeholders across economic, environmental, and social domains[140] - The Group has integrated sustainable development goals into daily operational management, adopting enhanced resource utilization, reduced pollution emissions, resource conservation, and strengthened safety production as fundamental corporate operating principles[140] - While pursuing economic benefits, the Group actively participates in public welfare activities to give back to society, striving to drive regional economic development and build harmonious community relationships[141] - The Group identified 15 material social responsibility issues through a four-stage approach: identification and analysis, assessment and prioritization, verification and review, and rectification and retrospective[145][147] Stakeholders Engagement The Group maintains close communication and cooperation with key stakeholders, including investors, employees, government, customers, suppliers, and community organizations, through various channels, focusing on and actively responding to issues such as operational status, risks, corporate governance, remuneration, occupational health and safety, legal compliance, product quality, procurement procedures, environmental protection, and community contributions - The Group's success relies on close communication and collaboration with various stakeholders[151] - Key stakeholders include investors, employees, government, customers, suppliers, and community organizations, with their respective communication channels and areas of concern outlined[152][154][155][156][157] - In 2019, the Group's raw coking coal and clean coking coal production were 4.41 million tonnes and 2.75 million tonnes, respectively, with sales revenue of approximately HKD 3,869 million[159] - In 2019, the Group distributed approximately HKD 901 million in dividends to shareholders, incurred approximately HKD 712 million in employee costs, and paid approximately HKD 440 million in income tax to the government[160] Product Liability The Group is committed to maintaining continuous supply, stable quality, and customer privacy for its coking coal products; by establishing a safety and quality standardization system, a quality technology center, and a sales confidentiality system, it ensures product safety, controllable quality, and customer information protection; no product recalls or major customer complaints occurred during the reporting period - The Group is committed to continuous supply, stable quality, and customer privacy[163] - Through the construction of coal mine safety and quality standardization, high-quality coking coal mines in continuous production have obtained Level 1 or Level 2 safety and quality standardization certifications[163][165] - The Group established a Quality Technology Center to strengthen coal quality and blending management, and formulated a "Sales Confidentiality System" to regulate business personnel from lending out sales-related information[165][166] - During the reporting period, the Group had no product recalls due to safety and health reasons, nor did it receive any major complaints regarding products and services[166] Supply Chain Management The Group ensures the rationality, transparency, and quality of product and service selection, while striving to reduce costs, by formulating a "Procurement Management System" and utilizing tender processes - The Group's basic criteria for selecting qualified suppliers include reasonable procurement prices, stable and timely supply, high-quality products and services, and a strong sense of social responsibility[167] - The Group primarily conducts procurement activities through bidding and tendering, with the entire process supervised by the Bidding and Tendering Committee to ensure transparency and enhance fairness, openness, and impartiality[167][169] Anti-Corruption The Group highly values employee professional conduct and ethical integrity, promoting anti-corruption through the "Employee Handbook" and "Measures for Preventing Occupational Crimes," strengthening power supervision, and requiring managers at or above department level to sign a "Pledge of Integrity in Performance of Duties" - The Group promotes anti-corruption education, strengthens power supervision and checks, and builds a corruption prevention system through its "Employee Handbook" and "Measures for Preventing Occupational Crimes"[171] - During the reporting period, all managers at or above department level within the Group signed the "Pledge of Integrity in Performance of Duties for Leading Cadres"[171] Health and Safety The Group prioritizes safety production, enhancing standardization through establishing safety production entities, standardizing management systems, strengthening safety training, and conducting special rectifications; it strictly enforces the "Work Safety Law" and "Coal Mine Safety Regulations," and has established occupational disease prevention and control agencies; no work-related fatalities occurred during the reporting period - The Group places safety production as its top priority, establishing and operating safety production entities, standardizing its safety management system, and improving its management, technical management, and assessment and evaluation systems[172] - The Group strengthens special rectifications in safety supervision, gas, water prevention and control, electromechanical transportation, and roof management, enhancing comprehensive safety training and skill competitions for all employees, making safety management more standardized and systematic[172] - The Group strictly adheres to the "Work Safety Law of the People's Republic of China" and "Coal Mine Safety Regulations" regarding occupational disease prevention and control, establishing dedicated agencies responsible for managing occupational disease prevention and control in coal mines[173][176] - During the reporting period, the National Coal Mine Safety Administration rated the Group's continuously producing high-quality coking coal mines as Level 1 or Level 2 safety and quality standardization certified[178] - During the reporting period, the Group had no work-related fatalities[178] Environmental Responsibility The Group adopts environmental protection as a key operating principle, formulating an "Environmental Management System" and strictly complying with national environmental laws and regulations; through measures such as optimizing mining efficiency, gas utilization, boiler upgrades, wastewater treatment, and solid waste prevention, it continuously reduces air pollutants and carbon emissions, and improves water and coal resource utilization - The Group formulated an "Environmental Management System", clarifying responsibilities of various levels of organizations and personnel regarding coal resources, pollutants, and resource use, and referenced multiple national environmental laws and regulations[179] - The Group's pollutant discharge outlets have been equipped with online monitoring equipment as per national environmental protection authorities, enabling real-time supervision of environmental protection policy implementation[179] - During the reporting period, the Group had no significant violations of national environmental protection laws and regulations[180] - The Group strives to improve resource recovery and utilization rates by optimizing labor organization and coal blending, and has introduced a centralized control unmanned conveyor belt system in all production mines[183] - The Group has fully implemented flue gas desulfurization, dust prevention, and boiler technological upgrades to reduce atmospheric pollutant emissions, and is constructing a gas oxidation heating device project at Xingwu Coal Mine to achieve "green mining" and "zero" gas emissions[184][188][191] Environmental Responsibility Performance (2019 vs 2018) | Metric | Unit | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total Sulfur Dioxide Emissions | Kilograms | 2,257 | 27,291 | | Total Soot Emissions | Kilograms | 12,401 | 12,137 | | Total Gas Emissions | Ten thousand cubic meters | 3,482 | 3,787 | | Mine Water Discharge | Ten thousand tonnes | 176 | 164 | | Gangue Discharge | Ten thousand tonnes | 140 | 76 | | Coal Recovery Rate | % | 87% | 86% | | Comprehensive Energy Consumption for Raw Coking Coal Production | kg standard coal equivalent/tonne | 4 | 4 | | Electricity Consumption | Ten thousand kWh | 21,129 | 17,824 | | Fresh Water Consumption | Ten thousand tonnes | 54 | 60 | | Gas Utilization Rate | % | 53% | 55% | | Mine Water Utilization Rate | % | 40% | 35% | Employee Responsibility The Group upholds a people-oriented employee responsibility philosophy, strictly complies with mainland Chinese labor laws and regulations, provides competitive remuneration and benefits, and a comprehensive training and development system, while striving to create a fair, open, and trusting work environment, prohibiting discrimination and illegal employment - The Group highly values a people-oriented employee responsibility philosophy, resolutely safeguarding employees' legitimate rights and interests, caring for their physical and mental well-being, and actively cultivating talent[213][214] - The Group strictly complies with relevant mainland Chinese employment laws and regulations, including the "Labor Law of the People's Republic of China," "Labor Contract Law," and "Social Insurance Law"[214][215] - The Group implements an equal, fair, and open recruitment system, prohibiting any discrimination and illegal or irregular employment, with no instances of child labor or forced labor[224][227] - The Group comprehensively assesses employee remuneration based on job responsibilities, performance, skills, seniority, working environment, and human resource market indicators, and provides various incentive reward systems[217][218] - Employees enjoy benefits such as pension insurance, medical insurance, unemployment insurance, work injury insurance, maternity insurance, housing provident fund (collectively known as "five insurances and one fund"), and paid leave[219] - As of December 31, 2019, the Group had 4,882 mainland Chinese employees, comprising 4,222 males and 660 females (females do not engage in underground coal mining work)[225][228][232] - The Group has established a three-tier training system, organized 2,170 person-times of safety training in 2019, and increased education and professional title subsidies, enhancing employees' learning enthusiasm and initiative[233][234] Social Responsibilities of the Group The Group actively maintains harmonious community relations, conducts environmental impact assessments before project initiation, and implements measures to mitigate impacts on communities and residents; through ongoing subsidence area relocation projects, it builds new homes for residents, improves living quality, and continuously provides employment opportunities - When conducting business, the Group commissions independent third parties to conduct environmental impact assessments and takes all feasible measures to minimize the impact of its operations on nearby communities and local residents[235][236] - The Group continuously implements a mining subsidence area relocation project, building new homes for community residents, improving their quality of life, and continuously providing employment opportunities in the region[236] Directors' Biographies Executive Directors Introduces the educational background, professional qualifications, past and current positions, and extensive experience of the company's executive directors within the company and relevant industries - Mr. Ding Rucai (55), Professor-level Senior Engineer, holds a Ph.D. from the School of Metallurgical and Ecological Engineering, University of Science and Technology Beijing, with extensive experience in managing listed companies, mergers and acquisitions, production management of steel and coal enterprises, project engineering construction, iron ore and coking coal resource trading, and shipping management; currently serves as Chairman of the Board[237][238][239] - Mr. Fan Wenli (40), Senior Mining Engineer and Registered Safety Engineer, holds a Bachelor's degree from Wuhan University of Technology and a Master's degree from the University of Science and Technology Beijing, with extensive experience in both open-pit and underground mine management; appointed as Executive Director and Managing Director on November 1, 2019[239][240][241][242] - Mr. Su Guohao (66), Executive Director and Deputy Managing Director, has extensive experience in the coal market, iron ore and coking coal resource trading, sales and marketing of electronic chemical products, and property investment[242][243][244] - Mr. Chan Siu Keung (52), Executive Director and Deputy Managing Director, has extensive experience in coal mining enterprises, including safety production management, procurement and logistics management, mining resource development, and coal trading[243][244] - Mr. Liu Qingshan (61), Executive Director and Deputy Managing Director, has extensive experience in accounting and finance within China's mining industry[245] Non-executive Directors Introduces the educational background, professional qualifications, past and current positions, and extensive experience of the company's non-executive directors in relevant industries - Ms. Chang Cun (41), Chinese Certified Public Accountant and Certified Internal Auditor, holds a Bachelor of Economics from Beijing Business School and a Master of Management from Beijing Technology and Business University, with extensive experience in accounting, auditing, finance, and insurance industries[246][247] - Mr. Shi Yubao (65), Senior Economist and Senior Political Engineer, graduated from Chongqing University with an MBA, possessing extensive experience in corporate management, strategic decision-making, and economics; appointed as Non-executive Director on September 1, 2019[248][249][250] Independent Non-executive Directors Introduces the educational background, professional qualifications, past and current positions, and extensive experience of the company's independent non-executive directors in legal, financial, banking, and academic fields - Mr. Kee Wah Sze (72), Hong Kong International Notary Public and China Appointed Attesting Officer, holds a Master of Laws in Chinese and Comparative Law from City University of Hong Kong and a Master of Laws from Renmin University of China, with many years of practice in Hong Kong, specializing in commercial and property conveyance legal business[250][251] - Mr. Choi Wai Yin (61), holds a Master of Finance from City University of Hong Kong, a Bachelor of Business Administration from The Chinese University of Hong Kong, and a Bachelor of Laws from Peking University, with extensive experience in finance and fund management[252] - Mr. Chan Pak Lam (71), has extensive experience in international banking in Hong Kong, Macau, and the United States[253][254] - Mr. Lo Man Yue (68), obtained a Ph.D. in Mechanical/Industrial Engineering from the University of Texas at Austin in 1976, formerly a professor at The Chinese University of Hong Kong, and a consultant to various institutions in Hong Kong and overseas[255][256][257] Corporate Governance Report Compliance with Corporate Governance Code The company complied with the Corporate Governance Code in FY2019, except that non-executive directors do not have a specific term of office but are subject to retirement by rotation at least once every three years under the company's articles of association, which the Board deems sufficient to achieve the Code's objectives - The Company complied with the code provisions of the Corporate Governance Code for the financial year ended December 31, 2019, except for a deviation from code provision A.4.1 regarding the specified term of office for non-executive directors[259] - All Directors (including non-executive and independent non-executive Directors) are subject to retirement by rotation and re-election by shareholders at the annual general meeting, at least once every three years, in accordance with the articles of association[259][261] Model Code for Securities Transactions The company adopted the Model Code for Securities Transactions by Directors of Listed Issuers under the Listing Rules as its code of conduct, which all directors complied with in 2019, and prohibits employees who may possess inside information from trading company shares during blackout periods - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers under the Listing Rules for Directors' securities transactions[262] - All Directors complied with the standards set out in the Model Code and the Company's code of conduct for Directors' securities transactions for the year ended December 31, 2019[262] - Any employee who may possess inside information regarding the Company or its shares is prohibited from trading company shares during blackout periods[262] Board of Directors The Board of Directors, comprising 11 members, exhibits significant diversity and is responsible for overall strategy formulation and performance monitoring; the Board holds regular meetings, ensures adequate information, and has procedures for directors to seek independent professional advice; Board members are subject to periodic retirement by rotation and re-election, with the number of independent non-executive directors meeting Listing Rules requirements and actively participating in corporate governance - The Board currently comprises 11 Directors, consisting of 5 executive Directors, 2 non-executive Directors, and 4 independent non-executive Directors[265] - The Company has adopted a Board Diversity Policy, considering factors such as gender, age, cultural and educational background, professional experience, skills, knowledge, and length of service[272] - The Company has adopted a Director Nomination Policy, outlining criteria and procedures for nominating and appointing Directors to ensure the Board possesses the necessary skills, experience, and diverse perspectives relevant to the Company's business[273][275] - The Board holds at least 4 meetings annually and endeavors to circulate agendas and relevant meeting materials to all Directors at least 3 days before the scheduled Board meeting date[279][282] - The Board has established procedures for Directors to seek independent professional advice when appropriate, with the costs borne by the Company[283] 2019 Board Meeting Attendance Record | Director | Board Meeting Attendance/Eligible Attendance | | :--- | :--- | | Ding Rucai (Chairman) | 6/6 | | Fan Wenli | 1/1 | | Su Guohao | 6/6 | | Chan Siu Keung | 5/6 | | Liu Qingshan | 6/6 | | Chang Cun | 6/6 | | Shi Yubao | 2/2 | | Kee Wah Sze | 6/6 | | Choi Wai Yin | 6/6 | | Chan Pak Lam | 6/6 | | Lo Man Yue | 6/6 | - Each Director must retire by rotation at least once every three years and is eligible for re-election at the general meeting[299] - The Company has appointed 4 independent non-executive Directors, comprising over one-third of the Board, with at least one possessing expertise in accounting or related financial management, all considered independent by the Company[301][304] - All Directors have provided the Company with records of their training received during FY2019, covering areas such as legal, financial, management, and Group business[311][312] Chairman and Managing Director The roles of Chairman and Managing Director are separated and held by different individuals to enhance independence and accountability; the Chairman leads the Board, ensuring good corporate governance and effective communication, while the Managing Director is responsible for the Group's business development and daily management - The roles of Chairman and Managing Director are separated and held by different individuals to enhance their independence and accountability[314] - Chairman Mr. Ding Rucai is responsible for leading the Board, ensuring good corporate governance, adequate information, encouraging discussion, and effective communication[314][315] - Mr. Fan Wenli, the Company's Managing Director (succeeding Mr. Li Shaofeng on November 1, 2019), assumes the overall duties of Chief Executive Officer, responsible for the Group's overall business development and daily management[314] - During the year, the Chairman held meetings with independent non-executive Directors without the presence of other Directors[316] Board Committees The Board has established an Executive Committee, Audit Committee, Nomination Committee, and Remuneration Committee, each with clear written terms of reference, to assist the Board in fulfilling its responsibilities and report resolutions to the Board - The Board has established an Executive Committee, Audit Committee, Nomination Committee, and Remuneration Committee to oversee specific areas of the Company's affairs and assist the Board in performing its duties[319] - The Executive Committee comprises all executive Directors, with the Chairman serving as its chairman, responsible for managing and supervising the Group's operations and fulfilling corporate governance responsibilities[320][322][323][325] - The Audit Committee is chaired by an independent non-executive Director and comprises all independent non-executive Directors, responsible for overseeing the relationship with the company's auditor, reviewing financial reports, and examining risk management and internal control systems[327][331] - The Nomination Committee is chaired by the Chairman, with independent non-executive Directors forming the majority; its main responsibilities include reviewing the Board structure, identifying suitable candidates for directorships, making recommendations on Director appointments or re-appointments, and assessing the independence of independent non-executive Directors[335][339] - The Remuneration Committee is chaired by an independent non-executive Director, with independent non-executive Directors forming the majority; its main responsibilities include recommending the Company's overall remuneration policy and structure for the Group's Directors and senior management, and determining the remuneration packages for individual executive Directors and senior management[343][348] Company Secretary The Company Secretary ensures smooth internal information flow within the Board, adherence to policies and procedures, and advises the Board on corporate governance and the implementation of the Corporate Governance Code; the Company Secretary reports to the Chairman and Managing Director and must undergo at least 15 hours of professional training - The Company Secretary supports the Board, ensuring good information flow among Board members and adherence to Board policies and procedures[351] - The Company Secretary reports to the Chairman and the Company's Managing Director, and all Directors have access to the Company Secretary's advice and services[352] - The Company Secretary confirmed having received at least 15 hours of relevant professional training during the year[352] Risk Management and Internal Control The Group established internal control and risk management systems referencing the COSO framework, with the Board responsible for assessing and defining risk appetite, and implementing risk governance through a "three lines of defense" model; the internal audit department independently assesses system effectiveness, and management continuously monitors risk management procedures - The Group established and implemented an internal control system suitable for its operations, referencing the COSO Integrated Internal Control Framework, covering a series of internal control elements including control environment, risk assessment, control activities, information and communication, and monitoring activities[354][355][356] - The Board is responsible for the internal control system and for reviewing its suitability and effectiveness; the Audit Committee is authorized to assist the Board in conducting such reviews[357] - The Group has an Internal Audit Department that reports directly to the Audit Committee, independently reviewing all of the Group's operations, risk management, and internal control systems[362] - The Group's risk management system is based on the "three lines of defense" model, with continuous Board oversight, and the Audit Committee's review findings reported to the Board on the effectiveness of the risk management system[368][369] - The Group established and implemented risk management policies and procedures suitable for its operations, referencing the COSO Enterprise Risk Management Framework, and developed both top-down and bottom-up risk management procedures[370][372][373][375][376] Inside Information Disclosure Policy The company adopted an Inside Information Disclosure Policy on December 21, 2015, aiming to prevent uneven, inadvertent, or selective disclosure of inside information and ensure shareholders and the public receive comprehensive, accurate, and timely information; the policy covers procedures for identifying, assessing, and reporting inside information, as well as confidentiality responsibilities for relevant personnel - The Company adopted an Inside Information Disclosure Policy on December 21, 2015, aiming to prevent uneven, inadvertent, or selective disclosure of inside information and ensure shareholders and the public receive comprehensive, accurate, and timely information or data regarding the Group's business and financial condition[378] - The policy covers procedures for identifying, assessing, and submitting potential inside information to the Board, as well as the responsibility of senior officers to maintain confidentiality of inside information[378] - The Company has communicated the implementation of the Inside Information Disclosure Policy to all relevant employees[379] Auditor's Remuneration In 2019, the company paid a total remuneration of HKD 2,014,000 to its auditor, PricewaterhouseCoopers, for statutory audit services and non-statutory audit services 2019 Auditor's Remuneration | Service Type | Amount (Thousand HKD) | | :--- | :--- | | Statutory Audit Services | 1,600 | | Non-statutory Audit Services (Review of interim financial report) | 350 | | Other Services | 64 | | Total | 2,014 | Directors' Responsibility for the Financial Statements The Board acknowledges its responsibility to prepare true and fair financial statements in accordance with Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance, and to provide a balanced