The statutory tax rate for Hong Kong profits tax is 16.5% (2007: 17.5%) on the estimated assessable profits arising in Hong Kong during the year. The lower Hong Kong profit tax rate is effective from the year of assessment 2008/2009, and so is applicable to the assessable profits arising in Hong Kong for the whole year ended December 31, 2008. No provision for Hong Kong profits tax has been made as the group had no assessable profits arising in Hong Kong for the year (2007: Nil).

Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the group operates, based on existing legislation, interpretations and practices in respect thereof.

Provision for Australian income tax has been made at the statutory rate of 30% (2007: 30%) on the estimated assessable profits arising in Australia during the year.

For the year ended December 31, 2008, the corporate tax rates applicable to the subsidiaries and jointly-controlled entities established and operating in the People’s Republic of China (the PRC), Indonesia and Kazakhstan are 25% (2007: 33%), 30% (2007: 30%) and 30% (2007: 30%), respectively.

Certain PRC subsidiaries of the group are subject to a full corporate income tax exemption for the two years and a 50% reduction in the succeeding three years, commencing from the first profitable year.

Under the new PRC Corporate Income Tax Law and its Implementation Rules (effective from January 1, 2008), the PRC corporate income tax rates for domestic and foreign-invested enterprises (including Sino-foreign equity joint ventures) are unified at 25%. Sino-foreign equity joint ventures which were established before the new PRC Corporate Income Tax Law was promulgated and have been entitled to the above income tax holiday can continue to enjoy the existing tax holiday until its expiry, subject to a five-year period restriction. Consequently, certain PRC subsidiaries of the group can continue to enjoy their tax holiday, commencing from their respective first profitable year and expiring within five years from January 1, 2008.

The group’s subsidiary owning a participating interest in oil and gas properties in Indonesia is subject to branch tax at the effective rate of 14% (2007: 14%).

Business Review:

The oil business would have been the group’s largest net profit contributor in 2008 but for the asset impairment loss in respect of certain oil investments of the group . The group has been able to account for a full year’s contribution from the Karazhanbas oilfield for the first time in 2008.

The group’s focus is on improving effective production from its oil assets, particularly the Karazhanbas oilfield which wields influence on the group’s benefits. The deployment of cyclic steam stimulation and steam flooding in place of cold heavy oil production with sand continues with the aim of extending well life and stabilizing production volume at a higher level. We believe that the current decline in the oil prices does not represent the market trend in the long term. We expect operations at the Karazhanbas oilfield will contribute more to the group’s performance when oil prices recover.

During the year, proved reserves at the Seram Island Non-Bula Block, Indonesia increased by 4.6 million barrels following the group’s successful discovery of the area of Nief Utara A and the re-entry in the area of East Nief.

The group continues to work with China National Petroleum Corporation in respect of the Yuedong oilfield at the Hainan-Yuedong Block to make steady progress and endeavors to move to the production stage as soon as feasible.

The group’s Australian assets comprising aluminium smelting, coal and import and export of commodities businesses all contributed significantly to the group’s results.

In January 2009, the group successfully delisted its Australian listed unit, CITIC Resources Australia Trading Limited (CATL). After being delisted, CATL is able to operate more effectively and competitively with greater management flexibility to conduct its business more efficiently.

Our manganese business continued to perform robustly and the group has expanded the production of manganese products and high carbon ferrochromium in the year. The group has acquired an interest in certain pre-operating exploration and mining rights in Gabon, Western Africa following the purchase of a 51% indirect interest in Compagnie Industrielle et Commerciale des Mines de Huazhou (Gabon) (Huazhou (Gabon)). In order to further develop the manganese business, the group is continuing to work on a proposal in respect of its spin-off and separate listing on The Stock Exchange of Hong Kong Limited (the Stock Exchange). The listing proposal remains subject to the approval of the Listing Committee of the Stock Exchange and shareholders of the company before it can proceed. In 2008, the company improved the financial well being and gearing ratio of the group by rising about HKD2.5 billion through a rights issue on the basis of three rights shares for every twenty existing shares.

Liquidity, Financial Resources And Capital Structure:


As at December 31, 2008, the group had a cash balance of HKD4,770.7 million. During the year, the company obtained funds of:

— HKD177.4 million through the disposal of common shares in the share capital of Ivanhoe Energy Inc.

— HKD2,523.8 million before expenses through a rights issue (the Rights Issue) of shares of HKD0.05 each in the share capital of the company


As at December 31, 2008, the group had outstanding borrowings of HKD13,836 million, which comprised:

— secured bank loans of HKD1,407.7 million;

— unsecured bank loans of HKD3,951 million;

— unsecured other loans of HKD532.2 million; and

— bond obligations of HKD7,945.1 million.

The secured bank loans were secured by the group’s 22.5% participating interest in the Portland Aluminium Smelter joint venture; property, plant and equipment, and prepaid land lease premiums of CITIC Resources Dameng Mining Industries Limited (CITIC Resources Dameng JV); and a guarantee provided by Guangxi Dameng Manganese Industry Co., Ltd.. The bank trade finance facilities available to CATL are guaranteed by CITIC Resources Australia Pty Limited (CRA).

Most transactions of CATL are debt funded which means CATL is highly geared. However, in contrast to term loans, CATL’s borrowings are self liquidating, transaction specific and of short durations, matching the term of the underlying trade. When sale proceeds are received at the completion of a transaction, the related borrowings are repaid accordingly.

In January 2008, the Company, as borrower, entered into a facility agreement with a syndicate of financial institutions as lenders in respect of an unsecured 5-year term loan facility of $280 million (HKD2,184 million) (the Loan). A sum of $150 million (HKD1,170 million) was borrowed under the Loan to refinance in full the then existing term loan of $150 million pursuant to a facility agreement dated 30 September 2005. The remaining sum of $130 million (HKD1,014 million) under the Loan will be used by the company for its general corporate funding requirements.

The bond obligations comprise the issue of $1,000,000,000 6.75% senior notes due 2014 (the Notes) by CITIC Resources Finance (2007) Limited (CR Finance), a direct wholly-owned subsidiary of the Company, in May 2007. The obligations of CR Finance under the Notes are irrevocably and unconditionally guaranteed by the company. The net proceeds of the Notes were used by the group to facilitate the acquisition of its interests in JSC Karazhanbasmunai, Argymak TransService LLP and Tulpar Munai Service LLP and for general working capital requirements.