Explanation on the Public Issuance of A Shares of the Company
2019/01/07 5253

On 2 January 2019, the Company issued multiple announcements including the Plan for the Public Issuance of A Shares. As there are not many cases of refinancing by public issuance for the recent years, there may be certain misunderstandings in or doubts for the Plan for the Public Issuance in the market. The Company hereby gives an explanation on several concerns of the market as follows:

I. The requirements for public issuance

The requirements for public issuance are more stringent compared with those of non-public issuance, which is more common in the capital market. For the financial perspective, the requirements on the issuer mainly include a continuous profit for the most recent three consecutive financial years, and the weighted average net returns on assets for the most recent three financial years exceeding 6%.

II. The determination of issuance price of the Public Issuance

The final issuance price of the Issuance will be determined based on the prevailing supervisory policies and market situation at the Issuance, and negotiations between the board of directors of the Company (the “Board”) or its authorised persons under the authorisation of the shareholders’ general meetings of the Company and the sponsor (the lead underwriter) after obtaining the approvals of the China Securities Regulatory Commission (the “CSRC”). Therefore, the range of the issuance price of the Public Issuance cannot be determined currently.

Pursuant to the prevailing regulations, the issuance price under public issuance shall be no less than the lower of the average trading price of the A shares for the 20 trading days or the average trading price of the A shares on the trading day preceding the date of publication of the offering documents. There is no discount for the issuance price compared with the market price.

III. Number of A Shares to be issued in the Public Issuance

As the number of A Shares to be issued = the amount of proceeds raised ÷ issuance price, the actual number of A Shares to be issued in the Public Issuance cannot be determined currently.

In this refinancing of the Company, the proposed amount of the proceeds raised is RMB8 billion. During the formulation of the Plan for the Public Issuance of A Shares, the Company made reference to the relevant regulation of non-public issuance issued by the CSRC, “the number of shares to be issued shall not exceed 20% of the total share capital before the issuance”. The Company followed the common practice of the market and took into account the actual situation that the current amount of share capital of the Company being comparatively large. The maximum number of A Shares to be issued under the Public Issuance was set as 15% of the number of total issued shares of the Company, i.e. not exceeding 3,400,000,000. 15% (3,400,000,000 shares) is only a broad maximum number, which shall not represent an indication of the actual issuance price and number of A Shares to be issued by the Company in the Public Issuance.

IV. The scale of the Public Issuance

The Company’s two initial public offerings (A Shares and H Shares) and one refinancing of A Shares raised RMB16.025 billion in total, while the Company made profit distribution of RMB20.337 billion to its shareholders accumulatively since it was listed. The Company pays full attention to the long-term returns of its shareholders. The proposed amount of proceeds to be raised this time (RMB8 billion) matches the scale, market capitalisation and capital demand of the Company.

V. The project to be invested by proceeds raised from the Public Issuance

The target company to be acquired in the Issuance is Nevsun Resources Ltd. (“Nevsun”), which is a company specialised in exploring and mining of copper, zinc, gold and other mineral resources. Nevsun owns two core assets including the Timok copper-gold mine and the Bisha copper-zinc mine. The Timok copper-gold mine is yet to be developed, while the Bisha copper-zinc mine is currently in production (with production of 95,000 tonnes of zinc metal in 2017). Upon completion of the acquisition, the copper resources reserve of the Company will increase by 8.253 million tonnes (on equity basis), representing 26.22% of the Company’s current copper resources reserve; the gold resources reserve of the Company will increase by 241.80 tonnes (on equity basis), representing 18.32% of the Company’s current gold resources reserve; the zinc resources reserve of the Company will increase by 1.877 million tonnes (on equity basis), representing 23.97% of the Company’s current zinc resources reserve. Super high-grade orebody is located in the upper part of the Upper Zone of Timok, the distribution of which is relatively concentrated. Measured by an 8% cutoff grade, the volume of super high-grade copper metal is 360,000 tonnes grading 12.3% in average; and the volume of gold associated with other metals is 25 tonnes grading 8.67g/t in average. After completion of the acquisition, the Company will firstly commence the development of the super high-grade orebody.

After acquiring Nevsun, the Company will fully utilise its technological competence and experience in operation and management, to adjust and optimise the project development plan and elevate the profit contribution of the project. The feasibility report, audit report and valuation report of the Timok copper-gold mine and the Bisha copper-zinc mine under Chinese standards are still in preparation. After the completion of relevant work, the Company will convene Board meeting again to consider the relevant proposals and make disclosures accordingly.