China Mining Resources: Major Asset Purchase Plan

Independent Financial Advisor: China Securities Co., Ltd.

January 2019
company statement
1. The company and all directors, supervisors and senior management personnel guarantee the truthfulness, accuracy and completeness of this plan and its summary, guarantee that there are no false records, misleading statements or major omissions, and assume individual and joint legal responsibilities.
2. The valuation work related to this major asset restructuring has not been completed, and all directors of the company guarantee the authenticity and rationality of the relevant data cited in this plan. The audited financial data, appraisal or valuation results of the relevant assets, and audited profit forecast data (if involved) will be disclosed in the material asset purchase report.
3. Any decision or opinion made by the approval authority on this exchange does not indicate its substantial judgment or guarantee on the value of the company's shares or investor returns. Any statement to the contrary is a false misrepresentation. The entry into force and completion of the matters related to the major asset purchase as described in this plan are yet to be approved or approved by the relevant examination and approval authorities.
4. After the completion of this major asset purchase, the company shall be responsible for the changes in the company's operations and income; the investor shall be responsible for the investment risks caused by this major asset purchase.
5. If investors have any doubts about this plan, they should consult their own stockbrokers, lawyers, professional accountants or other professional advisers.
counterparty commitment
Since this transaction is for the acquisition of overseas target assets, the counterparty signed a letter of commitment in both Chinese and English. The Chinese part of the commitment is as follows:
1. The counterparty has the necessary authority to sign the agreement of this transaction and perform the relevant obligations under the agreement;
2. There is no affiliation between the counterparty and the listed company, and no directors, supervisors or senior managers have been recommended to the listed company; the directors, senior managers and core personnel of the counterparty do not hold positions in the listed company;
3. The counterparty to the transaction has not been subject to any administrative punishment or criminal punishment related to the Chinese securities market in the past five years, nor has it been involved in any major civil litigation or arbitration related to economic disputes in the Chinese securities market; there is no failure to repay large debts on time or to perform commitments As a result, the China Securities Regulatory Commission takes administrative regulatory measures or is subject to disciplinary action by the stock exchange
4. The counterparty to the transaction will provide the listed company with the relevant information of this transaction in a timely manner in accordance with the requirements of the China Securities Regulatory Commission and/or the Shenzhen Stock Exchange. The documents, materials and information provided are true, accurate and complete in all material aspects. , if the documents, materials and information provided contain fraud, misleading statements or major omissions, causing losses to listed companies or investors, they will be liable for compensation in accordance with the law. If the counterparty is suspected of false records, misleading statements or major omissions in the information provided or disclosed, the counterparty will be placed on file for investigation by the judicial authorities or by the China Securities Regulatory Commission, the counterparty will suspend the transfer of listings until the conclusion of the case investigation is clear. Shares in which the company has an interest, if any.
5. The counterparty will perform confidentiality obligations in strict accordance with the "Share Purchase Agreement" and the provisions of laws and regulations during the process of participating in the implementation of this major asset reorganization. The counterparty, the directors and senior managers of the counterparty and their immediate family members have There has been no buying and selling of listed company stocks within a month, and no case has been placed on file for investigation or a case has been placed on file for investigation for suspected insider trading related to this major asset restructuring. The counterparty to the transaction has not been subject to any administrative penalty by the China Securities Regulatory Commission in the past 36 months, nor has it been subject to any criminal penalty or involved in any major civil litigation or arbitration related to economic disputes in the Chinese securities market.
Important notice
The abbreviations used in this part have the same meaning as those defined in the "Interpretation" of this plan.
The company reminds investors to read the full text of this plan carefully, and pay special attention to the following matters:
1. The transaction plan
(1) counterparty
The counterparties of this transaction are Cabot and Cabot G.B. Cabot is a public corporation incorporated and existing under the laws of the State of Delaware, USA; Cabot G.B. is a private limited company and is a wholly owned subsidiary of Cabot.
(2) The subject matter of the transaction
The target of this transaction is 100% shares of Tanco, CSF Inc and CSF Limited
(3) The pricing principle and transaction price of the transaction
This transaction is a market-oriented acquisition. The listed company comprehensively considers various factors such as resource scarcity and business synergy. After multiple rounds of bidding, the benchmark purchase price and The adjustment method, this transaction is not based on asset evaluation or valuation results as the pricing basis.
The benchmark purchase price for this transaction is US$130 million, and the final purchase price is still subject to net working capital, cash, delivery date liabilities and transaction costs, payment for Pioneer cesium garnet ore inventory, cesium garnet ore as stated in the final delivery statement The increase in inventory payment, the decrease in cesium garnet ore inventory payment, the increase in cesium formate bulk payment and the decrease in cesium formate bulk payment are calculated (please refer to “Section VI Main Contents of the Transaction Contract” of this plan for details of the adjustment method. "2. Purchase price").
According to the provisions of the "Restructuring Management Measures", in order to verify the fairness and reasonableness of the price of this major asset purchase transaction, China Mining Resources hired China United Appraisal as a valuation agency, and took September 30, 2018 as the valuation base date to evaluate the transaction target. Carry out a valuation and issue a "Valuation Report" for the management of the listed company's reference. As of the signing date of this plan, the valuation work has not yet been completed.
(IV) Payment method and source of funds for the consideration for this transaction
The consideration for this transaction will be paid in US dollars in cash, and the source of funds will be the listed company's own funds and self-raised funds.
2. This transaction constitutes a major asset reorganization
According to Articles 12 and 14 of the Administrative Measures for Restructuring, this transaction constitutes a major asset restructuring. According to the 2017 audit report of China Mining Resources, the 2018 financial data provided by the target company and the transaction price, the relevant proportions of this transaction are calculated as follows:
Item Total assets Operating income Net assets
Underlying Assets September 30, 2018/FY2018 (in thousands of dollars) 252,286 45,582 210,813
Transaction value (thousands of US dollars) 130,000 - 130,000
Whichever is higher (thousands of dollars) 252,286 45,582 210,813
After exchange rate conversion (ten thousand yuan) 173,547.54 29,823.85 145,018.26
Listed company at the end of 2017/degree (ten thousand yuan) 100,794.28 54,073.82 68,697.49
Target assets (or transaction value)/listed company 172.18% 55.15% 211.10%
Major asset reorganization standards stipulated in the "Restructuring Management Measures" 50% 50% 50% and the amount is > 50 million yuan
Does it meet the standard of major asset restructuring? Yes Yes Yes
Note: Total assets and net assets are converted at the exchange rate of 6.8790 on September 30, 2018, and operating income is converted at the average exchange rate of 6.5429 from September 30, 2017 to September 30, 2018;
3. This transaction does not constitute a reorganization and listing, and does not constitute a connected transaction
This transaction does not involve the issuance of shares and will not affect the equity structure of the listed company. The actual controller has not changed before and after the transaction. Therefore, this transaction does not constitute a reorganization and listing.
The counterparty of this transaction has no associated relationship with the listed company and its controlling shareholder and actual controller, so this transaction does not constitute a connected transaction.
4. The main impact of this restructuring on listed companies
(1) Impact on the shareholding structure
This transaction is to pay cash to purchase assets, and does not involve changes in the equity structure of the listed company, nor does it affect the control of the listed company.
(2) Influence on the financial status and profitability of listed companies
After the completion of this transaction, the listed company's income and profit levels will increase significantly, and the scale of total assets will also increase. Since the audited financial data of the target company has not been obtained and the valuation work has not yet been finalized, it is not yet possible to accurately and quantitatively analyze the financial status and profitability of the listed company after the completion of this transaction. The company will convene the board of directors again after completing the relevant work, make resolutions on relevant matters, and analyze in detail the specific impact of the transaction on the company's financial status and profitability in the major asset purchase report.
(3) Impact on the business of listed companies
1. This transaction is conducive to making up for the shortage of raw material supply
Before the transaction, the raw materials of cesium rubidium salt of the listed company mainly came from Bikita Company of Zimbabwe. Since cesium garnet is currently only sold by Bikita Company of Zimbabwe, the mineral resources are relatively scarce, so there is a certain dependence on Bikita Company. Although the listed company has maintained a good cooperative relationship with Bikita for many years, since the cooperation, Bikita's cesium garnet can meet the company's production needs. However, if the macro situation in Zimbabwe undergoes major adverse changes, or new control policies are formulated for the export of domestic ore, Dongpeng New Materials will face the risk of insufficient supply of important raw materials, which will have a certain negative impact on production and operation.
At present, the global caesium garnet resources are mainly concentrated in two mining areas. Among them, the Bikita mining area provides raw materials to Albemarle and the company in the United States, and the other is located in the Bernick Lake mining area in Manitoba, Canada, which is controlled by the target company and used for its own use.
Through this transaction, the listed company will have its own cesium garnet mining area, effectively reducing the risk of raw material supply for the cesium rubidium salt business, and its cesium salt business model will be upgraded to a full-process industry of "mineral mining + product production + back-end sales" Chain, effectively improve the strategic layout of the industrial chain, and enhance the ability of sustainable development and anti-risk capabilities.
2. This transaction is conducive to consolidating the leading market position of cesium and rubidium salts
Before this transaction, due to the scarcity of caesium garnet resources and high technical barriers in the industry, the only companies that could achieve mass production of caesium and rubidium salts in the world were listed companies, target companies and Albemarle. According to the statistics of the Lithium Branch of China Nonferrous Metals Industry Association, the listed company has a market share of more than 75% in the domestic cesium-rubidium salt market segment, making it a leading domestic cesium-rubidium salt manufacturer.
The target company is currently the world's major producer of cesium formate. From the perspective of revenue, the target company's revenue is more than three times that of the listed company's subsidiary Dongpeng New Materials' cesium and rubidium salts. From the perspective of customer structure, the target company has high-quality customer resources. , and have long-term good cooperative relations with the world-renowned oil drilling companies Total, Shell, British BP, and chemical industry leaders BASF, DuPont, etc.
Through this transaction, the listed company will effectively expand its market share in the cesium-rubidium salt market, consolidate its industry-leading position in the cesium-rubidium salt market, and obtain high-quality customer resources from the target company, and its sustainable competitiveness will be significantly improved.
3. This transaction will help the company to expand the global market and help the realization of globalization strategic goals
As the first batch of commercial comprehensive geological exploration technology service companies in China's non-ferrous metal industry to "go global", after years of development, the company has gradually formed a strong company in terms of experience, management, technology, talents, customers, and mechanisms. Comprehensive competitive advantages, especially in the aspects of going out market experience, brand, medium and high-end customer resources, etc. have a strong first-mover advantage.
At present, in addition to domestic business, the overseas business of listed companies is mainly concentrated in Asia and Africa, while the target company has subsidiaries in the United States, Canada, the United Kingdom, Singapore and other places, and its business covers Europe, America, Asia, Africa, and a global scale. This acquisition will be an important supplement to the company's globalization strategy, helping the company to rapidly expand the global market and laying the foundation for the company's long-term layout.
V. Decision-making procedures and approval procedures for this transaction
(1) The approval for this transaction has been obtained
1. The internal decision-making procedures that the listed company has performed for this transaction
(1) On January 30, 2019, the 21st meeting of the fourth session of the board of directors of the listed company reviewed and approved the "China Mining Resources Group Co., Ltd. Major Asset Purchase Plan" and other related proposals.
(2) On January 30, 2019, China Mining Resources, China Mining Hong Kong signed the "Share Purchase Agreement" with the counterparty.
2. The internal decision-making process that the counterparty has performed for this transaction
On January 11, 2019, Cabot held a board meeting, which reviewed and approved Cabot's transfer of the target company to China Mining Resources or its affiliates.
(2) Approvals or approvals still to be obtained for this transaction
1. Approved by the general meeting of shareholders of the listed company;
2. Approval or filing by Beijing Municipal Development and Reform Commission;
3. Approval or filing by Beijing Municipal Commission of Commerce;
4. Foreign exchange registration procedures for foreign direct investment;
5. Approval or filing by the Canadian Investment Review Board.
This transaction shall not be implemented until the above decision and approval are obtained. Whether the above decisions and approvals can be successfully completed and the time of completion are uncertain, investors are advised to pay attention to investment risks.
6. Valuation of this transaction
As of the signing date of this plan, since the valuation of the underlying assets has not been completed, this plan cannot disclose the valuation of the underlying assets for the time being. The specific valuation results, relevant basis and rationality analysis will be disclosed in the major asset purchase report.
7. Arrangements for the protection of the rights and interests of small and medium investors in this transaction
(1) Ensuring fair and equitable pricing of the underlying assets of this transaction
For the assets purchased this time, the company has hired an asset appraisal agency to evaluate the underlying assets to ensure that the pricing of the assets to be acquired is fair, fair and reasonable. The independent directors of the company will express independent opinions on the fairness of the evaluation and pricing of this major asset purchase. The independent financial advisors and lawyers hired by the company will verify the compliance and risks of the implementation process of the transaction, asset transfer matters and related follow-up matters, and express clear opinions.
(2) Strictly fulfilling the information disclosure obligations of listed companies
In the course of this transaction, the company and the relevant information disclosure obligors will strictly comply with the relevant provisions of the Securities Law, the Measures for the Administration of Information Disclosure of Listed Companies, the Measures for the Administration of Restructuring, and the Information Disclosure Memorandum No. 13. Earnestly fulfill the obligation of information disclosure, and fairly disclose to all investors major events that may have a greater impact on the trading price of listed companies' stocks. After the disclosure of this plan, the company will continue to disclose the progress of the company's restructuring in a timely and accurate manner in accordance with the requirements of relevant laws, regulations and normative documents.
(3) Notice and announcement procedure of general meeting of shareholders and arrangement of online voting
The listed company will issue a notice of convening the general meeting of shareholders to review this major asset purchase plan in accordance with the provisions of the "Articles of Association", and remind all shareholders of the company to participate in this general meeting of shareholders.
According to the "Several Regulations on Strengthening the Protection of the Rights and Interests of Public Shareholders" and other relevant regulations of the China Securities Regulatory Commission, in order to provide convenience for shareholders participating in the general meeting, the company will hold this general meeting by a combination of on-site voting and online voting. The company provides an online voting platform to all shareholders through the Shenzhen Stock Exchange system and the Internet voting system, and shareholders can vote online.

The voting rights can be exercised through the above-mentioned system within the time limit.
The company will separately count and disclose the voting situation of the company's directors, supervisors, senior managers, shareholders other than shareholders who individually or in aggregate hold more than 5% of the shares of the listed company.
Significant Risk Warning
When evaluating the company's major asset restructuring, investors should pay special attention to the following risk factors in addition to the other contents of this plan and the relevant documents disclosed at the same time as this plan.
1. Risks related to this transaction
(1) Approval risk
As of the issue date of this plan, the decision-making and approval procedures still to be performed for this transaction include but are not limited to:
1. Approved by the general meeting of shareholders of the listed company;
2. Approval or filing by Beijing Municipal Development and Reform Commission;
3. Approval or filing by Beijing Municipal Commission of Commerce;
4. Foreign exchange registration procedures for foreign direct investment;
5. Approval or filing by the Canadian Investment Review Board.
This transaction shall not be implemented until the above decision and approval are obtained. Whether the above decisions and approvals can be successfully completed and the time of completion are uncertain, investors are advised to pay attention to investment risks.
(2) Risk of suspension, termination or cancellation of this restructuring
In this major asset purchase, there is a risk of suspension, termination or cancellation of the transaction due to an unforeseen crisis in the assets to be acquired; there may be a need to reconvene the board of directors of the listed company to review the transaction plan due to major adjustments to the transaction plan by both parties. risks of.
In addition, the underlying assets of this transaction are located overseas, and the main body of the acquirer is a wholly-owned subsidiary of a listed company. Therefore, this transaction must comply with the relevant policies and regulations of China and relevant overseas countries (regions), and there are certain legal risks. Therefore, there is a risk that the prerequisites contained in the Equity Purchase Agreement cannot be realized in this major asset purchase, which may result in the transaction not being implemented.
(3) Risk of limited due diligence
Because it is difficult for the company to obtain detailed financial information of the target company and conduct audits before the equity delivery. Therefore, there is a risk that the transaction will not be able to provide the financial statements and audit reports of the target company prepared in accordance with the Chinese Accounting Standards for Business Enterprises applicable to the company.
The information of the target company disclosed in this plan relies on the relevant information publicly disclosed by the target company. However, because the listed company cannot conduct detailed due diligence, the relevant information of the target company disclosed in this report has the risk of incomplete, true and accurate disclosure.
(4) Valuation risk of the target company
This transaction is a market-oriented acquisition. The listed company comprehensively considers various factors such as resource scarcity and business synergy. After multiple rounds of bidding, the benchmark purchase price and The adjustment method, this transaction is not based on asset evaluation or valuation results as the pricing basis.
The benchmark purchase price for this transaction is US$130 million, and the final purchase price is still subject to net working capital, cash, delivery date liabilities and transaction costs, payment for Pioneer cesium garnet ore inventory, cesium garnet ore as stated in the final delivery statement Inventory payment increase, cesium garnet ore inventory payment decrease, cesium formate bulk payment increase, and cesium formate bulk payment decrease are calculated.
The company hired China United Appraisal with securities and futures qualifications to evaluate the target company. This estimation is based on the premise of continuous operation, comprehensively considering various influencing factors, and using the income method and market comparison method to evaluate the valuation object. The purpose of the valuation is to provide the company's shareholders with a decision-making reference for this transaction.
Although the valuation agency performed its duty of diligence in the valuation process, there is still a discrepancy between the actual situation in the future and the valuation assumptions, and the future profit does not reach the predicted level at the time of valuation, resulting in the valuation of the target company being inconsistent with the actual situation. risk of non-compliance.
(5) Risk of fund raising
The benchmark purchase price for this transaction is US$130 million, and the final purchase price is still subject to net working capital, cash, delivery date liabilities and transaction costs, payment for Pioneer cesium garnet ore inventory, cesium garnet ore as stated in the final delivery statement Inventory payment increase, cesium garnet ore inventory payment decrease, cesium formate bulk payment increase, and cesium formate bulk payment decrease are calculated. The source of funds for this transaction is the listed company's own and self-raised funds. In view of the large amount involved in this transaction, if the relevant financial institutions are unable to provide the company with credit funds in a timely and sufficient amount, this transaction has the financing risk that the transaction payment cannot be made in time and in full, and related financing risks are derived. Indemnity risk and transaction termination risk. Investors are drawn to the risk.
(VI) Subsequent business integration and risk management of the transaction
After the completion of this transaction, with the injection of the target company, the listed company will further consolidate the company's leading position in the cesium salt business and extend its business to overseas sectors. At the same time, the company's operating scale and total business volume will increase accordingly, and higher requirements will be placed on personnel composition, business management system and enterprise operation. In order to exert the overall synergy effect, the company will further sort out the commonalities in operation and management with the target company, seek common ground while reserving differences, sort out and integrate from the aspects of corporate culture, financial management and internal control standards, and learn from each other to realize the company's strategic layout. Since this acquisition is an overseas asset, there will inevitably be some differences in management culture. There are certain risks in whether the integration after the completion of this transaction can be successfully implemented and whether the integration effect can reach the expectation. If the company cannot meet the needs of overseas business development in a timely manner Optimizing the existing organizational model and management system may adversely affect the operation and management of the target company.
(7) Risks of unfinished stock trading inquiries
The company has conducted self-inspection on the institutions and personnel related to this transaction in accordance with relevant regulations such as the Measures for the Administration of Restructuring and the Notice on Regulating the Information Disclosure of Listed Companies and the Behaviors of Related Parties (Zheng Jian Gong Zi [2007] No. 128). During this period, a self-examination was conducted on the trading of China Mineral Resources' stocks. As of the announcement date of this plan, the company has not obtained the certificate of share change inquiry from China Securities Depository and Clearing Corporation Limited Shenzhen Branch during the self-inspection period of this transaction. The listed company will obtain the above inquiry certificate as soon as possible and make an announcement in a timely manner.
2. Risks related to the underlying assets
(1) Exchange rate fluctuation risk
According to the past transaction practices of the target company, in daily business activities, most of the purchase and sales businesses are mainly settled in US dollars. Therefore, fluctuations in the exchange rate of foreign currencies such as the US dollar against the RMB will also have a certain impact on the earnings of the listed company. In addition, the transaction is settled in U.S. dollars. Changes in the exchange rate between the U.S. dollar and the RMB will bring certain foreign exchange risks to the above acquisition, or may increase the actual cost of the acquisition.
(2) Production, operation and management risks
Since its establishment, the target company has continuously improved its production process, rebuilt its equipment and expanded its production capacity. With the continuous increase in output, the market has put forward higher requirements for the target company's production equipment, production organization, raw material procurement, market development and after-sales service, inventory management and other production and operation links. Although the target company continuously improves the quality of equipment, summarizes production and operation management experience, and improves the production and operation level, there are still risks that the production equipment cannot achieve the expected use effect in the future, and the production and operation management capabilities do not match the production scale of the enterprise.
(3) Risk of personnel loss
The target company has strong R&D capabilities, the management team and R&D team have rich industry experience, the target company pays attention to corporate culture, and maintains the stability of the company's core team and outstanding talents by optimizing the salary system, but it still cannot completely eliminate the brain drain Risks arising from the business development of the target company. If the core team members of the target company are lost in the future, or if they cannot continue to attract outstanding talents from related industries to join, it may affect the target company's competitive advantage, industry status, profitability, etc.
(4) Safety production risks
The mining area of ​​the target company is an underground operation. Although the target company has adopted a series of safety protection measures and established a safety production system, due to the characteristics of production, there are still safety production risks such as film gangs, roof fall, kick drum and other accidents.
(5) Tax risk
The target company is required to pay tax obligations in different countries and regions in which it operates, and the future effective tax rate may be subject to changes in the taxable income structure in the jurisdiction, changes in tax rates and other tax laws, changes in deferred tax assets and deferred tax liabilities, and corporate capital. Impact of potential changes in structure. Tax authorities sometimes make significant changes to tax rules and their application that could result in the subject company being subject to increased corporate tax liability and adversely affect its financial condition, results of operations or cash flow.
3. Other risks
(1) Risk of stock price fluctuations
Stock market investment returns and investment risks coexist. Stock prices are affected by many factors and are often unpredictable. The profitability and development prospects of listed companies, market supply and demand, national macroeconomic policy regulation, speculative behavior in the stock market, investors' psychological expectations, and other uncontrollable factors can all be affected. It has an impact on listed companies and even makes their prices deviate from their value. This transaction requires the approval of the relevant departments and takes a certain period of time to complete. During this period, the stock price of the listed company may fluctuate, which will bring certain risks to investors.
In response to this situation, listed companies will, in accordance with the requirements of relevant laws and regulations, truthfully, accurately, timely, completely and fairly disclose material information that may affect the stock price of listed companies to investors, so as to help investors make investment decisions.
(2) Other uncontrollable risks
The transaction does not rule out the possibility of adverse effects due to political, economic, natural disasters and other uncontrollable factors.
After the disclosure of this plan, the company will continue to disclose the progress of the company's transaction in a timely and accurate manner in accordance with the requirements of relevant laws and regulations. Investors are advised to pay attention to investment risks.