China Metal Resources Utilization Limited — Capital/Financing Update 2018

Jun 15, 2018

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement is for information purposes only and does not constitute an invitation or a solicitation of an offer to acquire, purchase or subscribe for securities.

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CHINA METAL RESOURCES UTILIZATION LIMITED 中 國 金 屬 資 源 利 用 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1636)

SIGNING OF ANNUAL PROCUREMENT AGREEMENTS INVOLVING ISSUE OF CONSIDERATION SHARES UNDER GENERAL MANDATE

The Directors are pleased to announce that on 15 June 2018, the Company, each of the relevant Suppliers and each of the relevant Subscribers entered into an Annual Procurement Agreement, pursuant to which each of the Suppliers agreed to supply a targeted amount of copper scrap raw materials to the Group from 16 June 2018 to 15 June 2019, the purchase price of which shall be partly satisfied with cash and partly satisfied with Consideration Shares.

For each ton of copper scrap raw materials supplied by a Supplier, the Company will pay (i) up to RMB3,000 by way of issuance of a maximum number of 734 Consideration Shares at an Issue Price of HK$5 per Consideration Share; and (ii) the remainder of the balance in cash. The arrangements under the Annual Procurement Agreements are expected to encourage such Suppliers to achieve the targeted raw material supply amount and to strengthen the Group’s operating liquidity.

As the targeted amount of supply of copper scrap raw materials from the Suppliers is 160,000 tonnes in aggregate, the maximum number of Consideration Shares that the Company may issue pursuant to the Annual Procurement Agreements is 117,440,000 Shares. The Consideration Shares will be allotted and issued to the Subscribers in one lot on the Allotment Date. Each of the Subscribers is a wholly-owned company of the relevant Supplier.

The maximum total number of 117,440,000 Consideration Shares to be allotted and issued to the Subscribers represent (i) approximately 4.69% of the existing issued share capital of the Company of 2,502,284,341 Shares as at the date of this announcement; and (ii) approximately 4.48% of the Company’s issued share capital 2,619,724,341 Shares as enlarged by the issue and allotment of the Consideration Shares.

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The Issue Price of HK$5 was determined after arm’s length negotiations between the Company and the Subscribers with reference to the recent trading prices of the Shares. The Issue Price represents (i) a discount of approximately 0.2% to the closing price of HK$5.01 per Share as quoted on the Stock Exchange on 15 June 2018 being the date of the Annual Procurement Agreements; (ii) a premium of approximately 1.6% to the average closing price of HK$4.92 per Share as quoted on the Stock Exchange for five consecutive trading days immediately prior to the date of the Annual Procurement Agreements; and (iii) a premium of approximately 1.4% to the average closing price of HK$4.93 per Share as quoted on the Stock Exchange for 10 consecutive trading days immediately prior to the date of the Annual Procurement Agreements.

The Consideration Shares will be allotted and issued pursuant to the General Mandate granted to the Directors by a resolution of the Shareholders passed at the AGM. As the Consideration Shares will be issued under the General Mandate, the allotment and issue of the Consideration Shares is not subject to Shareholders’ approval.

Shareholders and potential investors should note that the issuance of the Consideration Shares is subject to the fulfilment of conditions under the Annual Procurement Agreements and may or may not proceed. Shareholders and potential investors are reminded to exercise caution when dealing in the shares of the Company.

The Directors are pleased to announce that on 15 June 2018, the Company, each of the relevant Suppliers, and each of the relevant Subscribers entered into an Annual Procurement Agreement, pursuant to which each of the Suppliers agreed to supply a targeted amount of copper scrap raw materials to the Group from 16 June 2018 to 15 June 2019 the purchase price of which shall be partly satisfied with cash and partly satisfied with Consideration Shares.

THE ANNUAL PROCUREMENT AGREEMENTS

Date

15 June 2018

Parties

• (a) The Company;

• (b) Each of the relevant Suppliers; and

• (c) Each of the relevant Subscribers.

To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, each of the Suppliers and Subscribers is an Independent Third Party. It is not expected that any of the Suppliers or Subscribers will become a substantial shareholder of the Company immediately upon the allotment and issue of the Consideration Shares.

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Term

12 months commencing from 16 June 2018

Obligations of the Suppliers

Pursuant to the Annual Procurement Agreements, each of the Suppliers shall supply a targeted amount of copper scrap raw materials to the Company from 16 June 2018 to 15 June 2019.

The respective annual supply targets for each of the Suppliers are set out below:

Name of the Supplier	Annual supply target
	(tonnes)
Wu Jun	5,000
Lu Yanliang	9,000
Zhou Yajun	9,000
Tang Zhihua	9,000
Yang Sisi	25,000
Liu Liu	20,000
Shao Yingdong	5,000
Ge Jinbiao	3,000
Yang Shihu	3,000
Zhang Guoyu	3,000
Fu Jufang	3,000
Yi Bing	16,000
Chen Guanglun	25,000
Zheng Zuren	25,000

Basis of Consideration and payment mechanism

The unit price of the copper scrap raw materials shall be agreed separately for each purchase order with reference to the price quoted on the Shanghai Futures Exchange and quotations for the same material received by the Group from other suppliers on the same day.

For each ton of copper scrap raw materials supplied by a Supplier, the Company will pay (i) up to RMB3,000 by way of issuance of a maximum number of 734 Consideration Shares at an Issue Price of HK$5 per Consideration Share; and (ii) the remainder of the balance in cash.

As the targeted amount of supply of copper scrap raw materials from the Suppliers is 160,000 tonnes in aggregate, the maximum number of Consideration Shares that the Company may issue pursuant to the Annual Procurement Agreements is 117,440,000 Shares. The Consideration Shares will be allotted and issued to the Subscribers in one lot on the Allotment Date.

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Number of Consideration Shares

The maximum total number of 117,440,000 Consideration Shares to be allotted and issued to the Subscribers represent approximately 4.69% of the existing issued share capital of the Company of 2,502,284,341 Shares as at the date of this announcement; and (ii) approximately 4.48% of the Company’s issued share capital of 2,619,724,341 Shares as enlarged by the issue and allotment of the Consideration Shares (assuming that there will be no change in the issued share capital of the Company between the date of the Annual Procurement Agreements and the Allotment Date save for the issue of such Consideration Shares).

The maximum numbers of Consideration Shares to be issued to each of the Subscribers are set out below:

Maximum total Name of the Supplier and number of ultimate wholly-owned Consideration shareholder of the relevant Shares to be Name of the Subscriber Subscriber subscribed Abundant Peace Limited Wu Jun 3,670,000 Ample Prosperous Limited Lu Yanliang 6,606,000 Blissful Treasure Holdings Limited Zhou Yajun 6,606,000 Eminent Bloom Limited Tang Zhihua 6,606,000 Frontier Global Enterprises Limited Yang Sisi 18,350,000 Golden Elite Global Limited Liu Liu 14,680,000 Harmony Success Global Limited Shao Yingdong 3,670,000 Silver Kirin Holdings Limited Ge Jinbiao 2,202,000 Smooth Profit Holdings Limited Yang Shihu 2,202,000 Summit Year Holdings Limited Zhang Guoyu 2,202,000 Treasure Soar Global Limited Fu Jufang 2,202,000 Best Discovery Holdings Limited Yi Bing 11,744,000 Ming Yuan Ventures Limited Chen Guanglun 18,350,000 Goal Run Investments Limited Zheng Zuren 18,350,000

Name of the Subscriber

Issue Price

The Issue Price of HK$5 per Consideration Share represents:

• (i) a discount of approximately 0.2% to the closing price of HK$5.01 per Share as quoted on the Stock Exchange on 15 June 2018 being the date of the Annual Procurement Agreements;

• (ii) a premium of approximately 1.6% to the average closing price of HK$4.92 per Share as quoted on the Stock Exchange for five consecutive trading days immediately prior to the date of the Annual Procurement Agreements; and

• (iii) a premium of approximately 1.4% to the average closing price of HK$4.93 per Share as quoted on the Stock Exchange for 10 consecutive trading days immediately prior to the date of the Annual Procurement Agreements.

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The Issue Price of HK$5 was determined after arm’s length negotiations between the Company and the Subscribers with reference to the recent trading prices of the Shares. The Directors consider that the terms and conditions of the Annual Procurement Agreements (including the Issue Price) are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The aggregate nominal value of the Consideration Shares is HK$11,744,000.

Ranking of the Consideration Shares

The Consideration Shares, when allotted and issued, will be fully paid and rank pari passu in all respects among themselves and with the Shares in issue as at the date of allotment and issue of such Consideration Shares.

Conditions Precedent

The issuance of the Consideration Shares is subject to the Stock Exchange granting the approval for the listing of the Consideration Shares.

INFORMATION OF THE SUBSCRIBERS AND THE SUPPLIERS

The Subscribers are Abundant Peace Limited, Ample Prosperous Limited, Blissful Treasure Holdings Limited, Eminent Bloom Limited, Frontier Global Enterprises Limited, Golden Elite Global Limited, Harmony Success Global Limited, Silver Kirin Holdings Limited, Smooth Profit Holdings Limited, Summit Year Holdings Limited, Treasure Soar Global Limited, Best Discovery Holdings Limited, Ming Yuan Ventures Limited and Goal Run Investments Limited. Each Subscriber is a company incorporated in the British Virgin Islands with limited liability, principally engaged in investment holding.

The respective ultimate beneficial shareholders of Abundant Peace Limited, Ample Prosperous Limited, Blissful Treasure Holdings Limited, Eminent Bloom Limited, Frontier Global Enterprises Limited, Golden Elite Global Limited, Harmony Success Global Limited, Silver Kirin Holdings Limited, Smooth Profit Holdings Limited, Summit Year Holdings Limited, Treasure Soar Global Limited, Best Discovery Holdings Limited, Ming Yuan Ventures Limited and Goal Run Investments Limited are Wu Jun, Lu Yanliang, Zhou Yajun, Tang Zhihua, Yang Sisi, Liu Liu, Shao Yingdong, Ge Jinbiao, Yang Shihu, Zhang Guoyu, Fu Jufang, Yi Bing, Chen Guanglun and Zheng Zuren. Each of them is an individual carrying out recycling of waste materials (including copper scrap) business in the PRC.

None of the Suppliers is a new supplier to the Group. Wu Jun, Lu Yanliang, Yang Sisi, Liu Liu, Fu Jufong, Yi Bing, Chen Guanglun and Zheng Zuren were granted 400,000, 400,000, 400,000, 400,000, 130,000, 130,000, 300,000 and 300,000 share options in the Company respectively on 12 December 2017. For further details, please refer to the Company’s announcement dated 12 December 2017. To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, each of the Suppliers and Subscribers is an Independent Third Party. It is not expected that any of the Suppliers or Subscribers will become a substantial shareholder of the Company immediately upon the allotment and issue of the Consideration Shares or upon the exercise of the relevant share options. The Directors considered that the granting of the Consideration Shares is beneficial in providing incentive to the Suppliers to achieve their targeted supply amount under the Annual Procurement Agreements and to strengthen the Group’s operating liquidity.

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INFORMATION OF THE GROUP

The Group is a fast-growing manufacturer of recycled copper products (also known as copper semis), communication cables and power transmission and distribution cables in Southwest China. The Group processes recycled scrap copper and, to a lesser extent, electrolytic copper, to manufacture a range of copper products, including copper wire rods, copper wires, copper plates, copper granules, communication cables and power transmission and distribution cables. Since 2015, the Group has also extended its product range to aluminium products and has entered into trading activities in relation to electrolytic copper.

GENERAL MANDATE

The Consideration Shares will be allotted and issued pursuant to the General Mandate granted to the Directors by a resolution of the Shareholders passed at the AGM, under which the Directors are authorized to issue Shares up to a maximum of 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the AGM, which is equivalent to a maximum issue of additional 500,456,868 Shares. Since the grant of the General Mandate and up to the date of this announcement, the General Mandate has not been utilised and the Directors are allowed to issue up to a remaining 500,456,868 new Shares under the General Mandate. As the Consideration Shares will be issued under the General Mandate, the allotment and issue of the Consideration Shares is not subject to Shareholders’ approval.

APPLICATION FOR LISTING

The Company will apply to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares on the Stock Exchange.

REASONS FOR THE ISSUE OF THE CONSIDERATION SHARES

The issue of the Consideration Shares forms part of the Company’s payment for the supply of copper scrap raw materials from the Suppliers. The arrangements under the Annual Procurement Agreements are expected to encourage such Suppliers to achieve the targeted amount to supply raw materials and to strengthen the Group’s operating liquidity.

The Directors consider that the terms of the Annual Procurement Agreements (including the Issue Price) are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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EFFECTS ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

As at the date of this announcement, the Company has 2,502,284,341 Shares in issue. The shareholding structure of the Company (i) as at the date of this announcement; and (ii) immediately after the allotment and issuance of the Consideration Shares (assuming that there will be no further changes in the issued share capital of the Company prior to such exercise) are as follows:

Shareholders Mr. Yu Jiangqiu and Epoch Keen Limited (note 1) First Harvest Global Limited, Gold Wide Enterprises Limited and Ocean Through Limited (note 2) Mr. Kwong Wai Sun Wilson (note 3) Public Shareholders Hong Kong Zhongliang Recycling Mining Investments Limited (note 4) Subscribers Other public shareholders	As at the date of this announcement Number of Shares directly or indirectly held Approximate percentage of the issued share capital of the Company (%) 1,037,354,400 41.45 310,317,000 12.40 3,272,600 0.13 135,000,000 5.40 — — 1,016,340,341 40.62 2,502,284,341 100.00	Immediately after the Allotment Date assuming the Consideration Shares are issued in full Number of Shares directly or indirectly held Approximate percentage of the issued share capital of the Company (%) 1,037,354,400 39.60 310,317,000 11.85 3,272,600 0.12 135,000,000 5.15 117,440,000 4.48 1,016,340,341 38.80 2,619,724,341 100.00	Immediately after the Allotment Date assuming the Consideration Shares are issued in full Number of Shares directly or indirectly held Approximate percentage of the issued share capital of the Company (%) 1,037,354,400 39.60 310,317,000 11.85 3,272,600 0.12 135,000,000 5.15 117,440,000 4.48 1,016,340,341 38.80 2,619,724,341 100.00
			100.00

Notes:

1. The shares were held by Mr. Yu Jianqiu, Chairman and an executive Director of the Company, together with Epoch Keen Limited, a company wholly-owned by Mr. Yu Jianqiu.

2. First Harvest Global Limited, Gold Wide Enterprises Limited and Ocean Through Limited are companies wholly-owned by Mr. Huang Weiping, a Director.

3. Mr. Kwong Wai Sun Wilson is an executive Director.

4. Hong Kong Zhongliang Recycling Mining Investments Limited is wholly-owned by 涼山州礦冶投資控股 有限責任公司, 74.00% equity interest of 涼山州礦冶投資控股有限責任公司 is held by 涼山州國有投資 發展有限責任公司; 62.00% equity interest of 涼山州國有投資發展有限責任公司 is held by 涼山彝族自 治州國有資產監督管理委員會. Accordingly, each of 涼山州礦冶投資控股有限責任公司, 涼山州國有投 資發展有限責任公司, 涼山彝族自治州國有資產監督管理委員會 is deemed to be interested in the shares of the Company held by Hong Kong Zhongliang Recycling Mining Investments Limited.

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FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

Date of			Intended use of proceeds as
announcement	Fund raising activity	Net proceeds	announced	Actual use of proceeds
13 and 23 April	Issue of new ordinary	estimated to be	(i) approximately	Not applicable given the
2018	shares of 75,980,000	HK$364,704,000	HK$150,000,000 for	Subscription has not been
	Shares (the		reducing the Group’s debt to	completed as at the date of
	‘‘Subscription’’)		equity ratio; (ii)	this announcement.
			approximately
			HK$200,000,000 for paying
			consideration of any future
			acquisition opportunities to
			be identified by the Group,
			but if no such opportunities
			are identified, for purchasing
			raw materials and copper
			products in order to increase
			the Group’s production and
			trading business; and (iii) the
			remaining amount for
			purchasing raw materials and
			copper products in order to
			increase the Group’s
			production and trading
			business.
31 July 2017	Issue of convertible	HK$582,000,000	To purchase raw material for	Approximately HK$582,000,000
	bonds in an aggregate		the Company’s expansion of	was used for purchasing raw
	principal amount of		production	materials and copper
	HK$600,000,000			products in the ordinary
				course of the Group’s
				business

Shareholders and potential investors should note that the issuance of Consideration Shares is subject to the fulfilment or waiver of conditions under the Annual Procurement Agreements and may or may not proceed. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares of the Company.

DEFINITIONS

In this announcement, the following expressions shall have the following meanings, unless the context requires otherwise:

‘‘AGM’’	the annual general	meeting of the Company	meeting of the Company	held	on 6 June
	2018;
‘‘Allotment Date’’	a day within 10 business days from 15		June	2019;
‘‘Annual Procurement	each annual procurement agreement		entered into by the
Agreement(s)’’	Company and the	relevant Supplier	and	Subscriber in
	relation to the supply of copper scrap			raw	materials,
	pursuant to which	such Supplier has	agreed to		supply a
	targeted amount of	copper scrap raw materials to			the Group
	from 16 June 2018	to 15 June 2019;

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‘‘associate(s)’’ has the same meaning ascribed thereto under the Listing Rules;

• ‘‘Board’’ the board of Directors;

‘‘Company’’ China Metal Resources Utilization Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 1636);

• ‘‘connected person(s)’’ has the same meaning ascribed thereto under the Listing Rules;

• ‘‘Consideration Shares’’ new Share(s) to be allotted and issued to the Subscribers pursuant to the Annual Procurement Agreements, comprising a maximum of 117,440,000 new Shares to be allotted and issued to the Subscribers;

• ‘‘Director(s)’’ the director(s) of the Company; ‘‘General Mandate’’ the general mandate granted to the Directors by the resolution of the Shareholders passed at the AGM to allot, issue and deal with Shares and to make or grant offers, agreements and options which may require Shares to be issued, allotted or dealt with, which is subject to the limit of 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the AGM;

• ‘‘Group’’ the Company and its subsidiaries;

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong;

‘‘Hong Kong’’ The Hong Kong Special Administrative Region of the People’s Republic of China;

• ‘‘Independent Third person(s) who is/are not connected persons of the Company; Party(ies)’’

• ‘‘Issue Price’’ an issue price of HK$5 per Shares;

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

• ‘‘PRC’’ The People’s Republic of China, excluding (except where the context requires) Hong Kong, Macau Special Administrative Region and Taiwan;

• ‘‘RMB’’ Renminbi, the lawful currency of the PRC;

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• ‘‘Share(s)’’

ordinary share(s) of HK$0.10 each in the share capital of the Company;

• ‘‘Shareholder(s)’’

holder(s) of the Shares;

• ‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited;

• ‘‘Subscribers’’

Abundant Peace Limited, Ample Prosperous Limited, Blissful Treasure Holdings Limited, Eminent Bloom Limited, Frontier Global Enterprises Limited, Golden Elite Global Limited, Harmony Success Global Limited, Silver Kirin Holdings Limited, Smooth Profit Holdings Limited, Summit Year Holdings Limited, Treasure Soar Global Limited, Best Discovery Holdings Limited, Ming Yuan Ventures Limited and Goal Run Investments Limited;

• ‘‘Suppliers’’

Wu Jun, Lu Yanliang, Zhou Yajun, Tang Zhihua, Yang Sisi, Liu Liu, Shao Yingdong, Ge Jinbiao, Yang Shihu, Zhang Guoyu, Fu Jufong, Yi Bing, Chen Guanglun and Zheng Zuren;

• ‘‘%’’

per cent.

By order of the Board China Metal Resources Utilization Limited Mr. YU Jianqiu Chairman

Hong Kong, 15 June 2018

As at the date of this announcement, the Board comprises of four executive directors, namely, Mr. Yu Jianqiu (Chairman), Mr. Kwong Wai Sun Wilson, Mr. Huang Weiping and Ms. Zhu Yufen; and three independent non-executive directors, namely, Mr. Lee Ting Bun Denny, Mr. Pan Liansheng and Ms. Ren Ruxian.

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