Xinjiang Xinxin Mining Industry Co., Ltd. — M&A Activity 2009

Apr 8, 2009

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.

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Xinjiang Xinxin Mining Industry Co., Ltd.[*] 新疆新鑫礦業股份有限公司

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock code: 3833)

MAJOR TRANSACTION –

IN RELATION TO THE ACQUISITION OF 95% EQUITY INTEREST IN XINJIANG ZHONGXIN MINING COMPANY LIMITED

CONNECTED TRANSACTION – THE SHAANXI HONGHAO AGREEMENT

MAJOR TRANSACTION – THE ACQUISITIONS

The Board is pleased to announce that the Company has entered into the Agreements with the Vendors, pursuant to which the Company has conditionally agreed to acquire and the Vendors have conditionally agreed to sell their respective Sale Shares, representing an aggregate of 95% equity interest in Zhongxin Mining, for an aggregate consideration of RMB55,100,000.

Zhongxin Mining is principally engaged in the production and sales of copper and nickel matte.

As one of the applicable percentage ratios computed pursuant to Rule 14.04(9) of the Listing Rules in respect of the Acquisitions exceeds 25% but is under 100%, the Acquisitions collectively constitute a major transaction for the Company under the Listing Rules and are subject to the reporting, announcement and shareholders’ approval requirements of Chapter 14 of the Listing Rules.

Shaanxi Honghao is one of the Vendors and a shareholder holding 0.28% equity interest of the Company as at the date of this announcement. As a result, Shaanxi Honghao and its associates will be required to abstain from voting on the respective resolutions to approve the Acquisitions at the AGM. Such resolutions will be taken by poll pursuant to the Listing Rules.

The Company will convene the AGM to seek its shareholders’ approval of the Acquisitions. A circular containing, among other things, details of the Acquisitions and the Agreements, the financial information of the Group, the financial information of Zhongxin Mining, the unaudited pro forma financial information of the Enlarged Group, the notice of the AGM and other information as required under the Listing Rules will be despatched to the shareholders of the Company as soon as practicable.

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CONNECTED TRANSACTION – THE SHAANXI HONGHAO AGREEMENT

Shaanxi Honghao is one of the promoters (as defined in the Listing Rules) of the Company and one of the Vendors. Accordingly, Shaanxi Honghao is a connected person of the Company and the Company’s entering into the Shaanxi Honghao Agreement constitutes a connected transaction of the Company under the Listing Rules.

As one of the applicable percentage ratios in respect of the Shaanxi Honghao Agreement exceeds 2.5% but is less than 25% and the consideration is less than HK$10,000,000, the Shaanxi Honghao Agreement and the transaction contemplated thereunder is only subject to the reporting and announcement requirements as set out in Rules 14A.45 and 14A.47 of the Listing Rules and are exempt from independent shareholders’ approval requirement under Rule 14A.32 of the Listing Rules.

BACKGROUND

The Agreements

The Board is pleased to announce that the Company has entered into the Agreements with the Vendors to acquire the Sale Shares, being an aggregate of 95% equity interest in Zhongxin Mining.

The following table sets out the information in relation to each of the Agreements:

The Agreement Date of Agreement Vendor Purchaser Equity Interest in Zhongxin Mining Xinjiang I&D Agreement 8 April 2009 Xinjiang I&D the Company 57% No.13 Agriculture Agreement 8 April 2009 No.13 Agriculture the Company 17% Shaanxi Honghao Agreement 8 April 2009 Shaanxi Honghao the Company 9% Huilong Mining Agreement 8 April 2009 Huilong Mining the Company 6% Jinhua Mining Agreement 8 April 2009 Jinhua Mining the Company 6%

Consideration payable by the Company to each Vendor (RMB) 33,060,000 9,860,000 5,220,000 3,480,000 3,480,000

Total: 55,100,000

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Xinjiang I&D Agreement

Pursuant to the Xinjiang I&D Agreement dated 8 April 2009, the Company has agreed to acquire from Xinjiang I&D the Xinjiang I&D Sale Shares, being 57% equity interest in Zhongxin Mining, for a consideration of RMB33,060,000. The consideration shall be payable by the Company in cash to Xinjiang I&D within 7 days after the Xinjiang I&D Agreement has become effective. The procedures of the Industry and Commerce Administration Department relating to the transfer of the Xinjiang I&D Sale Shares shall be completed within 20 days after the Xinjiang I&D Agreement has become effective. The completion of the Xinjiang I&D Agreement is not conditional on each of the other Agreements.

Condition precedent:

The Xinjiang I&D Agreement is conditional and effective upon it having been approved by the shareholders of the Company at the AGM.

No.13 Agriculture Agreement

Pursuant to the No.13 Agriculture Agreement dated 8 April 2009, the Company has agreed to acquire from No.13 Agriculture the No.13 Agriculture Sale Shares, being 17% equity interest in Zhongxin Mining, for a consideration of RMB9,860,000. The consideration shall be payable by the Company in cash to No.13 Agriculture within 7 days after the No.13 Agriculture Agreement has become effective. The procedures of the Industry and Commerce Administration Department relating to the transfer of the No.13 Agriculture Sale Shares shall be completed within 20 days after the No.13 Agriculture Agreement has become effective. The completion of the No.13 Agriculture Agreement is not conditional on each of the other Agreements.

Condition precedent:

The No.13 Agriculture Agreement is conditional and effective upon it having been approved by the shareholders of the Company at the AGM.

Shaanxi Honghao Agreement

Pursuant to the Shaanxi Honghao Agreement dated 8 April 2009, the Company has agreed to acquire from Shaanxi Honghao the Shaanxi Honghao Sale Shares, being 9% equity interest in Zhongxin Mining, for a consideration of RMB5,220,000. The consideration shall be payable by the Company in cash to Shaanxi Honghao within 7 days after the Shaanxi Honghao Agreement has become effective. The procedures of the Industry and Commerce Administration Department relating to the transfer of the Shaanxi Honghao Sale Shares shall be completed within 20 days after the Shaanxi Honghao Agreement has become effective. The completion of the Shaanxi Honghao Agreement is not conditional on each of the other Agreements.

Condition precedent:

The Shaanxi Honghao Agreement is conditional and effective upon it having been approved by the shareholders of the Company at the AGM.

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Shaanxi Honghao is one of the promoters (as defined in the Listing Rules) of the Company. Accordingly, Shaanxi Honghao is a connected person of the Company and the Company’s entering into the Shaanxi Honghao Agreement constitutes a connected transaction of the Company under the Listing Rules. The original purchase cost of 9% equity interest in Zhongxin Mining payable by Shaanxi Honghao is RMB5,220,000.

Huilong Mining Agreement

Pursuant to the Huilong Mining Agreement dated 8 April 2009, the Company has agreed to acquire from Huilong Mining the Huilong Mining Sale Shares, being 6% equity interest in Zhongxin Mining, for a consideration of RMB3,480,000. The consideration shall be payable by the Company in cash to Huilong Mining within 7 days after the Huilong Mining Agreement has become effective. The procedures of the Industry and Commerce Administration Department relating to the transfer of the Huilong Mining Sale Shares shall be completed within 20 days after the Huilong Mining Agreement has become effective. The completion of the Huilong Mining Agreement is not conditional on each of the other Agreements.

Condition precedent:

The Huilong Mining Agreement is conditional and effective upon it having been approved by the shareholders of the Company at the AGM.

Jinhua Mining Agreement

Pursuant to the Jinhua Mining Agreement dated 8 April 2009, the Company has agreed to acquire from Jinhua Mining the Jinhua Mining Sale Shares, being 6% equity interest in Zhongxin Mining, for a consideration of RMB3,480,000. The consideration shall be payable by the Company in cash to Jinhua Mining within 7 days after the Jinhua Mining Agreement has become effective. The procedures of the Industry and Commerce Administration Department relating to the transfer of the Jinhua Mining Sale Shares shall be completed within 20 days after the Jinhua Mining Agreement has become effective. The completion of the Jinhua Mining Agreement is not conditional on each of the other Agreements.

Condition precedent:

The Jinhua Mining Agreement is conditional and effective upon it having been approved by the shareholders of the Company at the AGM.

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Information relating to Zhongxin Mining

Zhongxin Mining is principally engaged in the production and sale of copper and nickel matte and was established on 24 January 2006 with a registered capital of RMB58,000,000. Zhongxin Mining was previously a subsidiary of the Company, which held 57% equity interest in its registered capital. As disclosed on pages 107 and 108 of the prospectus of the Company dated 27 September 2007 (the “Prospectus”), the Company disposed of its 57% equity interest in Zhongxin Mining to Xinjiang I&D, an independent third party, in May 2007 at a consideration of RMB33,060,000 and Zhongxin Mining ceased to be a subsidiary of the Company. The consideration was determined based on a valuation conducted by a qualified valuer, an independent third party. The reason for such disposal was because it was uncertain as to when the smelter of Zhongxin Mining would be capable of economically viable production. Further, the Directors at that time believed that the Company’s smelting capacity was sufficient for its operation requirements and there was no immediate need to include the smelter of Zhongxin Mining in its production chain.

The Company is expecting that its requirement of water hardening and nickel matte and its smelting capacity will increase in 2009. The Acquisitions, including the acquisition of the Xinjiang I&D Sale Shares, will result in the increasing of the Company’s annual production capacity of water hardening and nickel matte by approximately 9,565 tons (or 5,000 tons of nickel metal), therefore such increase will provide significant assurance and certainty to the Company in expanding its refining capacity.

Immediately prior to the Company’s entering into the Agreements, the equity interest of Zhongxin Mining was held by Xinjiang I&D as to 57%, No.13 Agriculture as to 17%, Shaanxi Honghao as to 9%, Huilong Mining as to 6%, Jinhua Mining as to 6% and Xinjiang Aokai as to 5%. Except for Shaanxi Honghao who is a shareholder holding 0.28% equity interest of the Company, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, all the above shareholders and their ultimate beneficial owners are third parties independent of the Company and its connected persons (as defined in the Listing Rules) and such shareholders and their ultimate beneficial owners are independent of each other.

Based on the financial statements of Zhongxin Mining prepared in accordance with Hong Kong Financial Reporting Standards (HKFRS), for the period from 24 January 2006 (date of its establishment) to 31 December 2006, Zhongxin Mining recorded a net loss (after tax) of RMB2,939,000. Based on the financial statements of Zhongxin Mining for the year ended 31 December 2007, Zhongxin Mining recorded a net profit (before tax) of RMB6,764,000 and a net profit (after tax) of RMB7,332,000. Based on the financial statements of Zhongxin Mining for the year ended 31 December 2008, Zhongxin Mining recorded a net loss (before tax) of RMB47,892,000 and a net loss (after tax) of RMB36,943,000. The net assets of Zhongxin Mining as at 31 December 2006, 31 December 2007 and 31 December 2008 were RMB55,061,000, RMB62,393,000 and RMB25,450,000 respectively. The reason for the significant net loss of Zhongxin Mining in 2008 was mainly because its sales were solely determined by the spot price of nickel at the Shanghai Yangtze River Non-ferrous Metals which plunged to record lows in 2008 as a result of enormous hedging transactions in commodity prices in the international market caused by the global financial crisis in 2008. The management believes that this phenomenon will not last long in 2009. The significant decrease in net assets of Zhongxin Mining in 2008 was caused by the significant net loss sustained during the same period.

Zhongxin Mining owns the state-owned land use right and has obtained the Certificate of StateOwned Land Use Right in relation to a parcel of land with a site area of approximately 315,000 square meters located in Hami. Such parcel of land has 33 buildings and various ancillary erected thereon for Zhongxin Mining’s ore smelting production and operation. The major ongoing project being implemented by Zhongxin Mining is the “oxygen and acid production” project. The “oxygen

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and acid production” project is one of the sub-projects of Zhongxin Mining’s “annual smelting output of 5,000 tons nickel” project and such projects have obtained the consents, approval and filing documents from the relevant authority. Zhongxin Mining also owns other fixed assets which include machinery, transport vehicles, office facilities and electronic equipment.

Existing shareholding structure of Zhongxin Mining

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No.13 Shaanxi Huilong Jinhua
Xinjiang I&D Xinjiang Aokai
Agriculture Honghao Mining Mining
57% 17% 9% 6% 6% 5%
Zhongxin Mining
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Shareholding structure of Zhongxin Mining after completion of the Acquisitions

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The Company Xinjiang Aokai
95% 5%
Zhongxin Mining
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Consideration

The aggregate consideration of RMB55,100,000 for the Acquisitions was determined by reference to the net assets value of Zhongxin Mining, the valuation surplus of its property interest (including land use rights) conducted by an independent third party valuer and the growth potential of its business.

The property interest (including land use rights) of Zhongxin Mining valued by an independent third party valuer as at 31 December 2008 exceeded its book value by approximately RMB30,415,000. The growth potential of the business of Zhongxin Mining is one of the factors in determining the consideration for the Acquisitions as its actual annual production of nickel matte will increase from the existing annual production volume of approximately 2,500 tons (nickel metal content) to approximately 5,000 tons (nickel metal content) in the coming years. The increase in the requirements of the additional actual annual production of nickel matte will be supplied by the three nickel-copper mines (the Huangshandong nickel-copper mine, the Huangshan nickel-copper mine and the Xiangshan nickel-copper mine) recently acquired by the Company in February 2009.

The respective considerations and terms of the Agreements were agreed between the Company and the respective Vendors after negotiations at an arm’s length basis and on normal commercial terms.

The source of funding for the Acquisitions is from the internal resources of the Company.

INFORMATION RELATING TO THE COMPANY

The Company is principally engaged in the mining, ore processing, smelting and refining of nickel, copper and other non-ferrous metals, which include cobalt and precious metals such as gold, silver, platinum and palladium.

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INFORMATION RELATING TO XINJIANG I&D, NO.13 AGRICULTURE, SHAANXI HONGHAO, HUILONG MINING AND JINHUA MINING

Xinjiang I&D is principally engaged in property related investment, assets management, investment consultation, carpark operations, and property rental and management. No.13 Agriculture is principally engaged in the management and operation of government-owned investments. Shaanxi Honghao is principally engaged in the sale of metal related products, chemicals, machinery and accessories, construction material, electrical products, nonferrous metals and mining products. Huilong Mining is principally engaged in mining products processing and sale. Jinhua Mining is principally engaged in mining products processing and sale and mining machinery and chemical products sale.

REASONS FOR AND BENEFITS OF THE COMPANY’S ENTERING INTO THE AGREEMENTS

The major products of the Company are electrolytic nickels and copper cathodes, which are produced by its branch, Fukang Refinery (阜康治煉廠). The raw material for the production of electrolytic nickels and copper cathodes is water hardening and nickel matte. Zhongxin Mining is one of the only two nickel smelting enterprises located in Xinjiang, the PRC. After the outsourced nickel and copper concentrates are smelted and processed, the products of Zhongxin Mining become water hardening and nickel matte, which are the raw material used by Fukang Refinery (阜康治煉廠) in refining. Zhongxin Mining is the Company’s upstream supplier, which supplies all of its products to the Company’s branch, Fukang Refinery* (阜康治煉廠). Upon completion of the Acquisitions, it is expected that the Company’s annual production capacity of water hardening and nickel matte will increase by 9,565 tons (or 5,000 tons of nickel metal) and such increase will provide significant assurance to the Company in expanding its refining capacity.

Xinjiang Hami region enjoys a rich resource of nickel and copper. The Company has been able to successfully acquire a number of nickel and copper exploitation and production mine companies, such as Hami Hexin Mining Co. Ltd. (哈密和鑫礦業有限公司) in the Hami region, Xinjiang Yakesi Resources Co. Ltd. (新疆亞克斯資源開發股份有限公司) and Hami Jubao Resources Co. Ltd.* (哈密市聚寶資源開發有限公司). The Acquisitions will enable the Company to process locally the nickel and copper concentrates exploited from the nickel and copper mines in the Hami region as well as the Dongjiang region and to achieve maximum economic returns.

As the Company has established an advantage in nickel and copper smelting due to its management experience and skilled labour force, the Acquisitions will enable Zhongxin Mining to improve its industrial techniques, management quality and economic effects.

The Acquisitions will form a more complete production chain for the Company and improve the Company’s core competitiveness. In addition, the Acquisitions will provide significant strategic visions and benefits to the Company in implementing its development strategy in controlling resource, enhancing its production capacity, lowering the production cost, improving economic results, and ensuring a constant, healthy and rapid development.

The Directors are of the view that the consideration and the terms of the Agreements are fair and reasonable and the Acquisitions are in the interests of the Company and its shareholders as a whole.

The independent non-executive directors have approved the Shaanxi Honghao Agreement and are also of the view that the consideration and the terms of the Shaanxi Honghao Agreement are fair and reasonable and are in the interests of the Company and its shareholders as a whole.

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LISTING RULE REQUIREMENTS

Major Transaction

As one of the applicable percentage ratios computed pursuant to Rule 14.04(9) of the Listing Rules in respect of the Acquisitions exceeds 25% but is under 100%, the Acquisitions collectively constitute a major transaction for the Company under the Listing Rules and are subject to the reporting, announcement and shareholders’ approval requirements of Chapter 14 of the Listing Rules.

Shaanxi Honghao is one of the Vendors and a shareholder holding 0.28% equity interest of the Company as at the date of this announcement. As a result, Shaanxi Honghao and its associates will be required to abstain from voting on the respective resolutions to approve the Acquisitions at the AGM. Such resolutions will be taken by poll pursuant to the Listing Rules.

Connected Transaction

Shaanxi Honghao is one of the promoters (as defined in the Listing Rules) of the Company and one of the Vendors. Accordingly, Shaanxi Honghao is a connected person of the Company and the Company’s entering into the Shaanxi Honghao Agreement constitutes a connected transaction of the Company under the Listing Rules.

As one of the applicable percentage ratios in respect of the Shaanxi Honghao Agreement exceeds 2.5% but is less than 25% and the consideration is less than HK$10,000,000, the Shaanxi Honghao Agreement and the transaction contemplated thereunder are only subject to the reporting and announcement requirements as set out in Rules 14A.45 and 14A.47 of the Listing Rules and are exempt from independent shareholders’ approval requirement under Rule 14A.32 of the Listing Rules.

DESPATCH OF CIRCULAR

The Company will convene the AGM to seek its shareholders’ approval of the Acquisitions. A circular containing, among other things, details of the Acquisitions and Agreements, the financial information of the Group, the financial information of Zhongxin Mining, the unaudited pro forma financial information of the Enlarged Group, the notice of the AGM and other information as required under the Listing Rules will be despatched to the shareholders of the Company as soon as practicable.

DEFINITIONS

In this announcement, the following terms have the following meanings:

“Acquisitions”	the acquisitions by the Company of the Sale Shares, being an
	aggregate of 95% equity interest in Zhongxin Mining, from the
	Vendors pursuant to the terms of the respective Agreements, and
	Acquisition shall mean any one of them
“AGM”	the annual general meeting of the Company to be convened to
	approve, amongst others, the Acquisitions and the Agreements
“Agreements”	Huilong Mining Agreement, Jinhua Mining Agreement, No.13
	Agriculture Agreement, Shaanxi Honghao Agreement and
	Xinjiang I&D Agreement

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• “Board or Board of Directors” the board of directors of the Company “Company” Xinjiang Xinxin Mining Industry Co., Ltd.* (新疆新鑫礦業股 份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the H Shares of which are listed on the Stock Exchange

• “connected person” has the meaning ascribed to it under the Listing Rules “Director(s)” one or all of the director(s) of the Company “Enlarged Group” the Group immediately after completion of the Acquisitions “Group” the Company and its subsidiaries “HK$” Hong Kong dollar(s), the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Huilong Mining” Hami City Huilong Mining Industry Co., Ltd.* (哈密市滙隆礦 業有限責任公司), a limited liability company incorporated in the PRC

• “Huilong Mining Agreement” the sale and purchase agreement dated 8 April 2009 entered into among the Company and Huilong Mining in respect of the purchase of the Huilong Mining Sale Shares

• “Huilong Mining Sale Shares” representing 6% equity interest held by Huilong Mining in Zhongxin Mining as at the date of the Huilong Mining Agreement

• “Jinhua Mining” Hami City Jinhua Mining Co. Ltd.* (哈密市錦華礦產資源開發 有限責任公司), a limited liability company incorporated in the PRC

• “Jinhua Mining Agreement” the sale and purchase agreement dated 8 April 2009 entered into among the Company and Jinhua Mining in respect of the purchase of the Jinhua Mining Sale Shares

• “Jinhua Mining Sale Shares” representing 6% equity interest held by Jinhua Mining in Zhongxin Mining as at the date of the Jinhua Mining Agreement

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “No.13 Agriculture” No.13 Agriculture Construction Division of Xinjiang Production and Construction Military Unit State-owned Assets Operation Co., Ltd.* (新疆生產建設兵團農業建設第十三師國有資產經 營有限公司), a limited liability company incorporated in the PRC

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“No.13 Agriculture Agreement”	the sale and purchase agreement dated 8 April 2009 entered into
	among the Company and No.13 Agriculture in respect of the
	purchase of the No.13 Agriculture Sale Shares
“No.13 Agriculture Sale Shares”	representing 17% equity interest held by No. 13 Agriculture
	in Zhongxin Mining as at the date of the No.13 Agriculture
	Agreement
“PRC”	the People’s Republic of China (for the purpose of this
	announcement, excluding Hong Kong, Taiwan and the Macau
	Special Administrative Region of the PRC)
“RMB”	Renminbi, the lawful currency of the PRC
“Sale Shares”	Huilong Mining Sale Shares, Jinhua Mining Sale Shares, No.13
	Agriculture Sale Shares, Shaanxi Honghao Sale Shares and
	Xinjiang I&D Sale Shares, representing an aggregate of 95%
	equity interest in Zhongxin Mining
“Shaanxi Honghao”	Shaanxi Honghao Industry Co., Ltd.* (陝西鴻浩實業有限公司),
	a limited liability company incorporated in the PRC
“Shaanxi Honghao Agreement”	the sale and purchase agreement dated 8 April 2009 entered into
	among the Company and Shaanxi Honghao in respect of the
	purchase of the Shaanxi Honghao Sale Shares
“Shaanxi Honghao Sale Shares”	representing 9% equity interest held by Shaanxi Honghao
	in Zhongxin Mining as at the date of the Shaanxi Honghao
	Agreement
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary”	has the meaning to be construed in accordance with section 2 of
	the Companies Ordinance (Chapter 32, Laws of Hong Kong)
“Vendors”	Huilong Mining, Jinhua Mining, No.13 Agriculture, Shaanxi
	Honghao and Xinjiang I&D, and Vendor shall mean any one of
	them
“Xinjiang Aokai”	Xinjiang Aokai Investment Co., Ltd.*(新疆奧凱投資有限責任
	公司), a limited liability company incorporated in the PRC
“Xinjiang I&D”	Xinjiang Investment and Development (Group) Company
	Limited* (新疆投資發展（集團）有限責任公司), a limited
	liability company incorporated in the PRC
“Xinjiang I&D Agreement”	the sale and purchase agreement dated 8 April 2009 entered into
	among the Company and Xinjiang I&D in respect of the purchase
	of the Xinjiang I&D Sale Shares

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“Xinjiang I&D Sale Shares”

representing 57% equity interest held by Xinjiang I&D in Zhongxin Mining as at the date of the Xinjiang I&D Agreement

“Zhongxin Mining”

Xinjiang Zhongxin Mining Company Limited* (新疆眾鑫礦業 有限責任公司), a limited liability company incorporated in the PRC

“%”

per cent.

By Order of the Board Zhang Junjie, Lam Cheuk Fai Joint Company Secretaries

Hong Kong, 8 April 2009

As at the date of this announcement, the executive Directors of the Company are Mr. Yuan Ze, Mr. Shi Wenfeng, Mr. Zhang Guohua and Mr. Liu Jun; the non-executive Directors of the Company are Mr. Zhou Chuanyou and Mr. Niu Xuetao; and the independent non-executive Directors of the Company are Mr. Chen Jianguo, Mr. Sun Baosheng and Mr. Ng Yuk Keung.

• For identification purposes only

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