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CONNECTED TRANSACTION
IN RELATION TO THE RESOURCE COMPENSATION AGREEMENT
INTRODUCTION
The Board is pleased to announce that on 6 November 2019, Suancigou Mining, a subsidiary of the Company, entered into the Resource Compensation Agreement with Jingtai Power Generation. Given that 14.7 million tonnes of coal resources of Suancigou Mining were overlaid by the power plant phase II project to be constructed by Jingtai Power Generation, Jingtai Power Generation has agreed to pay compensation for overlaying of coal resources in an amount of RMB282.24 million to Suancigou Mining upon negotiation.
RESOURCE COMPENSATION AGREEMENT
The major terms of the Resource Compensation Agreement are as follows:
Parties | Suancigou Mining, Jingtai Power Generation |
Date | 6 November 2019 |
Overlaying of Resources | According to the Resource Compensation Agreement, the site of the |
power plant phase II project to be constructed by Jingtai Power | |
Generation is located within the coalfield of Suancigou Mine | |
owned by Suancigou Mining, with an overlaid area of 0.29996 sq. | |
km. in total. Under the Estimate Report of Overlaid Coal Resource | |
and Confirmations from Three Parties on Estimate Results, 14.7 | |
million tonnes of resource reserves in aggregate were overlaid by | |
the power plant phase II project. |
* For identification purpose only
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Consideration and | According to the Resource Compensation Agreement, Jingtai Power |
Payment | Generation agreed to pay overlaid resource compensation in a total |
amount of RMB282.24 million to Suancigou Mining. | |
Jingtai Power Generation shall pay 50% of the total overlaid | |
resource compensation, being RMB141.12 million, to Suancigou | |
Mining within 30 business days following the signing of the | |
Resource Compensation Agreement, and shall pay the remaining | |
balance, being RMB141.12 million, in two tranches, before the | |
completion of the power plant phase II to be put into operation. |
BASIS OF DETERMINATION OF CONSIDERATION
The consideration of the resource compensation was determined after arm's length negotiation between both parties. According to the Estimate Report of Overlaid Coal Resource and Confirmations from Three Parties on Estimate Results, the overlaid resource compensation price is calculated as follows:
Total overlaid resource compensation = Total reserve of overlaid resources × RMB15/tonne + exploitable reserve (being 70% of total reserve of overlaid resources) × RMB6/tonne, i.e.:
Total overlaid resource compensation = 14.70 million tonnes × RMB15/tonne + (14.70 million tonnes × 70%) × RMB6/tonne;
By calculation, the total overlaid resource compensation is RMB282.24 million.
REASONS FOR AND BENEFITS OF THE TRANSACTION
This transaction will enable Suancigou Mining to obtain additional funds for its operations. Meanwhile, Jingtai Power Generation, as a 29% owned investee of the Company, this transaction is conducted mainly for actively boosting the construction needs of the power plant phase II project of Jingtai Power Generation to support its sustainable and healthy development, and improve its core competitiveness and sustainable development ability, thereby further delivering and safeguarding long-term returns to all Shareholders of the Company.
This transaction is in line with the development needs of the Company, with a fair price and no prejudice to the interests of the Company and minority Shareholders. The Company will supervise the receipt of the proceeds from this transaction and control risks in order to protect the interests of its investors.
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IMPLICATIONS OF THE LISTING RULES
As at the date of this announcement, Suancigou Mining is a 52% owned subsidiary of the Company. As Jingneng Power held 24% equity interests in Suancigou Mining, Jingneng Power constitutes a connected person of the Company at the subsidiary level; meanwhile, as Jingtai Power Generation is a subsidiary of Jingneng Power, Jingtai Power Generation also constitutes a connected person of the Company at the subsidiary level. As such, the resource compensation contemplated under the Resource Compensation Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As the highest applicable percentage ratio in respect of the resource compensation calculated under the Listing Rules exceeds 1% but is less than 5%, the connected transaction shall be subject to the reporting, annual review and announcement requirements but exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.
OPINIONS OF DIRECTORS
As the Directors including Mr. Zhang Donghai, Mr. Liu Chunlin, Mr. Ge Yaoyong, Mr. Zhang Dongsheng, Mr. Wang Sanmin, Mr. Liu Jian and Mr. Lv Guiliang are deemed to have material interests in the above transaction, they have abstained from voting on the resolution regarding the signing of the Resource Compensation Agreement. Save as the above persons, none of the other Directors owns interest in the resource compensation.
The Directors (including independent non-executive Directors) have considered and approved the resolution on signing the Resource Compensation Agreement. They are of the view that (i) the resource compensation is on normal commercial terms, and is in the ordinary and usual course of business of the Group; (ii) the terms and conditions of the resource compensation are fair and reasonable; and (iii) the resource compensation is in the interests of the Company and the Shareholders as a whole.
GENERAL INFORMATION
Information on the Company
The Company is a joint stock limited company incorporated in the PRC on 23 September 1997, which is one of the largest coal enterprises in the PRC. The principal businesses of the Company include coal operations, transportation operations, coal related chemical operations and other operations.
Information on Suancigou Mining
Inner Mongolia Yitai Jingyue Suancigou Mining Co., Ltd., a limited liability company incorporated in the PRC on 18 September 2007 and a 52% non-wholly owned subsidiary of the Company, is mainly engaged in the production and sales of coal, processing and sales of mineral products and so on.
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Information on Jingtai Power Generation
Inner Mongolia Jingtai Power Generation Co., Ltd., a limited liability company incorporated in the PRC on 29 November 2007 and a 51% non-wholly owned subsidiary of Jingneng Power, is mainly engaged in power generation and sales, heat supply, coal purchase and sales, power equipment maintenance, power plant technical consulting, sales of coal ashes and by-products, waste materials disposal and intangible assets transfer.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions have the following meanings:
"Board" | the board of directors of the Company |
"resource compensation" | According to the Resource Compensation Agreement, Jingtai Power |
Generation will pay compensation for overlaying of coal resources | |
in an amount of RMB282.24 million to Suancigou Mining | |
"Resource Compensation | The Compensation Agreement for Overlaying of Coal Resources of |
Agreement" | Suancigou Mine Owned by Inner Mongolia Yitai Jingyue |
Suancigou Mining Co., Ltd. by Power Plant Phase II Project of | |
Inner Mongolia Jingtai Power Generation Co., Ltd. entered into | |
between Suancigou Mining and Jingtai Power Generation on 6 | |
November 2019 | |
"Company" | Inner Mongolia Yitai Coal Co., Ltd.* (內蒙古伊泰煤炭股份有限公 |
司) | |
"connected person(s)" | has the meaning ascribed to it under the Listing Rules |
"connected transaction" | has the meaning ascribed to it under the Listing Rules |
"Director(s)" | the director(s) of the Company |
"Estimate Report of Overlaid | Report on Estimates of Overlaid Coal Resources Due to Jingtai's |
Coal Resource and | Power Plant Phase II Project within the Coalfield of Suancigou |
Confirmations from Three | Mine Owned by Inner Mongolia Yitai Jingyue Suancigou Mining |
Parties on Estimate | Co., Ltd. issued by Inner Mongolia Coal Mine Design & Research |
Results" | Institute Limited Liability Company and its Confirmations from |
Three Parties on Estimate Results of Overlaid Resource Reserve | |
"Group" | the Company and its subsidiaries |
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"Jingneng Power" | Beijing Jingneng Power Co., Ltd.* (北京京能電力股份有限公司), |
a joint stock limited company incorporated in the PRC on 10 March | |
2000, whose A-shares are listed on the Shanghai Stock Exchange | |
(stock code: 600578) | |
"Jingtai Power Generation" | Inner Mongolia Jingtai Power Generation Co., Ltd.* (內蒙古京泰 |
發電有限責任公司), a limited liability company incorporated in the | |
PRC on 29 November 2007 | |
"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, for the purposes of this |
announcement only, the Hong Kong Special Administrative Region, | |
the Macau Special Administrative Region and Taiwan | |
"RMB" | Renminbi, the lawful currency of the PRC |
"Shareholder(s)" | the shareholder(s) of the Company |
"Suancigou Mining" | Inner Mongolia Yitai Jingyue Suancigou Mining Co., Ltd.* (內蒙古 |
伊泰京粵酸刺溝礦業有限責任公司), a limited liability company | |
incorporated in the PRC on 18 September 2007 | |
"subsidiary" or "subsidiaries" | has the meaning ascribed to it under the Listing Rules |
"%" | percent |
By order of the Board | |
Inner Mongolia Yitai Coal Co., Ltd.* | |
Zhang Donghai | |
Chairman |
Inner Mongolia, the PRC, 6 November 2019
As at the date of this announcement, the executive directors of the Company are Mr. Zhang Donghai, Mr. Liu Chunlin, Mr. Ge Yaoyong, Mr. Zhang Dongsheng, Mr. Wang Sanmin, Mr. Lv Guiliang and Mr. Liu Jian; and the independent non-executive directors of the Company are Ms. Du Yingfen, Mr. Zhang Zhiming, Mr. Huang Sujian and Mr. Wong Hin Wing.
* For identification purpose only
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