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TABLE OF CONTENTS
FEISHANG ANTHRACITE RESOURCES LIMITED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
Table of Contents
Exhibit 15.1
Preliminary and Subject to Completion, dated December 31, 2013
Information Statement dated , 2013
FEISHANG ANTHRACITE RESOURCES LIMITED
Ordinary Shares, par value HK$0.01 per share
China Natural Resources, Inc. ("CHNR") is furnishing this information statement in connection with its spin-off (the "Spin-off") of Feishang
Anthracite Resources Limited ("Feishang Anthracite"). CHNR intends to effect the Spin-off by way of a distribution in specie of the entire issued share capital of Feishang Anthracite to the
holders of the common shares of CHNR (the "Distribution").
Feishang
Anthracite is currently a wholly-owned subsidiary of CHNR. Feishang Anthracite is a producer of anthracite coal based in Guizhou province of the People's Republic of China
(the "PRC") and is primarily engaged in the acquisition, construction and development of anthracite coal mines and the extraction and sale of anthracite coal. After the completion of the
Spin-off, CHNR will no longer hold any shares in Feishang Anthracite.
In
connection with the Spin-off, the ordinary shares of Feishang Anthracite will be distributed on a pro rata basis to holders of record of the common shares of CHNR on
January 13, 2014 (the "Distribution Record Date"). Holders of CHNR common shares ("CHNR Shareholders") will be entitled to receive five Feishang Anthracite ordinary shares for each CHNR
common share held on the Distribution Record Date. CHNR Shareholders will not be required to pay any consideration for the Feishang Anthracite ordinary shares that they will be entitled to receive in
the Distribution or to surrender or exchange CHNR common shares in order to be entitled to receive Feishang Anthracite ordinary shares and do not need to take any other action in connection with the
Spin-off. No CHNR Shareholder approval of the Spin-off or Distribution is required or sought. CHNR is not asking you for a proxy and you are requested not to send CHNR
a proxy.
The
Spin-off is subject to the conditions described under "The Spin-off" in this information statement. Investors who trade in the Feishang Anthracite ordinary shares prior to receipt of
the Feishang Anthracite share certificates do so entirely at their own risk.
Currently,
there is no trading market for Feishang Anthracite ordinary shares. The Feishang Anthracite ordinary shares are expected to be listed on The Stock Exchange of Hong Kong
Limited (the "Hong Kong Stock Exchange") under the stock code "1738" on or around January 22, 2014. Admission to listing and trading is subject to the approval of the Listing Committee
of the Hong Kong Stock Exchange. The Feishang Anthracite ordinary shares will not be listed on any securities exchange in the United States or quoted on any automated inter-dealer quotation
system in the United States. An active trading market for Feishang Anthracite ordinary shares is not expected to develop in the United States.
CHNR
intends to treat the Distribution as a taxable dividend for U.S. Federal income tax purposes. See "Certain Material Tax Consequences" on page IS-29 of this information
statement.
You
should carefully consider the risks described under "Risk Factors Relating to the Distribution" beginning on page IS-17 of this information statement and under "Risk Factors"
beginning on page 37 of the Hong Kong Listing Document.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Feishang Anthracite ordinary
shares or passed upon the accuracy or adequacy of this information statement. Any representation to the contrary is a criminal offense.
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
This information statement is first being mailed to CHNR Shareholders on or about January , 2014.
TABLE OF CONTENTS
Information Statement
IS-i
Table of Contents
ABOUT THIS INFORMATION STATEMENT
This information statement incorporates the listing document (the "Hong Kong Listing Document") for the listing
of the Feishang Anthracite ordinary shares on the Hong Kong Stock Exchange, except for: (a) Appendix I — "Accountants' Report of the Company" to the
Hong Kong Listing Document, which contains our consolidated financial statements as of and for the years ended December 31, 2010, 2011 and 2012 and as of and for the six months ended
June 30, 2013 as audited by Ernst & Young in accordance with Auditing Guideline 3.340 Prospectuses and Reporting Accountant issued
by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and unaudited comparative consolidated financial statements for the six months ended June 30, 2012;
(b) Appendix II — "Accountants' Report of Guizhou Puxin" to the Hong Kong Listing Document, which contains the consolidated financial statements of
Guizhou Puxin Energy Co., Ltd. ("Guizhou Puxin") as of December 31, 2009 and March 17, 2010 and for the 76-day period ended March 17, 2010;
(c) Appendix III — "Competent Person's Report" to the Hong Kong Listing Document, which contains the
independent technical review of our seven coal mines prepared by Behre Dolbear Asia, Inc., a mineral industry expert, certain disclosures relating to our measured, indicated and inferred coal
resources as of July 31, 2013, which was prepared in accordance with Chapter 18 of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the
"Listing Rules") and certain disclosures relating to net present value for the Company and each of its anthracite coal mines as of July 31, 2013 through 2030 and payback periods which
are derived from Appendix III — "Competent Person's Report" to the Hong Kong Listing Document; and (d) a report prepared by Ernst & Young
relating to certain unaudited pro forma financial information included in Appendix VII — "Unaudited Pro Forma Financial Information" to the
Hong Kong Listing Document. Moreover, each of the sections headed "Summary — Non-IFRS Financial Measure — Cash Operating
Costs" and "Business — Non-IFRS Financial Measure — Cash Operating Costs" in the version of the Hong Kong Listing Document
incorporated herein includes a reconciliation of cash operating costs to cost of sales.
In
lieu of the financial statements contained in Appendix I — "Accountants' Report of the Company" to the Hong Kong Listing Document, we have
included in this information statement our consolidated financial statements as of and for the years ended December 31, 2010, 2011 and 2012 and as of and for the six months ended
June 30, 2013, which have been audited by Ernst & Young, and our unaudited comparative consolidated financial statements for the six months ended June 30, 2012. Except for the
auditing standards under which our consolidated financial statements as of and for the years ended 2010, 2011 and 2012 and as of and for the six months ended June 30, 2013 were audited by
Ernst & Young, these financial statements are substantially similar to those contained in Appendix I — "Accountants' Report of the Company" to the
Hong Kong Listing Document. For purposes of this information statement, all references in the Hong Kong Listing Document to "Appendix I — 'Accountants'
Report of the Company"' or "our consolidated financial statements" shall refer to our consolidated financial statements included in this information statement beginning on page F-1. The
consolidated financial statements of Guizhou Puxin contained in Appendix II — "Accountants' Report of Guizhou Puxin" to the Hong Kong Listing Documents
have been included in the Hong Kong Listing Document solely to satisfy the requirements of the Hong Kong Stock Exchange. The financial position and results of operations of Guizhou Puxin have been
consolidated into our consolidated financial statements since March 18, 2010.
Appendix
III — "Competent Person's Report" to the Hong Kong Listing Document, which contains the independent technical review of our seven coal
mines prepared by Behre Dolbear Asia, Inc., a mineral industry expert and certain disclosures relating to our measured, indicated and inferred coal resources as of July 31, 2013, which
was prepared in accordance with Chapter 18 of the Listing Rules, have been omitted from this information statement in order to comply with the requirements of the SEC Industry
Guide 7.
The
unaudited pro forma financial information included in the Hong Kong Listing Document under "Summary — Unaudited Pro Forma
Financial Information", "Financial Information — Unaudited Pro Forma Financial Information" and
Appendix VII — "Unaudited Pro Forma Financial Information" were prepared and included in the Hong Kong Listing Document in accordance with the
requirements of the Hong Kong Stock Exchange and the Listing Rules. Although the form and content of the unaudited pro forma financial information conform to the requirements of the Hong
Kong Stock Exchange and the Listing Rules, they do not meet the requirements of Article 11 of Regulation S-X under the Exchange Act. The unaudited pro forma
IS-1
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financial
information are based upon a number of assumptions and estimates that, while considered by us to be reasonable, are inherently subject to significant business, economic and other
uncertainties and contingencies. You are urged not to place any undue reliance on the unaudited pro forma financial information.
This
information statement should be read in conjunction with the Hong Kong Listing Document, and is qualified in its entirety by the more detailed information contained in the Hong Kong
Listing Document. For the avoidance of doubt, the documents delivered to the Registrar of Companies and available for inspection set forth in Appendix VI to the Hong Kong Listing
Document do not form a part of, and are not incorporated by reference in, this information statement. Terms used but not defined herein shall have the meanings given to them in the Hong Kong
Listing Document incorporated herein.
This
information statement is being furnished solely to provide information to existing CHNR Shareholders who will be entitled to receive Feishang Anthracite ordinary shares in
connection with the Spin-off. This information statement is not an offer to sell or a solicitation of any offer to buy any securities. The Spin-off and listing of the Feishang Anthracite ordinary
shares on the Hong Kong Stock Exchange do not involve any offering of any ordinary shares or any other securities of Feishang Anthracite, and no proceeds will be raised.
The
Feishang Anthracite ordinary shares to be distributed to you by CHNR in connection with the Distribution have not been and will not be registered under the U.S. Securities Act
of 1933, as amended (the "Securities Act"). The Feishang Anthracite ordinary shares are being registered under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange
Act"), pursuant to a registration statement on Form 20-F. You can retrieve a copy of the Form 20-F registration statement from the website of the U.S. Securities and Exchange
Commission (the "SEC") at www.sec.gov.
After
the completion of the Spin-off, we will become subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. As a
foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and
principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the
Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
No
person has been authorized to give any information or to make any representations other than those contained in this information statement and, if given or made, such information or
representations must not be relied upon as having been authorized. The information in this information statement is only accurate as of the date hereof. Nothing in this information statement may be
relied upon as a promise or representation as to future results or events, and the delivery of this information statement does not imply that there has been no change in the affairs of Feishang
Anthracite or CHNR or that the information in this information statement is correct as of any date subsequent to the date hereof.
You
should not construe the contents of this information statement as investment, legal or tax advice and should consult with your own counsel, accountants and other advisors as to
legal, tax, business, financial and related aspects of receiving Feishang Anthracite ordinary shares.
This
information statement has not been and will not be submitted to the British Virgin Islands Registrar of Corporate Affairs, any other authority in the British Virgin Islands or the
Hong Kong Stock Exchange, and may not be distributed to the public in the British Virgin Islands or in Hong Kong.
In
this information statement, unless the context otherwise requires, when we use the terms "we", "us", "our" or "Company", we are referring to Feishang Anthracite and its subsidiaries.
References
in this information statement to "US$" and "U.S. dollars" are to United States dollars and references to "HK$" are to Hong Kong dollars; and all references to
"RMB" or "Renminbi" are to Renminbi, the official currency of the PRC.
Unless
otherwise stated in this information statement, Renminbi amounts have been translated into U.S. dollars at the rate of RMB6.1374 to US$1.00 and Hong Kong dollars have been
translated into U.S. dollars
IS-2
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at
the rate of HK$7.7560 to US$1.00, which were exchange rates as set forth in the H.10 statistical release of the Federal Reserve Board on June 28, 2013. No representation is made that
the U.S. dollar amounts have been, could have been or could be converted to Renminbi, or vice versa, or that the Hong Kong dollar amounts have been, could have been or could be converted to
U.S. dollars, or vice versa, at that rate or at any other rate or at all.
Any
discrepancies in any table or elsewhere in this information statement between totals and sums of amounts listed herein are due to rounding.
The
financial information in this information statement, including the Hong Kong Listing Document, has been prepared in accordance with the International Financial Reporting Standards
("IFRS") issued by the International Accounting Standards Board (the "IASB"), which differ in certain respects from accounting principles generally accepted in certain other countries,
including generally accepted accounting principles in the United States.
SHAREHOLDER INQUIRIES
CHNR Shareholders with questions relating to the Spin-off may contact CHNR at Room 2205, 22/F, West Tower, Shun
Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong, email: info@chnr.net, telephone: +852 2810 7205. You may also request copies of this information statement by contacting CHNR
at the above address, email address or telephone number.
ENFORCEABILITY OF CIVIL LIABILITIES
Feishang Anthracite is a company incorporated in and under the laws of the British Virgin Islands with limited
liability, and all of Feishang Anthracite's directors and officers reside outside the United States and all or a substantial portion of the assets of Feishang Anthracite and of such persons are
located outside the United States. As a result, it may not be possible for shareholders to effect service of process within the United States upon Feishang Anthracite or such persons, or
to enforce against Feishang Anthracite or such persons judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the Federal securities
laws of the United States. Feishang Anthracite has been advised by its British Virgin Islands counsel, Maples and Calder, that there is doubt as to the enforceability in the British Virgin
Islands in original actions or in actions for enforcement of judgments of United States courts, or civil liabilities predicated solely upon the Federal securities laws of the
United States or the securities laws of any State or territory within the United States since the British Virgin
Islands does not have treaties with the United States providing for the reciprocal enforcement of civil judgments. Feishang Anthracite has also been advised by its PRC counsel,
Commerce & Finance Law Offices, that there is doubt as to the enforceability in the PRC, in original actions or in actions for enforcement of judgments of United States courts, of civil
liabilities predicated solely upon the Federal securities laws of the United States, since the PRC does not have treaties with the United States providing for the reciprocal recognition
and enforcement of judgment of courts.
IS-3
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FORWARD-LOOKING STATEMENTS
This information statement contains forward-looking statements. All statements other than statements of historical fact
contained in this information statement, including, without limitation, statements relating to our strategies, plans, objectives, goals and targets, our future financial, business or other performance
and development, the future development of our industry, the general economy of our key markets and globally, are intended to identify forward-looking statements. We also use the words "aim",
"anticipate", "believe", "continue", "could", "estimate", "expect", "forecast", "going forward", "intend", "may", "plan", "potential", "predict", "project", "ought to", "seek", "should", "will",
"would" and similar expressions to identify forward-looking statements.
These
forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors, some of which are beyond our control. In addition, these
forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Important factors that could materially affect our actual results,
performance or achievements include the risk factors set forth in "Risk Factors" in the Hong Kong Listing Document and the following:
- •
- our liquidity and financial condition;
- •
- our business strategies and plan of operations;
- •
- our future debt levels and capital needs and the availability and costs of bank loans and other forms of financing;
- •
- our capital expenditure plans;
- •
- projects under construction or planning;
- •
- the possibility of project cost overruns or unanticipated costs and expenses;
- •
- our production capacity;
- •
- our operations and business prospects;
- •
- our product mix;
- •
- changes in prices for anthracite coal;
- •
- supply and demand changes in anthracite coal markets;
- •
- changes in the competitive landscape in the anthracite coal industry;
- •
- our ability to reduce production costs;
- •
- our relationship with, and other conditions affecting, our customers;
- •
- risks inherent to coal mining, including accidents;
- •
- estimates of coal reserves;
- •
- our plans and objectives for future operations and expansion;
IS-4
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- •
- our dividend policy;
- •
- the regulatory environment and developments of our industry in general;
- •
- changes in political, economic, legal and social conditions in the PRC, including the PRC government's specific policies
with respect to the coal industries, economic growth, inflation, foreign exchange and the availability of credit; and
- •
- catastrophic losses from fires, floods, windstorms, earthquakes, diseases or other adverse weather-related damage.
These
forward-looking statements are based on current plans and estimates, which speak only as of the date they are made, and numerous assumptions regarding our present and future
business strategy and the environment in which we will operate in the future. Subject to the requirements of applicable laws, rules and regulations, we do not have any obligation to update or
otherwise revise any forward-looking statements in this information statement, whether as a result of new information, future events or otherwise.
Due
to these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this information statement might not occur in the way we expect, or at all.
Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements contained in this information statement are qualified by reference to this
cautionary statement.
IS-5
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SUMMARY
The following summary highlights information contained in, and is qualified in its entirety by, the more
detailed information (including our consolidated financial information and the notes thereto) appearing elsewhere in this information statement. Since the following is a summary, it does not contain
all of the information relevant to the Spin-off. Accordingly, you are urged to read the entire information statement, including the Hong Kong Listing Document.
OVERVIEW
We are a producer of anthracite coal based in Guizhou province of the PRC. We are primarily engaged in the acquisition, construction
and development of anthracite coal mines and the extraction and sale of anthracite coal. Our mining assets consist of seven underground anthracite coal mines in Guizhou province, of which five have
commenced commercial production, one is undergoing its pilot run phase and one is under construction. All of our anthracite coal mines are accessible by road and located in Guizhou province, which,
according to the SAWS and Fenwei, had the largest anthracite coal resources among the provinces in Southwest China as of December 31, 2012. The following table sets forth certain information
regarding our seven anthracite coal mines as of the date of the Hong Kong Listing Document, other than information regarding the total proved and probable reserves and the estimated mine lives of our
anthracite coal mines, which were as of July 31, 2013.
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|
|
|
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|
|
|
|
|
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|
|
|
|
Anthracite Coal Mine
|
|
Stage of Production |
|
Date of
Initial/Expected
Commercial Production |
|
Total
Proved and
Probable
Reserves
(in million
tonnes) |
|
Permitted
Annual
Production
Capacity
(in tonnes)(1) |
|
Estimated
Mine
Life(2) (in years) |
|
Baiping Coal Mine |
|
Commercial production |
|
June 2009 |
|
|
22.48 |
|
|
150,000 |
|
|
37 |
|
Liujiaba Coal Mine |
|
Commercial production |
|
December 2012 |
|
|
13.60 |
|
|
300,000 |
|
|
23 |
|
Zhulinzhai Coal Mine |
|
Commercial production |
|
April 2012 |
|
|
9.56 |
|
|
300,000 |
|
|
21 |
|
Gouchang Coal Mine |
|
Commercial production (suspended)(3) |
|
April 2011 |
|
|
5.72 |
|
|
90,000 |
|
|
52 |
|
Yongsheng Coal Mine |
|
Pilot run |
|
March 2014 |
|
|
51.96 |
|
|
600,000 |
|
|
29 |
|
Dayuan Coal Mine |
|
Commercial production |
|
November 2013 |
|
|
8.26 |
|
|
300,000 |
|
|
18 |
|
Dayun Coal Mine |
|
Construction |
|
July 2015 |
|
|
97.29 |
|
|
600,000 |
|
|
54 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
208.87 |
|
|
2,340,000 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Represents
the annual production capacity as permitted under the relevant mining rights permits.
- (2)
- Mine
life estimates are calculated by dividing proved and probable reserves by the optimized annual production capacity, which takes into account the
planned future increases in production capacity still in the design phase.
- (3)
- Operations
have been suspended at Gouchang Coal Mine since March 2013 pending the acquisition by us of a nearby coal mine and Gouchang Coal Mine
achieving certain production capacity targets in accordance with Guizhou province's coal mine consolidation policy. See "Business — Our Anthracite Coal
Mines — Mines in Commercial Production — Gouchang Coal Mine" on page 110 of the Hong Kong Listing Document.
As of July 31, 2013, we had total proved and probable coal reserves of approximately 208.87 million tonnes and total permitted
annual production capacity of 2.34 million tonnes. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, we sold 166,362 tonnes, 314,058 tonnes,
437,010 tonnes, 148,539 tonnes and 187,432 tonnes of anthracite coal, respectively, and had revenues of RMB38.7 million, RMB105.2 million, RMB141.9 million,
RMB55.2 million and RMB54.7 million, respectively. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, the average selling price of the anthracite coal we
produced was RMB232.4, RMB296.4, RMB323.6, RMB360.3 and RMB291.9 per tonne, respectively.
IS-6
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During
the Track Record Period, we derived our revenue primarily from the sale of coal we produced. From time to time, we also engaged in coal trading activities by selling coal that we
purchased from third party suppliers. In 2011, 2012 and the six months ended June 30, 2012 and 2013, revenue from sales of third party coal was RMB33.1 million, RMB1.1 million,
RMB1.1 million and nil, respectively, representing 31.5%, 0.8%, 2.0% and nil, respectively, of our total revenue. We did not engage in any coal trading activities in 2010, and we do not intend
to engage in any significant coal trading activities in the future.
In
the PRC, end users generally characterize anthracite coal as thermal coal, chemical coal or PCI coal. Thermal coal is generally used in the electric power industry for power
generation and in the construction industry for cement production. Chemical coal is generally used for the production of synthetic ammonia and methanol, and PCI coal is generally used for sintering,
smelting and injection purposes in the pulverized coal injection process in iron production. Prior to 2011, we sold substantially
all of the coal produced from our mines as thermal coal. In 2011, 2012 and the six months ended June 30, 2013, we derived approximately 5%, 5% and 1.2% of our revenue from the sale of chemical
coal we produced, respectively, while our remaining revenue in each of these years was derived from the sale of thermal coal we produced and coal sourced from third parties. Subject to market
conditions and the Guizhou government's annual guidance on supply of thermal coal to power plants, we intend to significantly increase our sales of chemical coal in the future and begin selling PCI
coal in 2014. Our ability to sell chemical coal or PCI coal during the Track Record Period has been constrained as our annual production levels were determined based in large part on the Guizhou
government's annual guidance relating to the provision of certain minimum amounts of thermal coal to power plants operating in Guizhou, which has taken up a significant portion of our production
capacity. We generally price our anthracite coal based on the prevailing market prices in Guizhou, the anthracite coal type and quality, our sales volume and the length of our relationship with
the customer.
In
order to increase our production capacity, we plan to optimize all of our currently operating anthracite coal mines by improving mine layout and upgrading mine infrastructure and
equipment. We expect that our optimization plans will begin in 2015 and, after their expected completion in December 2018, we expect to be able to achieve an aggregate annual production
capacity of 5.81 million tonnes. The estimated costs of our optimization plans are RMB807.5 million.
Anthracite
coal production in Guizhou has historically exceeded local consumption and this trend is expected to continue. Anthracite coal prices in Guizhou are also highly cyclical. For
example, anthracite coal prices in Guizhou declined significantly in the second quarter of 2012 and, after a brief period of recovery, declined significantly again in the first half of 2013. There
could be further declines in anthracite coal prices in Guizhou in the future. See "Risk Factors — Risks relating to PRC's Coal
Industry — Our business, financial condition and results of operations are susceptible to the cyclical nature of the PRC anthracite coal market and vulnerable to
fluctuations in anthracite coal prices" on page 49 of the Hong Kong Listing Document.
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Under
PRC law, each coal mine in the PRC must obtain certain permits prior to commencing commercial production, including a mining right permit, a safe production permit and a coal
production permit. The following table sets forth certain information regarding our mining right permits, safe production permits and coal production permits as of the Latest Practicable Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining Right Permit |
|
Safe Production Permit |
|
Coal Production Permit(5) |
Mine
|
|
Holder/permit number |
|
Permit date
(month/year) |
|
Expiration
date
(month/year) |
|
Permit date
(month/year) |
|
Expiration
date
(month/year) |
|
Permit date
(month/year) |
|
Expiration
date
(month/year) |
Baiping Coal Mine(1) |
|
Baiping Mining/ C5200002011111120121064 |
|
November
2011 |
|
August 2014 |
|
May 2012 |
|
May 2015 |
|
June 2009 |
|
June 2020 |
Liujiaba Coal Mine |
|
Xinsong Coal/ C5200002009091120036374(2) |
|
March 2011 |
|
September
2019 |
|
November
2012 |
|
November
2015 |
|
December
2012 |
|
December
2037 |
Zhulinzhai Coal Mine |
|
Linjiaao Coal/ C5200002011031120108782 |
|
April 2011 |
|
July 2018 |
|
March 2012 |
|
March 2015 |
|
April 2012 |
|
April 2031 |
Gouchang Coal Mine |
|
Gouchang Coal/ C5200002009121120048406 |
|
April 2011 |
|
April 2017 |
|
April 2011 |
|
April 2014 |
|
April 2011 |
|
April 2045 |
Yongsheng Coal Mine |
|
Guizhou Yongfu/ C5200002012021120124117(3) |
|
February
2012 |
|
November
2027 |
|
— |
|
— |
|
— |
|
— |
Dayuan Coal Mine |
|
Dayuan Coal/ 5200002011051120118585 |
|
March 2013 |
|
March 2023 |
|
November
2013 |
|
November
2016 |
|
— |
|
— |
Dayun Coal Mine |
|
Guizhou Dayun/ C5200002011031120112455(4) |
|
March 2011 |
|
March 2031 |
|
— |
|
— |
|
— |
|
— |
- (1)
- In
2011 and 2012, the actual production output of Baiping Coal Mine exceeded its permitted annual production capacity under its mining right permit and coal
production permit. See "Business — Our Anthracite Coal Mines — Mines in Commercial
Production — Baiping Coal Mine" on page 108 of the Hong Kong Listing Document. We have applied for a mining right permit with an annual production capacity
of 300,000 tonnes for Baiping Coal Mine and we expect to obtain such permit in 2014.
- (2)
- The
mining right has been pledged to China Minsheng Bank.
- (3)
- The
mining right has been pledged to China Minsheng Bank and Bank of China.
- (4)
- The
mining right has been pledged to China Merchants Bank.
- (5)
- The
National People's Congress Standing Committee passed certain amendments to the Coal Law, which became effective on June 29, 2013, including
removing the requirement of obtaining coal production permits.
Each of our anthracite coal mines currently utilizes manual longwall mining, semi-mechanical longwall mining or mechanical longwall mining methods
to extract coal. Longwall mining refers to extracting coal from long rectangular blocks of coal seams. Manual longwall mining refers to drilling holes in the mining face, placing explosives and
detonating the explosives to extract the coal. Mechanical and semi-mechanical longwall mining involve using a mechanical shearer in coal extraction. In mechanical longwall mining, the mine roof is
held up during the extraction process by automatic hydraulic roof supports, while in semi-mechanical longwall mining, the mine roof is held up hydraulic roof supports that are operated manually. The
following table sets forth the current extraction method of each of our anthracite coal mines:
|
|
|
Anthracite Coal Mine
|
|
Extraction Method |
Baiping Coal Mine |
|
Manual longwall |
Liujiaba Coal Mine |
|
Semi-mechanical longwall |
Zhulinzhai Coal Mine |
|
Manual longwall |
Gouchang Coal Mine |
|
Manual longwall |
Dayun Coal Mine |
|
Mechanical longwall |
Yongsheng Coal Mine |
|
Mechanical longwall |
Dayuan Coal Mine |
|
Semi-mechanical longwall |
IS-8
Table of Contents
CAPITAL EXPENDITURE
Our capital expenditures were RMB219.7 million, RMB341.5 million, RMB360.2 million, RMB202.9 million and
RMB139.3 million in 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, respectively. Our capital expenditures primarily related to the construction of our coal mines,
purchase of mining-related equipment and machinery and pre-payments for land use rights for our coal mines. We expect to pay approximately an aggregate of RMB636.5 million in 2013 and 2014 for
capital expenditures. We expect to fund these capital expenditures through interest-bearing bank loans and other borrowings. In the past, we have financed a significant portion of our cash
requirements with non-interest bearing loans from companies controlled by Mr. Li Feilie, our chairman and chief executive officer. In March 2013, we repaid a significant portion of the
non-interest bearing loans from companies controlled by Mr. Li with interest-bearing bank and other borrowings. We do not anticipate receiving additional non-interest bearing loans from our
related parties after the Listing. Accordingly, we expect our finance costs to increase significantly in the future. See "Financial Information — Indebtedness" to
the Hong Kong Listing Document.
OUR STRENGTHS
We believe our principal strengths include the following:
- •
- anthracite is a relatively scarce and valuable resource;
- •
- our high quality coal reserves;
- •
- we are located in Guizhou province, which has one of the largest anthracite coal resources in the PRC;
- •
- we are well-positioned to capitalize on industry consolidation opportunities in Guizhou; and
- •
- experienced management team.
BUSINESS STRATEGIES
We aim to grow our business by focusing on the following strategies:
- •
- achieve profitability through sales of higher margin chemical and PCI coal and increasing our production output;
- •
- strengthen our sales and marketing networks;
- •
- create a more vertically integrated business;
- •
- enhance our operational efficiency and cost control;
- •
- enhance the environmental and occupational health and safety standards of our operations; and
- •
- increase our anthracite coal production capacity in the long-term through mine optimization plans and acquisitions of high
quality anthracite coal mines.
IS-9
Table of Contents
THE SPIN-OFF
The following is a brief summary of certain information contained elsewhere in this information statement and the Hong Kong Listing
Document. This summary is qualified in its entirety by the more detailed information set forth in this information statement and the Hong Kong Listing Document.
|
|
|
| Distributed Company |
|
Feishang Anthracite Resources Limited, a company incorporated in the British Virgin Islands with limited liability on January 6, 2010 and a wholly-owned subsidiary of CHNR immediately prior to the
Distribution. |
Distributing Company |
|
China Natural Resources, Inc., a company incorporated in the British Virgin Islands on December 14, 1993 and the sole shareholder of Feishang Anthracite immediately prior to the
Distribution. |
Listing and Trading of Feishang Anthracite Ordinary Shares |
|
There is currently no public market for Feishang Anthracite ordinary shares. Feishang Anthracite ordinary shares are expected to be listed on the Hong Kong Stock Exchange under the stock code "1738"
on or around January 22, 2014. The proposed listing does not involve an offering of new shares or any other securities and no proceeds will be raised pursuant to the Listing. Admission to listing and trading is subject to the approval of the
Listing Committee of the Hong Kong Stock Exchange. Feishang Anthracite ordinary shares will not be listed on any securities exchange in the United States or quoted on any automated inter-dealer quotation system in the
United States. |
The Distribution and Spin-off |
|
On December 31, 2013, the board of directors of CHNR declared a conditional special interim dividend to the CHNR Shareholders to be satisfied by way of a distribution in specie of the entire
issued share capital of Feishang Anthracite, being an aggregate of 124,554,580 ordinary shares, to all CHNR Shareholders in proportion to their respective shareholdings in CHNR on the Distribution Record Date. |
|
|
CHNR Shareholders will be entitled to receive five Feishang Anthracite ordinary shares for each CHNR common share held on the Distribution Record Date. CHNR Shareholders will not be required to pay
any consideration for the Feishang Anthracite ordinary shares that they will be entitled to receive in the Distribution or to surrender or exchange CHNR common shares in order to be entitled to receive Feishang Anthracite ordinary shares and do not
need to take any other action in connection with the Distribution. After the completion of the Distribution, CHNR will no longer hold any shares in Feishang Anthracite. |
|
|
The listing of and dealing in Feishang Anthracite ordinary shares on the Hong Kong Stock Exchange is expected to commence on January 22, 2014. |
IS-10
Table of Contents
|
|
|
| |
|
Trades on the Hong Kong Stock Exchange are required to be settled between exchange participants (as defined in the Listing Rules of the Hong Kong Stock Exchange) through CCASS on the second
Business Day after any trading day. CCASS is the central depository of share certificates and provides a computerized book-entry settlement of share transactions between its participants. All activities under CCASS are subject to the General Rules of
CCASS and CCASS Operational procedures in effect from time to time. In order to facilitate the trading of Feishang Anthracite ordinary shares upon the Listing, we and CHNR have put in place arrangements where any holders of record of CHNR common
shares (the "Record CHNR Shareholders") on the Distribution Record Date will be provided with the following three options to receive Feishang Anthracite ordinary shares: |
|
|
Option 1 — Request the Share Certificate to be issued in the name of the relevant stockbroker in Hong Kong and have the Feishang Anthracite ordinary shares deposited into CCASS
for credit to the designated CCASS Participant's stock account of such stockbroker in Hong Kong |
|
|
Prior to January 13, 2014, a Record CHNR Shareholder may contact his/her/its stockbroker outside Hong Kong and request for confirmation that it has custodial and nominee arrangements with, and is
able to trade on the Hong Kong Stock Exchange through, a stockbroker in Hong Kong. If the Record CHNR Shareholders' stockbroker outside Hong Kong is able to do so, the Record CHNR Shareholder may, either himself/herself/itself or through such
stockbroker, request that the Share Certificate be issued in the name of the the relevant stockbroker in Hong Kong and have the Feishang Anthracite ordinary shares be deposited into CCASS for credit to the designated CCASS Participant's account of
that stockbroker in Hong Kong. Record CHNR Shareholders should consult his/her/its stockbroker regarding the timing, cost and procedures of having the Shares deposited into CCASS. |
|
|
Option 2 — Request the Share Certificate to be issued in the name of a stockbroker in Hong Kong and have the Feishang Anthracite ordinary shares deposited into CCASS for credit to
the designated CCASS Participant's account of such stockbroker |
|
|
If the Record CHNR Shareholder has a brokerage account with a stockbroker in Hong Kong and wishes to hold his/her/its Feishang Anthracite ordinary shares through such account following the Listing,
he/she/it may, prior to January 13, 2014 and either himself/herself/itself or through such stockbroker in Hong Kong, request that the Share Certificate be issued in the name of the relevant stockbroker in Hong Kong and have the Feishang
Anthracite ordinary shares deposited into CCASS for credit to the designated CCASS Participant's stock account of such stockbroker in Hong Kong. Record CHNR Shareholders should consult his/her/its stockbroker regarding the timing, cost and procedures
of having the Shares deposited into CCASS. |
IS-11
Table of Contents
|
|
|
| |
|
Option 3 — Request the Share Certificate to be sent to the Record CHNR Shareholder directly (default option if no action is taken or no option is selected) |
|
|
If the Record CHNR Shareholder wishes to receive the Share Certificate in his/her/its own name and have the Share Certificate sent to his/her/its address that appears on the register of members of
CHNR on the Distribution Record Date, he/she/it may, prior to January 13, 2014 and either himself/herself/itself or through his/her/its stockbroker, request that the Share Certificate be issued in his/her/its own name and be posted to
his/her/its address on January 21, 2014, the Business Day before the Listing Date. Share Certificates will be posted on the same day to the address that appears on the register of members of CHNR on the Distribution Record
Date for Record CHNR Shareholders who (i) do not take any action or (ii) make no option selection by January 13, 2014. However, as the Share Certificate will only be posted on the Business Day before the Listing
Date, it may not arrive by the Listing Date due to delivery time and the Feishang Anthracite ordinary shares may not be deposited into CCASS in time for settlement of trades conducted on the Hong Kong Stock Exchange on the Listing
Date. |
|
|
If a CHNR Shareholder wishes to trade the Feishang Anthracite ordinary shares on the Hong Kong Stock Exchange on or shortly after the Listing Date, we strongly recommend the CHNR Shareholder to
select option 1 or 2 above. Under option 3, the CHNR Shareholder will receive Share Certificates which will be posted only on the Business Day before the Listing Date. This may result in a lengthy period of time after the Listing before the
CHNR Shareholder can trade such Shares on the Stock Exchange. |
|
|
The share certificates will only become valid if the Distribution becomes unconditional. In the event the Distribution does not become unconditional, dealings in the shares on the Hong Kong Stock
Exchange will not commence on January 22, 2014. In such event, we will make an announcement of the above and, if necessary, of a revised timetable. Investors who trade in Feishang Anthracite ordinary shares prior to the receipt of the share
certificates do so entirely at their own risk. |
IS-12
Table of Contents
|
|
|
| |
|
Note for Beneficial CHNR Shareholders |
|
|
CHNR Shareholders who are holding CHNR common shares through a bank, broker, dealer, financial institution or other custodian or nominee ("Beneficial CHNR Shareholders") are not registered holders of
CHNR common shares and therefore do not appear on the register of members of CHNR. As Feishang Anthracite ordinary shares will be distributed under the Distribution only to those Record CHNR Shareholders on the Distribution
Record Date, there is no assurance that Beneficial CHNR Shareholders will be able to receive Feishang Anthracite ordinary shares on or prior to the Listing Date, because the timing and manner of delivery of the Feishang Anthracite ordinary shares
will depend on specific arrangements with their respective intermediaries. Beneficial CHNR Shareholders should therefore contact their respective intermediaries (i) to coordinate the delivery of Feishang Anthracite ordinary shares under the
Distribution or (ii) if they wish to become Record CHNR Shareholders to facilitate the receipt of Feishang Anthracite ordinary shares in the Distribution under their own names or for credit to their designated CCASS Participant's stock
account. |
|
|
For further information, see "The Spin-off" in the Hong Kong Listing Document. |
Conditions to the Distribution |
|
The Distribution is conditional on the Listing Committee of the Hong Kong Stock Exchange granting listing of, and permission to deal in, Feishang Anthracite ordinary shares in issue on the Main Board
of the Hong Kong Stock Exchange. |
Distribution Record Date |
|
January 13, 2014 |
|
|
In order to be entitled to receive Feishang Anthracite ordinary shares in the Distribution, CHNR Shareholders must be holders of record of CHNR common shares on the Distribution Record Date. See
"Expected Timetable" in the Hong Kong Listing Document. |
Risks Associated with the Distribution and Feishang Anthracite |
|
There are certain risks associated with the Distribution and Feishang Anthracite. See "Risk Factors Relating to the Distribution" beginning on page IS-17 of this information statement and "Risk
Factors" beginning on page 37 of the Hong Kong Listing Document. |
No CHNR Shareholder Approval Required |
|
No CHNR Shareholder approval of the Distribution is required or sought. CHNR is not asking you for a proxy and you are requested not to send CHNR a proxy. |
No Appraisal Rights |
|
CHNR Shareholders have no appraisal rights in connection with the Distribution. |
IS-13
Table of Contents
|
|
|
| Certain Relationships Among Mr. Li Feilie, CHNR and Feishang Anthracite After the Distribution |
|
Immediately after the Distribution, Mr. Li Feilie will directly and indirectly own approximately 59.33% of the ordinary shares of Feishang Anthracite. For a discussion of certain continuing
relationships among Mr. Li Feilie, CHNR and Feishang Anthracite, see "Relationship with Our Controlling Shareholders" and "Connected Transactions" in the Hong Kong Listing Document. |
Certain Material Tax Consequences |
|
The Distribution will not be subject to British Virgin Islands or Hong Kong tax, but CHNR intends to treat the Distribution as a taxable dividend for U.S. Federal income tax purposes. CHNR may be
subject to PRC withholding tax on the Distribution. For a discussion of certain material income tax consequences, see "Certain Material Tax Consequences" in this information statement. |
IS-14
Table of Contents
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical consolidated income statements for the years ended December 31, 2010, 2011 and 2012 and the
six months ended June 30, 2012 and 2013, and the selected consolidated statements of financial position as of December 31, 2010, 2011 and 2012 and June 30, 2013 are derived from
our consolidated financial statements, including the notes thereto, beginning on page F-1 of this information statement. We have not included the selected financial data
for 2008 and 2009 because certain subsidiaries which we acquired in 2009 did not have any financial statements prior to their acquisition by us, and reconstructing this historical financial formation
would involve unreasonable effort and expense. You should read the summary historical consolidated financial statements set forth below in conjunction with our consolidated financial statements
beginning on page F-1 of this information statement together with the accompanying notes, which have been prepared in accordance with IFRS as issued by the IASB.
Selected Consolidated Income Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
2013 |
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(in thousands, except number of shares)
|
|
Revenue |
|
|
38,668 |
|
|
105,211 |
|
|
141,939 |
|
|
55,156 |
|
|
54,716 |
|
|
8,915 |
|
Gross profit |
|
|
13,215 |
|
|
30,922 |
|
|
46,050 |
|
|
24,760 |
|
|
14,763 |
|
|
2,405 |
|
Operating Loss |
|
|
(54,545 |
) |
|
(22,985 |
) |
|
(36,602 |
) |
|
(11,270 |
) |
|
(231,685 |
) |
|
(37,750 |
) |
Profit/(Loss) Before Income Tax |
|
|
562,134 |
|
|
(55,150 |
) |
|
(82,266 |
) |
|
(32,921 |
) |
|
(273,224 |
) |
|
(44,518 |
) |
Income tax (expense)/benefit |
|
|
(6,141 |
) |
|
(9,750 |
) |
|
15,210 |
|
|
(5,784 |
) |
|
50,468 |
|
|
8,223 |
|
Profit/(Loss) for the Year |
|
|
555,993 |
|
|
(64,900 |
) |
|
(67,056 |
) |
|
(38,705 |
) |
|
(222,756 |
) |
|
(36,295 |
) |
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
|
(36,163 |
) |
Non-controlling interests |
|
|
(6,439 |
) |
|
(735 |
) |
|
8,256 |
|
|
2,156 |
|
|
(809 |
) |
|
(132 |
) |
Earnings (losses) per share attributable to owners of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
|
(36,163 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
|
(36,163 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
IS-15
Table of Contents
Selected Consolidated Statements of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2013 |
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
(in thousands, except number of shares)
|
|
Non-current assets |
|
|
1,824,292 |
|
|
2,125,475 |
|
|
2,477,108 |
|
|
2,451,243 |
|
|
399,394 |
|
Current assets |
|
|
107,222 |
|
|
179,085 |
|
|
285,754 |
|
|
245,852 |
|
|
40,058 |
|
Total assets |
|
|
1,931,514 |
|
|
2,304,560 |
|
|
2,762,862 |
|
|
2,697,095 |
|
|
439,452 |
|
Current liabilities |
|
|
544,306 |
|
|
811,181 |
|
|
1,315,865 |
|
|
1,200,957 |
|
|
195,678 |
|
Net current liabilities |
|
|
437,084 |
|
|
632,096 |
|
|
1,030,111 |
|
|
955,105 |
|
|
155,620 |
|
Total liabilities |
|
|
1,300,550 |
|
|
1,739,091 |
|
|
2,255,267 |
|
|
2,407,524 |
|
|
392,271 |
|
Equity attributable to owners of the Company |
|
|
554,831 |
|
|
479,784 |
|
|
413,654 |
|
|
196,439 |
|
|
32,007 |
|
Non-controlling interests |
|
|
76,133 |
|
|
85,685 |
|
|
93,941 |
|
|
93,132 |
|
|
15,174 |
|
Total equity |
|
|
630,964 |
|
|
565,469 |
|
|
507,595 |
|
|
289,571 |
|
|
47,181 |
|
Key Financial Ratios
The table below sets forth our key financial ratios as of the dates or for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the year
ended December 31, |
|
As of or for the six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Inventory turnover days(1) |
|
|
49 |
|
|
26 |
|
|
31 |
|
|
45 |
|
|
59 |
|
Average trade and bill payable turnover days(2) |
|
|
660 |
|
|
362 |
|
|
325 |
|
|
428 |
|
|
451 |
|
Average trade and bill receivable turnover days(3) |
|
|
29 |
|
|
61 |
|
|
101 |
|
|
75 |
|
|
157 |
|
Gearing ratio(4) |
|
|
47.5 |
% |
|
60.4 |
% |
|
68.8 |
% |
|
66.6 |
% |
|
86.5 |
% |
Debt to equity ratio(5) |
|
|
90.5 |
% |
|
152.4 |
% |
|
220.0 |
% |
|
199.8 |
% |
|
641.2 |
% |
Gross margin(6) |
|
|
34.2 |
% |
|
29.4 |
% |
|
32.4 |
% |
|
44.9 |
% |
|
27.0 |
% |
- (1)
- Inventory
turnover days are calculated by dividing the arithmetic mean of the opening and closing balances of inventories for the year by cost of sales in
that year and multiplying by 360 days. As we did not have any commercial production until March 18, 2010, inventory turnover days in 2010 is calculated by dividing the arithmetic mean of
the balance of inventories as of March 18 and December 31, 2010 by cost of sales for the period beginning on March 18, 2010 and ending on December 31, 2010, and multiplying
by 280 days.
- (2)
- The
average trade and bill payable turnover days are calculated by dividing the arithmetic mean of opening and ending balance of trade and bill payables for
the year by cost of sales in the year and then multiplying by 360 days. As we did not have any commercial production until March 18, 2010, the average trade and bill payables turnover
days in 2010 is calculated by dividing the arithmetic mean of the balance of trade and bill payables as of March 18 and December 31, 2010 by cost of sales for the period beginning on
March 18, 2010 and ending on December 31, 2010, and multiplying by 280 days.
- (3)
- The
average trade and bill receivable turnover days are calculated by dividing the arithmetic mean of opening and ending balance of trade and bill
receivables for the year by revenue in that year and then multiplying by 360 days. As we did not have any commercial production until March 18, 2010, the average trade and bill
receivables turnover days in 2010 is calculated by dividing the arithmetic mean of the balance of trade and bill receivables as of March 18 and December 31, 2010 by revenue for the
period beginning on March 18, 2010 and ending on December 31, 2010, and multiplying by 280 days.
- (4)
- Gearing
ratio is calculated by dividing total interest-bearing debt by total capital at the end of the year and multiplying by 100%. Interest-bearing debt
includes interest-bearing bank and other borrowings and mining rights payables. Capital includes total equity and interest-bearing debt.
- (5)
- Debt
to equity ratio is calculated by dividing total interest-bearing debt by total equity (based on book value without any revaluation) at the end of the
year and multiplying by 100%. Interest-bearing debt includes interest-bearing bank and other borrowings and mining rights payables.
- (6)
- Gross
margin is calculated by dividing gross profit by revenue at the end of the year and multiplying by 100%.
IS-16
Table of Contents
RISK FACTORS RELATING TO THE DISTRIBUTION
You should carefully consider the risks described below and under "Risk Factors" beginning on page 36 in the Hong Kong Listing
Document.
The combined market value of CHNR common shares and Feishang Anthracite ordinary shares after the Spin-off may be less than the market value of CHNR common shares prior to
the Spin-off.
CHNR currently has two business segments: base metals exploration and mining; and anthracite coal exploration and mining, which is
operated through Feishang Anthracite. After the completion of the Distribution, CHNR will no longer hold any Feishang Anthracite ordinary shares and, accordingly, it will only retain its base metals
exploration mining business. Until the market has fully evaluated the business of CHNR without Feishang Anthracite, as well as the business of Feishang Anthracite on a stand-alone basis, the trading
price of the common shares of CHNR and the ordinary shares of Feishang Anthracite may fluctuate significantly. In particular, the combined market value of CHNR common shares and Feishang Anthracite
ordinary shares after the Spin-off may be significantly less than the market value of CHNR common shares prior to the Spin-off.
CHNR intends to treat the Distribution as a taxable dividend for U.S. Federal income tax purposes.
It is not clear whether the Distribution would qualify as a tax-free spin-off under Section 355 of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"). If CHNR is required to report the Distribution to the IRS, CHNR intends to treat the Distribution as a taxable dividend to its Shareholders for
U.S. Federal income tax purposes. Under this treatment, as explained in "Certain Material Tax Consequences — United States Federal Income Taxation"
in this information statement, U.S. holders of CHNR common shares would be subject to tax on the fair market value of the Feishang Anthracite ordinary shares they receive. Holders should consult their own tax advisers
concerning the U.S. federal, state, local and other tax consequences of the Distribution in light of their particular
circumstances.
Holders of the Feishang Anthracite ordinary shares located in the United States may not be able to participate in rights offerings or elect to receive dividends in
the form of Feishang Anthracite ordinary shares and may experience dilution of their holdings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. We may not offer or sell
securities in the United States unless we register those securities under the Securities Act or an exemption from the registration requirements of the Securities Act is available. We cannot
assure you that we will be able to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these
rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of the Feishang Anthracite ordinary shares located in the United States
may be unable to participate in rights offerings and may experience dilution of their holdings as a result.
We
may offer, from time to time, a share dividend election to all our shareholders, subject to applicable securities laws, in respect of future dividends. We will, however, not
permit our shareholders to exercise such election unless the issuance of our ordinary shares pursuant to such election is either exempt from registration under the Securities Act
or registered under the provisions of the Securities Act. There can be no assurance that we will be able to establish an exemption from registration under the Securities
Act, and we are under no obligation to file a registration statement with respect to shares issuable pursuant to these elections or to endeavor to have a registration
IS-17
Table of Contents
statement
declared effective under the Securities Act. In addition, we may choose not to offer such election to some shareholders, and may instead offer those shareholders dividends in the form of
cash only. Accordingly, our shareholders may be unable to elect to receive dividends in the form of our ordinary shares rather than cash and, as a result may experience dilution of
their holdings.
CHNR faces uncertainties with respect to the applicability of PRC withholding tax on the Distribution.
Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (
) ("SAT Circular 698") issued by the State Administration of Taxation ("SAT") on December 10, 2009 with retroactive effect from January 1, 2008, if
a non-PRC resident enterprise transfers its indirect equity interests in a PRC resident enterprise by disposing of its equity interests in an overseas holding company ("Indirect Transfer"), and such
overseas holding company is located in a tax jurisdiction that has an effective tax rate of less than 12.5% or does not tax foreign income of its residents, the non-PRC resident enterprise, as the
transferor, is required to report the Indirect Transfer to the relevant PRC tax authorities. Using a "substance over form" principle, the PRC tax authorities may disregard the existence of the
overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of avoiding PRC tax, in which case the gains derived from such "Indirect Transfer" may be
subject to PRC withholding tax at a rate of up to 10%. SAT Circular 698 also provides that, if a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its
related parties at a price lower than the fair market value, the relevant PRC tax authorities have the authority to make reasonable adjustments to the taxable income of the transaction.
There
is uncertainty as to the application of SAT Circular 698. For example, while the term "Indirect Transfer" is not clearly defined, it is understood that the relevant PRC tax
authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with the PRC. In addition, there is no formal declaration with regard to
how to determine whether an overseas holding company lacks a "reasonable commercial purpose" or was "established for the purpose of avoiding PRC tax". As a result, there is a risk that the PRC tax
authorities would regard the Distribution as an "Indirect Transfer" by CHNR of our PRC subsidiaries to CHNR's shareholders subject to SAT Circular 698. If SAT Circular 698 were
determined to be applicable to the Distribution by the PRC tax authorities, CHNR could be required to withhold taxes at a rate of up to 10% on any gains derived from the Distribution, which may be
deemed as the difference between the fair value of our ordinary shares at the time of the Distribution and CHNR's tax basis in our ordinary shares.
We are a British Virgin Islands company and, because the rights of shareholders under British Virgin Islands differ from those under U.S. law, you may have difficulty
protecting your shareholder rights.
We are a company incorporated under the laws of the British Virgin Islands, and substantially all of our assets are located outside the
United States. In addition, all of our directors and executive officers are nationals or residents of jurisdictions other than the United States and all or a substantial portion of their
assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or
executive officers, or enforce judgments obtained in the United States courts against our directors or executive officers.
IS-18
Table of Contents
Our
corporate affairs are governed by our amended and restated memorandum and articles of association, The BVI Business Companies Act, 2004, of the British Virgin Islands and the common
law of the British Virgin Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors under British
Virgin Islands law are to a large extent governed by The BVI Business Companies Act, 2004, and the common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in
part from comparatively limited judicial precedent in the British Virgin Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the British Virgin
Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are not as clearly established as they would be under statutes or judicial
precedent in some jurisdictions in the United States. In particular, the British Virgin Islands has a less developed body of securities laws as compared to the United States, and some
states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law. In addition, British Virgin Islands companies may not have standing to initiate a shareholder
derivative action in a federal court of the United States.
The
British Virgin Islands courts are also unlikely:
- •
- to recognize or enforce against us judgments of courts of the United States based on certain civil liability
provisions of U.S. Federal securities laws; and
- •
- to impose liabilities against us, in original actions brought in the British Virgin Islands, based on certain civil
liability provisions of U.S. Federal securities laws that are penal in nature.
There
is no statutory recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands will generally
recognize and enforce a non-penal final and conclusive monetary judgment of a foreign court of competent jurisdiction without retrial on the merits.
As
a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors
or controlling shareholders than they would as shareholders of a U.S. company.
IS-19
Table of Contents
EXCHANGE RATE INFORMATION
The PRC
The People's Bank of China ("PBOC") sets and publishes daily a base exchange rate with reference primarily to the supply and demand of
Renminbi against a basket of currencies in the markets during the prior day. The PBOC also takes into account other factors such as the general conditions existing in the international foreign
exchange market. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of Renminbi to that of the U.S. dollar. Under the policy, Renminbi is permitted
to fluctuate within a narrow and managed band against a basket of certain foreign currencies determined by the PBOC. On May 18, 2007, the PBOC increased the floating band of Renminbi trading
prices against the U.S. dollar in the interbank spot foreign currency exchange market from 0.3% to 0.5%. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5% above
or below the central parity rate published by the PBOC. On June 19, 2010, the PBOC announced that it intends to further reform the Renminbi exchange rate regime by allowing greater flexibility
in the Renminbi exchange rate. According to this announcement, the exchange rate floating bands will remain the same as previously announced, but the PBOC will place more emphasis on reflecting market
supply and demand with reference to a basket of currencies. The floating band was further widened to 1.0% since April 16, 2012. The PRC government in the future may make further adjustments to
the exchange rate system. The PBOC authorized the China Foreign Exchange Trading Center, effective since January 4, 2006, to announce the central parity exchange rate of certain foreign
currencies against the Renminbi at 9:15 a.m. each business day. This rate is set as the central parity for the trading against the Renminbi in the inter-bank foreign exchange spot market and
the over the counter exchange rate for that business day.
The
following table sets forth the exchange rates between Renminbi and U.S. dollar for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate(1) |
|
Period
|
|
Period end |
|
Average(2) |
|
High |
|
Low |
|
|
|
(RMB per US$1.00)
|
|
2008 |
|
|
6.8225 |
|
|
6.9193 |
|
|
7.2946 |
|
|
6.7800 |
|
2009 |
|
|
6.8259 |
|
|
6.8295 |
|
|
6.8470 |
|
|
6.8176 |
|
2010 |
|
|
6.6000 |
|
|
6.7603 |
|
|
6.8330 |
|
|
6.6000 |
|
2011 |
|
|
6.2939 |
|
|
6.4475 |
|
|
6.6364 |
|
|
6.2939 |
|
2012 |
|
|
6.2301 |
|
|
6.2990 |
|
|
6.3879 |
|
|
6.2221 |
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
January |
|
|
6.2186 |
|
|
6.2215 |
|
|
6.2303 |
|
|
6.2134 |
|
February |
|
|
6.2213 |
|
|
6.2323 |
|
|
6.2438 |
|
|
6.2213 |
|
March |
|
|
6.2108 |
|
|
6.2154 |
|
|
6.2246 |
|
|
6.2105 |
|
April |
|
|
6.1647 |
|
|
6.1861 |
|
|
6.2078 |
|
|
6.1647 |
|
May |
|
|
6.1340 |
|
|
6.1416 |
|
|
6.1665 |
|
|
6.1213 |
|
June |
|
|
6.1374 |
|
|
6.1342 |
|
|
6.1488 |
|
|
6.1248 |
|
July |
|
|
6.1284 |
|
|
6.1343 |
|
|
6.1408 |
|
|
6.1284 |
|
August |
|
|
6.1193 |
|
|
6.1213 |
|
|
6.1302 |
|
|
6.1123 |
|
September |
|
|
6.1200 |
|
|
6.1198 |
|
|
6.1213 |
|
|
6.1178 |
|
October |
|
|
6.0943 |
|
|
6.1032 |
|
|
6.1209 |
|
|
6.0815 |
|
November |
|
|
6.0922 |
|
|
6.0929 |
|
|
6.0993 |
|
|
6.0903 |
|
December (through December 27) |
|
|
6.0684 |
|
|
6.0755 |
|
|
6.0927 |
|
|
6.0643 |
|
IS-20
Table of Contents
- (1)
- Exchange
rates between the Renminbi and the U.S. dollar for all periods through December 31, 2008 represent the noon buying rates for
U.S. dollars in New York City for cable transfers in Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. Exchange rates between the Renminbi and
the U.S. dollar from and after January 1, 2009 represent the daily rates as set forth in the H.10 statistical release of the Federal Reserve Board.
- (2)
- Annual
averages are calculated by averaging the exchange rates on the last business day of each month during the relevant year. Monthly averages are
calculated by averaging the daily rates during the relevant monthly period.
Hong Kong
The Hong Kong dollar is freely convertible into the U.S. dollar. Since October 17, 1983, the Hong Kong dollar has been
pegged to the U.S. dollar at the rate of HK$7.80 to US$1.00. Under existing Hong Kong law, (i) there are no foreign exchange controls that affect the remittance of dividend payments to
United States residents and (ii) there are no limitations on the rights of non-residents or foreign owners to hold the Feishang Anthracite ordinary shares. The Basic Law of the Hong Kong
Special Administrative Region of the People's Republic of China (the "Basic Law"), which came into effect on July 1, 1997, provides that no foreign exchange control policies shall be
applied in Hong Kong.
The
market exchange rate of the Hong Kong dollar against the U.S. dollar continues to be determined by the forces of supply and demand in the foreign exchange market. However,
against the background of the fixed rate system which applies to the issuance and withdrawal of Hong Kong currency in circulation, the market exchange rate has not deviated significantly from the
level of HK$7.80 to US$1.00 since the peg was first established. However, in May 2005, the Hong Kong Monetary Authority broadened the 22-year old trading band from the original rate of HK$7.80
per U.S. dollar to a rate range of HK$7.75 to HK$7.85 per U.S. dollar. The Hong Kong government has indicated its intention to maintain the link within that rate range. Under the Basic
Law, the Hong Kong dollar will continue to circulate and remain freely convertible. The Hong Kong government has also stated that it has no intention to impose exchange controls in Hong Kong and that
the Hong Kong dollar will remain freely convertible into other currencies, including the U.S. dollar. However, no assurance can be given that the Hong Kong government will maintain the link at
HK$7.75 to HK$7.85 to US$1.00 or at all.
IS-21
Table of Contents
The
following table sets forth the exchange rates between the Hong Kong dollar and the U.S. dollar for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate(1) |
|
Period
|
|
Period end |
|
Average(2) |
|
High |
|
Low |
|
|
|
(HK$ per US$1.00)
|
|
2008 |
|
|
7.7499 |
|
|
7.7814 |
|
|
7.8159 |
|
|
7.7497 |
|
2009 |
|
|
7.7536 |
|
|
7.7513 |
|
|
7.7618 |
|
|
7.7495 |
|
2010 |
|
|
7.7810 |
|
|
7.7692 |
|
|
7.8040 |
|
|
7.7501 |
|
2011 |
|
|
7.7663 |
|
|
7.7793 |
|
|
7.8087 |
|
|
7.7634 |
|
2012 |
|
|
7.7507 |
|
|
7.7556 |
|
|
7.7699 |
|
|
7.7493 |
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
January |
|
|
7.7560 |
|
|
7.7530 |
|
|
7.7585 |
|
|
7.7503 |
|
February |
|
|
7.7546 |
|
|
7.7552 |
|
|
7.7580 |
|
|
7.7531 |
|
March |
|
|
7.7629 |
|
|
7.7592 |
|
|
7.7640 |
|
|
7.7551 |
|
April |
|
|
7.7606 |
|
|
7.7631 |
|
|
7.7652 |
|
|
7.7606 |
|
May |
|
|
7.7625 |
|
|
7.7614 |
|
|
7.7639 |
|
|
7.7587 |
|
June |
|
|
7.7560 |
|
|
7.7602 |
|
|
7.7654 |
|
|
7.7534 |
|
July |
|
|
7.7558 |
|
|
7.7567 |
|
|
7.7587 |
|
|
7.7535 |
|
August |
|
|
7.7544 |
|
|
7.7553 |
|
|
7.7564 |
|
|
7.7537 |
|
September |
|
|
7.7551 |
|
|
7.7543 |
|
|
7.7557 |
|
|
7.7533 |
|
October |
|
|
7.7530 |
|
|
7.7536 |
|
|
7.7545 |
|
|
7.7524 |
|
November |
|
|
7.7526 |
|
|
7.7523 |
|
|
7.7535 |
|
|
7.7512 |
|
December (through December 27) |
|
|
7.7548 |
|
|
7.7534 |
|
|
7.7550 |
|
|
7.7517 |
|
- (1)
- Exchange
rates between the Hong Kong dollar and the U.S. dollar for all periods through December 31, 2008 represent the noon buying rates for
U.S. dollars in New York City for cable transfers in the Hong Kong dollar as certified for customs purposes by the Federal Reserve Bank of New York. Exchange rates between the
Hong Kong dollar and the U.S. dollar from and after January 1, 2009 represent the daily rates as set forth in the H.10 statistical release of the Federal Reserve Board.
- (2)
- Annual
averages are calculated by averaging the exchange rates on the last business day of each month during the relevant year. Monthly averages are
calculated by averaging the daily rates during the relevant monthly period.
IS-22
Table of Contents
CAPITALIZATION
The following table sets forth Feishang Anthracite's capitalization as of June 30, 2013. This table should be read in
conjunction with the information under "Selected Historical Financial Information" in this information statement and Feishang Anthracite's consolidated financial statements beginning on
page F-1 of this information statement. We have incurred significant indebtedness after June 30, 2013. See "Financial Information—Indebtedness" in the Hong Kong Listing
Document.
|
|
|
|
|
|
|
|
|
|
As of June 30, 2013 |
|
|
|
RMB |
|
US$ |
|
|
|
(in thousands)
|
|
INTEREST-BEARING LOANS |
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
Bank and other borrowings — guaranteed |
|
|
635,000 |
|
|
103,464 |
|
Current portion of long term bank and other borrowings — secured and guaranteed |
|
|
170,000 |
|
|
27,699 |
|
Current portion of long term bank and other borrowings — guaranteed |
|
|
56,900 |
|
|
9,271 |
|
Non-current |
|
|
|
|
|
|
|
Bank and other borrowings — guaranteed |
|
|
433,849 |
|
|
70,689 |
|
Bank and other borrowings — secured and guaranteed |
|
|
380,000 |
|
|
61,915 |
|
Bank and other borrowings — unsecured |
|
|
83,600 |
|
|
13,621 |
|
| |
|
|
|
|
|
Total Interest-Bearing Bank and Other Borrowings |
|
|
1,759,349 |
|
|
286,659 |
|
DUE TO RELATED COMPANIES |
|
|
|
|
|
|
|
Current |
|
|
140,633 |
|
|
22,914 |
|
| |
|
|
|
|
|
Total Due to Related Companies |
|
|
140,633 |
|
|
22,914 |
|
EQUITY |
|
|
|
|
|
|
|
Issued capital |
|
|
— |
|
|
— |
|
Reserves |
|
|
196,439 |
|
|
32,007 |
|
| |
|
|
|
|
|
Equity Attributable to Owners of the Company |
|
|
196,439 |
|
|
32,007 |
|
| |
|
|
|
|
|
TOTAL CAPITALIZATION |
|
|
2,096,421 |
|
|
341,580 |
|
| |
|
|
|
|
|
IS-23
Table of Contents
MARKET INFORMATION
Currently, there is no trading market for Feishang Anthracite ordinary shares. Feishang Anthracite is seeking the approval of the
Listing Committee of the Hong Kong Stock Exchange for the listing of Feishang Anthracite ordinary shares on the Hong Kong Stock Exchange. See "The Spin-off" in this information statement. The Feishang
Anthracite ordinary shares are expected to be listed on the Hong Kong Stock Exchange under the stock code "1738" on or around January 22, 2014. The proposed listing does not involve an offering
of new shares or any other securities and no new proceeds will be raised pursuant to the listing. There can be no assurance as to the establishment or continuity of any trading market for the Feishang
Anthracite ordinary shares. The Feishang Anthracite ordinary shares will not be listed on any securities exchange in the United States or quoted on any automated inter-dealer quotation system
in the United States.
IS-24
Table of Contents
THE HONG KONG STOCK EXCHANGE
The Hong Kong Stock Exchange, which commenced trading on April 2, 1986, was formed upon the unification of the four stock
exchanges then existing in Hong Kong and, by September 30, 2013, listed the shares of 1,399 companies on the main board with a total market capitalization of approximately
HK$22,679 billion. During the month ended September 30, 2013, the average trading volume in value for the main board per trading day on the Hong Kong Stock Exchange was approximately
HK$59 billion. On March 3, 1999, the Financial Secretary of Hong Kong announced in his budget speech a comprehensive reform of the securities and futures markets in Hong Kong, which
included the demutualization and merger of the five recognized and approved market operators in Hong Kong, namely the Hong Kong Stock Exchange, Hong Kong Futures Exchange Limited, HKSCC, The SEHK
Options Clearing House Limited and HKFE Clearing Corporation Limited under a single holding company (which was subsequently incorporated under the name of Hong Kong Exchanges and Clearing Limited
("HKEx")). The merger became effective on March 6, 2000.
As
a result of the merger, the former shareholders of the Hong Kong Stock Exchange and Hong Kong Futures Exchange Limited (together, the "Exchanges") effectively exchanged their
ownership rights in the Exchanges for economic interests in HKEx and the conventional right to receive dividends, while retaining their existing rights to trade on the Exchanges. At the same time,
certain of the regulatory functions performed by the Exchanges were passed over to the SFC.
Shares
in the HKEx were listed on the Hong Kong Stock Exchange on June 27, 2000. As a listed company on its own stock market, HKEx is regulated by the SFC to avoid any conflict of
interest and to ensure a level playing field between HKEx and other listed companies which are subject to the Listing Rules. Regulation by the SFC is imposed through two sets of provisions. First, the
Listing Rules have been amended to incorporate a new chapter (Chapter 38) relating specifically to the listing of HKEx and which sets out the requirements that must be satisfied for the
securities of HKEx to be listed on the Hong Kong Stock Exchange Second, a Memorandum of Understanding, dated June 19, 2000 (which was subsequently replaced and superseded by another Memorandum
of Understanding dated August 22, 2001), has been entered into among the SFC, HKEx and the Hong Kong Stock Exchange which sets forth the manner the parties to it will relate to each other in
relation to:
- •
- HKEx's and other applicants' and issuers' compliance with the Listing Rules;
- •
- the enforcement by the Hong Kong Stock Exchange of its rules in relation to HKEx's securities and those of other
applicants and issuers;
- •
- the SFC's supervision and regulation of HKEx as a listed issuer and, where a conflict of interest arises, other applicants
and issuers;
- •
- conflicts of interest which may arise between the interests of HKEx as a listed company and companies of which it is the
controller, and the interests in the proper performance of regulatory functions by such companies; and
- •
- market integrity.
Trading
on the Hong Kong Stock Exchange takes place on each business day with continuous trading being divided into morning and afternoon sessions. Trading is order-based using a
computer-assisted trading system that conveys bid and ask prices for securities. Trades are then effected on a matched trade basis directly between buyers and sellers. All securities are traded in
board lots. For most companies a board lot is 1,000 shares or 2,000 shares; odd lots are traded separately,
IS-25
Table of Contents
usually
at a small discount to the board lot prices. Settlement of trades on the Hong Kong Stock Exchange is required to take place on the second trading day after the day the trade takes place. All
trades on the Hong Kong Stock Exchange are required to be settled between Exchange Participants (as defined in the Listing Rules) through CCASS on the second Business Day after any trading day, the
central clearing and settlement system, operated by HKSCC. CCASS is the central depositary of share certificates and provides a computerized book-entry settlement of share transactions between its
participants, which includes all broker participants of the Hong Kong Stock Exchange. Share certificates kept at CCASS are electronically recorded in the stock accounts of its participants. CCASS also
facilitates money settlement between participants. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational procedures in effect from time to time. There are no
market-makers in the Hong Kong Stock Exchange except in the market for exchange-traded options, but exchange dealers may act as dual capacity broker-dealers. Short selling of securities at or through
the Hong Kong Stock Exchange is currently prohibited except in respect of a limited group of securities.
The
SFC charges a transaction levy of 0.003% of the consideration of each transaction and the Hong Kong Stock Exchange charges a trading fee of 0.005% of the consideration of each
transaction, payable by both seller and buyer. In addition, member brokers charge brokerage commissions to either a buyer or a seller which are freely negotiated between such brokers and their
clients. Additional administrative fees are also payable for trades settled through CCASS. Member brokers are required to make a contract note in respect of each transaction in securities. The
contract note is required to be stamped with ad valorem stamp duty and to be delivered to the client not later than the end of the second trading day following the transaction.
The
SFC, an independent, non-government statutory body outside the civil service that provides a general regulatory framework of the securities and futures industries, was established by
the Hong Kong government in 1989. The SFC administers certain elements of Hong Kong securities law, including the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) which
regulates, among other things, activities in the securities market, requirements and conduct of intermediaries, investor compensation, market misconduct and disclosure of interests.
The
Hong Kong Stock Exchange promulgates its own rules governing share trading and disclosure of information to shareholders and investors. Companies listed on the Hong Kong Stock
Exchange are required to comply with the provisions of the Listing Rules, which provide for, among other things, the issuance of interim and audited annual accounts to shareholders and the making of
prompt public disclosure of material transactions and developments. In addition, the Hong Kong Codes on Takeovers and Mergers and Share Repurchases, which have been issued by the SFC but do not have
the force of law, provide guidelines for the fair treatment of shareholders and preservation of an impartial trading market in connection with takeovers and mergers of public companies in Hong Kong
and guidelines for share repurchases by such companies. Part XV of the Securities and Futures Ordinance also contains provisions which require certain persons interested (or deemed to be
interested) in shares, underlying shares and short positions in listed companies in Hong Kong to disclose their interest in those shares in certain circumstances. Disclosure of the Directors'
interests in the Company is set out in Appendix V — "Statutory and General Information — Disclosure of
Interests" starting on page V-14 in the Hong Kong Listing Document.
IS-26
Table of Contents
The
Hong Kong Stock Exchange imposes a requirement on us to keep the Hong Kong Stock Exchange, the Shareholders and other holders of our listed securities informed as soon as reasonably
practicable of any information relating to us, including information which (i) is necessary to avoid a false market in our securities, or (ii) constitutes inside information within the
meaning of the Securities and Futures Ordinance and which is required to be disclosed under Part XIVA of the Securities and Futures Ordinance.
There
are also requirements under the Listing Rules for us to obtain prior shareholders' approval and/or to disclose to shareholders details of certain acquisitions or disposal of assets
and connected transactions.
The
Hang Seng Index is a capitalization-weighted index of a portfolio of stocks (currently 50) listed on the Hong Kong Stock Exchange. The highest and lowest closing levels of the
Hang Seng Index for the five years from 2008 to 2012 and the nine months ended September 30, 2013 were as follows:
|
|
|
|
|
|
|
|
Year
|
|
Highest closing level |
|
Lowest closing level |
|
2008 |
|
|
27,615.85 |
|
|
11,015.84 |
|
2009 |
|
|
22,943.98 |
|
|
11,344.58 |
|
2010 |
|
|
24,964.37 |
|
|
18,985.50 |
|
2011 |
|
|
24,419.62 |
|
|
16,250.27 |
|
2012 |
|
|
22,666.59 |
|
|
18,185.59 |
|
2013 (through September 30, 2013) |
|
|
23,822.06 |
|
|
19,813.98 |
|
IS-27
Table of Contents
CERTAIN INFORMATION CONCERNING CHNR
CHNR is incorporated in the British Virgin Islands with its principal executive offices at Room 2205, 22/F, West Tower, Shun Tak
Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong. The telephone number of CHNR at this location is +852 2810 7205.
Following
the Distribution, CHNR will continue to engage in base metals exploration and mining in the PRC.
Directors and Management
Upon the completion of the Spin-off:
- •
- Mr. TAM Cheuk Ho, an executive director of Feishang Anthracite, is expected to resign from his current positions at
CHNR as an executive director and executive vice president;
- •
- Mr. WONG Wah On Edward, an executive director of Feishang Anthracite, is expected to resign from his current
positions at CHNR as an executive director, chief financial officer and company secretary; and
- •
- Mr. YUE Ming Wai Bonaventure, chief financial officer and company secretary of Feishang Anthracite, is expected to
resign from his current position at CHNR as financial controller.
Agreements with Feishang Anthracite
After the Spin-off, CHNR will be a "connected person" of Feishang Anthracite under the Listing Rules. As a result, certain additional
compliance obligations on the part of Feishang Anthracite will arise from any transactions between CHNR and Feishang Anthracite that may occur after the Spin-off. See "Connected Transactions" in the
Hong Kong Listing Document.
IS-28
Table of Contents
CERTAIN MATERIAL TAX CONSEQUENCES
The following discussion of the material British Virgin Islands, Hong Kong, PRC and United States
Federal income tax consequences of the Distribution is based upon laws and relevant interpretations thereof in effect as of the date of this information statement, all of which are subject to change.
This discussion does not address all possible tax consequences relating to the Distribution ordinary shares, including the tax consequences under United States state and local tax laws. CHNR
Shareholders are urged to consult their own tax advisers concerning the overall tax consequences to them, including consequences arising under United States state and local or other
tax laws.
British Virgin Islands Tax Consequences
The distribution of Feishang Anthracite ordinary shares as part of the Distribution will not be subject to British Virgin
Islands tax.
Feishang
Anthracite, as well as all dividends, interest, rents, royalties, compensation and other amounts paid by Feishang Anthracite to persons who are not resident in the British
Virgin Islands and any capital gains realized with respect to any shares, debt obligations or other securities of Feishang Anthracite by persons who are not resident in the British Virgin Islands are
exempt from all provisions of the Income Tax Ordinance in the British Virgin Islands.
No
estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the British Virgin Islands with respect to any shares, debt
obligation or other securities of Feishang Anthracite.
All
instruments relating to transfers of property to or by Feishang Anthracite and all instruments relating to transactions in respect of the shares, debt obligations or other securities
of Feishang Anthracite and all instruments relating to other transactions relating to the business of CHNR or Feishang Anthracite are exempt from payment of stamp duty in the British Virgin Islands.
This assumes that CHNR and Feishang Anthracite do not hold an interest in real estate in the British Virgin Islands.
There
are currently no withholding taxes or exchange control regulations in the British Virgin Islands applicable to Feishang Anthracite.
Hong Kong Tax Consequences
The distribution of Feishang Anthracite ordinary shares as part of the Distribution will not be subject to Hong Kong tax.
Dividends
No tax is payable in Hong Kong in respect of dividends paid by Feishang Anthracite.
Capital Gains and Profits Tax
No tax is imposed in Hong Kong in respect of capital gains from the sale of the Feishang Anthracite ordinary shares.
IS-29
Table of Contents
Trading
gains from the sale of Feishang Anthracite ordinary shares by persons carrying on a trade, profession or business in Hong Kong where such gains arise in or are derived from Hong
Kong from such trade, profession or business will be chargeable to Hong Kong profits tax. Currently, profits tax is imposed on corporations at the rate of 16.5% and on individuals and unincorporated
businesses at a maximum rate of 15.0%. Gains from sales of Feishang Anthracite ordinary shares effected on the Hong Kong Stock Exchange will be considered to arise in or be derived from Hong Kong.
Liability for Hong Kong profits tax may thus arise in respect of trading gains from sales of the Feishang Anthracite ordinary shares effected on the Hong Kong Stock Exchange realized by persons
carrying on a business or trading or dealing in securities in Hong Kong.
Stamp Duty
Hong Kong stamp duty will be payable by the purchaser on every purchase, and by the seller on every sale, of Feishang Anthracite
ordinary shares registered on Feishang Anthracite's Hong Kong branch register. The duty is charged at the ad valorem rate of 0.1% of the consideration
for, or (if greater) the value of, the shares transferred on each of the seller and purchaser. In other words, a total of 0.2% is currently payable on a typical sale and purchase transaction of
shares. In addition, any instrument of transfer (if required) will be subject to a flat rate of stamp duty of HK$5.00. Where a sale or purchase of Feishang Anthracite ordinary shares registered
on Feishang Anthracite's Hong Kong branch register is effected by a person who is not resident in Hong Kong and any stamp duty payable on the contract note is not paid, the relevant instrument of
transfer (if any) shall be chargeable with such duty. If stamp duty is not paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.
No
Hong Kong stamp duty will be levied on the transfer of Feishang Anthracite ordinary shares that are registered on a share register outside Hong Kong.
No
Hong Kong stamp duty is payable in connection with the distribution of Feishang Anthracite ordinary shares to CHNR Shareholders in the Distribution.
PRC Tax Consequences
There is uncertainty as to whether the PRC tax authorities would regard the Distribution as an "Indirect Transfer" by CHNR of our PRC
subsidiaries to CHNR's shareholders subject to SAT Circular 698. If SAT Circular 698 were determined to be applicable to the Distribution by the PRC tax authorities, CHNR could be
required to withhold taxes at a rate of up to 10% on any gains derived from the Distribution, which may be deemed as the difference between the fair value of our ordinary shares at the time of the
Distribution and CHNR's tax basis in our ordinary shares. See "Risk Factors Relating to the Distribution — CHNR faces uncertainties with respect to the
applicability of PRC withholding tax on the Distribution" on page IS-18 of this information statement.
United States Federal Income Tax Consequences
This summary describes certain material U.S. Federal income tax consequences of the Distribution for CHNR Shareholders, but it
does not purport to be a comprehensive description of all of the tax considerations that may be relevant to such holders, including tax considerations that arise from rules of general application to
all taxpayers or to certain classes of investors or that are generally assumed to be known to investors. This summary applies only to a holder that receives Feishang Anthracite ordinary shares in the
Distribution and that holds its CHNR common shares and will hold the Feishang Anthracite ordinary shares it receives in the Distribution as capital assets. This summary does not apply to a holder
subject to special rules, such as a dealer in securities or currencies, a trader in securities that elects to use a mark-to-market method of accounting for securities holdings; a bank; a
life-insurance company; a tax-exempt organization; regulated investment companies; real estate investment trusts; a person subject to the alternative minimum tax; U.S. expatriates; a person
that holds his or her CHNR common shares
IS-30
Table of Contents
(or that
will hold his or her Feishang Anthracite ordinary shares) as part of a hedge, straddle or conversion transaction for tax purposes; a person whose functional currency for tax purposes
is not the U.S. dollar; or a person that owns or is deemed to own 10% or more of any class of CHNR common shares (or of Feishang Anthracite ordinary shares).
This
summary is based on the Code, its legislative history, existing and proposed regulations promulgated thereunder, published rulings and court decisions, all as currently in effect.
These laws are subject to change, possibly on a retroactive basis.
Holders should consult their own tax advisers concerning the U.S. Federal, state, local and foreign tax consequences of the Distribution in light of their particular
circumstances.
For
purposes of this summary, a "U.S. Holder" is, generally, a beneficial owner of CHNR common shares that is: (i) an individual citizen or resident of the
United States; (ii) a corporation (or other entity treated as a corporation for U.S. Federal income tax purposes) created or organized under the laws of the
United States or any state thereof or the District of Columbia; (iii) an estate the income of which is subject to U.S. Federal income taxation regardless of its source;
(iv) a trust if a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have authority to control all
substantial decisions of the trust; or (v) any other person that is subject to U.S. Federal income taxation on a net income basis with respect to the CHNR common shares.
If
a partnership or other pass-through entity is a beneficial owner of CHNR common shares, the tax treatment of a partner or other owner will generally depend upon the status of the
partner or other owner and the activities of the entity. Partners and other owners of a partnership or other pass-through entity that own CHNR common shares should consult their own tax adviser
regarding the tax consequences of the Distribution.
For
the U.S. Federal income tax consequences of the Distribution to a holder that is not a U.S. Holder (a "non-U.S. Holder"), see the discussion below under
"— Non-U.S. Holders."
U.S. Holders
Taxation of the Distribution
It is not clear whether the Distribution should be treated as a tax-free spin-off under Section 355 of the Code or as a taxable
distribution of property. If we are required to report the Distribution to the IRS, we intend to take the view that the Distribution will be treated as a taxable distribution, and the remainder of the
disclosure assumes this position is correct. Under this treatment, for U.S. Federal income tax purposes, the Distribution should be a taxable event for holders of CHNR common shares on the
Distribution Record Date. Accordingly, subject to the passive foreign investment company rules discussed below, a U.S. Holder:
- •
- should generally be treated as having received (at the time of receipt of the Feishang Anthracite ordinary shares)
a taxable distribution in an amount equal to the fair market value of the Feishang Anthracite ordinary shares received in the Distribution,
- •
- should have a tax basis in its Feishang Anthracite ordinary shares equal to their fair market value on the date of the
Distribution, and
- •
- should have a holding period in its Feishang Anthracite ordinary shares that will commence on the day after the date of
the Distribution.
The
amount distributed by CHNR to a U.S. Holder should be taxed as a "dividend" to the extent of such holder's proportionate share of CHNR's current and accumulated earnings and
profits (if any), and should otherwise be (i) a tax-free return of capital to the extent of such holder's adjusted tax basis in his or her CHNR common shares and (ii) thereafter
as a capital gain. CHNR does not maintain calculations of
IS-31
Table of Contents
its
earnings and profits in accordance with U.S. Federal income tax principles; accordingly holders should assume that the entire amount of the Distribution should be taxable as a dividend.
CHNR intends to treat the distribution of Feishang Anthracite ordinary shares as a taxable dividend for U.S. Federal income tax purposes, and the remainder of the disclosure assumes such
treatment.
The
dividend amount generally will be treated as foreign source ordinary dividend income, and generally will be eligible for reduced rates of taxation applicable to qualified dividend
income applicable to certain non-corporate U.S. Holders (assuming that CHNR common shares are listed on NASDAQ at the time of the Distribution), but will not be eligible for the dividends
received deduction allowed to corporations. The dividend will be includable in "net investment income" for purposes of the Medicare contribution tax applicable to certain non-corporate
U.S. Holders.
Passive Foreign Investment Company Considerations
A foreign corporation will be considered a Passive Foreign Investment Company or PFIC for any taxable year in which, taking into
account the income and assets of 25% or more owned subsidiaries, (i) 75% or more of its gross income is passive income, or (ii) 50% or more of the quarterly average value (or, if
elected, the adjusted tax basis) of its assets are considered "passive assets" (generally, assets that generate passive income). Passive income generally includes, among other items, dividends,
interest, gains from certain commodities transactions, certain rents, royalties and gains from the disposition of passive assets. Gains from commodities generally will be passive income unless they
arise from active business sales and substantially all of the corporation's commodities are inventory, depreciable property used in its trade or business or supplies used or consumed in the ordinary
course of business.
Based
on its audited accounts and relevant market and shareholder data, CHNR believes that it has not been a PFIC for U.S. Federal income tax purposes with respect to any of its
prior taxable years and that, taking into account the Distribution, it will not be a PFIC for the current taxable year or, based on current business plans, future taxable years. However these
conclusions are factual determinations that are made annually and thus may be subject to change. If CHNR were classified as a PFIC at any time during a U.S. Holder's holding period, such
U.S. Holder could be subject to an increased tax liability (possibly including an interest charge) upon the receipt of the Distribution. Specifically, the amount of the Distribution that is an
"excess distribution" would be allocated rateably over the U.S. Holder's holding period in the CHNR common shares, the amount allocated to the current taxable year and any year before CHNR
became a PFIC would be taxed as ordinary income in the current year, and the amount allocated to other taxable years would be taxed at the highest applicable marginal rate in effect for each year
(i.e., as ordinary income) and an interest charge would be imposed to
recover the deemed benefit from the deferred payment of the tax attributable to each earlier year. Generally, for a U.S. Holder, the "excess distribution" for the taxable year would be any
distributions received that are greater than 125% of the average annual distributions received during the three preceding taxable years or, if shorter, the U.S. Holder's holding period for its
CHNR common shares. The PFIC rules are complex, and holders should consult their own tax advisers regarding the possible application of the PFIC rules to the
Distribution.
Taxation of income from Feishang Anthracite ordinary shares
Dividends. Subject to the PFIC rules discussed below, distributions made by Feishang
Anthracite to a U.S. Holder should generally be taxed as a "dividend" to the extent of such holder's proportionate share of Feishang Anthracite's current and accumulated earnings and profits
(if any), and should otherwise be (i) a tax-free return of capital to the extent of such holder's adjusted tax basis in his or her Feishang Anthracite ordinary shares and
(ii) thereafter as a capital gain. Feishang Anthracite does not maintain calculations of its earnings and profits in accordance with U.S. Federal income tax principles; accordingly,
holders should assume that distributions they receive on their Feishang Anthracite ordinary shares should generally be taxed as dividends. Distributions treated as dividends are includable in the
income of a U.S. Holder as foreign source ordinary dividend income on the date the distribution is received by the holder and will not
IS-32
Table of Contents
be
eligible for the dividends received deduction allowed to corporations nor be eligible for reduced rates of taxation applicable to qualified dividend income applicable to certain non-corporate
U.S. Holders. Dividends paid in a foreign currency will be included in the income of a U.S. Holder as a dollar amount calculated by reference to the exchange rate in effect on the date
of receipt, whether or not converted into U.S. dollars. Any foreign currency received will have a basis equal to the value of such currency on the date of receipt. Dividends will be includable
in "net investment income" for purposes of the Medicare contribution tax applicable to certain non-corporate U.S. Holders.
If
the PRC imposes tax on dividends paid on the Feishang Anthracite ordinary shares, such taxes should be creditable against a U.S. Holder's U.S. Federal income tax
liability, subject to applicable restrictions. U.S. Holders should consult their own tax advisers regarding the availability of foreign tax credits in their particular circumstances.
Sale, Exchange or Disposition. Subject to the PFIC rules discussed below, gain or loss realized by a U.S. Holder on the sale,
exchange or other disposition of Feishang Anthracite ordinary shares will be subject to U.S. Federal income tax as U.S. source capital gain or loss in an amount equal to the
difference between the U.S. Holder's adjusted tax basis in its Feishang Anthracite ordinary shares (which, as indicated under "— United States Federal Income
Taxation — U.S. Holders — Taxation of the Distribution," should generally be equal to their fair market value on the
date of the Distribution) and the dollar-value of the amount realized on such sale, exchange or other disposition. If U.S. Holder disposes of their Feishang Anthracite ordinary shares in
exchange for foreign currency, the amount realized shall be determined at the U.S. dollar spot rate on the date of disposition, or, at the spot rate on the settlement date if the Feishang
Anthracite ordinary shares are traded on an established securities market and the holder is a cash basis U.S. holder or an accrual basis U.S. holder that so elects.
U.S. Holders will be required to recognize foreign exchange gain or loss to the extent the amount realized differs from the value of the foreign currency received as determined at the spot rate
on the settlement date.
The
gain or loss will be long-term gain or loss if the Feishang Anthracite ordinary shares were held for more than one year. The excess of net long-term capital gains over net short-term
capital losses generally will be taxed at a lower rate than ordinary income for non-corporate taxpayers. The deduction of capital losses is subject to limitations. Gains will be includable in
"net investment income" for purposes of the Medicare contribution tax applicable to certain non-corporate U.S. Holders.
If
tax were to be imposed by any non-U.S. jurisdiction on any gain from a disposition of the Feishang Anthracite ordinary shares, a U.S. Holder who is eligible for the
benefits of an applicable tax treaty may be able to treat such gain as non-U.S. source income if such treaty so provides. If the U.S. Holder is unable or fails to make the election to
treat any gain as non-U.S. source gain, then such U.S. Holder may not be able to use the foreign tax credit arising from any non-U.S. tax imposed on the disposition of the
Feishang Anthracite ordinary shares unless such credit can be applied (subject to applicable limitations) against tax due on other income derived from foreign sources.
PFIC. Based on Feishang Anthracite's audited accounts and anticipated trading value of Feishang Anthracite ordinary shares, Feishang
Anthracite believes that it will not be a PFIC for U.S. Federal income tax purposes for the current taxable year or, based on current business plans, any subsequent taxable years. However these
conclusions are factual determinations that are made annually and thus may be subject to change. If Feishang Anthracite were classified as a PFIC at any time during a U.S. Holder's holding
period, such U.S. Holder generally would be subject to adverse tax consequences (possibly including an increased tax liability and an interest charge) upon the receipt of dividends from
Feishang Anthracite or on the realization of gain on disposal of its shares.
IS-33
Table of Contents
Non-U.S. Holders
A Non-U.S. Holder generally will be exempt from U.S. Federal income tax, including withholding tax and backup withholding
tax, with respect to the Distribution. Similarly, a Non-U.S. Holder generally will be exempt from U.S. Federal income tax, including withholding tax and backup withholding tax, with
respect to distributions from, and sale, exchange or other disposition of, its Feishang Anthracite ordinary shares. However, to qualify for these exemptions, a Non-U.S. Holder may be required
to satisfy certain certification requirements of the Internal Revenue Service to establish that it is not a U.S. person. See "—United States Federal Income
Taxation—Information Reporting and Backup Withholding" below.
Information Reporting and Backup Withholding
To the extent paid within the United States or through certain U.S. related financial intermediaries, the Distribution as
well as future distributions on Feishang Anthracite ordinary shares and the sale, exchange or disposition of Feishang Anthracite ordinary shares are subject to information reporting and may be subject
to backup withholding unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number and certifies that no loss of exemption from
backup withholding has occurred. Non-U.S. Holders generally are not subject to information reporting or backup withholding. However, a Non-U.S. Holder may be required to provide a
certification as to its non-U.S. status in connection with payments received within the United States or through certain U.S. related financial intermediaries.
Backup
withholding tax is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against a holder's United States
Federal income tax liability, provided that such holder provides the required information to the United States Internal Revenue Service.
Certain
U.S. Holders are required to report to the United States Internal Revenue Service information with respect to their investments in Feishang Anthracite ordinary
shares not held through an account with a U.S. financial institution. U.S. Holders should consult their own tax advisers regarding any additional tax reporting or filing obligations they
may have as a result of the acquisition, ownership or disposition of Feishang Anthracite ordinary shares. Failure to comply with certain reporting obligations could result in the imposition of
substantial penalties.
IS-34
Table of Contents
EXPERT
The consolidated financial statements of Feishang Anthracite Resources Limited as of December 31, 2010, 2011, 2012 and
June 30, 2013 and for each of the three years in the period ended December 31, 2012 and the six months ended June 30, 2013, appearing in this information statement and included in
our Registration Statement on Form 20-F have been audited by Ernst & Young, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The offices of Ernst & Young are located at 22nd Floor,
CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong.
IS-35
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of
Feishang
Anthracite Resources Limited (Formerly known as "Wealthy Year Limited")
We
have audited the accompanying consolidated statements of financial position of Feishang Anthracite Resources Limited (the "Company"), formerly known as Wealthy Year Limited, as
of December 31, 2010, 2011, 2012 and June 30, 2013, and the related consolidated income statements, statements of comprehensive income, statements of changes in equity and statements of
cash flows for each of the three years in the period ended December 31, 2010, 2011, and 2012 and the six-month period ended June 30, 2013. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2010, 2011,
2012, and June 30, 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, 2011 and 2012 and the
six-month period ended June 30, 2013, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/
Ernst & Young
Certified Public Accountants
Hong Kong
November 19,
2013,
except for Note 37(f) and 37(g), as to which the date is
December 17, 2013
F-2
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
CONSOLIDATED INCOME STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
Notes |
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Revenue |
|
|
4 |
|
|
38,668 |
|
|
105,211 |
|
|
141,939 |
|
|
55,156 |
|
|
54,716 |
|
Cost of sales |
|
|
5 |
|
|
(25,453 |
) |
|
(74,289 |
) |
|
(95,889 |
) |
|
(30,396 |
) |
|
(39,953 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
13,215 |
|
|
30,922 |
|
|
46,050 |
|
|
24,760 |
|
|
14,763 |
|
Selling and distribution expenses |
|
|
|
|
|
(2,918 |
) |
|
(2,930 |
) |
|
(3,694 |
) |
|
(1,412 |
) |
|
(2,728 |
) |
Administrative expense |
|
|
|
|
|
(55,822 |
) |
|
(49,432 |
) |
|
(77,334 |
) |
|
(33,975 |
) |
|
(57,423 |
) |
Impairment loss on property, plant and equipment |
|
|
16 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(184,417 |
) |
Other operating expenses |
|
|
|
|
|
(9,020 |
) |
|
(1,545 |
) |
|
(1,624 |
) |
|
(643 |
) |
|
(1,880 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS |
|
|
|
|
|
(54,545 |
) |
|
(22,985 |
) |
|
(36,602 |
) |
|
(11,270 |
) |
|
(231,685 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
6 |
|
|
(6,007 |
) |
|
(31,841 |
) |
|
(44,533 |
) |
|
(20,655 |
) |
|
(43,731 |
) |
Interest income |
|
|
8 |
|
|
115 |
|
|
564 |
|
|
1,048 |
|
|
814 |
|
|
977 |
|
Gain on bargain purchase of a subsidiary |
|
|
30 |
|
|
624,148 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-operating income/(expense), net |
|
|
7 |
|
|
(1,577 |
) |
|
(888 |
) |
|
(2,179 |
) |
|
(1,810 |
) |
|
1,215 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIT/(LOSS) BEFORE INCOME TAX |
|
|
8 |
|
|
562,134 |
|
|
(55,150 |
) |
|
(82,266 |
) |
|
(32,921 |
) |
|
(273,224 |
) |
Income tax (expense)/benefit |
|
|
12 |
|
|
(6,141 |
) |
|
(9,750 |
) |
|
15,210 |
|
|
(5,784 |
) |
|
50,468 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROFIT/(LOSS) FOR THE
YEAR/PERIOD |
|
|
|
|
|
555,993 |
|
|
(64,900 |
) |
|
(67,056 |
) |
|
(38,705 |
) |
|
(222,756 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner of the Company |
|
|
|
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
Non-controlling interests |
|
|
|
|
|
(6,439 |
) |
|
(735 |
) |
|
8,256 |
|
|
2,156 |
|
|
(809 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
555,993 |
|
|
(64,900 |
) |
|
(67,056 |
) |
|
(38,705 |
) |
|
(222,756 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS/(LOSSES) PER SHARE ATTRIBUTABLE TO OWNER OF THE COMPANY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
14 |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
14 |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-3
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
PROFIT/(LOSS) FOR THE YEAR/PERIOD |
|
|
555,993 |
|
|
(64,900 |
) |
|
(67,056 |
) |
|
(38,705 |
) |
|
(222,756 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items to be reclassified to profit or loss in subsequent period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
360 |
|
|
425 |
|
|
82 |
|
|
(98 |
) |
|
155 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income for the year/period, net of tax |
|
|
360 |
|
|
425 |
|
|
82 |
|
|
(98 |
) |
|
155 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR/PERIOD, NET OF TAX |
|
|
556,353 |
|
|
(64,475 |
) |
|
(66,974 |
) |
|
(38,803 |
) |
|
(222,601 |
) |
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner of the Company |
|
|
562,792 |
|
|
(63,740 |
) |
|
(75,230 |
) |
|
(40,959 |
) |
|
(221,792 |
) |
Non-controlling interests |
|
|
(6,439 |
) |
|
(735 |
) |
|
8,256 |
|
|
2,156 |
|
|
(809 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
556,353 |
|
|
(64,475 |
) |
|
(66,974 |
) |
|
(38,803 |
) |
|
(222,601 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
F-4
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of
June 30, |
|
|
|
Notes |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
16 |
|
|
1,789,275 |
|
|
2,030,611 |
|
|
2,327,641 |
|
|
2,287,056 |
|
Rehabilitation fund |
|
|
17 |
|
|
19,507 |
|
|
23,018 |
|
|
29,894 |
|
|
41,783 |
|
Prepayments, deposits and other receivables |
|
|
20 |
|
|
15,510 |
|
|
71,846 |
|
|
115,821 |
|
|
117,039 |
|
Deferred tax assets |
|
|
12 |
|
|
— |
|
|
— |
|
|
3,752 |
|
|
5,365 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NON-CURRENT ASSETS |
|
|
|
|
|
1,824,292 |
|
|
2,125,475 |
|
|
2,477,108 |
|
|
2,451,243 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
18 |
|
|
5,324 |
|
|
5,328 |
|
|
11,266 |
|
|
15,080 |
|
Trade and bills receivables |
|
|
19 |
|
|
5,577 |
|
|
30,356 |
|
|
48,967 |
|
|
46,298 |
|
Corporate income tax refundable |
|
|
|
|
|
— |
|
|
— |
|
|
3,901 |
|
|
6,436 |
|
Prepayments, deposits and other receivables |
|
|
20 |
|
|
19,839 |
|
|
28,759 |
|
|
33,554 |
|
|
37,226 |
|
Restricted bank deposits |
|
|
21 |
|
|
— |
|
|
21,000 |
|
|
7,082 |
|
|
— |
|
Term deposits with an original maturity over three months |
|
|
21 |
|
|
— |
|
|
20,000 |
|
|
20,000 |
|
|
— |
|
Cash and cash equivalents |
|
|
21 |
|
|
76,482 |
|
|
73,642 |
|
|
160,984 |
|
|
140,812 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS |
|
|
|
|
|
107,222 |
|
|
179,085 |
|
|
285,754 |
|
|
245,852 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
|
|
1,931,514 |
|
|
2,304,560 |
|
|
2,762,862 |
|
|
2,697,095 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and bills payables |
|
|
22 |
|
|
80,017 |
|
|
69,402 |
|
|
103,798 |
|
|
97,737 |
|
Other payables and accrued liabilities |
|
|
23 |
|
|
26,369 |
|
|
36,406 |
|
|
60,155 |
|
|
58,124 |
|
Interest-bearing bank and other borrowings |
|
|
24 |
|
|
100,000 |
|
|
225,000 |
|
|
443,900 |
|
|
861,900 |
|
Due to related companies |
|
|
32 |
|
|
314,235 |
|
|
451,380 |
|
|
672,401 |
|
|
140,633 |
|
Interest payable |
|
|
|
|
|
4,253 |
|
|
5,979 |
|
|
9,093 |
|
|
11,195 |
|
Income tax payable |
|
|
|
|
|
240 |
|
|
402 |
|
|
950 |
|
|
— |
|
Mining rights payables |
|
|
25 |
|
|
19,192 |
|
|
22,612 |
|
|
25,568 |
|
|
31,368 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES |
|
|
|
|
|
544,306 |
|
|
811,181 |
|
|
1,315,865 |
|
|
1,200,957 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing bank and other borrowings |
|
|
24 |
|
|
318,742 |
|
|
510,886 |
|
|
569,630 |
|
|
897,449 |
|
Interest payable |
|
|
|
|
|
13,205 |
|
|
18,205 |
|
|
17,894 |
|
|
18,788 |
|
Deferred tax liabilities |
|
|
12 |
|
|
285,849 |
|
|
289,416 |
|
|
267,004 |
|
|
216,332 |
|
Mining rights payables |
|
|
25 |
|
|
132,966 |
|
|
103,378 |
|
|
77,810 |
|
|
66,150 |
|
Asset retirement obligations |
|
|
26 |
|
|
5,482 |
|
|
6,025 |
|
|
7,064 |
|
|
7,848 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NON-CURRENT LIABILITIES |
|
|
|
|
|
756,244 |
|
|
927,910 |
|
|
939,402 |
|
|
1,206,567 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
1,300,550 |
|
|
1,739,091 |
|
|
2,255,267 |
|
|
2,407,524 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued capital |
|
|
27 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Reserves |
|
|
29 |
|
|
554,831 |
|
|
479,784 |
|
|
413,654 |
|
|
196,439 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY ATTRIBUTABLE TO OWNER OF THE COMPANY |
|
|
|
|
|
554,831 |
|
|
479,784 |
|
|
413,654 |
|
|
196,439 |
|
NON-CONTROLLING INTERESTS |
|
|
|
|
|
76,133 |
|
|
85,685 |
|
|
93,941 |
|
|
93,132 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY |
|
|
|
|
|
630,964 |
|
|
565,469 |
|
|
507,595 |
|
|
289,571 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
|
|
|
|
1,931,514 |
|
|
2,304,560 |
|
|
2,762,862 |
|
|
2,697,095 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
F-5
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to owner of the Company |
|
|
|
|
|
|
|
Issued
capital |
|
Safety fund
and
production
maintenance
fund* |
|
Special
reserve* |
|
Merger
reserve* |
|
Retained
earnings/
(accumulated
losses)* |
|
Exchange
fluctuation
reserve* |
|
Total |
|
Non-
controlling
interests |
|
Total |
|
|
|
RMB'000
|
|
RMB'000
Note 29 (a)
|
|
RMB'000
Note 29 (b)
|
|
RMB'000
Note 29 (c)
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
At January 1, 2010 |
|
|
— |
|
|
— |
|
|
1,864 |
|
|
71,000 |
|
|
(48,305 |
) |
|
— |
|
|
24,559 |
|
|
38,932 |
|
|
63,491 |
|
Profit/(loss) for the year |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
562,432 |
|
|
— |
|
|
562,432 |
|
|
(6,439 |
) |
|
555,993 |
|
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
360 |
|
|
360 |
|
|
— |
|
|
360 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income/(loss) for the year |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
562,432 |
|
|
360 |
|
|
562,792 |
|
|
(6,439 |
) |
|
556,353 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed distribution to the owner of the Company (note 1.2(3)) |
|
|
— |
|
|
— |
|
|
— |
|
|
(70,000 |
) |
|
— |
|
|
— |
|
|
(70,000 |
) |
|
— |
|
|
(70,000 |
) |
Deemed contribution from the owner of the Company |
|
|
— |
|
|
— |
|
|
17,009 |
|
|
— |
|
|
— |
|
|
— |
|
|
17,009 |
|
|
— |
|
|
17,009 |
|
Acquisition of Guizhou Puxin (note 30) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
64,111 |
|
|
64,111 |
|
Gain/(loss) from Guizhou Yongfu reorganisation |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
20,471 |
|
|
— |
|
|
20,471 |
|
|
(20,471 |
) |
|
— |
|
Appropriation and utilisation of safety fund and production maintenance fund, net |
|
|
— |
|
|
1,066 |
|
|
— |
|
|
— |
|
|
(1,066 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 |
|
|
— |
|
|
1,066 |
|
|
18,873 |
|
|
1,000 |
|
|
533,532 |
|
|
360 |
|
|
554,831 |
|
|
76,133 |
|
|
630,964 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(64,165 |
) |
|
— |
|
|
(64,165 |
) |
|
(735 |
) |
|
(64,900 |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
425 |
|
|
425 |
|
|
— |
|
|
425 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss)/income for the year |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(64,165 |
) |
|
425 |
|
|
(63,740 |
) |
|
(735 |
) |
|
(64,475 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution to the owner of the Company (note 1.2(4)) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,000 |
) |
|
(20 |
) |
|
— |
|
|
(1,020 |
) |
|
— |
|
|
(1,020 |
) |
(Loss)/gain from Yangpu Dashi and Guizhou Dayun reorganisation |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,287 |
) |
|
— |
|
|
(10,287 |
) |
|
10,287 |
|
|
— |
|
Appropriation and utilisation of safety fund and production maintenance fund, net |
|
|
— |
|
|
3,255 |
|
|
— |
|
|
— |
|
|
(3,255 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011 |
|
|
— |
|
|
4,321 |
|
|
18,873 |
|
|
— |
|
|
455,805 |
|
|
785 |
|
|
479,784 |
|
|
85,685 |
|
|
565,469 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit for the year |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(75,312 |
) |
|
— |
|
|
(75,312 |
) |
|
8,256 |
|
|
(67,056 |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
82 |
|
|
82 |
|
|
— |
|
|
82 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss)/income for the year |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(75,312 |
) |
|
82 |
|
|
(75,230 |
) |
|
8,256 |
|
|
(66,974 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed contribution from the owner of the Company (note 32(c)) |
|
|
— |
|
|
— |
|
|
9,100 |
|
|
— |
|
|
— |
|
|
— |
|
|
9,100 |
|
|
— |
|
|
9,100 |
|
Appropriation and utilisation of safety fund and production maintenance fund, net |
|
|
— |
|
|
4,127 |
|
|
— |
|
|
— |
|
|
(4,127 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012 |
|
|
— |
|
|
8,448 |
|
|
27,973 |
|
|
— |
|
|
376,366 |
|
|
867 |
|
|
413,654 |
|
|
93,941 |
|
|
507,595 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-6
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to owner of the Company |
|
|
|
|
|
|
|
Issued capital |
|
Safety fund
and
production
maintenance
fund* |
|
Special
reserve* |
|
Merger
reserve* |
|
Retained
earnings/
(accumulated
losses)* |
|
Exchange
fluctuation
reserve* |
|
Total |
|
Non-
controlling
interests |
|
Total |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
Note 29 (a)
|
|
Note 29 (b)
|
|
Note 29 (c)
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2013 |
|
|
— |
|
|
8,448 |
|
|
27,973 |
|
|
— |
|
|
376,366 |
|
|
867 |
|
|
413,654 |
|
|
93,941 |
|
|
507,595 |
|
Loss for the period |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(221,947 |
) |
|
— |
|
|
(221,947 |
) |
|
(809 |
) |
|
(222,756 |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
155 |
|
|
155 |
|
|
— |
|
|
155 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income/(loss) for the period |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(221,947 |
) |
|
155 |
|
|
(221,792 |
) |
|
(809 |
) |
|
(222,601 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed contribution from the owner of the Company (note 32(c)) |
|
|
— |
|
|
— |
|
|
4,577 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,577 |
|
|
— |
|
|
4,577 |
|
Appropriation and utilisation of safety fund and production maintenance fund, net |
|
|
— |
|
|
1,570 |
|
|
— |
|
|
— |
|
|
(1,570 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
|
— |
|
|
10,018 |
|
|
32,550 |
|
|
— |
|
|
152,849 |
|
|
1,022 |
|
|
196,439 |
|
|
93,132 |
|
|
289,571 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to owner of the Company |
|
|
|
|
|
|
|
Issued capital |
|
Safety fund and
production
maintenance
fund* |
|
Special
reserve* |
|
Merger
reserve* |
|
Retained
earnings/
(accumulated
losses)* |
|
Exchange
fluctuation
reserve* |
|
Total |
|
Non-
controlling
interests |
|
Total |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Note 29 (a)
|
|
Note 29 (b)
|
|
Note 29 (c)
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2012 |
|
|
— |
|
|
4,321 |
|
|
18,873 |
|
|
— |
|
|
455,805 |
|
|
785 |
|
|
479,784 |
|
|
85,685 |
|
|
565,469 |
|
(Loss)/profit for the period |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(40,861 |
) |
|
— |
|
|
(40,861 |
) |
|
2,156 |
|
|
(38,705 |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(98 |
) |
|
(98 |
) |
|
— |
|
|
(98 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss)/income for the period |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(40,861 |
) |
|
(98 |
) |
|
(40,959 |
) |
|
2,156 |
|
|
(38,803 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed contribution from the owner of the Company (note 32(c)) |
|
|
— |
|
|
— |
|
|
1,811 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,811 |
|
|
— |
|
|
1,811 |
|
Appropriation and utilisation of safety fund and production maintenance fund, net |
|
|
— |
|
|
3,414 |
|
|
— |
|
|
— |
|
|
(3,414 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2012 |
|
|
— |
|
|
7,735 |
|
|
20,684 |
|
|
— |
|
|
411,530 |
|
|
687 |
|
|
440,636 |
|
|
87,841 |
|
|
528,477 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- *
- These reserve accounts comprise the consolidated reserves of RMB554.8 million, RMB479.8 million, RMB413.7 million,
RMB196.4 million and RMB440.6 million as of December 31, 2010, 2011, 2012, June 30, 2013 and June 30, 2012, respectively.
F-7
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
Notes |
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
(Unaudited)
|
|
RMB'000
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before income tax |
|
|
|
|
|
562,134 |
|
|
(55,150 |
) |
|
(82,266 |
) |
|
(32,921 |
) |
|
(273,224 |
) |
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
8 |
|
|
(115 |
) |
|
(564 |
) |
|
(1,048 |
) |
|
(814 |
) |
|
(977 |
) |
Finance cost |
|
|
|
|
|
5,917 |
|
|
31,366 |
|
|
44,410 |
|
|
20,583 |
|
|
36,073 |
|
Depreciation and amortisation |
|
|
8 |
|
|
8,055 |
|
|
13,037 |
|
|
17,812 |
|
|
6,401 |
|
|
7,696 |
|
Equity-settled share option expense |
|
|
28 |
|
|
17,009 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Loss on disposal of items of property, plant and equipment |
|
|
8 |
|
|
139 |
|
|
250 |
|
|
194 |
|
|
463 |
|
|
— |
|
Impairment loss on property, plant and equipment |
|
|
16 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
184,417 |
|
Impairment of inventories |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
984 |
|
Gain on bargain purchase of subsidiaries |
|
|
30 |
|
|
(624,148 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
|
(31,009 |
) |
|
(11,061 |
) |
|
(20,898 |
) |
|
(6,288 |
) |
|
(45,031 |
) |
Increase in rehabilitation fund |
|
|
|
|
|
(14,538 |
) |
|
(3,511 |
) |
|
(6,876 |
) |
|
(7,340 |
) |
|
(11,889 |
) |
Increase/(decrease) in trade and bills receivables |
|
|
|
|
|
(2,073 |
) |
|
(23,242 |
) |
|
(15,409 |
) |
|
12,318 |
|
|
2,644 |
|
Increase in inventories |
|
|
|
|
|
(1,659 |
) |
|
(4 |
) |
|
(5,938 |
) |
|
(4,447 |
) |
|
(4,798 |
) |
Increase in prepayments, deposits and other receivables |
|
|
|
|
|
(15,062 |
) |
|
(8,920 |
) |
|
(8,696 |
) |
|
(4,796 |
) |
|
(3,672 |
) |
Increase/(decrease) in trade and bills payables |
|
|
|
|
|
3,423 |
|
|
2,996 |
|
|
20,294 |
|
|
3,466 |
|
|
(21,103 |
) |
Increase/(decrease) in other payables and accrued liabilities |
|
|
|
|
|
24,849 |
|
|
17,931 |
|
|
20,049 |
|
|
18,053 |
|
|
(2,553 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from/(used in) operations |
|
|
|
|
|
(36,069 |
) |
|
(25,811 |
) |
|
(17,474 |
) |
|
10,966 |
|
|
(86,402 |
) |
Interest received |
|
|
|
|
|
115 |
|
|
564 |
|
|
1,048 |
|
|
814 |
|
|
977 |
|
Interest paid |
|
|
|
|
|
(1,637 |
) |
|
(31,294 |
) |
|
(43,816 |
) |
|
(19,026 |
) |
|
(33,782 |
) |
Income tax paid |
|
|
|
|
|
(2,133 |
) |
|
(6,021 |
) |
|
(10,406 |
) |
|
(4,306 |
) |
|
(5,302 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities |
|
|
|
|
|
(39,724 |
) |
|
(62,562 |
) |
|
(70,648 |
) |
|
(11,552 |
) |
|
(124,509 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment for purchase of land use rights |
|
|
|
|
|
(3,566 |
) |
|
(14,812 |
) |
|
(12,508 |
) |
|
(4,811 |
) |
|
(10,859 |
) |
Purchase of items of property, plant and equipment |
|
|
|
|
|
(216,165 |
) |
|
(326,655 |
) |
|
(347,672 |
) |
|
(198,092 |
) |
|
(128,454 |
) |
Net proceeds from disposal of items of property, plant and equipment |
|
|
|
|
|
1,194 |
|
|
— |
|
|
888 |
|
|
71 |
|
|
— |
|
Net cash paid for acquisition of subsidiaries |
|
|
30 |
|
|
2,558 |
|
|
(140,100 |
) |
|
— |
|
|
— |
|
|
— |
|
Advances to related companies |
|
|
|
|
|
(127,196 |
) |
|
(21,180 |
) |
|
(29,000 |
) |
|
|
|
|
|
|
Repayments from related companies |
|
|
|
|
|
103,970 |
|
|
58,078 |
|
|
3,140 |
|
|
— |
|
|
— |
|
Term deposits with an original maturity over three months |
|
|
21 |
|
|
— |
|
|
(20,000 |
) |
|
— |
|
|
20,000 |
|
|
20,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities |
|
|
|
|
|
(239,205 |
) |
|
(464,669 |
) |
|
(385,152 |
) |
|
(182,832 |
) |
|
(119,313 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-8
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
Notes |
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
(Unaudited)
|
|
RMB'000
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from interest-bearing bank and other borrowings |
|
|
|
|
|
318,742 |
|
|
360,000 |
|
|
501,258 |
|
|
330,000 |
|
|
918,600 |
|
Repayments of interest-bearing bank and other borrowings |
|
|
|
|
|
— |
|
|
(100,000 |
) |
|
(228,100 |
) |
|
(125,000 |
) |
|
(175,000 |
) |
Increase/(decrease) of restricted bank deposits |
|
|
21 |
|
|
— |
|
|
(21,000 |
) |
|
13,918 |
|
|
(11,566 |
) |
|
7,082 |
|
Advances from related companies |
|
|
|
|
|
458,322 |
|
|
433,940 |
|
|
456,226 |
|
|
241,875 |
|
|
1,664,486 |
|
Repayments to related companies |
|
|
|
|
|
(211,656 |
) |
|
(134,198 |
) |
|
(200,492 |
) |
|
(82,786 |
) |
|
(2,191,771 |
) |
Repayments to unrelated third parties |
|
|
* |
|
|
(261,673 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Prepayment of deferred bank loan interest |
|
|
|
|
|
— |
|
|
(14,370 |
) |
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
|
|
|
303,735 |
|
|
524,372 |
|
|
542,810 |
|
|
352,523 |
|
|
223,397 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
24,806 |
|
|
(2,859 |
) |
|
87,010 |
|
|
158,139 |
|
|
(20,425 |
) |
NET FOREIGN EXCHANGE DIFFERENCE |
|
|
|
|
|
358 |
|
|
19 |
|
|
332 |
|
|
3 |
|
|
253 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR/PERIOD |
|
|
|
|
|
51,318 |
|
|
76,482 |
|
|
73,642 |
|
|
73,642 |
|
|
160,984 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD |
|
|
21 |
|
|
76,482 |
|
|
73,642 |
|
|
160,984 |
|
|
231,784 |
|
|
140,812 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash paid for interest (including capitalised interest of RMB16.2 million, RMB22.9 million and RMB42.8 million, RMB20.8 million
and RMB19.4 million for the years ended December 31, 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, respectively) |
|
|
|
|
|
17,861 |
|
|
54,162 |
|
|
86,579 |
|
|
39,810 |
|
|
53,173 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- *
- Included
in the amount there is RMB162.4 million outstanding cash consideration paid in 2010 for the acquisition of Linjiaao Coal, Xinsong Coal, Dayuan
Coal, Baiping Mining and Gouchang Coal by Guizhou Puxin.
F-9
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
1.1 CORPORATE INFORMATION
The Company is a limited liability company incorporated in the British Virgin Islands ("BVI") on January 6, 2010. The registered office of the Company is
P.O. Box 173, Kingston Chambers, Road Town, Tortola, British Virgin Islands.
China
Natural Resources, Inc. ("CHNR") is a BVI holding company incorporated in 1993 with its shares listed on the NASDAQ Capital Market in the United States. The Company
is a wholly-owned subsidiary of CHNR.
CHNR's
principal shareholder is Feishang Group Limited ("Feishang" or "controlling shareholder"), a company incorporated in the British Virgin Islands. Mr. Li Feilie, the director
and beneficial owner of Feishang, is the Chairman and Chief Executive Officer of the Company.
Mr. Li
Feilie, together with Feishang, directly or indirectly holds an effective equity interest in CHNR ranging from 59.33% to 65.05% in aggregate for the years ended
December 31, 2010, 2011, 2012 and the six months ended June 30, 2013. In the opinion of the Directors of the Company, the ultimate holding company is Laitan Investments Limited, a
company incorporated in the British Virgin Islands.
The
Company is an investment holding company. During the years ended December 31, 2010, 2011, 2012 and the six months ended June 30, 2013, the Company's subsidiaries
(hereinafter referred to as the "Group") were involved in acquisition, construction and development of anthracite coal mines and extraction and sale of anthracite coal.
Before
the Reorganisation and formation of the Group, the business was carried out by the subsidiaries now comprising the Group as set out in note 1.3, all of which were
collectively controlled by the controlling shareholder.
As
at December 31, 2010, 2011, 2012 and June 30, 2013, the Group had net current liabilities of RMB437.1 million, RMB632.1 million, RMB1,030.1 million
and RMB955.1million, respectively and total assets less current liabilities of RMB1,387.2 million, RMB1,493.4 million, RMB1,447.0 million and RMB1,496.1 million,
respectively.
1.2 SIGNIFICANT EVENTS
- (1)
- Formation of the Company
In
January 2010, the Company was established as a direct wholly-owned subsidiary of Feishang which transferred its equity interest in the Company to CHNR in April 2010.
F-10
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (2)
- Acquisition of Guizhou Puxin Energy Co., Ltd. ("Guizhou Puxin") and its five subsidiaries (the "Acquisition")
(note 30)
In
March 2010, Guizhou Fuyuantong Energy Co., Ltd. ("Guizhou Fuyuantong"), an indirect wholly-owned PRC subsidiary of Feishang, acquired all the issued and
outstanding capital stock of Guizhou Puxin and its five subsidiaries, including Guizhou Nayong Dayuan Coal Mining Co., Ltd. ("Dayuan Coal"), Jinsha Baiping
Mining Co., Ltd. ("Baiping Mining"), Liuzhi Linjiaao Coal Mining Co., Ltd. ("Linjiaao Coal"), Liuzhi Xinsong Coal Mining Co., Ltd. ("Xinsong Coal") and Nayong
Gouchang Coal Mining Co., Ltd. ("Gouchang Coal") from unrelated third parties. In the consolidated financial statements, Guizhou Fuyuantong was identified as the accounting acquirer and
Guizhou Puxin and its five subsidiaries, including Dayuan Coal, Baiping Mining, Linjiaao Coal, Xinsong Coal and Gouchang Coal, were identified as the accounting acquirees. Note 30 sets out the
fair values of the assets and liabilities of Guizhou Puxin and its five subsidiaries as of the date of Acquisition.
In
April 2010, the Company acquired all the issued and outstanding capital stock of Guizhou Fuyuantong through its indirect subsidiary, Hong Kong Smartact Limited, from Feishang
at a cash consideration of RMB10.0 million. The consideration was fully paid in 2010.
- (3)
- Reorganisation of Guizhou Yongfu Mining Co., Limited ("Guizhou Yongfu")
In
July 2008, Feishang Yongfu Mining Limited ("Feishang Yongfu"), a Hong Kong company 100% controlled by Feishang, acquired a 70% equity interest in Guizhou Yongfu through its
direct subsidiary, Yangpu Shuanghu Industrial Development Co., Limited ("Yangpu Shuanghu"), from third party shareholders. In August 2008, Newhold Investments Limited ("Newhold"), a BVI
holding company which was a wholly-owned subsidiary of Feishang, acquired all of the equity interest in Feishang Yongfu.
In
January 2009, CHNR acquired all the issued and outstanding capital stock of Newhold and its subsidiaries, among which Guizhou Yongfu was an indirect 70%-owned subsidiary, from
Feishang and assumed the outstanding indebtedness owed by Newhold to Feishang on the closing date.
In
September 2010, the Company, through its indirect subsidiary Guizhou Puxin, acquired all of the CHNR's indirect 70% equity interest in Guizhou Yongfu at a cash consideration of
RMB70.0 million ("Guizhou Yongfu Reorganisation"). The consideration was fully paid in 2010.
- (4)
- Reorganisation of Hainan Yangpu Dashi Industrial Co., Limited ("Yangpu Dashi") and Guizhou Dayun
Mining Co., Ltd. ("Guizhou Dayun")
In
June 2008, Feishang Dayun Coal Mining Limited ("Feishang Dayun"), a Hong Kong company 100% controlled by Feishang, acquired 100% equity interest in Guizhou Dayun through its
wholly-owned subsidiary, Yangpu Dashi, from third party shareholders. In July 2008, Pineboom Investments Limited ("Pineboom"), a BVI holding company which was a wholly-owned subsidiary of
Feishang, acquired all of the equity interest in Feishang Dayun.
In
July 2009, CHNR acquired all the issued and outstanding capital stock of Pineboom and its subsidiaries, among which Yangpu Dashi and Guizhou Dayun were indirect wholly-owned
subsidiaries, from Feishang and assumed the outstanding indebtedness owed by Pineboom to Feishang on the closing date.
In
July 2011, the Company, through its indirect subsidiary Guizhou Puxin, acquired all of Pineboom's indirect 100% interest in Yangpu Dashi and Guizhou Dayun to Guizhou Puxin at a
cash consideration of RMB1.02 million ("Guizhou Dayun Reorganisation") which was fully paid in 2011.
As
a result of the aforementioned Acquisition and reorganisations, the Company became the holding company of the subsidiaries now comprising the Group.
F-11
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1.3 PARTICULARS OF PRINCIPAL SUBSIDIARIES
As at the date of this report, the Company had direct and indirect interests in its subsidiaries, all of which are private limited liability companies or have
substantially similar characteristics to a private company incorporated or registered in Hong Kong and Mainland China, the particulars of which are set out below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominal value
of issued
ordinary/
registered
share capital
RMB'000 |
|
|
|
|
|
|
|
|
|
|
Percentage of equity attributable to the Company |
|
|
|
|
Place and date of
incorporation/
registration and
operations |
|
|
Name
|
|
Direct % |
|
Indirect % |
|
Principal activities |
Bijie Feishang Energy Co., Ltd. (
) |
|
Mainland China October 19, 2010 |
|
|
10,000 |
|
|
— |
|
|
100 |
|
Investment holding |
Guizhou Dayun Mining Co., Ltd. (
) |
|
Mainland China April 14, 2004 |
|
|
150,000 |
|
|
— |
|
|
100 |
|
Coal development and mining |
Guizhou Fuyuantong Energy Co., Ltd. (
) |
|
Mainland China March 10, 2010 |
|
|
10,000 |
|
|
— |
|
|
100 |
|
Investment holding |
Guizhou Nayong Dayuan Coal Mining Co., Ltd. (
) |
|
Mainland China January 22, 2009 |
|
|
46,000 |
|
|
— |
|
|
99 |
|
Coal development and mining |
Guizhou Puxin Energy Co., Ltd. (
) |
|
Mainland China January 15, 2009 |
|
|
150,000 |
|
|
— |
|
|
100 |
|
Investment holding and coal trading |
Guizhou Yongfu Mining Co., Limited (
) |
|
Mainland China June 27, 2005 |
|
|
100,000 |
|
|
— |
|
|
70 |
|
Coal development and mining |
Hong Kong Smartact Limited (
) |
|
Hong Kong January 25, 2010 |
|
|
— |
|
|
100 |
|
|
— |
|
Investment holding |
Hainan Yangpu Dashi Industrial Co., Limited (
) |
|
Mainland China April 13, 2004 |
|
|
1,000 |
|
|
— |
|
|
100 |
|
Investment holding |
Jinsha Baiping Mining Co., Ltd. (
) |
|
Mainland China January 15, 2009 |
|
|
58,000 |
|
|
— |
|
|
70 |
|
Coal development and mining |
Jinsha Juli Energy Co., Ltd. (
) |
|
Mainland China November 16, 2012 |
|
|
30,000 |
|
|
— |
|
|
100 |
|
Preparatory work for the construction of coal beneficiation plant in Jinsha county |
Liuzhi Linjiaao Coal Mining Co., Ltd. (
) |
|
Mainland China November 19, 2008 |
|
|
30,600 |
|
|
— |
|
|
99 |
|
Coal development and mining |
Liuzhi Xinsong Coal Mining Co., Ltd. (
) |
|
Mainland China November 13, 2008 |
|
|
60,000 |
|
|
— |
|
|
99 |
|
Coal development and mining |
Nayong Gouchang Coal Mining Co., Ltd. (
) |
|
Mainland China September 10, 2009 |
|
|
40,000 |
|
|
— |
|
|
99 |
|
Coal development and mining |
Shenzhen Chixin Information and Consulting Co., Ltd. (
) |
|
Mainland China July 18, 2012 |
|
|
1,000 |
|
|
— |
|
|
100 |
|
Provision of management and consulting services to other companies in the Group |
- *
- The
English names of certain companies above represent the best efforts by the management of the Company in directly translating the Chinese names of certain
companies as no English names have been registered.
F-12
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2.1 BASIS OF PRESENTATION
The Company was part of a series of reorganisations and became the holding company of the companies now comprising the Group since July 2011.
The
consolidated income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group for the years ended December 31,
2010, 2011 and 2012 and the six months ended June 30, 2012 and 2013 include the results and cash flows of all companies now comprising the Group, as if the Group structure had been in existence
throughout each of the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2012 and 2013, since the earliest date presented or since the respective dates of
incorporation/establishment of the combining companies, or since the date when the subsidiaries and/or businesses first came under the common control of the controlling shareholder, whichever is a
shorter period. The consolidated statements of financial position of the Group as at December 31, 2010, 2011, 2012 and June 30, 2013 have been prepared to present the assets and
liabilities of the subsidiaries and/or businesses comprising the Group at these dates, as if the Group structure had been in existence as at these dates. The net assets and results of the relevant
companies of the Group were consolidated using the existing book values from the controlling shareholder's perspective. No adjustments are made to reflect fair values, or recognise any new assets or
liabilities as a result of the reorganisations.
Equity
interests in subsidiaries and held by parties other than the controlling shareholder prior to the reorganisations, if significant, are presented as non-controlling interests in
equity in applying the principles of merger accounting.
All
intra-group transactions and balances have been eliminated on consolidation.
COMPARATIVE INFORMATION
Certain items in the consolidated financial statements have been reclassified to conform to the current year's presentation to
facilitate comparison.
2.2 BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with IFRSs as issued by the IASB. All IFRSs effective for the annual period commencing from
January 1, 2013, together with the relevant transitional provisions, have been early adopted by the Group in the preparation of the consolidated financial statements throughout the years ended
December 31, 2010, 2011, 2012 and the six months ended June 30, 2013 as well as the six months ended June 30, 2012.
The
consolidated financial statements have been prepared on a historical cost basis. The consolidated financial statements are presented in Renminbi ("RMB").
Going concern
As of June 30, 2013, the Group had a working capital deficiency of RMB955.1 million and has undrawn loan facilities
totalling RMB260.0 million available to finance its future operations. Subsequent to the six months ended June 30, 2013, the Group has secured additional loan facilities as at
November 30, 2013 totalling RMB461.0 million and obtained confirmation letters from the banks to provide further loan facilities totaling RMB1,950.0 million pursuant to certain
conditions (note 37).
In
the opinion of the Directors, the Group's forecasts and projections, after taking into account of reasonably possible changes in trading performance, operating as well as capital
expenditure, and the available bank facilities, support that the Group's ability to continue to operate within level of its current capacity and that the Group is expected to have sufficient liquidity
to finance its operations for the next twelve months. Therefore, the consolidated financial statements have been prepared on a going concern basis. The going concern basis assumes that the Group will
continue in operation for the foreseeable future and will be able to realise its assets and discharge its liabilities and commitments in the normal course of business.
F-13
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2.3 ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING STANDARDS
The Group has not applied the following new and revised IFRSs, that have been issued but are not yet effective, in these financial statements:
|
|
|
IFRS 9 |
|
Financial Instruments(2) |
IFRS 10, IFRS 12 and IAS 27 (2011) Amendments |
|
Amendments to IFRS 10, IFRS 12 and IAS 27 — Investment Entities(1) |
IAS 32 Amendments |
|
Amendments to IAS 32 Financial Instruments: Presentation — Offsetting Financial Assets and Financial Liabilities(1) |
IAS 36 Amendments |
|
Amendments to IAS 36 Impairment: Recoverable Amount Disclosures for Non-Financial Assets(1) |
IAS 39 Amendments |
|
Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting(1) |
IFRIC 21 |
|
Levies(1) |
- (1)
- Effective
for annual periods beginning on or after January 1, 2014
- (2)
- Effective
for annual periods beginning on or after January 1, 2015
Further
information about those changes that are expected to significantly affect the Group is as follows:
IFRS 9
issued in November 2009 is the first part of phase 1 of a comprehensive project to entirely replace IAS 39 Financial
Instruments: Recognition and Measurement. This phase focuses on the
classification and measurement of financial assets. Instead of classifying financial assets into four categories, an entity shall classify financial assets as subsequently measured at either amortised
cost or fair value, on the basis of both the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. This aims to improve and
simplify the approach for the classification and measurement of financial assets compared with the requirements of IAS 39.
In
October 2010, the IASB issued additions to IFRS 9 to address financial liabilities (the "Additions") and incorporated in IFRS 9 the current derecognition
principles of financial instruments of IAS 39. Most of the Additions were carried forward unchanged from IAS 39, while changes were made to the measurement of financial liabilities
designated as at fair value through profit or loss using the fair value option ("FVO"). For these FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes
in credit risk must be presented in other comprehensive income ("OCI"). The remainder of the change in fair value is presented in the income statement, unless presentation of the fair value change in
respect of the liability's credit risk in OCI would create or enlarge an accounting mismatch in the income statement. However, loan commitments and financial guarantee contracts which have been
designated under the FVO are scoped out of the Additions.
F-14
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
IAS 39
is aimed to be replaced by IFRS 9 in its entirety. Before this entire replacement, the guidance in IAS 39 on hedge accounting and impairment of financial
assets continues to apply. The Group expects to adopt IFRS 9 from January 1, 2015. The Group will quantify the effect in conjunction with other phases, when the final standard including
all phases is issued.
The
IAS 32 Amendments clarify the meaning of "currently has a legally enforceable right to set off" for offsetting financial assets and financial liabilities. The amendments also
clarify the application of the offsetting criteria in IAS 32 to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous.
The amendments are not expected to have any impact on the financial position or performance of the Group upon adoption on January 1, 2014.
The
narrow-scope amendments to IAS 36 Impairment of Assets address the disclosure of information about the recoverable amount of
impaired assets if that amount is based on fair value less costs of disposal. When developing IFRS 13 Fair Value Measurement, the IASB decided to
amend IAS 36 to require disclosures about the recoverable amount of impaired assets. The Group expects to adopt the amendments from January 1, 2014.
The
narrow-scope amendments to IAS 39 will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to
effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met (in this context, a novation indicates that parties to a contract agree to replace
their original counterparty with a new one). The amendments are not expected to have any impact on the financial position or performance of the Group upon adoption on January 1, 2014.
IFRIC
Interpretation 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. It
also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is
triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be recognised before the specified minimum threshold is reached. The Group expects to adopt the
amendments from January 1, 2014.
The
Group has already commenced an assessment of the related impact of the above revised standards, amendments and interpretations on the Group's financial statements and is not
expecting any significant impact on the Group's financial position and results.
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- (a)
- Subsidiaries
Subsidiaries
are all those entities over which the Group has power over the investee such that the Group is able to direct the relevant activities, has exposure or rights to variable
returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investee's returns.
- (b)
- Business combinations
The
consolidated financial statements incorporate the financial statements of the Company and its subsidiaries for the years ended December 31, 2010, 2011, 2012, and the six
months ended June 30, 2013. As explained in note 2.1 above, the acquisition of subsidiaries and business under common control,
where applicable, has been accounted for using merger accounting. The financial statements of the combining entities or businesses under common control are prepared for the same reporting period as
the Company, using consistent accounting policies.
F-15
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The
merger method of accounting involves incorporating the financial statement items of the combining entities or businesses in which the common control combinations occurs as if they
had been combined from the date when the combining entities or businesses first came under the control of the controlling shareholder. The net assets of the combining entities or businesses are
combined using the existing book values from the controlling shareholder's perspective. No amount is recognised in respect of goodwill or the excess of the acquirers' interest in the net fair value of
acquirees' identifiable assets, liabilities and contingent liabilities over the cost of investment at the time of common control combination.
The
consolidated income statement include the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or
businesses first came under common control or since their respective dates of incorporation/establishment, where this is a shorter period, regardless of the date of the common control combination. All
intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated on consolidation.
Business
combinations, other than business combinations under common control, are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it
measures the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation either at fair
value or at the proportionate share of the acquiree's identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition costs incurred are expensed and
included in administrative expenses.
When
the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms,
economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If
the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the
acquisition date through the income statement.
Any
contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent
consideration that is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in the income statement or as a change to other comprehensive income. If the
contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within
the scope of IAS 39, it is measured in accordance with the appropriate IFRS.
Goodwill
is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the
Group's previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair
value of the net assets of the subsidiary acquired, the difference is, after reassessment, recognised in the income statement as a gain on bargain purchase.
F-16
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (c)
- Related parties
A
party is considered to be related to the Group if:
- (1)
- the
party is a person or a close member of that person's family and that person
- (i)
- has
control or joint control over the Group;
- (ii)
- has
significant influence over the Group; or
- (iii)
- is
a member of the key management personnel of the Group or of a parent of the Group;
or
- (2)
- the
party is an entity where any of the following conditions applies:
- (i)
- the
entity and the Group are members of the same group;
- (ii)
- one
entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
- (iii)
- the
entity and the Group are joint ventures of the same third party;
- (iv)
- one
entity is a joint venture of a third entity and the other entity is an associate of the third entity;
- (v)
- the
entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
- (vi)
- the
entity is controlled or jointly controlled by a person identified in (1); and
- (vii)
- a
person identified in (1)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a
parent of the entity).
- (d)
- Property, plant and equipment
Property,
plant and equipment comprise buildings, mining structures, mining rights, machinery and equipment, motor vehicles, exploration rights and construction in progress.
Exploration
rights are capitalised and amortised over the term of the license granted to the Company by the authorities.
When
proved and probable coal reserves have been determined, costs incurred to develop coal mines are capitalised as part of the cost of the mining structures.
Buildings,
mining structures, machinery and equipment, and motor vehicles are stated at cost less accumulated depreciation and any impairment losses. Expenditures for routine repairs and
maintenance are expensed as incurred.
Mining
rights are stated at cost less accumulated amortisation and any impairment losses. The costs of mining rights are initially capitalised when purchased. If proved and probable
reserves are established for a property and it has been determined that a mineral property can be economically developed, costs are capitalised and are amortised upon production based on actual units
of production over the estimated proved and probable reserves of the mines. For mining rights in which proved and probable reserves have not yet been established, the Group assesses the carrying value
for impairment at the end of each reporting period. The Group's rights to extract minerals are contractually limited by time. However, the Group believes that it will be able to extend licenses.
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Mining
related buildings, mining structures and mining related machinery and equipment are stated at cost less accumulated depreciation and any impairment losses. Those mining related
assets for which proved and probable reserves have been established are depreciated upon production based on actual units of production over the estimated proved and probable reserves of
the mines.
Reserve
estimates are reviewed when information becomes available that indicates a reserve change is needed, or at a minimum once a year. Any material effect from changes in estimates is
considered in the period the change occurs.
Depreciation
for the following items is calculated on the straight-line basis over each asset's estimated useful life down to the estimated residual value of each asset. Estimated useful
lives are as follows:
|
|
|
|
| |
Non-mining related buildings |
|
15 - 35 years |
| |
Non-mining related machinery and equipment |
|
5 - 15 years |
| |
Motor vehicles |
|
5 - 8 years |
Residual
values, useful lives and the depreciation method are reviewed and, adjusted if appropriate, at each reporting date.
When
properties are retired or otherwise disposed, the related cost and accumulated depreciation are removed from the respective accounts and any profit or loss on disposition is
recognised in the income statement.
Construction
in progress is carried at cost and is to be depreciated when placed into service over the estimated useful lives or units of production of those assets. Construction costs
are capitalised as incurred. Interest is capitalised as incurred during the construction period.
- (e)
- Exploration and evaluation costs
Exploration
and evaluation assets include topographical and geological surveys, exploratory drilling, sampling and trenching and activities in relation to commercial and technical
feasibility studies, and expenditure incurred to secure further mineralisation in existing coal bodies and to expand the capacity of a mine. Expenditure incurred prior to acquiring legal rights to
explore an area is expensed as incurred.
Once
the exploration right to explore has been acquired, exploration and evaluation expenditure is charged to the income statement as incurred, unless a future economic benefit is more
likely than not to be realised. Exploration and evaluation assets acquired in a business combination are initially recognised at fair value. They are subsequently stated at cost less accumulated
impairment.
When
it can be reasonably ascertained that a mining property is capable of commercial production, exploration and evaluation costs are transferred to tangible or intangible assets
according to the nature of the exploration and evaluation assets. If any project is abandoned during the evaluation stage, the total expenditure thereon will be written off.
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (f)
- Impairment of non-financial assets
Where
an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets, etc.), the asset's recoverable amount
is estimated.
An
impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in
use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the
recoverable amount is determined for the cash-generating unit to which the asset belongs. The fair value less costs to sell calculation is based on available data from binding sales transactions in
arm's length transactions of similar assets or observable market prices less incremental costs for disposing of the asset or other appropriate valuation technique. The value in use calculation is
based on a discounted cash flow model, using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to
the income statement in the period in which it arises in those categories consistent with the function of the impaired asset.
An
assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If
such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed on if there has been a change in the estimates used
to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment
loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the income statement in the period in which it arises (only if there are revalued assets in the
financial statement), unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that
revalued asset.
- (g)
- Financial assets
As
of December 31, 2010, 2011, 2012 and June 30, 2013, the Group's financial assets within the scope of IAS 39 are all classified as loans and receivables. The Group
determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus transaction costs.
All
regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than 12 months after the reporting date, which are classified as non-current assets. Loans and receivables are included in
"trade and bills receivables", "prepayments, deposits and other receivables", "term deposits with an original maturity over three months", "restricted bank deposits", "cash and cash equivalents",
"rehabilitation fund" and "due from related companies" in the consolidated statements of financial position. These assets are subsequently carried at amortised cost using the effective interest method
("EIR") less any provision for impairment. Gains and losses are recognised in the interest income or finance costs in the consolidated income statement when the loans and receivables are derecognised
as well as through the amortisation process.
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 2010, 2011, 2012 and June 30, 2013, the carrying amounts of rehabilitation fund are not materially
different from their fair values. The carrying values of other financial assets approximated their fair values due to the short-term maturity of these instruments.
The Group assesses at each reporting date whether there is any objective evidence that the loans and receivables are impaired. The
Group first assesses individually whether objective evidence of impairment exists for loans and receivables that are individually significant, or collectively for loans and receivables that are not
individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed loans and receivables, whether significant or not, it includes the asset
in a group of loans and receivables with similar credit risk characteristics and collectively assesses them for impairment. Loans and receivables that are individually assessed for impairment and for
which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.
If
there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between
the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective
interest rate (the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount
of the impairment loss is recognised in the income statement in finance costs for loans and in other operating expenses for receivables.
If,
in a subsequent year, the amount of the estimated impairment loss increases or decreases and the decrease can be related objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognised in the consolidated income
statement, to the extent that the carrying value of the asset does not exceed amortised cost at the reversal date.
In
relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial
difficulties of the debtor and significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor) that the Group will not be able to collect all
of the amounts due under the original terms of an invoice.
For financial assets classified as loans and receivables, the financial asset (or, where applicable a part of a financial asset or part
of a group of similar financial assets) is derecognised where:
- (i)
- the
rights to receive cash flows from the asset have expired;
- (ii)
- the
Group retains the rights to receive cash flows from the asset, but has assumed an obligation to pay the received cash flows in full without material
delay to a third party under a "pass-through" arrangement; or
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (iii)
- the
Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of
the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When
the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks
and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the
extent of the Group's continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis
that reflects the rights and obligations that the Group has retained.
Continuing
involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
- (h)
- Financial liabilities at amortised cost
Financial
liabilities including trade and bills payables, amounts due to related companies, other payables and certain accrued liabilities, interest-bearing loans, mining rights payable
and interest payable are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the EIR. The related interest expense is
recognised within "finance costs" in the consolidated income statement.
Gains
and losses are recognised in the consolidated income statement when the liabilities are derecognised as well as through the amortisation process.
As of December 31, 2010, 2011, 2012 and June 30, 2013, the carrying values of these financial liabilities other than
long-term interest-bearing loans and mining rights payable, approximated their fair values due to the short-term maturity of these instruments. The carrying values of long-term interest bearing-loans
and mining rights payable approximated their fair values as the interest rates on almost all the balances are reset each year based on prevailing interest rates stipulated by the People's Bank
of China.
The
Group had no financial liabilities measured at fair value on a recurring or a non-recurring basis as of December 31, 2010, 2011, 2012 and June 30, 2013.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled, or expires.
When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in
the consolidated income statement.
F-21
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Financial assets and liabilities are offset and the net amount reported in the consolidated statements of financial position, if and
only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities
simultaneously.
- (i)
- Financial guarantee contracts
Financial
guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to
make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the
reporting date and the amount recognised less cumulative amortisation.
- (j)
- Inventories
Inventories
are stated at the lower of cost and net realisable value. Cost is determined by the weighted-average method. Net realisable value is based on estimated selling prices less
any estimated costs to be incurred to completion and disposal. Major types of inventories include:
- •
- Spare parts and consumables
- •
- Coal
- (k)
- Cash and cash equivalents
For
the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are
readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts
which are repayable on demand and form an integral part of the Group's cash management.
For
the purpose of the statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which
are not restricted as to use.
- (l)
- Employee benefits
The Group contributes on a monthly basis to various defined contribution retirement benefit plans administered by the PRC government.
The relevant government agencies undertake to assume the retirement benefit obligation payable to all existing and future retired
employees under these plans and the Group has no further obligation for post-retirement benefits beyond the contributions made. Further information is set out in note 9.
F-22
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
All full-time employees of the Group are entitled to participate in various government-sponsored housing funds. The Group contributes
on a monthly basis to these funds based on certain percentages of the salaries of the employees. The Group's liability in respect of these funds is limited to the contributions payable in
each year.
- (m)
- Asset retirement obligations
The
Group's legal or constructive obligations associated with the retirement of non-financial assets are recognised at fair value at the time the obligations are incurred and if it is
probable that an outflow of resources will be required to settle the obligation, and a reasonable estimate of fair value can be made. Upon initial recognition of a liability, a corresponding amount is
capitalised as part of the carrying amount of the related property, plant and equipment. Asset retirement obligations are regularly reviewed by management and are revised for changes in future
estimated costs and regulatory requirements. Changes in the estimated timing of retirement or future estimated costs are dealt prospectively by recording an adjustment against the carrying value of
the provision and a corresponding adjustment to property and equipment. Depreciation of the capitalised asset retirement cost is generally determined on a units-of-production basis. Accretion of the
asset retirement obligation is recognised over time and generally will escalate over the life of the producing asset, typically as production declines. Accretion is included in the finance cost in the
consolidated income statement. Any difference between the recorded obligation and the actual costs of reclamation is recorded in the income statement in the period the obligation is settled.
- (n)
- Borrowing costs
Borrowing
costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs directly relating to the acquisition, construction or
production of a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. The
capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. All other borrowing costs are expensed in the period in which they
are incurred.
- (o)
- Revenue recognition
The
Group sells its products pursuant to sales contracts entered into with its customers. Revenue for all products is recognised when the significant risks and rewards of ownership have
passed to the customer and when collectability is reasonably assured. The passing of the significant risks and rewards of ownership to the customer is based on the terms of the sales contract,
generally upon delivery and acceptance of the product by the customer.
F-23
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In accordance with the relevant tax laws in the PRC, value-added taxes ("VAT") is levied on the invoiced value of sales and is payable by the purchaser. The Group
is required to remit the VAT it collects to the tax authority, but may deduct the VAT it has paid on eligible purchases. The difference between the amounts collected and paid is presented as VAT
recoverable or payable in the consolidated statements of financial position. VAT on sales amounted to RMB9.3 million, RMB18.4 million, RMB29.8 million, RMB10.1 million and
RMB12.8 million for the years ended December 31, 2010, 2011, 2012, the six months ended June 30, 2012 and June 30, 2013, respectively. The Group recognises revenues net
of VAT.
The
price adjustment fund ("PAF") was imposed by the Guizhou Provincial Government of the PRC at predetermined rates and on the quantity of coal sold by entities operated in Guizhou
Province. The PAF paid can be claimed as a deductible expense for corporate income tax purposes and the amount claimed is based on the actual amount paid. The Group recognised PAF in "cost of sales"
in the consolidated income statement.
- (p)
- Income taxes
Income
tax comprises current and deferred tax. Income tax is recognised in the consolidated income statement or consolidated statement of comprehensive income, either as an expense as it
relates to operating activities or as a component of the applicable categories of other comprehensive income or loss.
Current
tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantially enacted, by the reporting date, in the countries where the Group operates and generates taxable income.
Deferred
tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred
tax liabilities are recognised for all taxable temporary differences, except:
- •
- where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- •
- in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred
tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised,
except:
- •
- where the deferred tax assets relating to the deductible temporary differences arise from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
- •
- in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised.
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The
carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is probable that sufficient
taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred
tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred
tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation authority.
- (q)
- Share-based payment transactions
Employees
(including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity
instruments ("equity-settled transactions").
The
cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using the
Black-Scholes option pricing model.
The
cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled.
The cumulative expense recognised for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Group's
best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the income statement for a period represents the movement in the cumulative expense recognised as
at the beginning and end of that period.
No
expense is recognised for awards that do not ultimately vest for the Group.
- (r)
- Foreign currency translation
The
functional currency of substantially all the operations of the Group is the RMB, the national currency of the PRC. Transactions denominated in currencies other than the RMB recorded
by the entities of the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in other
currencies have been translated into RMB at the functional currency rates of exchange prevailing at the end of the reporting period. The resulting exchange gains or losses are credited or charged to
the consolidated income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the date of the initial
transactions.
The
financial statements of certain overseas subsidiary operations with a functional currency other than the RMB have been translated into RMB. The assets and liabilities of these
entities have been translated using the exchange rates prevailing at the reporting date and the income statement have been translated using the weighted average exchange rate for the year. Resulting
translation adjustments are reported as a separate component of other comprehensive income.
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On
disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.
- (s)
- Provisions
A
provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required
to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.
When
the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be
required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the income statement.
- (t)
- Leases
Leases
that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a
finance lease, the cost of the leased asset is capitalised at the lower of its fair value of the present value of the minimum lease payments and recorded together with the obligation, excluding the
interest element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in property, plant and equipment, and depreciated over the shorter of the lease terms
and the estimated useful lives of the assets. The finance costs of such leases are charged to the income statement so as to provide a constant periodic rate of charge over the lease terms.
Leases
where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals payable under operating leases net of
any incentives received from the lessor are charged to the income statement on the straight-line basis over the lease terms.
Prepaid
land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.
2.5 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect
the reported amounts of assets, liabilities at the reporting date and the reported amounts of revenues and expenses during the reporting period. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
Judgements
In the process of applying the Group's accounting policies, management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated financial statements.
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (i)
- Commercial production start date
The
Group assesses the stage of each coal mine under construction to determine when a coal mine moves into the production stage. The criteria used to assess the start date are determined
based on the unique nature of each coal mine construction project. The Group considers various relevant criteria to assess when the coal mine is substantially complete, ready for its intended use and
is reclassified from "Construction in progress" to "Mining structures". The criteria will include, but are not limited, to the following:
- •
- The level of capital expenditure compared to the construction cost estimates
- •
- Completion of a reasonable period of testing of the mine and equipment
- •
- Ability to produce coals in saleable form (within specifications)
- •
- Ability to sustain ongoing production of coal
When
a mine construction project moves into the production stage, the capitalisation of certain coal mine construction costs ceases, and further extraction costs incurred are either
regarded as inventory or expensed, except for costs that qualify for capitalisation relating to mining asset additions or improvements, underground mine development or mineable reserve development.
The commercial production start date is also the date when depreciation and/or amortisation of the mining structure assets commences.
Estimates and assumptions
The
key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustments to the
carrying amounts of assets and liabilities within the next financial year, are discussed below. The Company has based its assumptions and estimates on parameters available when the consolidated
financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the
Company. Such changes are reflected in the assumptions when they occur.
- (i)
- Impairment of property, plant and equipment
Long-lived
assets to be held and used, such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts
may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair
value less costs to sell and value in use. In estimating the recoverable amounts of assets, various assumptions, including future cash flows to be associated with the non-current assets and discount
rates, are made. If future events do not correspond to such assumptions, the recoverable amounts will need to be revised, and this may have an impact on the Group's results of operations or financial
position.
Other
than those disclosed in note 16, there were no impairments recognised for the years ended December 31, 2010, 2011, 2012 and the six months ended
June 30, 2013.
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FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (ii)
- Units-of-production depreciation for mining related assets
The
Group determines the depreciation and/or amortisation of mining related assets by the actual units of production over the estimated reserves of the mines. Further details about the
reserve estimates are included in note 2.5 (iv) below.
- (iii)
- Useful lives of non-mining related property, plant and equipment
The
Group's management determines the estimated useful lives and related depreciation charges for its non-mining related property, plant and equipment. This estimate is based on the
historical experience of the actual useful lives of non-mining related property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovation
and competitor action in response to severe industry cycles. Management will increase the depreciation charges where useful lives are less than previously estimated lives, or it will write-off or
write-down technically obsolete or non-strategic assets that have been abandoned or sold.
- (iv)
- Reserve estimates
Proved
and probable coal reserve estimates are estimates of the amount of coal that can be economically and legally extracted from the Group's mining properties. In determining the
estimates, recent production and technical information of each mine will be considered.
Fluctuations
in factors including the price of coal, production costs and transportation costs of coal, a variation on recovery rates or unforeseen geological or geotechnical perils may
render it necessary to revise the estimates of coal reserves.
Because
the economic assumptions used to estimate reserves changes from period to period, and because additional geological data is generated during the course of operations, estimates
of reserves may change from period to period. Changes in reported reserves may affect the Group's financial results and financial position in a number of ways, including
the following:
- •
- Asset carrying values may be affected due to changes in estimated future cash flows.
- •
- Depreciation, depletion and amortisation charged to the income statement may change where such charges are determined by
the units of production basis, or where the useful economic lives of assets change.
- •
- Asset retirement obligations may change where changes in estimated reserves affect expectations about the timing or cost
of these activities.
- •
- The carrying value of deferred tax assets may change due to changes in estimates of the likely recovery of the
tax benefits.
- (v)
- Trade and other receivables
The
Group's management determines the provision for impairment of trade and other receivables. This estimate is based on the credit history of its customers and current market
conditions. Management reassesses the provision at the end of each reporting period.
F-28
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (vi)
- Income taxes
There
are certain transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, the differences will be reflected in the
income tax and deferred tax provisions in the period in which the determination is made. In addition, the realisation of future income tax assets is dependent on the Group's ability to generate
sufficient taxable income in future years to utilise income tax benefits and income tax loss carryforwards. Deviations of future profitability from estimates or in the income tax rate would result in
adjustments to the value of future income tax assets and liabilities that could have a significant effect on earnings.
- (vii)
- Provision for asset retirement obligations
The
provision for asset retirement obligations is determined by management based on the past experience and best estimation of future expenditures, taking into account existing relevant
PRC regulations. However, insofar as the effect on the land and the environment from current mining activities becomes apparent in future years, the estimate of the associated costs may be subject to
revision from time to time.
3. OPERATING SEGMENT INFORMATION
For management purposes, the Group operates in one business unit based on its products, and has only one reportable segment which is the exploration and mining of
coal. The Group conducts its principal
operation in the PRC. Management monitors the operating results of its business units as a whole for the purpose of making decisions about resources allocation and performance assessment.
Geographic information
The Group's revenue from external customers is derived solely from its operation in Mainland China, and no non-current assets of the
Group are located outside Mainland China.
Information about major customers
During the year ended December 31, 2010, sales derived from two customers accounted for 29.7% and 24.4% of the consolidated
revenue, respectively. During the year ended December 31, 2011, sales derived from three customers accounted for 29.2%, 19.0% and 14.8% of the consolidated revenue, respectively. During the
year ended December 31, 2012, sales derived from two customers accounted for 24.1% and 15.3% of the consolidated revenue, respectively. During the six months ended June 30, 2012, sales
derived from one customer accounted for 55.3% of the consolidated revenue. During the six months ended June 30, 2013, sales derived from four customers accounted for 24.5%, 18.7%, 13.6% and
11.6% of the consolidated revenue, respectively.
F-29
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REVENUE
Revenue comprises the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Sale of coal |
|
|
38,668 |
|
|
105,211 |
|
|
141,939 |
|
|
55,156 |
|
|
54,716 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
All
of the Group's revenue is derived solely from its operations in Mainland China.
5. COST OF SALES
Cost of sales comprises the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Sale of coal (note 8) |
|
|
25,453 |
|
|
74,289 |
|
|
95,889 |
|
|
30,396 |
|
|
39,953 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
6. FINANCE COSTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Interest on interest-bearing bank and other borrowings |
|
|
15,987 |
|
|
48,980 |
|
|
83,490 |
|
|
38,208 |
|
|
52,934 |
|
Interest on payables for mining rights |
|
|
5,845 |
|
|
11,908 |
|
|
5,892 |
|
|
3,231 |
|
|
3,235 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
21,832 |
|
|
60,888 |
|
|
89,382 |
|
|
41,439 |
|
|
56,169 |
|
Less: capitalised interest (note 16) |
|
|
(16,224 |
) |
|
(30,065 |
) |
|
(45,609 |
) |
|
(21,155 |
) |
|
(20,446 |
) |
Bank charges |
|
|
90 |
|
|
475 |
|
|
123 |
|
|
72 |
|
|
46 |
|
Entrusted loan commission fee |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,612 |
|
Accretion expenses (note 26) |
|
|
309 |
|
|
543 |
|
|
637 |
|
|
299 |
|
|
350 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,007 |
|
|
31,841 |
|
|
44,533 |
|
|
20,655 |
|
|
43,731 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
F-30
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NON-OPERATING INCOME/(EXPENSES), NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Reversal of other payable |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,271 |
|
Loss on disposal of items of property, plant and equipment (note 8) |
|
|
(139 |
) |
|
(250 |
) |
|
(194 |
) |
|
(463 |
) |
|
— |
|
Donation |
|
|
(909 |
) |
|
(297 |
) |
|
(1,445 |
) |
|
(1,266 |
) |
|
(28 |
) |
Others |
|
|
(529 |
) |
|
(341 |
) |
|
(540 |
) |
|
(81 |
) |
|
(28 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,577 |
) |
|
(888 |
) |
|
(2,179 |
) |
|
(1,810 |
) |
|
1,215 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
F-31
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. PROFIT/(LOSS) BEFORE INCOME TAX
The Group's profit/(loss) before income tax is arrived at after charging/(crediting):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Crediting: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income on bank deposits |
|
|
115 |
|
|
564 |
|
|
1,048 |
|
|
814 |
|
|
977 |
|
Gain on bargain purchase (note 30) |
|
|
624,148 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Charging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of inventories sold (a) |
|
|
19,413 |
|
|
65,808 |
|
|
66,963 |
|
|
21,593 |
|
|
29,001 |
|
Price adjustment fund |
|
|
2,624 |
|
|
4,995 |
|
|
12,116 |
|
|
7,135 |
|
|
2,792 |
|
Sales tax and surcharge |
|
|
1,856 |
|
|
1,812 |
|
|
3,897 |
|
|
1,216 |
|
|
1,834 |
|
Utilisation of safety fund and production maintenance fund |
|
|
1,560 |
|
|
1,674 |
|
|
12,913 |
|
|
452 |
|
|
6,326 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (note 5) |
|
|
25,453 |
|
|
74,289 |
|
|
95,889 |
|
|
30,396 |
|
|
39,953 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Employee benefit expenses (note 9) |
|
|
46,117 |
|
|
40,631 |
|
|
63,941 |
|
|
24,558 |
|
|
32,916 |
|
Depreciation, depletion and amortisation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— Property, plant and equipment |
|
|
8,055 |
|
|
13,037 |
|
|
17,812 |
|
|
6,401 |
|
|
7,696 |
|
Auditors' remuneration |
|
|
23 |
|
|
24 |
|
|
2,449 |
|
|
1,450 |
|
|
1,800 |
|
Operating lease rental: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— Office properties |
|
|
729 |
|
|
932 |
|
|
622 |
|
|
489 |
|
|
155 |
|
Loss on disposal of items of property, plant and equipment (note 7) |
|
|
139 |
|
|
250 |
|
|
194 |
|
|
463 |
|
|
— |
|
Impairment of property, plant and equipment |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
184,417 |
|
Write down of inventories to net realisable value |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
984 |
|
Repairs and maintenance |
|
|
1,572 |
|
|
2,219 |
|
|
1,209 |
|
|
664 |
|
|
863 |
|
Losses arising from temporary suspension of production (b) |
|
|
— |
|
|
— |
|
|
3,278 |
|
|
2,948 |
|
|
6,389 |
|
- (a)
- Included
in the cost of inventories sold are RMB17.3 million, RMB25.1 million, RMB51.6 million, RMB16.6 million and
RMB21.6 million for the years ended December 31, 2010, 2011, 2012, the six months ended June 30, 2012 and June 30, 2013, relating to employee benefit expenses, and
depreciation, depletion and amortisation, these amounts are also included in the respective amounts disclosed separately above for each type of expense.
- (b)
- The
amount represented the overhead costs incurred during the period of temporary suspension of production implemented by the local governments for
inspections as well as the suspension of production in Gouchang Coal Mine according to Guizhou Province's coal mine consolidation policy issued in March 2013.
F-32
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Wages, salaries and allowances |
|
|
36,191 |
|
|
43,601 |
|
|
78,579 |
|
|
28,599 |
|
|
41,679 |
|
Contribution to pension plans (a) |
|
|
2,947 |
|
|
2,246 |
|
|
654 |
|
|
1,037 |
|
|
1,302 |
|
Housing funds (a) |
|
|
972 |
|
|
879 |
|
|
143 |
|
|
493 |
|
|
388 |
|
Welfare and other expenses |
|
|
6,578 |
|
|
8,711 |
|
|
9,342 |
|
|
4,587 |
|
|
5,130 |
|
Equity-settled share option expense (note 28) |
|
|
17,009 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
63,697 |
|
|
55,437 |
|
|
88,718 |
|
|
34,716 |
|
|
48,499 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
- (a)
- As
stipulated by the PRC state regulations, the employees of the Group's subsidiaries which operate in Mainland China are required to participate in a
central pension scheme operated by the local municipal government and government-sponsored housing funds. These subsidiaries are required to contribute a certain percentage of their payroll costs for
those qualified urban employees to the central pension scheme as well as the housing funds.
Employee
benefits charged to the consolidated income statements are analysed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Total employee benefits accrued for the year |
|
|
63,697 |
|
|
55,437 |
|
|
88,718 |
|
|
34,716 |
|
|
48,499 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount included in inventories |
|
|
(297 |
) |
|
(1,012 |
) |
|
(1,978 |
) |
|
(1,403 |
) |
|
(3,110 |
) |
Amount included in property, plant and equipment |
|
|
(17,283 |
) |
|
(13,794 |
) |
|
(22,799 |
) |
|
(8,755 |
) |
|
(12,473 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Amount charged to income statements (note 8) |
|
|
46,117 |
|
|
40,631 |
|
|
63,941 |
|
|
24,558 |
|
|
32,916 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
10. DIRECTOR'S AND CHIEF EXECUTIVE'S REMUNERATION
Mr. Li Feilie was appointed as the Company's director and Chief Executive Officer on January 15, 2010. There are no fees or remuneration paid to
Mr. Li Feilie for the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013 except the share-based compensation in the year of 2010, as
disclosed in note 28.
Mr. Tam
Cheuk Ho and Mr. Wong Wah On Edward were appointed as the Company's director on February 1, 2013. There were no fees or remuneration paid to Mr. Tam
Cheuk Ho and Mr. Wong Wah On Edward for the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013.
There
is no arrangement under which a director waived or agreed to waive any remuneration during the years ended December 31, 2010, 2011, 2012, and the six months ended
June 30, 2013.
The
Group did not have any non-executive directors, independent non-executive directors and chief executives at any time during the years ended December 31, 2010, 2011, 2012, and
the six months ended June 30, 2013.
F-33
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. FIVE HIGHEST PAID INDIVIDUALS
The five individuals whose emoluments, including share-based compensation, were the highest in the Group during the years ended December 31, 2010, 2011,
2012, and the six months ended June 30, 2012 and 2013 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees |
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
Directors |
|
|
1 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
Non-director individuals |
|
|
4 |
|
|
5 |
|
|
5 |
|
|
5 |
|
|
5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
5 |
|
|
5 |
|
|
5 |
|
|
5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
The
details of remuneration paid to the five highest paid individuals who were directors of the Company during the years ended December 31, 2010, 2011, 2012, and the six months
ended June 30, 2012 and 2013 have been included in note 10 above. Details of the remuneration paid to the remaining non-director and non-chief-executive individuals are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Wages, salaries and allowances |
|
|
755 |
|
|
770 |
|
|
1,259 |
|
|
574 |
|
|
648 |
|
Contribution to pension plans |
|
|
— |
|
|
— |
|
|
12 |
|
|
4 |
|
|
7 |
|
Housing funds |
|
|
— |
|
|
— |
|
|
3 |
|
|
2 |
|
|
5 |
|
Welfare and other expenses |
|
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
755 |
|
|
770 |
|
|
1,274 |
|
|
582 |
|
|
665 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
The
number of non-director, non-chief-executive, highest paid employees whose remuneration fell within the following bands is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees |
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
Nil to RMB1,000,000 |
|
|
4 |
|
|
5 |
|
|
5 |
|
|
5 |
|
|
5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
5 |
|
|
5 |
|
|
5 |
|
|
5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
F-34
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAX AND DEFERRED TAX
The Company is incorporated in the British Virgin Islands ("BVI") and conducts its primary business through its subsidiaries in the PRC. It also has an
intermediate holding company in Hong Kong. Under the current laws of the BVI, the Company incorporated in the BVI is not subject to tax on income or capital gains. Hong Kong Profits Tax rate is 16.5%
during the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013. The Company's Hong Kong subsidiary has both Hong Kong-sourced and non-Hong
Kong-sourced incomes. The latter is not subject to Hong Kong Profits Tax and the related expenses are non-tax-deductible. For the Hong Kong-sourced income, no provision for Hong Kong Profits Tax was
made as such operation sustained tax losses during the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013. Furthermore, there are no withholding
taxes in Hong Kong on the remittance of dividends.
Effective
from January 1, 2008, the PRC's statutory corporate income tax ("CIT") rate is 25%. The Company's PRC subsidiaries are subject to income tax at 25% on their respective
taxable incomes as calculated in accordance with the CIT Law and its relevant regulations ("the actual method") except for Dayuan Coal, Gouchang Coal, Baiping Mining, Xinsong Coal, Linjiaao
Coal and Guizhou Yongfu. Prior to 2012, based on the local practices, the aforementioned subsidiaries were taxed on a deemed profit method based on their actual revenue minus deemed expenses with the
25% statutory rate. Practically, the CIT were collected approximately at a range of RMB9.5 to RMB32.0 per tonne of sales, or 7.50% to 10.64% of sales. No deferred tax assets were then provided
for these subsidiaries in view of the deemed profit method imposed.
During
the second half of 2012, the Group received written confirmations from the respective local tax bureaus that the aforementioned subsidiaries excluding Guizhou Yongfu are subject
to income tax on the actual method effective retrospectively from 2011. Guizhou Yongfu is subject to income tax on the actual method effective retroactively from the date of establishment. The effect
of change in the taxing method is the recognition of deferred tax assets for prior year tax losses amounting RMB15.3 million during 2012.
Under
the prevailing CIT Law and its relevant regulations, any dividends paid by the Company's PRC subsidiaries from their earnings derived after January 1, 2008 to the Company's
Hong Kong subsidiary are subject to a 5% or 10%, depending on the applicability of the Sino-Hong Kong tax treaty, PRC dividend withholding tax.
In
accordance with the New CIT Law, enterprises established under the laws of foreign countries or regions and whose "place of effective management" is located within the PRC
territory are considered PRC resident enterprises and subject to the PRC income tax at the rate of 25% on worldwide income. The definition of "place of effective management" refers to an establishment
that exercises, in substance, overall management and control over the production and business, personnel, accounting and properties of an enterprise. As of June 30, 2013, no detailed
interpretation or guidance has been issued to define "place of effective management". If the Company's non-PRC incorporated entities are deemed PRC tax residents, such entities would be subject to PRC
tax under the New CIT Law. As of June 30, 2013, the Company has analysed the applicability of this law and has not accrued for PRC tax on such basis. The Company will continue to monitor
changes in the interpretation or guidance of this law.
F-35
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The
current and deferred components of income tax expense/(benefit) appearing in the consolidated income statements are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Current — Mainland China |
|
|
2,066 |
|
|
6,183 |
|
|
10,954 |
|
|
4,769 |
|
|
1,817 |
|
Deferred — Mainland China |
|
|
4,075 |
|
|
3,567 |
|
|
(26,164 |
) |
|
1,015 |
|
|
(52,285 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,141 |
|
|
9,750 |
|
|
(15,210 |
) |
|
5,784 |
|
|
(50,468 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
A
reconciliation of the income taxes computed at the PRC statutory tax rate of 25% to the actual income tax expense/(benefit) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Profit/(loss) before income tax |
|
|
562,134 |
|
|
(55,150 |
) |
|
(82,266 |
) |
|
(32,921 |
) |
|
(273,224 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Tax at the statutory tax rate of 25% |
|
|
140,534 |
|
|
(13,788 |
) |
|
(20,567 |
) |
|
(8,230 |
) |
|
(68,306 |
) |
Effect of different tax rates for the Company and the Hong Kong subsidiary |
|
|
3 |
|
|
7 |
|
|
142 |
|
|
2 |
|
|
3,433 |
|
Effect of the deemed profit method |
|
|
1,779 |
|
|
1,528 |
|
|
— |
|
|
131 |
|
|
— |
|
Non-taxable income |
|
|
(156,037 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-deductible expenses |
|
|
12,586 |
|
|
8,605 |
|
|
3,058 |
|
|
1,943 |
|
|
1,094 |
|
Deferred tax assets not recognised |
|
|
2,114 |
|
|
1,110 |
|
|
794 |
|
|
522 |
|
|
(1,543 |
) |
Tax losses not recognised |
|
|
5,153 |
|
|
12,280 |
|
|
16,241 |
|
|
11,140 |
|
|
15,526 |
|
Recognition of deferred tax assets for prior year tax losses |
|
|
— |
|
|
— |
|
|
(15,278 |
) |
|
— |
|
|
— |
|
Others |
|
|
9 |
|
|
8 |
|
|
400 |
|
|
276 |
|
|
(672 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit) |
|
|
6,141 |
|
|
9,750 |
|
|
(15,210 |
) |
|
5,784 |
|
|
(50,468 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
F-36
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The
Group's major deferred tax assets and deferred tax liabilities, shown after jurisdictional netting, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities and other payables |
|
|
— |
|
|
— |
|
|
3,612 |
|
|
3,351 |
|
Capitalized pilot run income |
|
|
— |
|
|
— |
|
|
7,737 |
|
|
10,944 |
|
Tax losses |
|
|
— |
|
|
— |
|
|
16,298 |
|
|
21,851 |
|
Others |
|
|
— |
|
|
— |
|
|
423 |
|
|
473 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
28,070 |
|
|
36,619 |
|
| |
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and fair value adjustment of property, plant and equipment* |
|
|
(285,849 |
) |
|
(289,416 |
) |
|
(291,322 |
) |
|
(247,586 |
) |
| |
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities |
|
|
(285,849 |
) |
|
(289,416 |
) |
|
(263,252 |
) |
|
(210,967 |
) |
| |
|
|
|
|
|
|
|
|
|
Classification in the consolidated statements of financial position: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets |
|
|
— |
|
|
— |
|
|
3,752 |
|
|
5,365 |
|
| |
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
(285,849 |
) |
|
(289,416 |
) |
|
(267,004 |
) |
|
(216,332 |
) |
| |
|
|
|
|
|
|
|
|
|
- *
- Included
in the deferred tax liabilities, there are RMB281.4 million, RMB280.4 million, RMB278.7 million and RMB232.9 million
deferred tax liabilities recognised relating to fair value adjustment on property, plant and equipment as of December 31, 2010, 2011, 2012 and June 30, 2013, respectively.
During
2012, deferred tax assets were recognised for Dayuan Coal, Xinsong Coal, Linjiaao Coal and Guizhou Yongfu which were either in the construction phase or had just commenced
commercial production. They were taxed on a deemed profit method before and were changed to the actual method during 2012 as approved by the respective local tax bureaus. In assessing the
recoverability of the Group's deferred tax assets, the management has performed a detailed assessment on the available taxable temporary differences relating to the same taxation authority and the
same taxable entity, which will result in taxable amounts against which the deductible temporary differences and unused tax losses can be utilised before they expire. In addition, the management has
also performed a detailed assessment on these coal mining subsidiaries' profitability based on their production plans, product mix, forecasted selling prices, and the related production and
operational costs, of which strong profits are expected. Accordingly, the management considered it is probable that the Group, in future, will earn sufficient taxable profits to utilise these coal
mining subsidiaries' deductible temporary differences and unused tax losses before they expire and as such, the related deferred tax assets are recognised.
The
Group did not recognise any deferred tax liabilities in respect of the 5% or 10%, depending on the applicability of the tax treaty preferential, PRC dividend withholding tax on the
undistributed earnings of its PRC subsidiaries as there were no undistributed earnings available due to aggregate loss of the subsidiaries as of December 31, 2010, 2011, 2012 and
June 30, 2013.
F-37
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The
total amounts of unused tax losses for which no deferred tax assets were recognised amounting to RMB18.6 million, RMB55.1 million, RMB97.8 million and
RMB145.5 million as of December 31, 2010, 2011, 2012 and June 30, 2013, respectively. As of June 30, 2013, unused tax losses of RMB18.6 million,
RMB36.5 million and RMB42.7 million and RMB47.7 million, if unused, will expire by end of 2015, 2016, 2017 and 2018, respectively.
The
gross movements on the deferred tax account are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
At beginning of the year/period |
|
|
— |
|
|
(285,849 |
) |
|
(289,416 |
) |
|
(263,252 |
) |
Debited/(credited) to consolidated income statements |
|
|
(4,075 |
) |
|
(3,567 |
) |
|
26,164 |
|
|
52,285 |
|
Acquisition of a subsidiary (note 30) |
|
|
(281,774 |
) |
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
At end of the year/period |
|
|
(285,849 |
) |
|
(289,416 |
) |
|
(263,252 |
) |
|
(210,967 |
) |
| |
|
|
|
|
|
|
|
|
|
13. PROFIT/(LOSS) ATTRIBUTABLE TO OWNER OF THE COMPANY
The consolidated profit/(loss) attributable to owner of the Company for the years ended December 31, 2010, 2011, 2012 and the six months ended
June 30, 2012 and June 30, 2013 includes a loss of RMB0.01 million, a loss of RMB0.01 million, a loss of RMB0.57 million, a loss of RMB0.01 million and a loss
of RMB0.01 million, respectively, which has been dealt with in the financial statements of the Company (note 33).
14. EARNINGS/(LOSSES) PER SHARE ATTRIBUTABLE TO OWNER OF THE COMPANY
Basic and diluted earnings/(losses) per share for the years ended December 31, 2010, 2011, 2012 and the six months ended June 30, 2013 were
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Profit/(loss) for the year attributable to owner of the Company: |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings/(losses) per share attributable to owner of the Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
The
Company did not have any potential diluted shares throughout the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013. Accordingly,
the diluted earnings per share amounts are the same as the basic earnings per share amounts.
15. DIVIDEND
No dividend has been paid or declared by the Company since its incorporation.
F-38
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings |
|
Mining
structures
and mining
rights |
|
Machinery
and
equipment |
|
Motor
vehicles |
|
Construction
in progress |
|
Total |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2010 |
|
|
399 |
|
|
139,346 |
|
|
757 |
|
|
2,735 |
|
|
37,134 |
|
|
180,371 |
|
Acquisition of Guizhou Puxin |
|
|
5,053 |
|
|
1,248,471 |
|
|
12,055 |
|
|
2,383 |
|
|
68,419 |
|
|
1,336,381 |
|
Additions |
|
|
8 |
|
|
105,916 |
|
|
4,987 |
|
|
2,245 |
|
|
177,214 |
|
|
290,370 |
|
Transfers |
|
|
2,610 |
|
|
1,568 |
|
|
6,420 |
|
|
— |
|
|
(10,598 |
) |
|
— |
|
Disposals |
|
|
(81 |
) |
|
(9,763 |
) |
|
(379 |
) |
|
— |
|
|
— |
|
|
(10,223 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 |
|
|
7,989 |
|
|
1,485,538 |
|
|
23,840 |
|
|
7,363 |
|
|
272,169 |
|
|
1,796,899 |
|
Additions |
|
|
9,429 |
|
|
14,164 |
|
|
7,718 |
|
|
426 |
|
|
222,886 |
|
|
254,623 |
|
Transfers |
|
|
50 |
|
|
50,569 |
|
|
5,655 |
|
|
— |
|
|
(56,274 |
) |
|
— |
|
Disposals |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(250 |
) |
|
(250 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011 |
|
|
17,468 |
|
|
1,550,271 |
|
|
37,213 |
|
|
7,789 |
|
|
438,531 |
|
|
2,051,272 |
|
Additions |
|
|
1,795 |
|
|
8,511 |
|
|
27,678 |
|
|
6,322 |
|
|
271,618 |
|
|
315,924 |
|
Transfers |
|
|
11,994 |
|
|
130,642 |
|
|
23,916 |
|
|
— |
|
|
(166,552 |
) |
|
— |
|
Disposals |
|
|
(118 |
) |
|
(611 |
) |
|
(697 |
) |
|
— |
|
|
— |
|
|
(1,426 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012 |
|
|
31,139 |
|
|
1,688,813 |
|
|
88,110 |
|
|
14,111 |
|
|
543,597 |
|
|
2,365,770 |
|
Additions |
|
|
1,805 |
|
|
8,617 |
|
|
12,661 |
|
|
4,231 |
|
|
124,214 |
|
|
151,528 |
|
Transfers |
|
|
— |
|
|
30,458 |
|
|
3,304 |
|
|
— |
|
|
(33,762 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
|
32,944 |
|
|
1,727,888 |
|
|
104,075 |
|
|
18,342 |
|
|
634,049 |
|
|
2,517,298 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation, depletion and amortisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2010 |
|
|
(11 |
) |
|
(7,700 |
) |
|
(164 |
) |
|
(584 |
) |
|
— |
|
|
(8,459 |
) |
Depreciation charge |
|
|
(283 |
) |
|
(4,571 |
) |
|
(2,713 |
) |
|
(488 |
) |
|
— |
|
|
(8,055 |
) |
Disposals |
|
|
7 |
|
|
8,779 |
|
|
104 |
|
|
— |
|
|
— |
|
|
8,890 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 |
|
|
(287 |
) |
|
(3,492 |
) |
|
(2,773 |
) |
|
(1,072 |
) |
|
— |
|
|
(7,624 |
) |
Depreciation charge |
|
|
(482 |
) |
|
(9,815 |
) |
|
(1,946 |
) |
|
(794 |
) |
|
— |
|
|
(13,037 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011 |
|
|
(769 |
) |
|
(13,307 |
) |
|
(4,719 |
) |
|
(1,866 |
) |
|
— |
|
|
(20,661 |
) |
Depreciation charge |
|
|
(805 |
) |
|
(11,741 |
) |
|
(4,189 |
) |
|
(1,077 |
) |
|
— |
|
|
(17,812 |
) |
Disposals |
|
|
16 |
|
|
108 |
|
|
220 |
|
|
— |
|
|
— |
|
|
344 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012 |
|
|
(1,558 |
) |
|
(24,940 |
) |
|
(8,688 |
) |
|
(2,943 |
) |
|
— |
|
|
(38,129 |
) |
Depreciation charge |
|
|
(630 |
) |
|
(3,821 |
) |
|
(2,823 |
) |
|
(422 |
) |
|
— |
|
|
(7,696 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
|
(2,188 |
) |
|
(28,761 |
) |
|
(11,511 |
) |
|
(3,365 |
) |
|
— |
|
|
(45,825 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2010, December 31, 2010, 2011 and 2012 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Impairment |
|
|
— |
|
|
(184,417 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(184,417 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
|
— |
|
|
(184,417 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(184,417 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2010 |
|
|
388 |
|
|
131,646 |
|
|
593 |
|
|
2,151 |
|
|
37,134 |
|
|
171,912 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 |
|
|
7,702 |
|
|
1,482,046 |
|
|
21,067 |
|
|
6,291 |
|
|
272,169 |
|
|
1,789,275 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011 |
|
|
16,699 |
|
|
1,536,964 |
|
|
32,494 |
|
|
5,923 |
|
|
438,531 |
|
|
2,030,611 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012 |
|
|
29,581 |
|
|
1,663,873 |
|
|
79,422 |
|
|
11,168 |
|
|
543,597 |
|
|
2,327,641 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
|
30,756 |
|
|
1,514,710 |
|
|
92,564 |
|
|
14,977 |
|
|
634,049 |
|
|
2,287,056 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-39
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As at December 31, 2010, 2011, 2012 and June 30, 2013, certain mining rights with carrying amounts of RMB140.5 million,
RMB520.3 million, RMB525.5 million and RMB527.5 million were pledged to secure
bank loans with carrying amounts of RMB168.7 million, RMB338.7 million, RMB475.0 million and RMB450.0 million, respectively.
As
at June 30, 2013, certain buildings with a carrying amount totalling RMB20.8 million were without title certificates. The Group has obtained the relevant confirmation
letters issued by the local authorities confirming that they will not impose any penalties in connection with the construction of these buildings, and that the Group may continue to use these
buildings in accordance with the current uses. The directors of the Company are of the view that the Group is entitled to lawfully and validly occupy and use the above-mentioned buildings. The
directors of the Company are also of the opinion that the aforesaid matter will not have any significant impact on the Group's financial position as of June 30, 2013.
Interest
expenses of RMB16.2 million, RMB30.1 million, RMB45.6 million and RMB20.4 million arising from borrowings attributable to the construction of
property, plant and equipment were capitalised at an annual rate of 5.40% to 9.17% and were included in 'additions' to construction in progress and mining rights during the years ended
December 31, 2010, 2011, 2012 and the six months ended June 30, 2013, respectively.
Exploration
costs totalling RMB3.9 million, nil, nil and nil were incurred during the years ended December 31, 2010, 2011, 2012 and the six months ended June 30,
2013, respectively, of which RMB2.2 million, nil, nil and nil have been capitalised in the exploration rights and construction in progress in property, plant and equipment, and
RMB1.7 million, nil, nil and nil have been included in other operating expenses in the income statements for the years ended December 31, 2010, 2011, 2012 and the six months ended
June 30, 2013, respectively.
F-40
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Operations
have been suspended at Gouchang Coal Mine since March 2013 pending the acquisition by the Group of a nearby coal mine and Gouchang Coal Mine achieving certain
production capacity targets in accordance with Guizhou Province's coal mine consolidation policy. The whole Gouchang Coal Mine was designated as a CGU. The carrying value of the long-term assets was
compared to the recoverable amount of the CGU, which was based predominantly on the fair-value-less-costs-of-disposal ("FVLCD") approach. FVLCD calculations use pre-tax cash flow projections. Other
key assumptions applied in the impairment tests include the production volume, expected coal price, coal product mix, product cost and related expenses. Management determined that these key
assumptions were based on past performance and their expectations on market development. Further, the Group adopts a pre-tax rate of 15.05% that reflects specific risks related to CGU as discount
rates. For the six months ended June 30, 2013, impairment loss for property, plant and equipment of RMB184.4 million (nil for the years ended December 31, 2010, 2011, 2012)
was recognised in profit or loss.
17. REHABILITATION FUND
The rehabilitation fund represents restricted cash set aside by the Group in banks and cash placed with authorities for the purpose of future environmental
rehabilitation as well as the settlement of asset retirement obligations.
18. INVENTORIES
Inventories are summarised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Spare parts and consumables |
|
|
2,868 |
|
|
3,066 |
|
|
6,393 |
|
|
8,112 |
|
Coal |
|
|
2,456 |
|
|
2,262 |
|
|
4,873 |
|
|
6,968 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
5,324 |
|
|
5,328 |
|
|
11,266 |
|
|
15,080 |
|
| |
|
|
|
|
|
|
|
|
|
The
provision for impairment of inventories of the Group amounted to nil, nil, nil and RMB1.0 million for the years ended December 31, 2010, 2011, 2012, and the six months
ended June 30, 2013, respectively.
19. TRADE AND BILLS RECEIVABLES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Trade receivables |
|
|
5,577 |
|
|
29,356 |
|
|
38,166 |
|
|
39,998 |
|
Less: provision for impairment |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
5,577 |
|
|
29,356 |
|
|
38,166 |
|
|
39,998 |
|
Bills receivable |
|
|
— |
|
|
1,000 |
|
|
10,801 |
|
|
6,300 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
5,577 |
|
|
30,356 |
|
|
48,967 |
|
|
46,298 |
|
| |
|
|
|
|
|
|
|
|
|
Credit
of up to three months is granted to customers with an established trading history, otherwise sales on cash terms or payment in advance are required. Trade receivables are
non-interest-bearing.
F-41
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
An aged analysis of the trade receivables as at the end of each reporting period, based on the invoice date, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Within 3 months |
|
|
5,577 |
|
|
17,485 |
|
|
36,996 |
|
|
32,666 |
|
3 to 6 months |
|
|
— |
|
|
10,776 |
|
|
909 |
|
|
3,117 |
|
6 to 12 months |
|
|
— |
|
|
1,095 |
|
|
254 |
|
|
4,197 |
|
Over 12 months |
|
|
— |
|
|
— |
|
|
7 |
|
|
18 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
5,577 |
|
|
29,356 |
|
|
38,166 |
|
|
39,998 |
|
| |
|
|
|
|
|
|
|
|
|
The
aged analysis of the trade receivables that are not individually nor collectively considered to be impaired is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Neither past due nor impaired |
|
|
5,577 |
|
|
17,485 |
|
|
36,996 |
|
|
32,666 |
|
Within one year past due |
|
|
— |
|
|
11,871 |
|
|
1,163 |
|
|
7,314 |
|
More than one year past due |
|
|
— |
|
|
— |
|
|
7 |
|
|
18 |
|
| |
|
|
|
|
|
|
|
|
|
Trade receivables, net |
|
|
5,577 |
|
|
29,356 |
|
|
38,166 |
|
|
39,998 |
|
| |
|
|
|
|
|
|
|
|
|
Receivables
that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, the directors of the
Company are
of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully
recoverable.
Bills
receivable are bills of exchange with maturity dates of less than one year.
F-42
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
The balance consists of prepayments, deposits and other receivables at cost of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid spare parts and consumables purchases |
|
|
5,344 |
|
|
7,413 |
|
|
3,095 |
|
|
3,583 |
|
Deposits |
|
|
2,731 |
|
|
5,200 |
|
|
10,249 |
|
|
9,986 |
|
Staff advances |
|
|
4,042 |
|
|
3,648 |
|
|
4,081 |
|
|
4,763 |
|
Withheld social security |
|
|
3,125 |
|
|
5,170 |
|
|
5,417 |
|
|
4,036 |
|
Value-added tax recoverable |
|
|
2,707 |
|
|
4,292 |
|
|
6,188 |
|
|
10,007 |
|
Prepaid transportation fee |
|
|
486 |
|
|
400 |
|
|
1,184 |
|
|
1,015 |
|
Others |
|
|
1,404 |
|
|
2,636 |
|
|
3,340 |
|
|
3,836 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
19,839 |
|
|
28,759 |
|
|
33,554 |
|
|
37,226 |
|
| |
|
|
|
|
|
|
|
|
|
Non-current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayments for land use rights |
|
|
9,681 |
|
|
24,493 |
|
|
37,001 |
|
|
47,860 |
|
Prepayments for construction related work |
|
|
1,527 |
|
|
36,715 |
|
|
72,678 |
|
|
61,774 |
|
Deposits for equipment purchases |
|
|
2,207 |
|
|
5,485 |
|
|
4,622 |
|
|
5,207 |
|
Prepayments for mining plans design |
|
|
1,191 |
|
|
4,625 |
|
|
1,100 |
|
|
1,767 |
|
Others |
|
|
904 |
|
|
528 |
|
|
420 |
|
|
431 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
15,510 |
|
|
71,846 |
|
|
115,821 |
|
|
117,039 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
35,349 |
|
|
100,605 |
|
|
149,375 |
|
|
154,265 |
|
| |
|
|
|
|
|
|
|
|
|
None
of the above assets is either past due or impaired.
21. CASH AND CASH EQUIVALENTS AND PLEDGED DEPOSITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Restricted bank deposits (a) |
|
|
— |
|
|
21,000 |
|
|
7,082 |
|
|
— |
|
Term deposits with an original maturity over three months |
|
|
— |
|
|
20,000 |
|
|
20,000 |
|
|
— |
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
— Cash on hand |
|
|
174 |
|
|
202 |
|
|
100 |
|
|
179 |
|
— Cash at banks |
|
|
76,308 |
|
|
73,440 |
|
|
160,884 |
|
|
140,633 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
76,482 |
|
|
114,642 |
|
|
188,066 |
|
|
140,812 |
|
| |
|
|
|
|
|
|
|
|
|
Notes:
- (a)
- Restricted
bank deposits mainly include deposits of RMB21.0 million held as security for the working capital facilities as of December 31,
2011 (note 24) and of RMB7.1 million held as security for the banks bills as of December 31, 2012 (note 22).
F-43
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (b)
- Deposits
and cash and cash equivalents are denominated in the following currencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB |
|
|
76,454 |
|
|
114,618 |
|
|
188,047 |
|
|
140,797 |
|
Hong Kong dollar |
|
|
28 |
|
|
24 |
|
|
19 |
|
|
15 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
76,482 |
|
|
114,642 |
|
|
188,066 |
|
|
140,812 |
|
| |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents are principally RMB-denominated deposits placed with banks in the PRC. The RMB is not freely convertible into other currencies, however, under the PRC's Foreign
Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB into other currencies through banks authorised
to conduct foreign exchange business.
Cash
at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on
the
immediate cash requirements of the Group, and earn interest at respective short term deposit rates. The bank balances and pledged deposits are deposited with creditworthy banks with no recent history
of default.
22. TRADE AND BILLS PAYABLES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Trade payables* |
|
|
80,017 |
|
|
69,402 |
|
|
96,716 |
|
|
97,737 |
|
Bills payables |
|
|
— |
|
|
— |
|
|
7,082 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
80,017 |
|
|
69,402 |
|
|
103,798 |
|
|
97,737 |
|
| |
|
|
|
|
|
|
|
|
|
- *
- Included
in trade payables were RMB74.1 million, RMB60.5 million, RMB64.6 million and RMB79.7 million due to construction related
constructors as of December 31, 2010, 2011 and 2012 and June 30, 2013.
The
ageing analysis of trade payables is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Within one year |
|
|
56,266 |
|
|
63,349 |
|
|
87,284 |
|
|
87,532 |
|
More than one year |
|
|
23,751 |
|
|
6,053 |
|
|
9,432 |
|
|
10,205 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
80,017 |
|
|
69,402 |
|
|
96,716 |
|
|
97,737 |
|
| |
|
|
|
|
|
|
|
|
|
Bills
payable are bills of exchange with maturity of less than one year. Time deposits of nil, nil, RMB7.1 million and nil were pledged to secure the bank bills as of
December 31, 2010, 2011, 2012 and June 30, 2013.
F-44
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The
trade payables are non-interest bearing and are normally settled on a term of three to six months other than those due to construction related constructors which are repayable on
terms ranging from three months to about one year.
23. OTHER PAYABLES AND ACCRUED LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Natural resources fee (a) |
|
|
505 |
|
|
48 |
|
|
693 |
|
|
522 |
|
Construction deposits from contractors |
|
|
4,118 |
|
|
4,160 |
|
|
6,309 |
|
|
6,866 |
|
Social security payable (b) |
|
|
6,116 |
|
|
16,620 |
|
|
16,268 |
|
|
11,151 |
|
Payroll payable |
|
|
10,573 |
|
|
5,204 |
|
|
16,711 |
|
|
12,084 |
|
Advances from customers |
|
|
1,117 |
|
|
4,057 |
|
|
11,325 |
|
|
9,641 |
|
Other taxes payables |
|
|
980 |
|
|
4,618 |
|
|
5,154 |
|
|
5,205 |
|
Accrued expenses |
|
|
— |
|
|
— |
|
|
— |
|
|
9,141 |
|
Others |
|
|
2,960 |
|
|
1,699 |
|
|
3,695 |
|
|
3,514 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
26,369 |
|
|
36,406 |
|
|
60,155 |
|
|
58,124 |
|
| |
|
|
|
|
|
|
|
|
|
- (a)
- The
natural resources fee represents fees payable to the PRC Government and is calculated as a percentage of sales.
- (b)
- Social
security consists of employee retirement insurance, medical insurance, maternity insurance, employment injury insurance and unemployment insurance
and housing funds for the benefit of the Group's employees.
24. INTEREST-BEARING BANK AND OTHER BORROWINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital facilities |
|
|
— |
|
|
70,000 |
|
|
— |
|
|
— |
|
Bank and other borrowings — guaranteed |
|
|
100,000 |
|
|
100,000 |
|
|
265,000 |
|
|
635,000 |
|
Current portion of long term bank and other borrowings — secured and guaranteed |
|
|
— |
|
|
55,000 |
|
|
155,000 |
|
|
170,000 |
|
Current portion of long term bank and other borrowings — guaranteed |
|
|
— |
|
|
— |
|
|
23,900 |
|
|
56,900 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
225,000 |
|
|
443,900 |
|
|
861,900 |
|
| |
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank and other borrowings — guaranteed |
|
|
— |
|
|
77,144 |
|
|
149,630 |
|
|
433,849 |
|
Bank and other borrowings — secured and guaranteed |
|
|
318,742 |
|
|
433,742 |
|
|
420,000 |
|
|
380,000 |
|
Bank and other borrowings — unsecured |
|
|
— |
|
|
— |
|
|
— |
|
|
83,600 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
318,742 |
|
|
510,886 |
|
|
569,630 |
|
|
897,449 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
418,742 |
|
|
735,886 |
|
|
1,013,530 |
|
|
1,759,349 |
|
| |
|
|
|
|
|
|
|
|
|
F-45
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Certain
of the interest-bearing bank and other borrowings are secured by:
- (1)
- Pledges
over the Group's mining rights with carrying amounts of RMB140.5 million, RMB520.3 million, RMB525.5 million and
RMB527.5 million as of December 31, 2010, 2011, 2012 and June 30, 2013, respectively;
- (2)
- Pledges
over the Company's equity interest in Baiping Mining, Dayuan Coal, Gouchang Coal, Linjiaao Coal, Xinsong Coal and Dayun Coal;
- (3)
- Pledges
over certain of the Group's time deposits with carrying amounts of nil, RMB21.0 million, nil and nil as of December 31, 2010, 2011,
2012 and June 30, 2013, respectively;
In
addition, Mr. Li Feilie has guaranteed certain of the Group's interest-bearing bank and other borrowings up to RMB150.0 million, RMB277.1 million,
RMB486.6 million and RMB805.7 million as of December 31, 2010, 2011, 2012 and June 30, 2013, respectively. Also, the Group's fellow subsidiaries have guaranteed certain of
the Group's interest-bearing bank and other borrowings up to RMB418.7 million, RMB665.9 million, RMB1,013.5 million and RMB1,050.7 million as of December 31, 2010,
2011, 2012 and June 30, 2013, respectively (note 32).
All
borrowings are denominated in RMB.
The
ranges of the effective interest rates on the Group's bank and other borrowings are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30 |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Fixed-rate bank and other borrowings |
|
|
6.37 |
|
|
6.37 |
|
|
7.20~9.00 |
|
|
6.97~7.87 |
|
|
6.30~9.00 |
|
Floating-rate bank and other borrowings |
|
|
5.94~8.32 |
|
|
6.22~9.84 |
|
|
5.94~9.47 |
|
|
5.94~9.47 |
|
|
6.40~9.00 |
|
The
maturity profile of the bank and other borrowings as of December 31, 2010, 2011, 2012, and June 30, 2013 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Bank and other borrowings repayable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Within one year or on demand |
|
|
100,000 |
|
|
225,000 |
|
|
443,900 |
|
|
861,900 |
|
In the second year |
|
|
55,000 |
|
|
175,000 |
|
|
143,000 |
|
|
470,000 |
|
In the third to fifth years, inclusive |
|
|
215,000 |
|
|
287,144 |
|
|
426,630 |
|
|
427,449 |
|
Beyond five years |
|
|
48,742 |
|
|
48,742 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
418,742 |
|
|
735,886 |
|
|
1,013,530 |
|
|
1,759,349 |
|
| |
|
|
|
|
|
|
|
|
|
F-46
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
25. MINING RIGHTS PAYABLES
Mining rights payables represent the payables to the Guizhou Provincial Department of Land and Resources as a result of acquiring the mining rights for Guizhou
Yongfu, Dayuan Coal, Gouchang Coal, Baiping Mining, Xinsong Coal, Linjiaao Coal and Guizhou Dayun. Mining rights payables are classified as current/non-current liabilities according to instalment
plans agreed with the Guizhou Provincial Department of Land and Resources.
Maturities
of mining rights payables are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Within one year or on demand |
|
|
19,192 |
|
|
22,612 |
|
|
25,568 |
|
|
31,368 |
|
In the second year |
|
|
29,588 |
|
|
25,568 |
|
|
22,368 |
|
|
22,368 |
|
In the third to fifth years, inclusive |
|
|
70,304 |
|
|
67,104 |
|
|
55,442 |
|
|
43,782 |
|
Beyond five years |
|
|
33,074 |
|
|
10,706 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
152,158 |
|
|
125,990 |
|
|
103,378 |
|
|
97,518 |
|
| |
|
|
|
|
|
|
|
|
|
The
mining rights payables bear interest at a rate stipulated by the People's Bank of China from year to year. The ranges of the interest rates for mining rights payables
for the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013 are 5.85%~6.40%, 6.65%~7.05%, 6.15%~6.55% and 6.00~6.55%, respectively.
26. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations primarily relate to the closure of mines, which includes dismantling mining-related structures and the reclamation of land upon
exhaustion of coal reserves.
The
following table describes the changes to the Group's asset retirement obligation liability:
|
|
|
|
|
|
|
Amount |
|
|
|
RMB'000
|
|
At January 1, 2010 |
|
|
2,055 |
|
Arising during the year |
|
|
— |
|
Recognised from business combination (note 30) |
|
|
3,118 |
|
Accretion expenses (note 6) |
|
|
309 |
|
| |
|
|
|
At December 31, 2010 |
|
|
5,482 |
|
Arising during the year |
|
|
— |
|
Accretion expenses (note 6) |
|
|
543 |
|
| |
|
|
|
At December 31, 2011 |
|
|
6,025 |
|
Arising during the year |
|
|
402 |
|
Accretion expenses (note 6) |
|
|
637 |
|
| |
|
|
|
At December 31, 2012 |
|
|
7,064 |
|
Change of estimation |
|
|
434 |
|
Accretion expenses (note 6) |
|
|
350 |
|
| |
|
|
|
At June 30, 2013 |
|
|
7,848 |
|
| |
|
|
|
The
inflation rate, discount rate and market risk premium used for estimating the provision for asset retirement obligations for the years ended December 31, 2010,
2011, 2012 and the six months ended June 30, 2013 are 2.53%, 9.91% and 6.09%, respectively. There were no material changes to those rates used in subsequent periods.
F-47
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
27. ISSUED CAPITAL
The Company was incorporated on January 6, 2010 with authorised capital of a maximum of 50,000 shares of a single class each with a par value of
US$1.00. On January 15, 2010, 1 share was issued to Feishang which was subsequently transferred to CHNR on April 30, 2010.
28. SHARE-BASED COMPENSATION
In January 2008, 1,000,000 stock options of CHNR were granted to Mr. Li Feilie, at an exercise price of US$22.64 per share (the fair
market value of CHNR's common stock as of the grant date). Vesting is conditional upon Mr. Li Feilie's working for CHNR for the next three years commencing from the grant date. As of
December 31, 2010, the compensation expense related to the options has been fully recognised. In January 2011, the outstanding 1,000,000 shares of stock options were expired and
not exercised.
The
estimated fair value of these options at the date of grant using the Black Scholes option pricing model was RMB78.0 million, which is being amortised over the requisite
service period of three years with the following assumptions: risk-free interest rate of 3.00%; no dividend yield; volatility of 124.50%; and the expected term of the options of one year.
Since
the share options were granted by CHNR to Mr. Li Feilie for his services to CHNR, including the coal business of the Group, the compensation expense relating to his service
to the coal business of the Group of RMB17.0 million for the year ended December 31, 2010, determined using a proportional
allocation method based on the headcount of the coal business and non-coal business of CHNR, is recognised in the Group's financial statements with a corresponding credit to deemed contribution from
the owner of the Company.
29. RESERVES
The amounts of the Group's reserves and movements therein for each of the years ended December 31, 2010, 2011, 2012, and the six months ended
June 30, 2013 are presented in the consolidated statements of changes in equity.
- (a)
- Safety fund and production maintenance fund
The
safety and production maintenance fund represents the safety production fund and the production maintenance fund which is accrued based on production volume in accordance with the
circular of the Ministry of Finance on enterprise safety production.
- (b)
- Special reserve
The
special reserve represents equity-settled share option expense related to the coal business (note 28) as well as prepaid listing expenses undertaken and paid by CHNR on behalf
of the Group (note 32(c)).
- (c)
- Merger reserve
The
merger reserve of the Group represents the capital contributions from the owner of the Company. The additions during the years ended December 31, 2010, 2011, 2012, and
the six months ended June 30, 2013 represent the injection of additional paid-in capital by the equity holders of the subsidiaries to the respective companies. The deductions during the
years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013 represent the acquisition of paid-in capital of the subsidiaries by the Company from the
owner of the Company which is accounted for as a distribution to the owner of the Company in the consolidated statements of changes in equity.
F-48
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
30. BUSINESS COMBINATION
As further explained below, during the year ended December 31, 2010, the Group completed the Acquisition. Guizhou Puxin and its subsidiaries principally
engage in coal mine development and operation in Guizhou Province, the PRC.
On
March 18, 2010, Guizhou Fuyuantong, an indirect wholly-owned PRC subsidiary of Feishang, acquired all the issued and outstanding capital stock of Guizhou Puxin and its five
subsidiaries, including Baiping Mining, Dayuan Coal, Gouchang Coal, Linjiaao Coal and Xinsong Coal, from unrelated third parties. The total purchase consideration was in the form of cash, totalling
RMB150.0 million.
In
April 2010, the Company acquired all the issued outstanding capital stock of Guizhou Fuyuantong through its direct subsidiary, Hong Kong Smartact Limited, from Feishang for
RMB10.0 million. Guizhou Puxin and its five subsidiaries engage in coal mine development and operation in Guizhou Province, the PRC.
The
following table summarises the carrying amounts and the fair values of assets and liabilities of Guizhou Puxin and its five subsidiaries, including Baiping Mining, Dayuan Coal,
Gouchang Coal, Linjiaao Coal and Xinsong Coal when they were acquired from the unrelated third parties on March 18, 2010:
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
Fair value |
|
|
|
RMB'000 |
|
RMB'000 |
|
Property, plant and equipment |
|
|
1,160,775 |
|
|
1,336,381 |
|
Rehabilitation fund |
|
|
4,969 |
|
|
4,969 |
|
Other non-current assets |
|
|
8,436 |
|
|
8,436 |
|
Inventories |
|
|
3,665 |
|
|
3,665 |
|
Trade receivables |
|
|
2,478 |
|
|
2,478 |
|
Cash and cash equivalents |
|
|
12,458 |
|
|
12,458 |
|
Other current assets |
|
|
156,048 |
|
|
156,048 |
|
Trade payables |
|
|
(20,443 |
) |
|
(20,443 |
) |
Other current liabilities |
|
|
(349,457 |
) |
|
(349,457 |
) |
Deferred tax liabilities |
|
|
(237,873 |
) |
|
(281,774 |
) |
Asset retirement obligations |
|
|
(3,118 |
) |
|
(3,118 |
) |
Other non-current liabilities |
|
|
(31,384 |
) |
|
(31,384 |
) |
Non-controlling interests |
|
|
(62,153 |
) |
|
(64,111 |
) |
| |
|
|
|
|
|
|
Fair value recognised by the Group |
|
|
|
|
|
774,148 |
|
Purchase price paid to unrelated third parties of the Group |
|
|
|
|
|
(150,000 |
) |
| |
|
|
|
|
|
|
Bargain purchase gain |
|
|
|
|
|
624,148 |
|
| |
|
|
|
|
|
|
The
bargain purchase gain arise from the distressed sale by the unrelated third parties as a result of the consolidation of smaller coal mines by the PRC government. The valuation is
based on an independent valuation report, which uses an income-based approach estimating the future economic benefits and discounting these benefits into present value using a discount rate
appropriate for the risks associated with realising those benefits. The fair value measurement was catagorized in Level 3 hierarchy under IFRS 13 Fair Value
Measurement. The fair value of the non-controlling interest is measured at the non-controlling interest proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
F-49
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Since
the Acquisition date, Guizhou Puxin and its five subsidiaries contributed RMB38.7 million to the Group's revenue and a loss of RMB68.6 million to the consolidated
profit for the year ended December 31, 2010.
Had
the Acquisition taken place at the beginning of the year, the revenue and profit of the Group for the year ended December 31, 2010 would have been RMB48.0 million and
RMB548.6 million, respectively.
An
analysis of the cash flows in respect of the acquisition of Guizhou Puxin and its subsidiaries is as follows:
|
|
|
|
|
|
|
RMB'000 |
|
Cash consideration |
|
|
(150,000 |
) |
Cash and cash equivalents acquired |
|
|
12,458 |
|
| |
|
|
|
Net outflow of cash and cash equivalents |
|
|
(137,542 |
) |
| |
|
|
|
Out
of the total cash consideration amounting to RMB150.0 million, RMB9.9 million was paid during the year ended December 31, 2010. The outstanding balance of
RMB140.1 million was fully paid in July 2011.
31. COMMITMENTS
- (a)
- Capital commitments
The
Group had the following capital commitments as of December 31, 2010, 2011 and 2012, and June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Construction and purchase of items of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
— Contracted, but not provided for |
|
|
57,854 |
|
|
99,398 |
|
|
94,625 |
|
|
88,961 |
|
— Authorised, but not contracted for |
|
|
297,055 |
|
|
123,611 |
|
|
520,126 |
|
|
405,295 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
354,909 |
|
|
223,009 |
|
|
614,751 |
|
|
494,256 |
|
| |
|
|
|
|
|
|
|
|
|
- (b)
- Operating lease commitment
The
Group has commitments to make the following future minimum lease payments under non-cancellable operating leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Within the first year |
|
|
932 |
|
|
1,000 |
|
|
73 |
|
|
936 |
|
After one year but not more than five years |
|
|
2,986 |
|
|
2,046 |
|
|
24 |
|
|
943 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
3,918 |
|
|
3,046 |
|
|
97 |
|
|
1,879 |
|
| |
|
|
|
|
|
|
|
|
|
F-50
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In
October 2012, Guizhou Yongfu entered into an operating lease agreement with a third party contractor for a shearer to be used in coal extraction at its current mining face. The
rental of the shearer is determined by the production volume during the period and the unit rent rate of RMB68.0/ton. The shearer was not utilised during the years ended December 31, 2010,
2011, 2012, and the six months ended June 30, 2013 until the commencement of pilot run of Guizhou Yongfu in July 2013.
32. RELATED PARTY TRANSACTIONS
In addition to the transactions detailed elsewhere in these financial statements, the Group had the following transactions with related parties during the years
ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013:
- (a)
- Outstanding balances with related companies
The
Group's payables with related companies, which are all unsecured and non-interest-bearing are summarised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of
June 30, |
|
|
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables to related companies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wuhu Feishang |
|
* |
|
|
25,000 |
|
|
118,000 |
|
|
118,000 |
|
|
— |
|
Yangpu Lianzhong |
|
* |
|
|
— |
|
|
104,985 |
|
|
— |
|
|
— |
|
Feishang Management |
|
* |
|
|
263,401 |
|
|
178,843 |
|
|
540,010 |
|
|
131,000 |
|
Yunnan Feishang |
|
* |
|
|
— |
|
|
35,180 |
|
|
— |
|
|
— |
|
Yangpu Shuanghu |
|
* |
|
|
14,993 |
|
|
— |
|
|
— |
|
|
— |
|
CHNR |
|
** |
|
|
9,698 |
|
|
9,291 |
|
|
9,537 |
|
|
9,633 |
|
Feishang Enterprise |
|
** |
|
|
1,143 |
|
|
5,081 |
|
|
4,854 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314,235 |
|
|
451,380 |
|
|
672,401 |
|
|
140,633 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
- *
- These
are subsidiaries under the control of CHNR and Feishang.
- **
- These
are subsidiaries under the control of Feishang.
The
payables with related companies are all due on demand or within one year.
F-51
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (b)
- Compensation of key management personnel of the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Wages, salaries and allowances |
|
|
385 |
|
|
824 |
|
|
2,523 |
|
|
1,012 |
|
|
1,303 |
|
Contribution to pension plans |
|
|
— |
|
|
23 |
|
|
37 |
|
|
7 |
|
|
40 |
|
Housing funds |
|
|
— |
|
|
— |
|
|
16 |
|
|
11 |
|
|
55 |
|
Welfare and other expenses |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
40 |
|
Equity-settled share option expense |
|
|
17,009 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,394 |
|
|
847 |
|
|
2,576 |
|
|
1,030 |
|
|
1,438 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Further
details of the directors' and chief executive's emoluments are included in note 10 to the consolidated financial statements.
- (c)
- Listing expenses
Pursuant
to undertakings, CHNR, the parent of the Company, agreed to bear the listing expenses amounting to RMB9.1 million, RMB4.6 million and RMB1.8 million for the
year ended December 31, 2012, the months ended June 30, 2013 and 2012, respectively (note 29) in relation to the listing by introduction of the shares of the Company on the Main
Board of The Stock Exchange of Hong Kong Limited.
F-52
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
33. CONDENSED FINANCIAL INFORMATION OF THE COMPANY
The following is the condensed financial information of the Company on a non-consolidated basis:
CONDENSED STATEMENTS OF FINANCIAL POSITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
|
|
As of June 30,
2013 |
|
|
|
2010 |
|
2011 |
|
2012 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN A SUBSIDIARY AND TOTAL NON-CURRENT ASSETS |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Due from a subsidiary |
|
|
9,689 |
|
|
9,278 |
|
|
9,202 |
|
|
9,062 |
|
| |
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS |
|
|
9,689 |
|
|
9,278 |
|
|
9,202 |
|
|
9,062 |
|
| |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
9,689 |
|
|
9,278 |
|
|
9,202 |
|
|
9,062 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other payables and accrued liabilities |
|
|
— |
|
|
— |
|
|
236 |
|
|
— |
|
Due to parent |
|
|
9,698 |
|
|
9,292 |
|
|
9,537 |
|
|
9,633 |
|
| |
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES |
|
|
9,698 |
|
|
9,292 |
|
|
9,773 |
|
|
9,633 |
|
| |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
9,698 |
|
|
9,292 |
|
|
9,773 |
|
|
9,633 |
|
| |
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued capital |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Reserves |
|
|
(9 |
) |
|
(14 |
) |
|
(571 |
) |
|
(571 |
) |
| |
|
|
|
|
|
|
|
|
|
EQUITY ATTRIBUTABLE TO OWNER OF THE COMPANY |
|
|
(9 |
) |
|
(14 |
) |
|
(571 |
) |
|
(571 |
) |
| |
|
|
|
|
|
|
|
|
|
TOTAL EQUITY |
|
|
(9 |
) |
|
(14 |
) |
|
(571 |
) |
|
(571 |
) |
| |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
|
9,689 |
|
|
9,278 |
|
|
9,202 |
|
|
9,062 |
|
| |
|
|
|
|
|
|
|
|
|
The
investment in a subsidiary, namely Hong Kong Smartact, was in unlisted shares, measured at cost of 1 Hong Kong dollar. Particulars of the principal direct and indirect
subsidiaries are set out in note 1.3 to the consolidated financial statements.
The
amount due from a subsidiary included in the Company's current assets of RMB9.7 million, RMB9.3 million, RMB9.2 million and RMB9.1 million as of
December 31, 2010, 2011, 2012 and June 30, 2013, respectively, are unsecured, interest-free and are due on demand.
The
amount due to parent, namely CHNR, was unsecured, interest-free and is due on demand or within one year as of December 31, 2010, 2011, 2012 and June 30, 2013.
As
at December 31, 2010, 2011, 2012 and June 30, 2013, the Company had net current liabilities of RMB0.01 million, RMB0.01 million, RMB0.6 million and
RMB0.6 million, respectively and total assets less current liabilities of negative RMB0.01 million, negative RMB0.01 million, negative RMB0.6 million and negative
RMB0.6 million, respectively.
F-53
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED INCOME STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months
ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
ADMINISTRATIVE EXPENSES |
|
|
9 |
|
|
6 |
|
|
564 |
|
|
6 |
|
|
8 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAX |
|
|
9 |
|
|
6 |
|
|
564 |
|
|
6 |
|
|
8 |
|
INCOME TAX EXPENSE |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
LOSS FOR THE YEAR/PERIOD |
|
|
9 |
|
|
6 |
|
|
564 |
|
|
6 |
|
|
8 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
CONDENSED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months
ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Net cash flows used in operating activities |
|
|
(9 |
) |
|
(6 |
) |
|
(564 |
) |
|
(6 |
) |
|
(8 |
) |
Net cash flows used in investing activities |
|
|
(9,689 |
) |
|
(6 |
) |
|
(6 |
) |
|
(7 |
) |
|
(6 |
) |
Net cash flows from financing activities |
|
|
9,698 |
|
|
12 |
|
|
328 |
|
|
13 |
|
|
14 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
— |
|
|
— |
|
|
(242 |
) |
|
— |
|
|
— |
|
NETFOREIGN EXCHANGE DIFFERENCE |
|
|
— |
|
|
— |
|
|
242 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
The
above financial statements have been provided pursuant to the requirements of Rule 12-04(a) and 4-08(e)(3) of Regulation S-X, which require condensed financial
information as to financial position, results of operations and cash flows of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have
been presented when the restricted net assets of the consolidated and unconsolidated subsidiaries and the parent's equity in the undistributed earnings of 50 percent or less owned persons
accounted for by the equity method together exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. As of June 30, 2013,
RMB407.3 million of the restricted capital and reserves are not available for distribution, and as such, the condensed financial information of the Company has been presented for the years
ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2013.
In
the parent-company-only financial statements, the Company's investments in subsidiaries are stated at cost. The parent-company-only financial statements should be read in conjunction
with the Company's consolidated financial statements.
The
Company does not have any significant commitments or long-term obligations as of any of the years presented.
During
the years ended December 31, 2010, 2011, 2012 and the six months ended June 30, 2013, no cash dividends were declared and paid by subsidiaries of the Company.
F-54
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
34. TRANSFERS OF FINANCIAL ASSETS
At December 31, 2012 and June 30, 2013, the Group endorsed certain bills receivable accepted by banks in the PRC (the "Derecognised Bills"),
to certain of its suppliers in order to settle the trade payables due to these suppliers with a carrying amount in aggregate of RMB22.5 million and RMB16.4 million, respectively. The
Derecognised Bills have a maturity from one to six months at the end of the reporting period. In accordance with the Law of Negotiable Instruments in the PRC, the holders of the Derecognised Bills
have a right of recourse against the Group if the PRC banks default (the "Continuing Involvement"). In the opinion of the directors, the Group has transferred substantially all risks and
rewards relating to the Derecognised Bills. Accordingly, it has derecognised the full carrying amounts of the Derecognised Bills and the associated trade payables. The maximum exposure to loss from
the Group's Continuing Involvement in the Derecognised Bills and the undiscounted cash flows to repurchase the Derecognised Bills equals to their carrying amounts. In the opinion of the directors, the
fair values of the Group's Continuing Involvement in the Derecognised Bills are not significant.
During
the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013, the Group has not recognised any gain or loss on the date of
transfer of the Derecognised Bills. No gains or losses were recognised from the continuing involvement, both during the year or cumulatively. The
Endorsement has been made evenly throughout the years ended December 31, 2010, 2011, 2012, and the six months ended June 30, 2013.
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Financial instruments of the Group primarily include cash, trade and bills receivables, certain other current assets, trade and bills payables, certain other
liabilities, amounts due to related companies, interest-bearing bank and other borrowings and mining rights payables.
The
Group is exposed to credit risk, foreign currency risk, interest rate risk and liquidity risk. The Group has not used any derivatives and other instruments for hedging purposes. The
Group does not hold or issue derivative financial instruments for trading purposes. The Group reviews and agrees policies for managing each of these risks and they are summarised below.
- (a)
- Credit risk
The
carrying amounts of the Group's cash and cash equivalents, time deposits, restricted bank deposits, trade and bills receivables, and certain other current assets, represent the
Group's maximum exposure to credit risk in relation to its financial assets.
The
Group maintains its cash and cash deposits primarily with various PRC state-owned banks and Hong Kong-based financial institutions, which management believes are of high credit
quality. The Group performs periodic evaluations of the relative credit standing of those financial institutions.
The
carrying amounts of the Group's cash and cash equivalents, time deposits, restricted bank deposits, trade and bills receivables, and certain other current assets, represent the
Group's maximum exposure to credit risk in relation to its financial assets.
F-55
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The
Group sells anthracitic coal to companies in the PRC. Trade receivables are typically unsecured and are mainly derived from revenue earned from customers in the PRC. The risk with
respect to trade receivables is mitigated by credit evaluations that the Group performs on its customers and its ongoing monitoring of outstanding balances. The Group provides impairment for trade
receivables primarily based on the age of the balances and factors surrounding the customer's credit worthiness. No provision for impairment of trade receivables was provided during the years ended
December 31, 2010, 2011, 2012 and the six months ended June 30, 2013. As of December 31, 2010, 2011, 2012 and June 30, 2013, receivables due from the largest five customers
accounted for 59.4%, 84.2%, 87.2% and 53.6% of the trade receivables, respectively.
Sales
to the largest five customers accounted for 66.6%, 73.5%, 56.7%, 73.7% and 72.8% of the consolidated revenue for the years ended December 31, 2010, 2011 and 2012 and the six
months ended June 30, 2012 and 2013, respectively. The largest five customers are all recognised and creditworthy third parties and trading terms are mainly on payment in advance or with a
credit period of one month. The Group expects the concentration of coal customers to subside once the production volume increases in the future.
Bills
receivable represent letters of credit obtained by customers of the Group to finance purchases which have been presented to banks for payment after delivery of goods to customers.
As of December 31, 2011, 2012 and June 30, 2013, the bills receivable balance was guaranteed by financial institutions. The bills receivable have normal terms of maturity of
six months.
- (b)
- Foreign currency risk
These
financial statements are presented in RMB, which is the Company's presentation currency. The currency is not freely convertible into foreign currencies. The State Administration
for Foreign Exchange, under the authority of the People's Bank of China, controls the conversion of the currency into foreign currencies. The value of the currency is subject to changes in PRC
government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. All foreign exchange transactions continue
to take place either through the People's Bank of China or other banks authorised to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China.
- (c)
- Interest rate risk
Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the
risk of changes in market interest rates relates primarily to the Group's long-term debt obligations with floating interest rates. The interest rate risk is closely monitored by the Group's senior
management. As of December 31, 2010, 2011, 2012 and June 30, 2013, the interest rates for only 5.30%, 8.10%, 12.50% and 31.97% of the Group's interest-bearing debts were fixed,
respectively. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on the portion of interest-bearing bank and other borrowings and mining rights payables
with floating interest rates except for interest which is capitalised. With all other variables held constant, the Group's profit / (loss) before tax is affected through the impact on floating rate
borrowings as follows:
F-56
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
Increase/(decrease)
in basis points |
|
Increase/(decrease)
in profit/(loss) before tax |
|
|
|
|
|
RMB'000
|
|
Year ended December 31, 2010 |
|
|
100 |
|
|
(668 |
) |
|
|
|
(100 |
) |
|
668 |
|
Year ended December 31, 2011 |
|
|
100 |
|
|
(2,841 |
) |
|
|
|
(100 |
) |
|
2,841 |
|
Year ended December 31, 2012 |
|
|
100 |
|
|
(4,289 |
) |
|
|
|
(100 |
) |
|
4,289 |
|
Six months ended June 30, 2013 |
|
|
100 |
|
|
(5,530 |
) |
|
|
|
(100 |
) |
|
5,530 |
|
- (d)
- Liquidity risk
The
Group manages its liquidity risk by regularly monitoring its liquidity requirements and its compliance with debt covenants to ensure that it maintains sufficient cash and cash
equivalents, and adequate time deposits to meet its liquidity requirements in the short and long term. Bank facilities have been put in place for contingency purposes (note 37).
The
table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
On demand |
|
Less than
1 year |
|
1 to 5 years |
|
More than
5 years |
|
Total |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Trade and bills payables |
|
|
— |
|
|
97,737 |
|
|
— |
|
|
— |
|
|
97,737 |
|
Other payables and accrued liabilities |
|
|
— |
|
|
29,684 |
|
|
— |
|
|
— |
|
|
29,684 |
|
Interest-bearing bank and other borrowings |
|
|
— |
|
|
978,168 |
|
|
1,045,164 |
|
|
— |
|
|
2,023,332 |
|
Due to related companies |
|
|
140,633 |
|
|
— |
|
|
— |
|
|
— |
|
|
140,633 |
|
Mining rights payables |
|
|
— |
|
|
38,976 |
|
|
97,764 |
|
|
— |
|
|
136,740 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,633 |
|
|
1,144,565 |
|
|
1,142,928 |
|
|
— |
|
|
2,428,126 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
On demand |
|
Less than
1 year |
|
1 to 5 years |
|
More than
5 years |
|
Total |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Trade and bills payables |
|
|
— |
|
|
103,798 |
|
|
— |
|
|
— |
|
|
103,798 |
|
Other payables and accrued liabilities |
|
|
— |
|
|
22,022 |
|
|
— |
|
|
— |
|
|
22,022 |
|
Interest-bearing bank and other borrowings |
|
|
— |
|
|
508,388 |
|
|
654,212 |
|
|
— |
|
|
1,162,600 |
|
Due to related companies |
|
|
672,401 |
|
|
— |
|
|
— |
|
|
— |
|
|
672,401 |
|
Mining rights payables |
|
|
— |
|
|
32,234 |
|
|
110,524 |
|
|
— |
|
|
142,758 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
672,401 |
|
|
666,442 |
|
|
764,736 |
|
|
— |
|
|
2,103,579 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
F-57
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
On demand |
|
Less than
1 year |
|
1 to 5 years |
|
More than
5 years |
|
Total |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Trade and bills payables |
|
|
— |
|
|
69,402 |
|
|
— |
|
|
— |
|
|
69,402 |
|
Other payables and accrued liabilities |
|
|
— |
|
|
9,964 |
|
|
— |
|
|
— |
|
|
9,964 |
|
Interest-bearing bank and other borrowings |
|
|
— |
|
|
277,992 |
|
|
557,015 |
|
|
49,146 |
|
|
884,153 |
|
Due to related companies |
|
|
451,380 |
|
|
— |
|
|
— |
|
|
— |
|
|
451,380 |
|
Mining rights payables |
|
|
— |
|
|
27,644 |
|
|
121,529 |
|
|
18,256 |
|
|
167,429 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
451,380 |
|
|
385,002 |
|
|
678,544 |
|
|
67,402 |
|
|
1,582,328 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
On demand |
|
Less than
1 year |
|
1 to 5 years |
|
More than
5 years |
|
Total |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Trade and bills payables |
|
|
— |
|
|
80,017 |
|
|
— |
|
|
— |
|
|
80,017 |
|
Other payables and accrued liabilities |
|
|
— |
|
|
8,700 |
|
|
— |
|
|
— |
|
|
8,700 |
|
Interest-bearing bank and other borrowings |
|
|
— |
|
|
134,357 |
|
|
270,000 |
|
|
48,742 |
|
|
453,099 |
|
Due to related companies |
|
|
314,235 |
|
|
— |
|
|
— |
|
|
— |
|
|
314,235 |
|
Mining rights payables |
|
|
— |
|
|
22,980 |
|
|
118,758 |
|
|
46,513 |
|
|
188,251 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314,235 |
|
|
246,054 |
|
|
388,758 |
|
|
95,255 |
|
|
1,044,302 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
- (e)
- Capital management
The
primary objectives of the Group's capital management are to safeguard the Group's ability to continue as a going concern and to maintain healthy capital ratios in order to support
its business and maximise shareholders' value. The Group also relies on financial support from its controlling shareholder.
The
Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may return capital
to shareholders, raise new debt or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2010, 2011,
2012, and the six months ended June 30, 2013.
The
Group monitors capital on the basis of the debt to capital ratio (gearing ratio), which is calculated as interest-bearing debt divided by total capital. Interest-bearing debt
includes interest-bearing bank and other borrowings and mining rights payables. Capital includes total equity and interest-bearing debt. The gearing ratios as at the end of each of the years ended
December 31, 2010, 2011, 2012, and the six months ended June 30, 2013 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Interest-bearing debt |
|
|
570,900 |
|
|
861,876 |
|
|
1,116,908 |
|
|
1,856,867 |
|
Total equity |
|
|
630,964 |
|
|
565,469 |
|
|
507,595 |
|
|
289,571 |
|
| |
|
|
|
|
|
|
|
|
|
Total capital |
|
|
1,201,864 |
|
|
1,427,345 |
|
|
1,624,503 |
|
|
2,146,438 |
|
| |
|
|
|
|
|
|
|
|
|
Gearing ratio |
|
|
47.5% |
|
|
60.4% |
|
|
68.8% |
|
|
86.5% |
|
| |
|
|
|
|
|
|
|
|
|
F-58
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
36. MATERIAL NON-CONTROLLING INTERESTS
The Group has two subsidiaries with material non-controlling interests ("NCI"). Information regarding these subsidiaries is as follows:
Six months ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Principal place
of business |
|
NCI in
subsidiary |
|
Profit/(loss)
allocated
to NCI |
|
Accumulated
NCI |
|
Dividends
paid to NCI
in year |
|
|
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Baiping Mining |
|
Mainland China |
|
|
30 |
% |
|
2,133 |
|
|
67,097 |
|
|
— |
|
Guizhou Yongfu |
|
Mainland China |
|
|
30 |
% |
|
(1,337 |
) |
|
21,070 |
|
|
— |
|
Six months ended June 30, 2012 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Principal place
of business |
|
NCI in
subsidiary |
|
Profit/(loss)
allocated
to NCI |
|
Accumulated
NCI |
|
Dividends
paid to NCI
in year |
|
|
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Baiping Mining |
|
Mainland China |
|
|
30 |
% |
|
3,618 |
|
|
60,052 |
|
|
— |
|
Guizhou Yongfu |
|
Mainland China |
|
|
30 |
% |
|
(1,253 |
) |
|
21,134 |
|
|
— |
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Principal place
of business |
|
NCI in
subsidiary |
|
Profit
allocated
to NCI |
|
Accumulated
NCI |
|
Dividends
paid to NCI
in year |
|
|
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Baiping Mining |
|
Mainland China |
|
|
30 |
% |
|
8,530 |
|
|
64,964 |
|
|
— |
|
Guizhou Yongfu |
|
Mainland China |
|
|
30 |
% |
|
20 |
|
|
22,407 |
|
|
— |
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Principal place
of business |
|
NCI in
subsidiary |
|
Profit/(loss)
allocated
to NCI |
|
Accumulated
NCI |
|
Dividends
paid to NCI
in year |
|
|
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Baiping Mining |
|
Mainland China |
|
|
30 |
% |
|
1,204 |
|
|
56,434 |
|
|
— |
|
Guizhou Yongfu |
|
Mainland China |
|
|
30 |
% |
|
(1,743 |
) |
|
22,387 |
|
|
— |
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Principal place
of business |
|
NCI in
subsidiary |
|
Loss
allocated
to NCI |
|
Accumulated
NCI |
|
Dividends
paid to NCI
in year |
|
|
|
|
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Baiping Mining |
|
Mainland China |
|
|
30 |
% |
|
2,233 |
|
|
55,230 |
|
|
— |
|
Guizhou Yongfu |
|
Mainland China |
|
|
30 |
% |
|
1,727 |
|
|
24,130 |
|
|
— |
|
F-59
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Summarised
financial information including consolidation adjustments but before inter-company eliminations is as follows:
Baiping Mining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Cash and cash equivalents |
|
|
71 |
|
|
21,297 |
|
|
4,564 |
|
|
2,246 |
|
Other current assets |
|
|
11,816 |
|
|
23,643 |
|
|
30,967 |
|
|
39,098 |
|
Non-current assets |
|
|
280,504 |
|
|
293,307 |
|
|
310,529 |
|
|
312,387 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
292,391 |
|
|
338,247 |
|
|
346,060 |
|
|
353,731 |
|
| |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
52,153 |
|
|
93,621 |
|
|
73,621 |
|
|
35,579 |
|
Non-current liabilities |
|
|
56,137 |
|
|
56,512 |
|
|
55,891 |
|
|
94,495 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
108,290 |
|
|
150,133 |
|
|
129,512 |
|
|
130,074 |
|
| |
|
|
|
|
|
|
|
|
|
Baiping Mining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Revenue |
|
|
13,233 |
|
|
44,189 |
|
|
106,446 |
|
|
44,136 |
|
|
40,227 |
|
Profit/(loss) for the year/period |
|
|
(7,442 |
) |
|
4,012 |
|
|
28,434 |
|
|
12,060 |
|
|
7,112 |
|
Total comprehensive income/(loss) for the year/period, net of tax |
|
|
(7,442 |
) |
|
4,012 |
|
|
28,434 |
|
|
12,060 |
|
|
7,112 |
|
Net cash flows generated from/(used in) operating activities |
|
|
(5,265 |
) |
|
8,112 |
|
|
50,272 |
|
|
21,005 |
|
|
(3,930 |
) |
Increase/(decrease) in cash and cash equivalents |
|
|
(985 |
) |
|
21,226 |
|
|
(16,733 |
) |
|
(19,770 |
) |
|
(2,318 |
) |
Guizhou Yongfu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
Cash and cash equivalents |
|
|
3,918 |
|
|
3,209 |
|
|
3,825 |
|
|
12,018 |
|
Other current assets |
|
|
136,999 |
|
|
72,894 |
|
|
70,081 |
|
|
67,825 |
|
Non-current assets |
|
|
268,179 |
|
|
403,441 |
|
|
543,252 |
|
|
606,365 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
409,096 |
|
|
479,544 |
|
|
617,158 |
|
|
686,208 |
|
| |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
85,000 |
|
|
96,328 |
|
|
262,907 |
|
|
109,669 |
|
Non-current liabilities |
|
|
243,664 |
|
|
308,594 |
|
|
279,562 |
|
|
506,307 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
328,664 |
|
|
404,922 |
|
|
542,469 |
|
|
615,976 |
|
| |
|
|
|
|
|
|
|
|
|
F-60
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guizhou Yongfu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Revenue |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Profit/(loss) for the year/period |
|
|
(5,755 |
) |
|
(5,808 |
) |
|
66 |
|
|
(4,177 |
) |
|
(4,457 |
) |
Total comprehensive income/(loss) for the year/period, net of tax |
|
|
(5,755 |
) |
|
(5,808 |
) |
|
66 |
|
|
(4,177 |
) |
|
(4,457 |
) |
Net cash flows used in operating activities |
|
|
(2,531 |
) |
|
(3,953 |
) |
|
(6,930 |
) |
|
(2,103 |
) |
|
(4,943 |
) |
Increase/(decrease) in cash and cash equivalents |
|
|
(45,261 |
) |
|
(709 |
) |
|
616 |
|
|
381 |
|
|
8,193 |
|
37. EVENTS AFTER THE REPORTING PERIOD
- (a)
- On
July 5, 2013, Guizhou Puxin received and fully drew down a RMB105.0 million three-year entrusted loan from China Minsheng
Bank Co., Ltd., entrusted by Yangpu Banghua, an unrelated third party. The purpose of the loan is to finance the operating working capital, mine construction, payment of mining rights
payables and debt settlement. The loan bears fixed interest rate of 7.38% per annum and bears commission fee at a rate of 0.33%.
- (b)
- On
July 18, 2013, the Group obtained a confirmation letter from China Minsheng Bank which will provide a loan facility totalling
RMB1.6 billion for a year during which the Group can draw down loan amounts pursuant to the conditions set out in the confirmation letter. On July 29, 2013, the Group obtained a revised
confirmation letter from China Minsheng Bank which extends the expiry period of the loan facility from a year to one and a half years.
- (c)
- On
August 14, 2013 and October 17, 2013, Guizhou Puxin received a RMB100.0 million and RMB150.0 million one-year bank loan from
China Minsheng Bank Co., Ltd., Chongqing Branch, respectively. The purpose of the loan is to finance the purchase of coal and to finance the working capital of Guizhou Puxin,
respectively. The loans are guaranteed by Wuhu Feishang Industrial Development Co., Ltd. ("WFID"), and Pingxiang Iron & Steel Co., Ltd. ("Pingxiang"). Pingxiang was
a related company controlled by Mr. Li Feilie, who is also an executive officer, director and the principal beneficial owner of the Company. Upon the disposition by Mr. Li Feilie in
January 2013, Pingxiang became an independent third party thereafter. The loans are also collateralized by a pledge of the outstanding stock of Guizhou Puxin. The loans bear floating annual
interest rate of 6.60% and 6.00% per annum, respectively. The loans were fully drawn down in August 2013 and October 2013, respectively.
- (d)
- On
August 29, 2013, Guizhou Puxin received and fully drew down a RMB76.0 million one-year entrusted loan from China Industrial International
Trust Limited. The purpose of the loan is to finance the working capital of Guizhou Puxin. The loan bears a fixed interest rate of 7.29% per annum. The loan is secured by a RMB16.0 million
bank deposit.
- (e)
- On
October 10, 2013, the Group obtained a confirmation letter from China Merchants Bank which will provide a loan facility totalling
RMB350.0 million for seventeen months during which the Group can draw down loan amounts pursuant to the conditions set out in the confirmation letter.
F-61
Table of Contents
FEISHANG ANTHRACITE RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- (f)
- On
October 22, 2013, Guizhou Puxin received and fully drew down a RMB30.0 million six months' short-term bank loan from China Everbright Bank.
The purpose of the loan is to finance the purchase of coal. The loan is guaranteed by Feishang Enterprise. The loan bears a fixed interest rate of 6.72% per annum.
- (g)
- On
December 6, 2013, the Company increased its authorized share capital under which it may issue an aggregate of: (i) a maximum of
50,000 shares of one class with a par value of US$1.00 each; and (ii) a maximum of 1,000,000,000 ordinary shares of one class with a par value of HK$0.01 each (the "Listco
Shares"), pursuant to which CHNR completed the subscription for 124,554,580 Listco Shares of the Company with a par value of HK$0.01 each at a total consideration of HK$98.4 million as
of December 12, 2013. Subsequently, on December 12, 2013, the Company repurchased the one outstanding share with a par value of US$1.00 in the Company held by CHNR at par and
simultaneously cancelled the class of 50,000 ordinary shares with a par value of US$1.00 each.
38. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved and authorised for issue by the board of directors on December 17, 2013.
F-62
Table of Contents
IMPORTANT
If you are in any doubt about the contents of this listing document, you should seek independent professional advice.
Feishang Anthracite Resources Limited
(Incorporated in the British Virgin Islands with limited liability)
LISTING BY INTRODUCTION
OF THE ENTIRE ISSUED SHARE CAPITAL OF THE COMPANY
ON THE MAIN BOARD OF
THE STOCK EXCHANGE OF HONG KONG LIMITED
|
|
|
|
|
Nominal value |
|
: |
|
HK$0.01 per Share |
Stock code |
|
: |
|
1738 |
Joint Sponsors
(in alphabetical order)
Hong
Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this listing document,
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 listing document.
This
listing document is published in connection with the Listing on the Stock Exchange of our Shares which are currently in issue and held by CHNR and will be distributed to the shareholders of CHNR
upon completion of the Distribution. This listing document contains particulars given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and
the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) for the purpose of giving information with regard to the Company and its subsidiaries.
This listing document does not constitute an offer of, nor is it calculated to invite offers for, shares or other securities of the Company, nor have such shares or other
securities been allotted with a view to any of them being offered for sale to or subscription by the public. No new Shares will be allotted or issued in connection with, or pursuant to, this listing
document.
Information
regarding the proposed arrangements for the listing of, and dealings and settlement of dealings in, the Shares following completion of the Spin-off is set out in the section headed
"Information about this Listing Document and the Spin-off" in this listing document.
Your
attention is drawn to the section headed "Risk Factors" in this listing document.
December 31, 2013
Table of Contents
EXPECTED TIMETABLE(1)
|
|
|
Register of members of CHNR closes from |
|
Friday, January 10, 2014 |
Distribution Record Date |
|
Monday, January 13, 2014 |
Register of members of CHNR opens on |
|
Tuesday, January 14, 2014 |
Dispatch of Share certificates on(2) |
|
Tuesday, January 21, 2014 |
Listing of and dealing in the Shares on the Stock Exchange expected to commence on(2) |
|
Wednesday, January 22, 2014 |
Notes:
- (1)
- All
dates and times refer to Hong Kong dates and times, except as otherwise stated. Details of the Spin-off, including its condition, are set out in the
sections headed "Information about this Listing Document and the Spin-off" and "The Spin-off" in this listing document.
- (2)
- The
Share certificates are expected to be dispatched on January 21, 2014. The Share certificates will only become valid if the Distribution becomes
unconditional. In the event the Distribution does not become unconditional, dealings in the Shares on the Stock Exchange will not commence on January 22, 2014. In such event, we will make an
announcement of the above and, if necessary, of a revised timetable. Investors who trade in the Shares prior to the receipt of the Share certificates do so entirely at their own risk.
- The
first day of dealing in CHNR Shares on an ex entitlement basis will be determined by NASDAQ Capital Market and made available at
www.nasdaq.com.
i
Table of Contents
CONTENTS
IMPORTANT NOTICE TO INVESTORS
We have not authorized anyone to provide you with information or representation that is different from what is contained in this listing document. Any such
information or representation must not be relied on by you as having been authorized by us, the Joint Sponsors, any of our or their respective directors, officers or representatives or any other
person involved in the Spin-off.
ii
Table of Contents
iii
Table of Contents
SUMMARY
This summary is intended to give you an overview of the information contained in this listing document. Since it is a summary, it does not contain all the information
that may be important to you. You should read the listing document in its entirety. The reserve data of the Company included in this listing document are determined by measuring the raw coal
extracted from our coal mines. The characteristics of our coal products are assessed by measuring our raw coal after beneficiation (or coal
washing) as may be required under the Chinese Coal Classification Standard. See "Business — Our Coal Characteristics and Coal
Products — Coal Classification".
OVERVIEW
We are a producer of anthracite coal based in Guizhou province of the PRC. We are primarily engaged in the acquisition,
construction and development of anthracite coal mines and the extraction and sale of anthracite coal. Our mining assets consist of seven underground anthracite coal mines in Guizhou province, of
which five have commenced commercial production, one is undergoing its pilot run phase and one is under construction. All of our anthracite coal mines are accessible by road and located in
Guizhou province, which, according to the SAWS and Fenwei, had the largest anthracite coal resources among the provinces in Southwest China as of December 31, 2012. The following table
sets forth certain information regarding our seven anthracite coal mines as of the date of this listing document, other than information regarding the total proved and probable reserves and the
estimated mine lives of our anthracite coal mines, which were as of July 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthracite Coal Mine
|
|
Stage of Production |
|
Date of
Initial/Expected
Commercial
Production |
|
Total
Proved and
Probable
Reserves
(in million
tonnes) |
|
Permitted
Annual
Production
Capacity
(in tonnes)(1) |
|
Estimated
Mine Life(2)
(in years) |
|
Baiping Coal Mine |
|
Commercial production |
|
June 2009 |
|
|
22.48 |
|
|
150,000 |
|
|
37 |
|
Liujiaba Coal Mine |
|
Commercial production |
|
December 2012 |
|
|
13.60 |
|
|
300,000 |
|
|
23 |
|
Zhulinzhai Coal Mine |
|
Commercial production |
|
April 2012 |
|
|
9.56 |
|
|
300,000 |
|
|
21 |
|
Gouchang Coal Mine |
|
Commercial production (suspended)(3) |
|
April 2011 |
|
|
5.72 |
|
|
90,000 |
|
|
52 |
|
Yongsheng Coal Mine |
|
Pilot run |
|
March 2014 |
|
|
51.96 |
|
|
600,000 |
|
|
29 |
|
Dayuan Coal Mine |
|
Commercial production |
|
November 2013 |
|
|
8.26 |
|
|
300,000 |
|
|
18 |
|
Dayun Coal Mine |
|
Construction |
|
July 2015 |
|
|
97.29 |
|
|
600,000 |
|
|
54 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
208.87 |
|
|
2,340,000 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
- (1)
- Represents
the annual production capacity as permitted under the relevant mining rights permits.
- (2)
- Mine
life estimates are calculated by dividing proved and probable reserves by the optimized annual production capacity, which takes into account the
planned future increases in production capacity still in the design phase.
- (3)
- Operations
have been suspended at Gouchang Coal Mine since March 2013 pending the acquisition by us of a nearby coal mine and Gouchang Coal
Mine achieving certain production capacity targets in accordance with Guizhou province's coal mine consolidation policy. See "Business — Our Anthracite Coal
Mines — Mines in Commercial Production — Gouchang Coal Mine".
1
Table of Contents
As of July 31, 2013, we had total proved and probable coal reserves of approximately 208.87 million tonnes and total permitted
annual production capacity of 2.34 million tonnes. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, we sold 166,362 tonnes, 314,058 tonnes,
437,010 tonnes, 148,539 tonnes and 187,432 tonnes of anthracite coal, respectively, and had revenues of RMB38.7 million, RMB105.2 million, RMB141.9 million,
RMB55.2 million and RMB54.7 million, respectively. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, the average selling price of the anthracite coal we
produced was RMB232.4, RMB296.4, RMB323.6, RMB368.3 and RMB291.9 per tonne, respectively.
During
the Track Record Period, we derived our revenue primarily from the sale of coal we produced. From time to time, we also engaged in coal trading activities by selling coal that we
purchased from third party suppliers. In 2011, 2012 and the six months ended June 30, 2012 and 2013, revenue from sales of third party coal was RMB33.1 million, RMB1.1 million,
RMB1.1 million and nil, respectively, representing 31.5%, 0.8%, 2.0% and nil, respectively, of our total revenue. We did not engage in any coal trading activities in 2010, and we do not intend
to engage in any significant coal trading activities in the future.
In
the PRC, end users generally characterize anthracite coal as thermal coal, chemical coal or PCI coal. Thermal coal is generally used in the electric power industry for power
generation and in the construction industry for cement production. Chemical coal is generally used for the production of synthetic ammonia and methanol, and PCI coal is generally used for sintering,
smelting and injection purposes in the pulverized coal injection process in iron production. Prior to 2011, we sold substantially all of the coal produced from our mines as thermal coal. In 2011, 2012
and the six months ended June 30, 2013, we derived approximately 5%, 5% and 1.2% of our revenue from the sale of chemical coal we produced, respectively, while our remaining revenue in each of
these years was derived from the sale of thermal coal we produced and coal sourced from third parties. Subject to market conditions and the Guizhou government's annual guidance on supply of thermal
coal to power plants, we intend to significantly increase our sales of chemical coal in the future and begin selling PCI coal in 2014. Our ability to sell chemical coal or PCI coal during the Track
Record Period has been constrained as our annual production levels were determined based in large part on the Guizhou government's annual guidance relating to the provision of certain minimum amounts
of thermal coal to power plants
operating in Guizhou province, which has taken up a significant portion of our production capacity. We generally price our anthracite coal based on the prevailing market prices in Guizhou province,
the anthracite coal type and quality, our sales volume and the length of our relationship with the customer.
In
order to increase our production capacity, we plan to optimize all of our currently operating anthracite coal mines by improving mine layout and upgrading mine infrastructure and
equipment. We expect that our optimization plans will begin in 2015 and, after their expected completion in December 2018, we expect to be able to achieve an aggregate annual production
capacity of 5.81 million tonnes. The estimated costs of our optimization plans are RMB807.5 million.
Anthracite
coal production in Guizhou province has historically exceeded local consumption and this trend is expected to continue. Anthracite coal prices in Guizhou province are also
highly cyclical. For example, anthracite coal prices in Guizhou province declined significantly in the second quarter
2
Table of Contents
of
2012 and, after a brief period of recovery, declined significantly again in the first half of 2013. There could be further declines in anthracite coal prices in Guizhou province in the future. See
"Risk Factors — Our business, financial condition and results of operations are susceptible to the cyclical nature of the PRC anthracite coal market and
vulnerable to fluctuations in anthracite coal prices".
Under
PRC law, each coal mine in the PRC must obtain certain permits prior to commencing commercial production, including a mining right permit, a safe production permit and a coal
production permit. The following table sets forth certain information regarding our mining right permits, safe production permits and coal production permits as of the Latest Practicable Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining Right Permit |
|
Safe Production Permit |
|
Coal Production Permit(5) |
Mine
|
|
Holder/permit number |
|
Permit date
(month/year) |
|
Expiration
date
(month/year) |
|
Permit date
(month/year) |
|
Expiration
date
(month/year) |
|
Permit date
(month/year) |
|
Expiration
date
(month/year) |
Baiping Coal Mine(1) |
|
Baiping Mining/ C5200002011111120121064 |
|
November
2011 |
|
August 2014 |
|
May 2012 |
|
May 2015 |
|
June 2009 |
|
June 2020 |
Liujiaba Coal Mine |
|
Xinsong Coal/ C5200002009091120036374(2) |
|
March 2011 |
|
September
2019 |
|
November
2012 |
|
November
2015 |
|
December
2012 |
|
December
2037 |
Zhulinzhai Coal Mine |
|
Linjiaao Coal/ C5200002011031120108782 |
|
April 2011 |
|
July 2018 |
|
March 2012 |
|
March 2015 |
|
April 2012 |
|
April 2031 |
Gouchang Coal Mine |
|
Gouchang Coal/ C5200002009121120048406 |
|
April 2011 |
|
April 2017 |
|
April 2011 |
|
April 2014 |
|
April 2011 |
|
April 2045 |
Yongsheng Coal Mine |
|
Guizhou Yongfu/ C5200002012021120124117(3) |
|
February
2012 |
|
November
2027 |
|
— |
|
— |
|
— |
|
— |
Dayuan Coal Mine |
|
Dayuan Coal/ 5200002011051120118585 |
|
March 2013 |
|
March 2023 |
|
November
2013 |
|
November
2016 |
|
— |
|
— |
Dayun Coal Mine |
|
Guizhou Dayun/ C5200002011031120112455(4) |
|
March 2011 |
|
March 2031 |
|
— |
|
— |
|
— |
|
— |
- (1)
- In
2011 and 2012, the actual production output of Baiping Coal Mine exceeded its permitted annual production capacity under its mining right permit and coal
production permit. See "Business — Our Anthracite Coal Mines — Mines in Commercial
Production — Baiping Coal Mine" on page 97. We have applied for a mining right permit with an annual production capacity of 300,000 tonnes for
Baiping Coal Mine and we expect to obtain such permit in 2014.
- (2)
- The
mining right has been pledged to China Minsheng Bank.
- (3)
- The
mining right has been pledged to China Minsheng Bank and Bank of China.
- (4)
- The
mining right has been pledged to China Merchants Bank.
- (5)
- The
National People's Congress Standing Committee passed certain amendments to the Coal Law, which became effective on June 29, 2013, including
removing the requirement of obtaining coal production permits.
Each of our anthracite coal mines currently utilizes manual longwall mining, semi-mechanical longwall mining or mechanical longwall mining methods
to extract coal. Longwall mining refers to extracting coal from long rectangular blocks of coal seams. Manual longwall mining refers to drilling holes in the mining face, placing explosives and
detonating the explosives to extract the coal. Mechanical and semi-mechanical longwall mining involve using a mechanical shearer in coal
3
Table of Contents
extraction.
In mechanical longwall mining, the mine roof is held up during the extraction process by automatic hydraulic roof supports, while in semi-mechanical longwall mining, the mine roof is held
up by hydraulic roof supports that are operated manually. The following table sets forth the current extraction method of each of our anthracite coal mines:
|
|
|
Anthracite Coal Mine
|
|
Extraction Method |
Baiping Coal Mine |
|
Manual longwall |
Liujiaba Coal Mine |
|
Semi-mechanical longwall |
Zhulinzhai Coal Mine |
|
Manual longwall |
Gouchang Coal Mine |
|
Manual longwall |
Dayun Coal Mine |
|
Mechanical longwall |
Yongsheng Coal Mine |
|
Mechanical longwall |
Dayuan Coal Mine |
|
Semi-mechanical longwall |
NON-IFRS FINANCIAL MEASURES
Cash Operating Costs
Cash operating cost is not a measure calculated in accordance with IFRS and is being disclosed in this listing document pursuant to the
requirements of the Hong Kong Stock Exchange. We believe cash operating cost is a relevant and useful measure to our investors, as it is used by our management as a gauge of our production costs and
for purposes of internal reporting and planning in connection with our liquidity and cash requirements.
Our
cash operating costs consist primarily of the costs of wages and labor, materials, power and maintenance. Our total cash operating costs increased from RMB102.7 per tonne of saleable
coal produced in 2010 to RMB123.9 in 2011, primarily due to the increase in the cost of wages and labor. Our total cash operating costs increased from RMB123.9 per tonne of saleable coal produced in
2011 to RMB156.7 in 2012, primarily due to the increase in the cost of materials. We expect total cash operating costs to be approximately RMB156.0 upon the completion of the optimization phase
construction of our anthracite coal mines. Set forth below are our cash operating costs of our coal mines that were in commercial production in 2010, 2011, 2012 and the six months ended
June 30, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Cash Operating Costs
(RMB/Tonne of Saleable Coal Produced) |
|
Category
|
|
Year ended
December 31,
2010 |
|
Year ended
December 31,
2011 |
|
Year ended
December 31,
2012 |
|
Six months
ended June 30,
2013 |
|
Wages and labor |
|
|
62.7 |
|
|
83.2 |
|
|
88.9 |
|
|
100.7 |
|
Materials |
|
|
28.8 |
|
|
26.1 |
|
|
47.5 |
|
|
44.8 |
|
Power |
|
|
7.6 |
|
|
9.4 |
|
|
11.5 |
|
|
16.0 |
|
Maintenance |
|
|
1.2 |
|
|
1.6 |
|
|
1.7 |
|
|
1.5 |
|
Other |
|
|
2.4 |
|
|
3.6 |
|
|
7.1 |
|
|
5.6 |
|
| |
|
|
|
|
|
|
|
|
|
Total cash operating costs |
|
|
102.7 |
|
|
123.9 |
|
|
156.7 |
|
|
168.6 |
|
| |
|
|
|
|
|
|
|
|
|
Set forth below is a reconciliation of our cash operating costs to cost of sales for the periods indicated which the Company believes to be the
most directly comparable IFRS financial measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
2010 |
|
Year ended
December 31,
2011 |
|
Year ended
December 31,
2012 |
|
Six months
ended June 30,
2013 |
|
|
|
(RMB in thousands)
|
|
Cost of sales(1) |
|
|
25,453 |
|
|
74,289 |
|
|
95,889 |
|
|
39,953 |
|
Opening coal balance |
|
|
(1,794 |
) |
|
(2,456 |
) |
|
(2,262 |
) |
|
(4,873 |
) |
Ending coal balance |
|
|
2,456 |
|
|
2,262 |
|
|
4,873 |
|
|
6,968 |
|
Price adjustment fund |
|
|
(2,624 |
) |
|
(4,995 |
) |
|
(12,116 |
) |
|
(2,792 |
) |
Sales taxes |
|
|
(1,856 |
) |
|
(1,812 |
) |
|
(3,897 |
) |
|
(1,834 |
) |
Cost of third party coal sold |
|
|
— |
|
|
(30,229 |
) |
|
(1,110 |
) |
|
— |
|
Inventory write-down |
|
|
— |
|
|
— |
|
|
— |
|
|
984 |
|
Non-cash operating costs |
|
|
(5,303 |
) |
|
(5,259 |
) |
|
(12,934 |
) |
|
(5,949 |
) |
| |
|
|
|
|
|
|
|
|
|
Total cash operating costs |
|
|
16,332 |
|
|
31,800 |
|
|
68,443 |
|
|
32,457 |
|
| |
|
|
|
|
|
|
|
|
|
- (1)
- Cost
of sales is the amount presented in our consolidated financial statements included in
Appendix I — "Accountants' Report of the Company".
4
Table of Contents
CAPITAL EXPENDITURE
Our capital expenditures were RMB219.7 million, RMB341.5 million, RMB360.2 million, RMB202.9 million and
RMB139.3 million in 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, respectively. Our capital expenditures were primarily related to the construction of our coal mines,
purchase of mining-related equipment and machinery and pre-payments for land use rights for our coal mines. We expect to pay approximately an aggregate of RMB636.5 million in 2013 and 2014 for
capital expenditures. We expect to fund these capital expenditures through interest-bearing bank loans and other borrowings. In the past, we have financed a significant portion of our cash
requirements with non-interest bearing loans from companies controlled by Mr. Li Feilie, our chairman and chief executive officer. In March 2013, we repaid a significant portion of the
non-interest bearing loans from companies controlled by Mr. Li with interest-bearing bank and other borrowings. We do not anticipate receiving additional non-interest bearing loans from our
related parties after the Listing. Accordingly, we expect our finance costs to increase significantly in the future. See "Financial Information — Indebtedness".
OUR EXPANSION PLANS
Historical Losses of the Company
In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, we incurred operating losses of RMB54.5 million,
RMB23.0 million, RMB36.6 million, RMB11.3 million and RMB231.7 million, respectively, and, disregarding the effects of a RMB624.1 million non-recurring gain relating
to the acquisition of Guizhou Puxin in 2010, we would have incurred net losses in each of those periods. The losses incurred during the Track Record Period were primarily due to the following
reasons:
- •
- Substantial pre-production activities during the Track Record
Period. During the Track Record Period, only four of our seven anthracite coal mines have commenced commercial production. Of these four
mines, the Liujiaba Coal Mine only commenced commercial production in December 2012 and Zhulinzhai Coal Mine only commenced commercial production in April 2012. Accordingly, for a majority of the
Track Record Period, these mines remained in the construction phase and only Baiping Coal Mine was in commercial production throughout the Track Record Period. Gouchang Coal Mine commenced production
in 2011 but was suspended since March 2013 pending the completion of an acquisition of a nearby coal mine in accordance with the mine consolidation policies of Guizhou province.
- •
- Our largest mines remain in pre-commercial production
phases. Our largest mine in terms of proved and probable coal reserves, Dayun Coal Mine, is still under construction. Yongsheng Coal
Mine, our second largest mine in terms of proved and probable coal reserves, was under construction for most of 2013 and the mine face and gas ventilation tunnels were recently completed, and
commenced a pilot run in June 2013. Given our two largest mines remain in the pre-commercial production stage, our annual production output
5
Table of Contents
of
coal remains very small. As of July 31, 2013, we had total proved and probable coal reserves of approximately 208.87 million tonnes. However, our total permitted annual production
capacity remained at only 2.34 million tonnes as of the same date.
- •
- Significant capital expenditures and associated debt and financing costs incurred during the Track Record
Period. In 2010, 2011, 2012 and the six months ended June 30, 2013, we incurred capital expenditures of RMB219.7 million,
RMB341.5 million, RMB360.2 million and RMB139.3 million, respectively. Such capital expenditures relate primarily to the construction of our anthracite coal mines, purchase of
mining-related equipment and machinery and pre-payments for land use rights for our anthracite coal mines. In order to fund these capital expenditures, we incurred significant debt and associated
financing costs. In 2010, 2011, 2012 and the six months ended June 30, 2013, we incurred finance costs for bank borrowings and mining rights payables (including the capitalized interest) of
RMB21.8 million, RMB60.9 million, RMB89.4 million and RMB56.2 million, respectively. These capital expenditures and the associated finance costs have contributed in part to
our historical losses.
- •
- Impairment loss for Gouchang Coal Mine for the six months ended June 30,
2013. During the six months ended June 30, 2013, we incurred an impairment loss on property, plant and equipment of
RMB184.4 million in connection with the suspension of Gouchang Coal Mine. This represented a one-off and non-recurring impairment loss and we do not expect any further material impairment
losses to be made in respect of Gouchang Coal Mine. The impairment losses were recognized because our management determined that RMB184.4 million of the carrying amount of Gouchang Coal Mine's
total non-current assets of RMB256.6 million may not be recoverable after considering the circumstances relating to the suspension of Gouchang Coal Mine. See "Financial
Information — Description of the Key Components of Our Results Of Operations — Impairment Loss on Property, Plant and
Equipment".
- •
- Constrained ability to sell chemical coal or PCI coal due to small annual production
output. As mentioned above, given our two largest mines remain in pre-commercial production stage, our current annual coal production
output remains very small. We have from time to time provided a minimum amount of our anthracite coal as thermal coal to power plants operating in Guizhou province in response to the Guizhou
government's annual guidance, which historically has taken up a significant portion of our production output. In 2010, 2011 and 2012 and the six months ended June 30, 2013, we produced and sold
136,000 tonnes, 202,000 tonnes, 382,000 tonnes and 171,000 tonnes, respectively, of thermal coal to power plants in Guizhou province in response to the Guizhou government's annual guidance. In 2013,
we plan to produce approximately 360,000 tonnes of thermal coal in response to the Guizhou government's annual guidance. This has constrained our ability to sell chemical or PCI coal which are able to
generally command higher selling prices and higher profit margins than thermal coal.
- •
- Fluctuation in anthracite coal prices. Our gross margin,
which is equal to gross profit divided by revenue, decreased from 44.9% in the six months ended June 30, 2012 to 27.0%
6
Table of Contents
in
the same period in 2013, primarily due to a significant decrease in the average selling price of our self-produced coal. In the six months ended June 30, 2012 and 2013, the average selling
price of the anthracite coal we produced was RMB368.3 and RMB291.9 per tonne, respectively. While the anthracite coal production in Guizhou province continued to decrease during the Track Record
Period, from 62.6 million tonnes in 2010, to 59.9 million tonnes in 2011 and 53.4 million tonnes in 2012, our sale of anthracite coal continued to increase, from 166,362 tonnes in
2010, to 314,058 tonnes in 2011 and 437,010 tonnes in 2012.
See
"Financial Information — Results of Operations".
Our Expansion Plans
In order to improve our financial conditions in the future, we intend to carry out the following plans before the end of
2015:
- •
- Expansion of Baiping Coal Mine, Liujiaba Coal Mine, Zhulinzhai Coal Mine and Dayuan Coal
Mine. In order for us to increase our sales of chemical coal, we will need to increase our annual production output. To achieve this, we
plan to increase our total annual production capacity of approximately 890,000 tonnes for 2013 to 1,680,000 tonnes for 2014 and 2,900,000 tonnes for 2015, respectively, through the expansion of
Baiping Coal Mine, Liujiaba Coal Mine, Zhulinzhai Coal Mine and Dayuan Coal Mine and by accelerating the construction of Dayun Coal Mine. The estimated commencement of commercial production of
Yongsheng Coal Mine in March 2014 is also expected to increase our annual production output.
- •
- Complete the construction of a coal beneficiation plant in Jinsha
county. In order to sell the anthracite coal from our anthracite coal mines as PCI coal and as chemical coal with certain technical
specifications, the coal would need to be washed. The construction of the coal beneficiation plant in Jinsha county (which is close to the Yongsheng Coal Mine) is expected to further enhance the
quality of the anthracite coal we produce and to enable the sale of such coal as higher margin chemical coal and PCI coal.
- •
- Construct a shipping port along the Wujiang River. We
currently transport coal to our customers primarily by road using third party coal transportation services. Such costs are borne by our customers. To become more competitive, we are constructing a
shipping port along the Wujiang River which is expected to (i) allow us to transport coal from our anthracite coal mines by waterway which will be more efficient and reliable than road
transportation and (ii) provide us with access to anthracite coal net importing provinces, such as Guangdong and Guangxi.
- •
- Increase the sale of self-produced chemical coal and PCI
coal. By increasing our total annual production output and with the addition of our own coal beneficiation plant, we will be in a
position to increase our sale of anthracite coal as chemical coal and PCI coal, which we believe will greatly improve our financial performance.
7
Table of Contents
In
2013, 2014 and 2015, we expect to incur approximately RMB379.3 million, RMB257.2 million and RMB201.2 million, respectively, of capital expenditures to carry out
the above plans, which are expected to be funded primarily through interest-bearing bank loans and other borrowings. See "Financial Information — Liquidity and
Capital Resources — Working Capital" and "Financial Information — Liquidity and Capital
Resources — Capital Expenditure".
The
following table highlights the key milestones for our expansion plans as of the date of the listing document. See "Business — Our Anthracite
Coal Mines — Our Expansion Plans".
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Major development activities/plan |
|
Forecast
total
annual
production
capacity
(in tonnes) |
|
Forecast
total coal
processing
capacity
(in tonnes) |
|
Forecast
total
annual coal
shipping
capacity
(in tonnes) |
|
Forecast
capital
expenditure
(RMB in
millions) |
|
Primary
source of
funding |
2013 |
|
• Commenced the construction
of the beneficiation plant in September 2013
•
Achieved commercial production at Dayuan Coal Mine in November 2013
• Continue expanding annual coal production capacity at the coal mines in commercial production |
|
|
890,000 |
|
|
0 |
|
|
0 |
|
|
379.3 |
|
Bank and other borrowings |
2014
|
|
•
Commence commercial
production at Yongsheng Coal Mine in March 2014
•
Complete the construction of the first phase of the beneficiation plant in April 2014
• Commence the construction of the first phase of the shipping port in May 2014
• Complete the construction of the first phase of the shipping port in December
2014
• Continue expanding annual coal
production capacity at the coal mines in commercial production |
|
|
1,680,000 |
|
|
600,000 |
|
|
500,000 |
|
|
257.2 |
|
Bank and other borrowings |
2015
|
|
•
Commence the
construction of the second phase of the beneficiation plant in January 2015
• Complete the construction of the second phase of the beneficiation plant in June 2015
• Achieve commercial production at Dayun Coal Mine in July 2015
• Commence the construction of the second
phase of the shipping port in July 2015
• Complete the construction of the
second phase of the shipping port by the end of 2015
• Continue expanding annual coal production capacity at the coal mines in commercial production |
|
|
2,900,000 |
|
|
1,200,000 |
|
|
1,000,000 |
|
|
201.2 |
|
Bank and other borrowings |
8
Table of Contents
The
following table sets forth the development status, estimated timeline and estimated capital expenditure required to achieve commercial production as of the Latest
Practicable Date for Yongsheng Coal Mine and Dayun Coal Mine:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Capital
Expenditure
Required to
Achieve
Commercial
Production as of
the Latest
Practicable Date
(RMB in millions) |
|
|
|
|
|
Material
Permits to be
Obtained
before
Commercial
Production |
|
|
|
|
|
|
|
|
|
Permitted
Annual
Production
Capacity
(in tonnes) |
|
|
|
Expected Timeline |
|
Mines under
Construction
|
|
Development Status |
|
Material Approval Process |
|
Expected Time |
|
Yongsheng Coal Mine |
|
|
600,000 |
|
• Safe production
permit |
|
• Completed major
construction
• Completed quality
authentication
• Completed on-site inspection
for pilot run
• Undergoing pilot run
phase |
|
• Obtain approval of safety
facilities acceptance
• Complete the environmental
acceptance inspection
• Obtain safe production
permit
• Commence commercial
production |
|
• January 2014
• February 2014
• March 2014
• March 2014 |
|
|
47.9 |
|
Dayun Coal Mine |
|
|
600,000 |
|
• Safe production
permit |
|
• Undergoing major
construction phase |
|
• Complete quality
authentication
• Obtain approval of pilot
run
• Obtain approval of safety
facilities acceptance
• Complete the environmental
acceptance inspection
• Obtain safe production
permit
• Commence commercial
production |
|
• September 2014
• November 2014
• May 2015
• July 2015
• July 2015
• July 2015 |
|
|
222.2 |
|
THE SPIN-OFF
We are a wholly-owned subsidiary of CHNR, a BVI company with common shares listed on the NASDAQ Capital Market under the symbol "CHNR"
and controlled by Mr. Li Feilie, our chairman and chief executive officer. CHNR has two business segments: base metals exploration and mining; and anthracite coal exploration and mining. CHNR's
anthracite coal exploration and mining segment is operated through our Company.
On
December 31, 2013, the CHNR Board approved a conditional special interim dividend to the CHNR Shareholders to be satisfied by way of a distribution in specie of the
entire issued share capital of our Company to all CHNR Shareholders in proportion to their respective shareholdings in CHNR on the Distribution Record Date. Pursuant to the Distribution, each CHNR
Shareholder will be entitled to five Shares for every CHNR Share held on the Distribution Record Date. Share certificates are expected to be dispatched on January 21, 2014 to holders of record
of CHNR Shares ("Record CHNR
9
Table of Contents
Shareholders")
as of the Distribution Record Date in accordance with the options the Company offers. CHNR Shareholders who are holding CHNR Shares through a bank, broker, dealer, financial
institution or other custodian or nominee ("Beneficial CHNR Shareholders") are not registered holders of CHNR Shares and therefore do not appear on the register of members of CHNR. As Shares will be distributed under the
Distribution only to those Record CHNR Shareholders on the Distribution Record Date, there is no assurance that Beneficial CHNR
Shareholders will be able to receive Shares on or prior to the Listing Date. Beneficial CHNR Shareholders should therefore contact their respective intermediaries (i) to coordinate the delivery
of Shares under the Distribution or (ii) if they wish to become Record CHNR Shareholders to facilitate the receipt of Shares in the Distribution under their own names or for credit to their
designated CCASS Participant's stock amount. See "The Spin-Off" for further details.
The
Spin-off does not involve any offering of new Shares or a public offering of any other securities and no funds will be raised pursuant to the Spin-off. The Distribution is
conditional on the Listing Committee granting listing of, and permission to deal in, our Shares in issue on the Main Board of the Stock Exchange. The reasons for the Spin-off include
the following:
- •
- as CHNR's base metals exploration and mining business is fundamentally different from our Company's business, we believe
the Spin-off could result in more efficient and focused management for our Company and CHNR;
- •
- following the Spin-off, each of our Company and CHNR may adopt more effective incentive compensation arrangements,
including share-based compensation, that are more directly tied to performance;
- •
- after the Spin-off, each of our Company and CHNR may adopt more individually tailored capital structures; and
- •
- we believe that after the Spin-off, the trading price of the shares of each of our Company and CHNR may more accurately
reflect their respective values, and any future capital raised by our Company or CHNR may more accurately reflect such company's respective cost of capital.
Immediately
following the Spin-off, Mr. Li Feilie, our chairman and chief executive officer, will, through his shareholdings in Laitan Investments and Feishang, continue to be a
Controlling Shareholder of the Company. See "Relationship with Our Controlling Shareholders" for further details.
In
connection with the Distribution, CHNR subscribed for 124,554,580 Shares at a total consideration of HK$98,380,000 on December 6, 2013 which represents the injection of
further equity by CHNR into our Company. See "History and Development — Increase in Share Capital Prior to Distribution".
10
Table of Contents
We
expect to announce the Spin-off and Distribution on or around December 31, 2013. Neither the Distribution nor the Spin-off is subject to the approval of CHNR Shareholders or
NASDAQ. The Shares to be distributed in connection with the Distribution is being registered under the U.S. Exchange Act pursuant to a registration statement on Form 20-F. After the
completion of the Spin-off, we will become subject to periodic reporting and other informational requirements of the U.S. Exchange Act as applicable to "foreign private issuers" as defined
therein.
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following summary historical consolidated income statements for the years ended December 31, 2010, 2011 and 2012 and the six
months ended June 30, 2012 and 2013, and the selected consolidated statements of financial position as of December 31, 2010, 2011 and 2012 and June 30, 2013 are derived from our
consolidated financial statements, including the notes thereto, set forth in Appendix I — "Accountants' Report of the Company". You should read the summary
historical consolidated financial statements set forth below in conjunction with our consolidated financial statements included in
Appendix I — "Accountants' Report of the Company," together with the accompanying notes, which have been prepared in accordance with IFRS as issued by
the IASB.
Summary Consolidated Income Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(RMB in thousands)
|
|
Revenue |
|
|
38,668 |
|
|
105,211 |
|
|
141,939 |
|
|
55,156 |
|
|
54,716 |
|
Gross profit |
|
|
13,215 |
|
|
30,922 |
|
|
46,050 |
|
|
24,760 |
|
|
14,763 |
|
Operating loss |
|
|
(54,545 |
) |
|
(22,985 |
) |
|
(36,602 |
) |
|
(11,270 |
) |
|
(231,685 |
) |
Profit/(loss) before income tax |
|
|
562,134 |
(1) |
|
(55,150 |
) |
|
(82,266 |
) |
|
(32,921 |
) |
|
(273,224 |
) |
Income tax (expense)/benefit |
|
|
(6,141 |
) |
|
(9,750 |
) |
|
15,210 |
|
|
(5,784 |
) |
|
50,468 |
|
Profit/(loss) for the year |
|
|
555,993 |
|
|
(64,900 |
) |
|
(67,056 |
) |
|
(38,705 |
) |
|
(222,756 |
) |
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
Non-controlling interests |
|
|
(6,439 |
) |
|
(735 |
) |
|
8,256 |
|
|
2,156 |
|
|
(809 |
) |
- (1)
- In
2010, we recognized a non-recurring and non-cash gain on bargain purchase of RMB624.1 million in connection with our acquisition of Guizhou Puxin.
We did not recognize a similar gain in 2011. See "Financial Information — Results of Operations — Year Ended
December 31, 2011 Compared to Year Ended December 31, 2010".
11
Table of Contents
Summary Consolidated Statements of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
(RMB in thousands)
|
|
Non-current assets |
|
|
1,824,292 |
|
|
2,125,475 |
|
|
2,477,108 |
|
|
2,451,243 |
|
Current assets |
|
|
107,222 |
|
|
179,085 |
|
|
285,754 |
|
|
245,852 |
|
Total assets |
|
|
1,931,514 |
|
|
2,304,560 |
|
|
2,762,862 |
|
|
2,697,095 |
|
Current liabilities |
|
|
544,306 |
|
|
811,181 |
|
|
1,315,865 |
|
|
1,200,957 |
|
Net current liabilities |
|
|
437,084 |
|
|
632,096 |
|
|
1,030,111 |
|
|
955,105 |
|
Total liabilities |
|
|
1,300,550 |
|
|
1,739,091 |
|
|
2,255,267 |
|
|
2,407,524 |
|
Equity attributable to owners of the Company |
|
|
554,831 |
|
|
479,784 |
|
|
413,654 |
|
|
196,439 |
|
Non-controlling interests |
|
|
76,133 |
|
|
85,685 |
|
|
93,941 |
|
|
93,132 |
|
Total equity |
|
|
630,964 |
|
|
565,469 |
|
|
507,595 |
|
|
289,571 |
|
GROSS MARGIN
For
the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2012 and 2013, our gross margin, which is equal to gross profit divided by revenue,
was 34.2%, 29.4%, 32.4%, 44.9% and 27.0%, respectively.
Our
gross margin decreased from 44.9% in the six months ended June 30, 2012 to 27.0% in the same period in 2013, primarily due to a significant decrease in the average selling
price of our self-produced coal.
Our
gross margin increased from 29.4% in 2011 to 32.4% in 2012, primarily due to a significant reduction of our coal trading activities, which had lower profit margins than selling
self-produced coal.
Our
gross margin decreased from 34.2% in 2010 to 29.4% in 2011, primarily due to the commencement of our coal trading activities in January 2011, which had lower profit margins
than selling self-produced coal. See "Financial Information — Results of Operations".
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information was prepared and included in the listing document in accordance with the
requirements of the Stock Exchange and the Listing Rules and does not meet the requirements of Article 11 of Regulation S-X under the Exchange Act.
The
unaudited pro forma adjusted consolidated net tangible assets attributable to owner of the Company and the unaudited pro forma adjusted consolidated net tangible assets per share
attributable to owner of the Company, as of June 30, 2013 was RMB233.2 million and RMB1.87, respectively. Please refer to the section headed "A. Unaudited Pro Forma Adjusted
Consolidated Net Tangible Assets" in Appendix VII to this listing document which has been prepared for the purpose of illustrating the financial effects of certain changes in our share capital
and the occurrence of certain listing expenses.
The
adjusted consolidated losses attributable to owner of the Company and the unaudited pro forma adjusted losses per share attributable to owner of the Company for the six months ended
June
12
Table of Contents
30,
2013 was RMB262.7 million and RMB2.11, respectively. Please refer to the section headed "B. Unaudited Pro Forma Adjusted Losses Per Share" in Appendix VII to this listing
document which has been prepared for the purpose of illustrating the financial effects of the occurrence of certain listing expenses.
REGULATORY COMPLIANCE
During the Track Record Period, the Company had certain material non-compliant incidents, including over-production, failure to
complete the environmental trial run and
the environmental acceptance inspection prior to the commercial production, failure to complete social insurance registration and pay social insurance contributions for employees, failure to timely
complete housing provident fund registrations and pay requirement housing provident fund contribution for employees and making intercompany loans. For further information on each of these incidents,
see "Business — Regulatory Compliance". Based on the Company's confirmations and all the confirmation letters issued by relevant authorities regarding
non-compliance incidents disclosed in the listing document, our PRC legal advisors, Commerce & Finance Law Offices, advised that the possibility for the
13
Table of Contents
relevant authorities to impose penalties against certain PRC subsidiaries of the Company based on such non-compliance incidents should be remote, and therefore the possibility
for such non-compliance incidents to cause material adverse impacts on the business operation of our PRC subsidiaries should be remote from a PRC law perspective.
Recent Developments
There has been no material change to our business, industry or regulatory environment since June 30, 2013 and up to the date of
the listing document, except for additional listing expenses between RMB37.9 million to RMB43.6 million we expect to incur.
In
the six months ended June 30, 2013, we sold 187,432 tonnes of anthracite coal and had revenues of RMB54.7 million, and the average selling price of the anthracite coal
we produced was RMB291.9 per tonne. In the nine months ended September 30, 2013, we sold 324,094 tonnes of anthracite coal and had revenues of RMB95.6 million (unaudited), and the
average selling price of the anthracite coal we produced was RMB295.1 per tonne. Our finance costs increased significantly from RMB20.7 million in the six months ended June 30, 2012 to
RMB43.7 million in the same period in 2013, principally due to a 38.5% increase in interest expenses on interest-bearing bank and other borrowings from RMB38.2 million in the six months
ended June 30, 2012 to RMB52.9 million in the same period in 2013. We expect our finance costs to increase in 2013 compared to 2012. Our finance costs is expected to continue to be
substantial in the foreseeable future primarily due to the debt and financing costs associated with the capital expenditure we expect to incur for our expansion plans. The Company also expects to
record loss for the year ended December 31, 2013.
Our
unaudited net current liabilities were RMB993.9 million as of October 31, 2013 compared to RMB955.1 million as of June 30, 2013. For more details, see
"Financial Information — Liquidity and Capital Resources — Working Capital".
Anthracite
coal prices in Guizhou province declined significantly in the second quarter of 2012 and again in the first half of 2013 as a result of the general economic slowdown in the
PRC, which reduced demand, as well as an increase in production capacity in Shanxi province, which increased supply. The decline in anthracite coal prices in Guizhou province is expected to continue.
See "Industry Overview — Coal Pricing in Guizhou province — Recent Guizhou Anthracite Coal Prices".
We
had incurred expenses in connection with the Listing of RMB9.1 million in 2012 and RMB14.2 million in the six months ended June 30, 2013, which were accounted for
as our administrative expenses. We expect to further incur an additional RMB37.9 million to RMB43.6 million of expenses in connection with the Listing, which are subject to adjustments
to be agreed by the Company, the Joint Sponsors and other parties. The incurred and unpaid expenses relating to the Listing are expected to be settled promptly after the Listing and would be accounted
for as administrative expenses. We expect the additional listing expense to significantly increase our expected loss in 2013. See "Financial Information — Listing
Expenses".
14
Table of Contents
In
July 2013, we entered into a RMB105.0 million 7.38% three-year entrusted loan with China Minsheng Bank, which has been fully drawn down. In July 2013, we obtained a legally
binding commitment letter from China Minsheng Bank to provide a term loan with an aggregate principal amount of up to RMB1.6 billion that may be drawn down on or before January 29, 2015,
subject to certain conditions.
In
August 2013, we entered into a RMB76.0 million 7.29% one-year entrusted loan with China Industrial International Trust Limited, an Independent Third Party, which has been fully
drawn down. In August 2013, we entered into a RMB100.0 million 6.60% one-year bank loan with China Minsheng Bank, which has been fully drawn down.
In
October 2013, we entered into a RMB150.0 million 6.00% one-year bank loan with China Minsheng Bank, which has been fully drawn down. In addition, in October 2013, we obtained a
legally binding commitment letter from China Merchants Bank to provide a term loan with an aggregate principal amount of up to RMB350 million that may be drawn down before March 10,
2015, subject to certain conditions, including a repayment term of not less than one year for each draw down. In October 2013, we entered into a RMB30.0 million 6.72% six-month bank loan
with China Everbright Bank, which has been fully drawn down.
In
December 2013, the Company repaid all of the outstanding loans of RMB33.4 million due to CHNR. In December 2013, the Company increased its authorized share
capital under which it may issue an aggregate of: (i) a maximum of 50,000 shares of one class with a par value of US$1.00 each; and (ii) a maximum of 1,000,000,000 Shares
of one class with a par value of HK$0.01 each (the "Shares"). In December 2013, CHNR completed the subscription for 124,554,580 Shares of the Company with a par value of HK$0.01
each at a total consideration of HK$98.4 million. The Company intends to apply the consideration of HK$98.4 million for the purpose of working capital and other general corporate
purposes, including settling the listing expenses and repayment of all outstanding loans of RMB33.4 million owed to CHNR. In December 2013, the Company repurchased the one share with a
par value of US$1.00 in the Company held by CHNR at par and simultaneously, the Company reduced its authorized but unissued share capital by the cancellation of the entire class of
50,000 ordinary shares with a par value of US$1.00 each.
15
Table of Contents
DEFINITIONS
In this listing document, unless the context otherwise requires, the following words and expressions shall have the following meanings. Certain technical terms are
explained in the section headed "Glossary of Technical Terms" in this listing document.
|
|
|
"Accountants' Report of the Company" |
|
a report prepared by the Company's reporting accountants, Ernst & Young, in respect of the Company for the purpose of
incorporation in this listing document. Please refer to Appendix I to this listing document for the full report |
"Accountants' Report of Guizhou Puxin" |
|
a report prepared by the Company's reporting accountants, Ernst & Young, in respect of Guizhou Puxin for the purpose of
incorporation in this listing document. Please refer to Appendix II to this listing document for the full report |
"Articles of Association" |
|
the articles of association of our Company (as amended from time to time), adopted on December 23, 2013 a summary of
which is set out in Appendix IV — "Summary of the Constitution of Our Company and British Virgin Islands Companies Law" to this listing document |
"associate(s)" |
|
has the meaning ascribed thereto under the Listing Rules |
"Baiguochong Mine" |
|
a lead-zinc mine located in E Shan town, Fanchang county, Anhui province, the PRC, which is wholly-owned by Yunnan
Feishang |
"Baiping Coal Mine" |
|
a coal mine located in Gaoping, Jinsha county, Qianbei Coal District, Guizhou province, the PRC, which is wholly-owned by Baiping
Mining |
"Baiping Mining" |
|
Jinsha Baiping Mining Co. Ltd. (
), a company organized in the PRC on January 15, 2009 and owned as to 70% by Guizhou Puxin and 30% by Yangpu Wanshun Energy Co. Ltd., an Independent Third Party |
"Bank of Chongqing" |
|
Bank of Chongqing Co., Ltd. (
), a company organized in the PRC and an Independent Third Party |
"Bank of Communications" |
|
Bank of Communications Co., Ltd. (
), a company organized in the PRC and an Independent Third Party |
"Behre Dolbear" or "Behre Dolbear Asia, Inc" |
|
Behre Dolbear Asia, Inc., a subsidiary of Behre Dolbear Group, Inc, a mineral industry advisory and consulting group, which
specializes in performing mineral industry studies for mining companies, financial institutions and natural resource firms, and an Independent Third Party |
|
|
|
16
Table of Contents
|
|
|
"Bijie Feishang" |
|
Bijie Feishang Energy Co. Ltd. (
), a company organized in the PRC on October 19, 2010 and a wholly-owned subsidiary of Guizhou Puxin |
"Board" or "Board of Directors" |
|
the board of directors of our Company |
"BVI" |
|
the British Virgin Islands |
"BVI Business Company" |
|
a business company with limited liability incorporated under the Companies Act |
"Business Day" |
|
any day (other than a Saturday, Sunday or public holiday) on which banks in Hong Kong are generally open for business |
"CAGR" |
|
compound annual growth rate |
"CCASS" |
|
the Central Clearing and Settlement System established and operated by HKSCC |
"CCASS Clearing Participant" |
|
a person admitted to participate in CCASS as a direct clearing participant or a general clearing participant |
"CCASS Custodian Participant" |
|
a person admitted to participate in CCASS as a custodian participant |
"CCASS Investor Participant" |
|
a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a
corporation |
"CCASS Participant" |
|
a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant |
"China", "PRC" or "State" |
|
the People's Republic of China excluding, for the purpose of this listing document only, Hong Kong, Macao and Taiwan, unless
otherwise specified |
"China Coal" |
|
China Coal Mining Investments Limited (
), a company incorporated in Hong Kong on January 14, 2008 and a wholly-owned subsidiary of CHNR |
"China Coal Resource" |
|
China Coal Resource Website (
), a website established in 1998 by a group of experts from sectors such as coal, coke, coal-chemical, coal transportation and sales and strategic investments |
"China Everbright Bank" |
|
China Everbright Bank Co., Ltd. (
), a company organized in the PRC and an Independent Third Party |
|
|
|
17
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|
|
|
"China Merchants Bank" |
|
China Merchants Bank Co., Ltd. (
), a company organized in the PRC and an Independent Third Party |
"China Minsheng Bank" |
|
China Minsheng Banking Corp., Ltd. (
), a company organized in the PRC and an Independent Third Party |
"CHNR" |
|
China Natural Resources, Inc., a company incorporated in the BVI on December 14, 1993 and the sole Shareholder of our
Company prior to the Distribution |
"CHNR Board" |
|
the board of directors of CHNR |
"CHNR Group" |
|
CHNR and its subsidiaries, which, except where the context otherwise requires, includes our Company |
"CHNR Share(s)" |
|
common shares in the capital of CHNR without par value |
"CHNR Shareholder(s)" |
|
holder(s) of the CHNR Shares |
"Companies Act" |
|
The BVI Business Companies Act, 2004 |
"Companies Ordinance" |
|
the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), as amended or supplemented from time to time |
"Company", "Group", "our", "we" or "us" |
|
Feishang Anthracite Resources Limited (
), a company incorporated in the BVI with limited liability on January 6, 2010 and, except where the context otherwise requires, all of its subsidiaries |
"Competent Person's Report" |
|
a competent person's report issued by Behre Dolbear dated December 7, 2013, details of which are set out in
"Appendix III — Competent Person's Report" to this listing document |
"Controlling Shareholder(s)" |
|
immediately following the Spin-off, Feishang, Laitan Investments and/or Mr. Li Feilie |
"Core Businesses" |
|
the business of the acquisition and exploitation of coal mining rights (including the exploration, construction, development and
operation of coal mines) located in Guizhou province in the PRC |
"Corporate Transactions" |
|
the series of acquisitions and other transactions undertaken by our Company in 2010 and 2011, details of which are set forth in
the section headed "History and Development" in this listing document |
"CPC" |
|
Communist Party of China |
|
|
|
18
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|
|
|
"CSRC" |
|
China Securities Regulatory Commission (
) |
"Dayuan Coal" |
|
Guizhou Nayong Dayuan Coal Mining Co. Ltd. (
), a company organized in the PRC on January 22, 2009 and owned as to 99% by Guizhou Puxin and 1% by Mr. Li Shenggen, an Independent Third Party |
"Dayuan Coal Mine" |
|
a coal mine located in Xinfang, Nayong county, Zhina Coal District, Guizhou province, the PRC, which is wholly-owned by Dayuan
Coal |
"Dayun Coal Mine" |
|
a coal mine located in Gaopingxiang, Jinsha county, Qianbei Coal District, Guizhou province, the PRC, which is wholly-owned by
Guizhou Dayun |
"Deed of Non-Competition" |
|
the deed of non-competition dated December 24, 2013, entered into between Feishang, Laitan Investments, Mr. Li Feilie,
Feishang Energy and the Company in respect of the Core Businesses (as defined in the section headed "Relationship with Our Controlling Shareholders — Deed of Non-Competition" in this listing document) |
"Director(s)" |
|
director(s) of our Company |
"Distribution" |
|
a conditional special interim dividend declared by CHNR to be satisfied by way of a distribution in specie of the entire
issued share capital of our Company, being an aggregate of 124,554,580 Shares to the CHNR Shareholders, subject to the satisfaction of the conditions described in the section headed "The Spin-off" in this listing document |
"Distribution Record Date" |
|
January 13, 2014, being the record date for ascertaining entitlements to the Distribution |
"Entrusted Loan" |
|
the loan in the amount of RMB131.0 million made available by Feishang Management as the entrusting party, through the
Chongqing branch of China Minsheng Bank as the lender, to Guizhou Puxin as the borrower |
"Feishang" |
|
Feishang Group Limited, a company incorporated in the BVI on January 3, 1997 and is wholly-owned by Laitan Investments,
which is one of our Controlling Shareholders |
"Feishang Energy" |
|
Guizhou Feishang Energy Co., Ltd. (
), a company organized in the PRC on February 1, 2010 and a wholly-owned subsidiary of Shenzhen Feishang |
|
|
|
19
Table of Contents
|
|
|
"Feishang Enterprise" |
|
Feishang Enterprise Group Co., Ltd. (
), a company organized in the PRC on June 9, 2000 and owned as to 60.74% by Mr. Li Feilie, 4.48% by Mr. Li Feiwen, 17.39% by Mr. Li Qingquan and 17.39% by Ms. Li Ruijin, all of whom are associates of
Mr. Li Feilie |
"Feishang Management" |
|
Shenzhen Feishang Management and Consulting Co. Limited (
), a company organized in the PRC on October 6, 2008 and a wholly-owned subsidiary of Yunnan Feishang |
"Feishang Mining" |
|
Feishang Mining Holdings Limited (
), a company incorporated in the BVI on September 3, 2004 and, since February 3, 2006, a wholly-owned subsidiary of CHNR |
"Fenwei" |
|
Shanxi Fenwei Energy Consulting Co., Ltd. (
), an independent market consultant we engaged to prepare a report on certain industry data contained in this listing document |
"GDP" |
|
gross domestic product |
"Gouchang Coal" |
|
Nayong Gouchang Coal Mining Co. Ltd. (
), a company organized in the PRC on September 10, 2009 and owned as to 99% by Guizhou Puxin and 1% by Mr. Huang Bin, an Independent Third Party |
"Gouchang Coal Mine" |
|
a coal mine located in Kunzhai, Nayong county, Zhina Coal District, Guizhou province, the PRC, which is wholly-owned by Gouchang
Coal |
"Guizhou Bank" |
|
Bank of Guizhou (
),
a company organized in the PRC and an Independent Third Party |
"Guizhou Dayun" |
|
Guizhou Dayun Mining Co., Ltd. (
), a company organized in the PRC on April 14, 2004 and a wholly-owned subsidiary of Guizhou Puxin |
"Guizhou Fuyuantong" |
|
Guizhou Fuyuantong Energy Co., Ltd. (
), a company organized in the PRC on March 10, 2010 and a wholly-owned subsidiary of Smartact |
"Guizhou Puxin" |
|
Guizhou Puxin Energy Co., Ltd. (
), a company organized in the PRC on January 15, 2009 and a wholly-owned subsidiary of Guizhou Fuyuantong |
20
Table of Contents
|
|
|
"Guizhou Yongfu" |
|
Guizhou Yongfu Mining Co., Limited (
), a company organized in the PRC on June 27, 2005 and owned as to 70% by Guizhou Puxin and 30% by Yangpu Wanshun Energy Co. Ltd., an Independent Third Party |
"HK$" or "Hong Kong dollars" |
|
Hong Kong dollars, the lawful currency of Hong Kong |
"HKSCC" |
|
Hong Kong Securities Clearing Company Limited |
"HKSCC Nominees" |
|
HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC |
"Hong Kong" |
|
the Hong Kong Special Administrative Region of the PRC |
"Hong Kong Branch Share Registrar" |
|
Tricor Investor Services Limited |
"Huachuang Securities" |
|
Huachuang Securities Limited (
), a company organized in the PRC and an Independent Third Party |
"IASB" |
|
International Accounting Standards Board |
"IFRS" |
|
International Financial Reporting Standards issued by the IASB |
"Independent Third Party(ies)" |
|
persons who, as far as our Directors are aware after having made all reasonable enquiries, are not connected with (within the
meaning of the Listing Rules) any directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates |
"Industrial and Commercial Bank of China" |
|
Industrial and Commercial Bank of China Limited (
), a company organized in the PRC and an Independent Third Party |
"Jinsha Juli" |
|
Jinsha Juli Energy Resources Co. Ltd., (
), a company organized in the PRC on November 16, 2012 and owned as to 99% by Guizhou Puxin and 1% by Bijie Feishang |
"Joint Sponsors" |
|
Jefferies Hong Kong Limited and Nomura International (Hong Kong) Limited |
"Laitan Investments" |
|
Laitan Investments Limited, a company incorporated in the BVI on January 8, 1997 and is wholly-owned by Mr. Li Feilie,
which is one of our Controlling Shareholders |
|
|
|
21
Table of Contents
|
|
|
"Latest Practicable Date" |
|
December 24, 2013, being the latest practicable date for the purpose of ascertaining certain information contained in this listing document
prior to its publication |
"Linjiaao Coal" |
|
Liuzhi Linjiaao Coal Mining Co., Ltd. (
), a company organized in the PRC on November 19, 2008 and owned as to 99% by Guizhou Puxin and 1% by Mr. Zheng Shengjian, an Independent Third Party |
"Listing" |
|
the listing of the Shares on the Main Board of the Stock Exchange by way of introduction |
"Listing Committee" |
|
the listing committee of the Stock Exchange |
"Listing Date" |
|
the date, expected to be on or about January 22, 2014, on which the Shares are listed on the Stock Exchange and from which
dealings in the Shares are permitted to commence on the Stock Exchange |
"Listing Rules" |
|
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended or supplemented from time to
time |
"Liujiaba Coal Mine" |
|
a coal mine located in Xinhua, Liuzhi Special District, Zhina Coal District, Guizhou province, the PRC, which is wholly-owned by
Xinsong Coal |
"Luojiachong Mine" |
|
a copper-polymetallic mine located in the west of Chisha town, Fanchang county, Anhui province, the PRC, which is wholly-owned by
Yunnan Feishang |
"Main Board" |
|
the stock exchange (excluding the option market) operated by the Stock Exchange which is independent from and operated in
parallel with the Growth Enterprise Market of the Stock Exchange |
"Memorandum of Association" |
|
the memorandum of association of our Company (as amended from time to time), adopted on December 23, 2013, a summary of
which is set out in Appendix IV — "Summary of the Constitution of Our Company and British Virgin Islands Companies Law" to this listing document |
"MLR" |
|
the Ministry of Land and Resources of the PRC (
) |
"MOF" |
|
the Ministry of Finance of the PRC (
) |
|
|
|
22
Table of Contents
|
|
|
"MOFCOM" |
|
the Ministry of Commerce of the PRC (
) or its predecessor, the Ministry of Foreign Trade and Economic Cooperation of the PRC (
) |
"NDRC" |
|
National Development and Reform Commission of the PRC (
) |
"NEA" |
|
National Energy Administration (
) |
"PBOC" |
|
People's Bank of China (
) |
"Peak Vision Appraisals Limited" |
|
an independent property valuation company we engaged to provide an overview of certain property interests held by us |
"PRC Company Law" |
|
the Company Law of the PRC (
), as amended |
"PRC Enterprise Income Tax Law" or the "EIT Law" |
|
The Enterprise Income Tax Law of the PRC (
), as amended |
"PRC GAAP" |
|
the generally accepted accounting principles in the PRC |
"PRC Government" |
|
the Government of the PRC |
"RMB" or "Renminbi" |
|
Renminbi, the lawful currency of the PRC |
"SACMS" |
|
State Administration of Coal Mine Safety of the PRC (
) |
"SAFE" |
|
State Administration of Foreign Exchange of the PRC (
) |
"Sanjiazhai Mine" |
|
a coal mine located in Liuzhi Special District, Guizhou province, PRC, which is controlled by Feishang Enterprise |
"SAT" |
|
State Administration of Taxation of the PRC (
) |
"SAWS" |
|
State Administration of Work Safety of the PRC (
) |
"SFC" |
|
the Securities and Futures Commission of Hong Kong |
"SFO" |
|
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or supplemented from time to
time |
23
Table of Contents
|
|
|
"Share(s)" |
|
ordinary shares in the capital of our Company with a par value of HK$0.01 each |
"Share Option Scheme" |
|
the share option scheme conditionally approved by the then sole Shareholder on December 23, 2013, a summary of the principal
terms of which is set out in Appendix V — "Statutory and General Information — (b) Share Option Scheme" to this listing document |
"Shareholder(s)" |
|
holder(s) of the Shares |
"Shenzhen Chixin" |
|
Shenzhen Chixin Information Consulting Co., Ltd. (
), a company organized in the PRC on July 18, 2012 and a wholly-owned subsidiary of Guizhou Puxin |
"Shenzhen Feishang" |
|
Shenzhen Feishang Energy Investment Co., Ltd. (
), a company organized in the PRC on September 28, 2007 and a wholly-owned subsidiary of Feishang Enterprise |
"Sichong Mine" |
|
a gold-silver-lead-zinc mine located in Suncun town, Fanchang county, Anhui province, the PRC, which is wholly-owned by Wuhu
Feishang |
"Smartact" |
|
Hong Kong Smartact Limited (
), a company incorporated in Hong Kong on January 3, 2010 and a wholly-owned subsidiary of the Company |
"SPDB" |
|
Shanghai Pudong Development Bank Co., Ltd. (
), a company organized in the PRC and an Independent Third Party |
"Spin-off" |
|
the spin-off of the Company to be effected by way of the Listing and the Distribution, the details of which are set out in the
section of "The Spin-off" |
"State Council" |
|
the State Council of the PRC (
) |
"Stock Exchange" |
|
The Stock Exchange of Hong Kong Limited |
"Takeovers Code" |
|
Code on Takeovers and Mergers and Share Repurchases published by the SFC |
"Track Record Period" |
|
the financial years of our Company ended December 31, 2010, 2011 and 2012 and the six months ended June 30,
2013 |
"U.S." or "United States" |
|
the United States of America |
|
|
|
24
Table of Contents
|
|
|
"U.S. Exchange Act" |
|
the United States Securities Exchange Act of 1934, as amended |
"U.S. Securities Act" |
|
the United States Securities Act of 1933, as amended |
"US$" or "U.S. dollars" |
|
United States dollars, the lawful currency of the United States |
"VAT" |
|
value added tax |
"WFID" |
|
Wuhu Feishang Industrial Development Co., Ltd. (
), a company organized in the PRC on December 26, 2001 and owned as to 90% by Feishang Enterprise and 10% by Shenzhen Chaopeng Investment Co., Ltd. (
), a 90%-owned subsidiary of Feishang Enterprise |
"Wuhu Feishang" |
|
Wuhu Feishang Mining Development Co. Limited (
), a company organized in the PRC on June 21, 2002 and a wholly-owned subsidiary of Feishang Mining |
"Wuhu Port" |
|
Wuhu Port Co., Ltd. (
), a company organized in the PRC on September 12, 2002 and owned as to 60% by WFID and 40% by Yangpu Jinding Industrial Co., Ltd. (
), an Independent Third Party |
"Xinsong Coal" |
|
Liuzhi Xinsong Coal Mining Co. Ltd. (
), a company organized in the PRC on November 13, 2008 and owned as to 99% by Guizhou Puxin and 1% by Mr. Cai Songqing, an Independent Third Party |
"Yangpu Dashi" |
|
Hainan Yangpu Dashi Industrial Co., Limited (
), a company organized in the PRC on April 13, 2004 and a wholly-owned subsidiary of Guizhou Puxin |
"Yangpu Lianzhong" |
|
Yangpu Lianzhong Mining Co. Limited (
), a company organized in the PRC on January 21, 2008 and a wholly-owned subsidiary of China Coal |
"Yangpu Shuanghu" |
|
Yangpu Shuanghu Industrial Development Co. Limited (
), a company organized in the PRC on May 11, 2004 and a wholly-owned subsidiary of CHNR |
"Yongsheng Coal Mine" |
|
a coal mine located in Huajuexiang, Jinsha county, Qianbei Coal District, Guizhou province, the PRC, which is wholly-owned by
Guizhou Yongfu |
|
|
|
25
Table of Contents
|
|
|
"Yunnan Feishang" |
|
Yunnan Feishang Mining Co. Limited (
), a company organized in the PRC on June 12, 2007 and a wholly-owned subsidiary of Wuhu Feishang |
"Zhulinzhai Coal Mine" |
|
a coal mine located in Xinhua, Liuzhi Special District, Zhina Coal District, Guizhou province, the PRC, which is wholly-owned by
Linjiaao Coal |
In
this listing document, the terms "associate", "connected person", "connected transaction", "controlling shareholder", "subsidiary" and "substantial shareholder" shall have the
meanings given to such terms in the Listing Rules, unless the context otherwise requires.
In
this listing document, if there is any inconsistency between the Chinese names of entities or enterprises established in China or Chinese government authorities or departments and
their English translations, the Chinese names shall prevail.
Certain
amounts and percentage figures included in this listing document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures preceding them.
26
Table of Contents
GLOSSARY OF TECHNICAL TERMS
This glossary contains explanations of certain technical terms used in this listing document. Such terminology and meanings may not correspond to standard industry
meanings or usages of those terms.
|
|
|
"anthracite coal" |
|
coal that has a volatile matter content of 10% or less under the Chinese Coal Classification Standard |
"ash content" |
|
the inorganic residue remaining after the combustion of coal; ash content is an important characteristic of coal because it
impacts boiler performance of electric generating plants and determines the suitability of the coal for end users |
"chemical coal" |
|
coal used for the production of synthetic ammonia and methanol |
"Chinese Coal Classification Standard" |
|
a national standard (GB/T 5751-2009) in respect of coal classification issued by the General Administration of Quality
Supervision, Inspection and Quarantine of the PRC and the Standardization Administration of the PRC |
"Chinese Coal Granularity Classification Standard" |
|
a national standard (GB/T 189-1997) in respect of coal granularity classification issued by the General Administration of Quality
Supervision, Inspection and Quarantine of the PRC |
"coal seam" |
|
a geological structure containing a series of layers of coal, shale and other mineral materials of various thickness within a
defined zone |
"drilling and blasting" or "manual longwall mining" |
|
a coal extraction method involving drilling holes in mining face, placing explosives and detonating the explosives |
"grindability" |
|
level of difficulty of grinding coal into particles sizes required for efficient combustion in pulverized coal boiler
furnaces |
"heat value" |
|
energy released by coal during combustion |
|
|
|
27
Table of Contents
|
|
|
"JORC Code" |
|
Australian Code of Reporting of Mineral Resources and Ore Reserves, prepared by the Joint Ore Reserves Committee of the Australasian Institute of
Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia in 1999 and revised in 2004 |
"longwall mining" |
|
mining method of extracting coal from long rectangular blocks of coal seams and delivering the extracted coal to the surface via
a mine conveyor system |
"mechanical longwall mining" |
|
a type of longwall mining where the mine roof is held up by automatic hydraulic roof supports during the extraction
process |
"mining face" |
|
the working area where the extraction of overburden or coal takes place in an underground or open-cut mine |
"MJ/kg" |
|
megajoules per kilogram |
"moisture content" |
|
amount of moisture in coal, expressed as a percentage of the weight of the coal |
"overburden" |
|
barren rock material, either loose or consolidated, overlying a mineral deposit, which must be removed prior to
mining |
"PCI coal" |
|
coal generally used for sintering, smelting and injection purposes in the pulverized coal injection process in iron
production |
"PRC Solid Mineral Resources/ Reserves Classification Code" |
|
a mineral reserves classification system of the PRC which is consistent with the principles of classification adopted
internationally |
"probable reserves" |
|
unless otherwise indicated economically mineable part of an indicated resource and, in some circumstances, measured resource
under the JORC Code |
"proved reserves" |
|
unless otherwise indicated economically mineable part of a measured resource under the JORC Code |
"pulverized coal injection process" |
|
process that involves blowing large volumes of fine coal granules into the blast furnace during the iron production
process |
|
|
|
28
Table of Contents
|
|
|
"reclamation" |
|
process of restoring land and the environment to their original state following mining activities, which commonly includes reshaping the land to
its approximate original appearance, restoring topsoil and planting native grass and ground cover |
"recovery rate" |
|
percentage of coal that can be recovered from the coal deposits at existing mines |
"rock bolt" |
|
a long anchor bolt used to support and stabilize mine tunnel and shaft walls |
"semi-mechanical longwall mining" |
|
a type of longwall mining where the mine roof is held up manually during the extraction process |
"shotcrete" |
|
a technique involving spraying concrete through a hose onto a surface at high speed to reinforce and stabilize the
surface |
"slagging and tunneling" |
|
a tunneling technique using large mechanical tunnel scrapers |
"sulfur content" |
|
the amount of sulfur dioxide that may be emitted as a result of combustion |
"thermal coal" |
|
coal used in combustion processes by power producers and industrial users to produce steam for power and heat |
"tonne" |
|
a metric mass unit that equals 1,000 kilograms |
"underground mine" |
|
a mine where the coal is extracted from below the surface without removing the overburden |
"volatile matter content" |
|
matters that are released from coal at high temperatures, other than moisture |
"WY1-class anthracite coal" |
|
anthracite coal that has a volatile matter content of no more than 3.5% or helium content of no more than 2.0%. Under the Chinese
Coal Classification Standard, in case of a conflict between the classification of anthracite coal based on volatile matter content and helium content, the classification based on helium content will be used |
"WY2-class anthracite coal" |
|
anthracite coal that has a volatile matter content of more than 3.5% and no more than 6.5% or helium content of more than 2.0%
and no more than 3.0%. Under the Chinese Coal Classification Standard, in case of a conflict between the classification of anthracite coal based on volatile matter content and helium content, the classification based on helium content will be
used |
|
|
|
29
Table of Contents
|
|
|
"WY3-class anthracite coal" |
|
anthracite coal that has a volatile matter content of more than 6.5% and no more than 10.0% or helium content of more than 3.0%. Under the
Chinese Coal Classification Standard, in case of a conflict between the classification of anthracite coal based on volatile matter content and helium content, the classification based on helium content will be used |
30
Table of Contents
FORWARD-LOOKING STATEMENTS
This listing document contains forward-looking statements. All statements other than statements of historical fact contained in this
listing document, including, without limitation, statements relating to our strategies, plans, objectives, goals and targets, our future financial, business or other performance and development, the
future development of our industry, the general economy of our key markets and globally, are intended to identify forward-looking statements. We also use the words "aim", "anticipate", "believe",
"continue", "could", "estimate", "expect", "forecast", "going forward", "intend", "may", "plan", "potential", "predict", "project", "ought to", "seek", "should", "will", "would" and similar
expressions to identify forward-looking statements.
These
forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors, some of which are beyond our control. In addition, these
forward-looking statements
reflect our current views with respect to future events and are not a guarantee of future performance. Important factors that could materially affect our actual results, performance or achievements
include the risk factors set forth in "Risk Factors" and the following:
- •
- our liquidity and financial condition;
- •
- our business strategies and plan of operations;
- •
- our future debt levels and capital needs and the availability and costs of bank loans and other forms of financing;
- •
- our capital expenditure plans;
- •
- projects under construction or planning;
- •
- the possibility of project cost overruns or unanticipated costs and expenses;
- •
- our production capacity;
- •
- our operations and business prospects;
- •
- our product mix;
- •
- changes in prices for anthracite coal;
- •
- supply and demand changes in anthracite coal markets;
- •
- changes in the competitive landscape in the anthracite coal industry;
- •
- our ability to reduce production costs;
- •
- our relationship with, and other conditions affecting, our customers;
- •
- risks inherent to coal mining, including accidents;
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- •
- estimates of coal reserves;
- •
- our plans and objectives for future operations and expansion;
- •
- our dividend policy;
- •
- the regulatory environment and developments of our industry in general;
- •
- changes in political, economic, legal and social conditions in the PRC, including the PRC's government's specific policies
with respect to the coal industries, economic growth, inflation, foreign exchange and the availability of credit; and
- •
- catastrophic losses from fires, floods, windstorms, earthquakes, diseases or other adverse weather-related damage.
The
Directors confirm that these forward-looking statements are made by the Directors after due and careful considerations and on bases and assumptions that are fair
and reasonable.
These
forward-looking statements are based on current plans and estimates, which speak only as of the date they are made, and numerous assumptions regarding our present and future
business strategy and the environment in which we will operate in the future. Subject to the requirements of applicable laws, rules and regulations, we do not have any obligation to update or
otherwise revise any forward-looking statements in this listing document, whether as a result of new information, future events or otherwise.
Due
to these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this listing document might not occur in the way we expect, or at all.
Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements contained in this listing document are qualified by reference to this cautionary
statement.
In
this listing document, statements of or references to our intentions or that any of our Directors are made as of the date of this listing document. Any such information may change in
light of future developments.
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WAIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES
We have applied to the Stock Exchange for, and the Stock Exchange has granted to us, the following waiver from strict
compliance with the Listing Rules.
BASIC CONDITIONS IN RELATION TO QUALIFICATIONS FOR LISTING
According to Rule 8.05 of the Listing Rules, an issuer must satisfy one of the three tests in relation to: (i) profit;
(ii) market capitalization, revenue and cash flow; or (iii) market capitalization and revenue requirements. Chapter 18 of the Listing Rules applies to mineral companies. Under
Rules 8.05 and 18.04 of the Listing Rules, the requirements of Rule 8.05 of the Listing Rules may not apply if the Stock Exchange is satisfied that the directors and management of
the issuer have sufficient experience relevant to the exploration and/or extraction activity that the issuer is pursuing and the directors and management relied on have a minimum of five years of
relevant industry experience. We have applied for, and the Stock Exchange has granted, a waiver from strict compliance with Rule 8.05 of the Listing Rules in accordance with the reasoning under
Rules 8.05 and 18.04 of the Listing Rules.
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INFORMATION ABOUT THIS LISTING DOCUMENT AND THE SPIN-OFF
DIRECTORS' RESPONSIBILITY FOR THE CONTENTS OF THIS LISTING DOCUMENT
This listing document, for which the Directors collectively and individually accept full responsibility, includes particulars given in
compliance with the Listing Rules for the purpose of giving information to the public with regard to us.
The
Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this listing document is accurate and complete
in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this listing document misleading.
INFORMATION ON THE SPIN-OFF
The Spin-off does not involve any offering of new Shares or a public offering of any other securities and no funds will be raised
pursuant to the Spin-off. The Distribution is conditional on the Listing Committee granting the listing of, and permission to deal in, the Shares in issue on the Main Board of the Stock Exchange. If
such condition is not satisfied, the Distribution will not be made and the Spin-off will not take place, in which case an announcement to that effect will be made.
Neither the publication or delivery of this listing document nor the distribution of Shares pursuant to the Distribution should, under any circumstances,
constitute a representation that there has been no change or development reasonably likely to involve a change in our affairs since the date of this listing document or imply that the information
contained in this listing document is correct as of any date subsequent to the date of this listing document.
RESTRICTION ON THE USE OF THIS LISTING DOCUMENT
This listing document is published solely in connection with the Spin-off. It may not be used for any other purpose and, in particular,
no person is authorized to use or reproduce this listing document or any part thereof in connection with any offering of shares or other securities of our Company. Accordingly, there is no, and will
not be any, public offer, solicitation, or invitation by or on behalf of our Company and/or the Joint Sponsors to invest or hold any of our Shares. Neither this listing document nor any other document
or information (or any part thereof) delivered or supplied under or in relation to the Spin-off may be used for the purpose of making, and the delivery, distribution and availability of this
listing document or such other document or information (or any part thereof) does not constitute, any offer of or solicitation or an invitation by or on behalf of our Company or the Joint
Sponsors to invest or hold any of our Shares.
INFORMATION AND REPRESENTATIONS
We have not authorized anyone to provide any information or to make any representation not contained in this listing document. You
should not rely on any information or representation not contained in this listing document as having been authorized by us, the Joint Sponsors, or any of our
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or
their respective directors, officers or representatives or any other person involved in the Spin-off. No representation is made that there has been no change or development reasonably likely to
involve a change in our affairs since the date of this listing document or imply that the information contained in this listing document is correct as of any date subsequent to the date of this
listing document.
NO CHANGE IN BUSINESS
No change in the business of our Company is contemplated immediately following the Spin-off.
APPLICATION FOR THE LISTING OF OUR SHARES ON THE STOCK EXCHANGE BY WAY OF INTRODUCTION
There is no established public trading market for our Shares. An application has been made to the Listing Committee for the listing of,
and permission to deal in, on the Main Board of the Stock Exchange, the Shares in issue.
No
part of the share or loan capital of our Company is listed on or dealt in on any other stock exchange. At present, our Company is not seeking or proposing to seek such listing of, or
permission to deal in, the share or loan capital of our Company on any other stock exchange.
REGISTER OF MEMBERS AND STAMP DUTY
Our Company's principal register of members will be maintained by our principal registrar Maples Fund Services (Cayman) Limited in the
BVI and our Company's Hong Kong register of members will be maintained by the Hong Kong Branch Share Registrar.
Dealings
in our Shares registered in our register of members in Hong Kong maintained by the Hong Kong Branch Share Registrar will be subject to Hong Kong stamp duty.
Unless
our Company determines otherwise, dividends payable in Hong Kong dollars in respect of our Shares will be paid to the Shareholders listed on our Company's Hong Kong register of
members, by way of check sent by ordinary post, at our Shareholder's risk, to the registered address of each Shareholder.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of listing of, and permission to deal in, our Shares on the Stock Exchange and compliance with the stock
admission requirements of HKSCC, our Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in our
Shares on the Stock Exchange or on any other date HKSCC chooses.
Settlement
of transactions between participants of the Stock Exchange is required to take place in CCASS on the second business day after the relevant trading day.
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All
activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.
All
necessary arrangements have been made for our Shares to be admitted into CCASS.
PROFESSIONAL TAX ADVICE RECOMMENDED
You should consult your professional advisers if you are in any doubt as to the taxation implications of receiving, purchasing,
holding, disposing of and dealing in our Shares. We emphasize that none of us, the Joint Sponsors, any of our or their respective directors, officers or representatives or any other person involved in
the Spin-off accepts responsibility for any tax effects or liabilities resulting from the receipt of, purchase, holding or disposing of, or dealing in, our Shares or your exercise of any rights
attaching to our Shares.
COMMENCEMENT OF DEALINGS IN OUR SHARES
Dealings in our Shares on the Stock Exchange are expected to commence on January 22, 2014.
Our
Shares will be traded in board lots of 500 Shares each. The stock code of our Shares is 1738.
LANGUAGE
If there is any inconsistency between this listing document and the Chinese translation of this listing document, this listing document
shall prevail. The translated English names of the PRC nationals, entities, departments, facilities, certificates, titles, laws, regulations, natural persons or other entities (including certain of
our subsidiaries) included in this listing document and for which no official English translation exists are unofficial translations for your reference only.
ROUNDING
Any discrepancies in any table or chart between the total shown and the sum of the amounts listed thereon are due to rounding. Certain
amounts and percentage figures included in this listing document have been subject to rounding adjustments, or have been rounded to one decimal place.
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RISK FACTORS
You should consider carefully all the information set forth in this listing document and, in particular, the risks and uncertainties described below before making an
investment in our Shares. Our business, financial condition, results of operations or prospects could be materially and adversely affected by any of these risks and uncertainties. The market
price of our Shares could decline significantly due to any of these risks, and you may lose all or part of your investment. Additional risks and uncertainties that
are not presently known to us or that we currently deem immaterial may arise or become material in the future and may have a material adverse effect on
our Company.
RISKS RELATING TO OUR BUSINESS
As we are a development stage coal mining company with a limited operating and production history, it is difficult to evaluate our business and prospects.
We are a development stage coal mining company. We have seven underground anthracite coal mines in Guizhou province, of which
five have commenced commercial production, one is undergoing its pilot run phase and one is under construction. Baiping Coal Mine, Gouchang Coal Mine (currently suspended), Zhulinzhai Coal Mine,
Liujiaba Coal Mine and Dayuan Coal Mine commenced commercial production in June 2009, April 2011, April 2012, December 2012 and November 2013, respectively. We
did not generate any revenue or begin commercial production of anthracite coal until the acquisition of Guizhou Puxin in March 2010. Accordingly, we have a limited operating and
production history upon which you could evaluate our business and prospects. We are subject to risks and uncertainties frequently encountered by coal mining companies at an early stage of
development in the PRC, and our ability to manage and respond to these risks is unproven. Some of these risks and uncertainties relate to our
ability to:
- •
- expand production capacity in a cost-effective manner;
- •
- respond to fluctuating demand for, and variations in price of, coal in a highly cyclical market;
- •
- respond to competition in a highly fragmented market;
- •
- effectively market and sell the anthracite coal we produce;
- •
- respond to changing, unpredictable and increasingly onerous regulatory requirements; and
- •
- raise sufficient capital to sustain and grow our business.
If
we are not successful in addressing these risks, our business, financial condition, results of operations and prospects will be materially and adversely affected.
We have a history of losses and we anticipate that losses will continue.
Our business has not yet achieved any operating profits. In 2010, 2011, 2012 and the six months ended June 30, 2012 and
2013, we incurred operating losses of RMB54.5 million, RMB23.0 million,
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RMB36.6 million,
RMB11.3 million and RMB231.7 million, respectively, and, disregarding the effects of a RMB624.1 million non-recurring gain relating to the
acquisition of Guizhou Puxin in 2010, we would have incurred net losses in each of those periods. We cannot assure you when or if we will be able to achieve or sustain profitability.
We require a significant amount of cash to fund the growth of our business as well as to meet our working capital requirements, and we may be unable to obtain
sufficient capital in a timely manner or on acceptable terms, or at all.
Our business is capital intensive. In particular, we will need a substantial amount of cash for the construction and development
of our coal mines, our coal beneficiation plant and our shipping port. As of the date of this listing document, we expect to pay approximately an aggregate of RMB636.5 million in 2013 and
2014 for capital expenditures. These estimated capital expenditures are expected to be used primarily for the construction of Dayuan Coal Mine, Dayun Coal Mine, Yongsheng Coal Mine, a coal
beneficiation plant in Jinsha county and a port along the Wujiang River near Yongsheng coal Mine. We have not generated any net cash flows from our operating activities, and as of
December 31, 2010, 2011 and 2012 and June 30, 2013, we had net current liabilities of RMB437.1 million, RMB632.1 million, RMB1,030.1 million and
RMB955.1 million, respectively. As a result, we may need to obtain additional funding to finance our growth and meet our working capital requirements. Our ability to obtain additional
funding is subject to a variety of uncertainties, including:
- •
- our financial condition, results of operations and cash flows;
- •
- the conditions in the PRC, Hong Kong and other markets where we may seek to raise funds;
- •
- investors' perception of, and demand for, securities of coal mining companies; and
- •
- economic, political and other conditions in the PRC and elsewhere.
Among
our seven coal mines, five have commenced commercial production, one is undergoing its pilot run phase and one is under construction. In the past, we have financed a
significant portion of our funding needs with non-interest bearing loans from companies controlled by Mr. Li Feilie, our chairman and chief executive officer. In 2013, we refinanced a
significant portion of our non-interest bearing loans with interest-bearing bank and other borrowings, which significantly increased our finance costs and reduced our ability to obtain
additional financing. If we are
unable to obtain sufficient funding in a timely manner or on acceptable terms, or at all, our business, financial condition, results of operations and prospects would be materially and adversely
affected.
We are highly leveraged, which may materially and adversely affect our financial condition and results of operations as well as our ability to expand
our business.
We have a high degree of financial leverage. As of December 31, 2010, 2011 and 2012 and June 30, 2013, our gearing
ratio was 47.5%, 60.4%, 68.8% and 86.5%, respectively. We rely heavily on borrowings to fund our capital requirements and expect to continue to do so in the future. As of December 31,
2010, 2011 and 2012 and June 30, 2013, we had total outstanding interest-bearing bank
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and
other borrowings of RMB418.7 million, RMB735.9 million and RMB1,013.5 million and RMB1,759.3 million, respectively, and as of October 31, 2013, the total
outstanding amount of our interest-bearing bank and other borrowings was RMB1,966.5 million. In addition, in July 2013, we obtained a legally binding commitment letter from China
Minsheng Bank to provide a term loan with an aggregate principal amount of up to RMB1.6 billion that may be drawn down on or before January 29, 2015, subject to certain conditions.
Furthermore, in October 2013, we obtained a legally binding commitment letter from China Merchants Bank to provide a term loan with an aggregate principal amount of up to
RMB350 million that may be drawn down before March 10, 2015, subject to certain conditions. Moreover, in the past, we have financed a significant portion of our cash requirements
with non-interest bearing loans from companies controlled by Mr. Li Feilie, our chairman and chief executive officer. If these loans had been interest-bearing, our finance costs would
have been significantly higher. The degree to which we are leveraged may impair our ability to make necessary capital expenditure, increase our exposure to interest rate fluctuations, and limit
our ability to develop business opportunities or make strategic acquisitions, which may materially and adversely affect our financial condition and results of operations as well as our ability
to expand our business.
If we are unable to successfully expand our coal production capacity, our business and prospects would be materially and adversely affected.
Our future success is dependent on our ability to expand our coal production capacity. We need to increase our coal production
capacity and meet the demands of our customers as well as benefit from economies of scale and reduce our average costs. In particular, Dayun Coal Mine and Yongsheng Coal Mine have not commenced
commercial production, and our ability to achieve commercial production at these coal mines in a timely and cost effective manner is subject to a number of risks and factors beyond our control,
including:
- •
- construction delays and cost overruns due to weather, mechanical failures, mine accidents, unforeseen geological
anomalies, changes in government regulations or policies and other reasons;
- •
- inability to obtain or delays in obtaining the requisite government approvals; and
- •
- our ability to fund the capital expenditure requirements.
The
construction of our anthracite coal mines has been subject to multiple delays and cost overruns, and we cannot assure you that delays and cost overruns will not occur in the
future. In the past, our delays and cost overruns were caused by various factors beyond our control, including:
- •
- suspensions of mining activities in Guizhou province by the Guizhou government in response to the occurrence of
severe mining accidents and certain government meetings and other events in Guizhou province;
- •
- unanticipated difficulties in relocating local residents affected by certain of our coal mines as required by the
local government. In particular, coal production at Zhulinzhai Coal Mine has been slowed down by the relocation of local residents affected by the mine's operations and construction progress of
Dayun Coal Mine has been slowed down by the relocation of local residents affected by the mine's construction;
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- •
- the upgrade of certain of our coal mines from using drilling and blasting mining methods to semi-mechanical longwall
mining methods in 2011 in anticipation of Guizhou province's new requirements relating to mining methods, which required us to incur significant time and expense to redesign and upgrade Liujiaba
Coal Mine; and
- •
- suspension of construction of one of the two mine faces of Yongsheng Coal Mine as required by the Jinsha County
Administration of Coal Mine in 2013.
In
addition, our business, financial condition and results of operations may be materially and adversely affected if we are unable to continue operations at our coal mines. For
example, the operations at Gouchang Coal Mine were suspended from March to August 2012 under certain newly implemented mine gas control requirements in Guizhou province, and have been
suspended by the Guizhou government since March 2013 pending the acquisition by us of a nearby coal mine and Gouchang Coal Mine achieving certain production capacity targets in accordance
with Guizhou province's coal mine consolidation policy. We cannot assure you that our acquisition of the coal mine near Gouchang Coal Mine would be successful or that Gouchang Coal Mine would be
able to resume production. As of July 31, 2013, Gouchang Coal Mine had proved and probable reserve of 5.72 million tonnes, representing approximately 2.7% of our total proved and
probable reserve.
To
manage the growth of our business, we would also need to improve our operational and financial systems, procedures and controls, integrate the transportation logistics at these
coal mines with our existing operating coal mines, as well as expand, train and manage our employee base. We cannot assure you that our current and planned operations, personnel, systems and
internal procedures and controls will be adequate to support our future growth. If we are unable
to increase our coal production capacity in a timely and cost effective manner, or if we are unable to successfully manage and integrate our increased coal production capacity, we may not be
able to effectively grow our business, benefit from the intended economies of scale or achieve profitability.
Our reliance on sales of thermal coal makes our financial results vulnerable to downturns in the demand for, and government price controls imposed on, thermal coal in
the PRC.
Although we intend to increase our sales of chemical coal in the future, we currently derive a significant portion of our revenue
from the sale of thermal coal to local power plants in Guizhou province. The demand for thermal coal from power producers in the PRC is dependent on a number of factors, including the rate of
economic growth and general economic conditions in the PRC, the PRC Government's economic, energy, environmental and other policies, and the availability and cost of alternative energy sources.
Although thermal coal is expected to remain a significant energy source in the PRC, the PRC Government is investing heavily in exploring alternative energy sources, including
nuclear, hydroelectric, wind and solar power. Moreover, the PRC Government agreed during the United Nations Climate Change Conference in December 2009 to reduce carbon dioxide
emissions by 40% to 45% by 2020 from 2005 levels. Any government initiative to reduce energy consumption or control greenhouse gas emission could reduce the demand for, and prices of, thermal
coal in the PRC.
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Moreover,
the price of thermal coal in the PRC has from time to time been subject to government price controls. For example, in November 2011, the NDRC issued the Notice on Implementation of Temporary Price Intervention on Thermal
Coal and Enhancement of Thermal Coal Price Control (
) which limited increases in the contract price of thermal
coal sold to certain power producers in the PRC to 5% in 2012 and imposed a maximum price limit of
RMB800 per tonne on the spot prices of thermal coal. While these price control measures did not directly impact the average selling prices of our thermal coal, which were significantly
below the specified price limits prior to the enactment of these measures, these measures may have created downward pressures on the PRC thermal coal market generally and indirectly affected the
average selling prices of our thermal coal. Although these price control measures were terminated in January 2013, we cannot assure you that the price of thermal coal would not be subject
to further price controls in the future. Any significant decline in the demand for, or prices of, thermal coal could materially decrease our revenue and cash flows, and may further increase our
net losses.
We may not be able to successfully produce, market and sell chemical and PCI coal, which could materially and adversely affect our business and prospects.
Our future profitability will significantly depend on our ability to produce, market and sell chemical coal and PCI coal, which
generally command higher average selling prices and have higher margins than thermal coal. In 2011, 2012 and the six months ended June 30, 2013, we derived approximately 5%, 5% and 1.2%,
respectively, of our revenue from the sale of self-produced chemical coal, and we have not yet commenced selling any PCI coal. As part of our strategy, however, we intend to significantly
increase our sales of chemical coal, and we intend to begin selling PCI coal in 2014.
Our
ability to market and sell chemical and PCI coal is subject to a number of risks and uncertainties. For example, our annual coal production levels were determined based in
large part on the Guizhou government's annual guidance relating to the provision of certain minimum amounts of thermal coal to power plants operating in Guizhou province, which has significantly
limited our capacity to produce and sell chemical coal. See "Regulation — PRC Laws relating to the Coal
Industry — Supply of thermal coal to power plants". We cannot assure you that we will not be subject to other regulatory requirements or government actions
that will constrain our ability to produce, market or sell chemical or PCI coal in the future. Moreover, although we have entered into certain non-binding cooperation arrangements relating to
the sale of chemical coal, we have not yet entered into any binding agreements for the sale of chemical or PCI coal, and we cannot assure you that we will be able to effectively market and sell
chemical or PCI coal. The target customers for chemical and PCI coal, which primarily include chemical, steel and iron companies, are different from our existing customers for thermal coal,
which mainly consist of power producers, and we cannot assure you that we will be able to develop the necessary customer relationships. Furthermore, the underdeveloped road, water and railway
transportation infrastructure in the regions where our coal mines are located may limit our ability to efficiently transport chemical and PCI coal to our target customers. If we cannot
successfully produce, market and sell chemical and PCI coal in sufficient quantities, our revenue and cash flows as well as our financial condition and results of operations could be materially
and adversely affected.
We
are in the process of constructing a coal beneficiation plant in Jinsha county to process anthracite coal into chemical coal and PCI coal. However, we have no experience with
constructing or operating coal beneficiation plants, and we cannot assure you that we will be able to complete the construction process without significant delays or cost overruns, or that we
will be able to operate the coal beneficiation plant efficiently and profitably once it has been constructed.
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The coal reserve and coal quality data in this listing document are estimates and may be inaccurate, and our actual reserves, coal quality and production may differ
materially from these estimates.
The coal reserve and coal quality data on which our production and capital expenditure plans are based are estimates that have
made based on the results of geological exploration and were reviewed by Behre Dolbear, an independent mining consultant. There are inherent uncertainties in estimating coal reserves and coal
quality, and these reserve and coal quality estimates may be inaccurate and may differ materially from our actual volume of reserves, rates of production, coal quality and coal characteristics.
As these coal reserve estimates are based on a number of assumptions regarding expected market coal prices, production and transportation costs and recovery rates, these assumptions may turn out
to be incorrect or need to be revised in light of actual results. For example, unexpected geographic anomalies, such as faults, discovered during the extraction process could reduce our assumed
recovery rates as well as the quality of the coal extracted. Moreover, most of our coal mines have multiple mining stacked seams, and we may not be able to achieve the assumed recovery rates due
to our inexperience with multiple mining stacked seams, particularly the lower stacked seams, and the current engineering and technical design of our coal mines may not support the assumed
recovery rates, particularly in the later years of production when deeper extraction from our coal mines is needed to recover the coal. Furthermore, because the coal quality data reviewed by the
Competent Person were based on translations of the various studies and there is a large number of coal seams at several coal mines of the Company, coal quality may not be accurately defined. If
any revision results in these estimates in a substantial reduction in proved or probable reserves or coal quality at one or more of our coal mines, our business, financial condition, results of
operations and prospects could be materially and adversely affected.
Unanticipated faults at our coal mines could materially and adversely affect our production output, coal quality and mining operations.
Faults are displacements or offsets in coal seams that could reduce coal production output and extraction rates by obstructing
mining equipment. Moreover, due to the prevalence of rocks in fault areas, the quality of coal extracted from fault areas are typically lower as a result of the high rock content in the
extracted coal. Mining in fault areas could also wear out mining equipment more rapidly, as well as adversely affect the safety of mining operations by reducing roof stability and acting as trap
zones for gas.
Although
we have planned our mines to avoid known faults, we have not conducted any seismic studies to generate full subsurface profiles of our coal mines to identify the full
extent of faulting, and we cannot assure you that the actual extent of faulting at our coal mines is not more extensive than currently estimated. We have encountered unanticipated faults at
Yongsheng Coal Mine and Liujiaba Coal Mine, which have adversely affected recovery rates at those mines and rendered the coal extracted in the fault areas unsuitable for use as chemical coal or
PCI coal. If we encounter additional unanticipated faults at our coal mines in the future, our production output and coal quality could suffer, and our business, financial condition, results of
operations and prospects could be materially and adversely affected.
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Our business, financial condition, results of operations and prospects could be materially and adversely affected if we are unable to obtain or renew the necessary
government permits and licenses or complete the required environmental trial runs and inspections relating to our operations.
Prior to the commencement of commercial production, each coal mine in the PRC is required to obtain a number of permits and
licenses, including:
- •
- a mining right permit;
- •
- a safe production permit; and
- •
- a coal production permit.
In
addition to these permits, prior to commencing commercial production, coal mines in the PRC are required to complete an environmental trial run and an environmental acceptance
inspection.
We
cannot assure you that we will be able to obtain or renew the permits, licenses and approvals necessary for our business operations or complete the required environmental trial
runs and inspections in a timely manner or at all, or that onerous conditions will not be imposed in connection with the granting or renewal of such permits and licenses. The granting of permits
and licenses in the PRC is discretionary and is subject to the PRC Government's prevailing economic, energy, environmental, health and safety and other policies. If we are unable to obtain or
renew the required permits and licenses at any of our coal mines, we may need to suspend, terminate or downsize our operations, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
In
2012, the production output of Baiping Coal Mine significantly exceeded its assessed annual production capacity as set forth in its mining right permit and coal production
permit. Moreover, none of our anthracite coal mines have completed the requisite environmental trial run or the environmental acceptance inspection prior to commencing commercial production.
Although the relevant PRC Governmental authorities have issued letters to confirm that no penalties would be imposed in respect of these violations, we cannot assure that similar violations will
not occur in the future, which could subject us to significant fines, production suspensions and, for certain serious violations, criminal liability and mine closure. See
"Business — Regulatory Compliance".
Our long-term business and prospects depend upon our ability to successfully increase our production based on existing coal reserves, and acquire and develop
additional coal reserves.
As of July 31, 2013, we had approximately 208.87 million tonnes of proved and probable coal reserves, respectively.
Our existing coal reserves will decline as we produce coal. As a result, our ability to sustain or increase our production in the long-term will depend on our ability to increase our production
based on existing coal reserves, and acquire additional coal reserves and develop these reserves into coal mines. We cannot assure you that we will be able to successfully identify suitable
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coal
reserves for acquisition, or that we will be able to acquire such reserves on acceptable terms, or at all. There is a limited supply of desirable coal reserves in the PRC, and there is
intense
competition for mining rights from other coal producers, some of which may have significantly greater financial and other resources than we do.
Moreover,
assuming we are able to acquire additional coal reserves, our ability to develop these reserves into commercially viable coal mines is subject to a number of risks. For
example, the geological and extraction conditions of these reserves may turn out to be different from what we anticipated, the characteristics of the coal produced from these reserves may be
less desirable than we expected, the construction and production costs may be higher than our estimates, and the relevant governmental approvals, permits and licenses may be delayed or withheld.
If we cannot successfully expand our coal resources, our business and prospects could be materially and adversely affected.
We are dependent on a limited number of customers for a substantial portion of our revenue, and a significant reduction in purchases or delayed payments by our largest
customers would materially decrease our revenue and cash flows, as well as materially and adversely affect our liquidity.
In 2010, 2011, 2012 and the six months ended June 30, 2013, we derived 66.6%, 73.5%, 56.7% and 72.8%, respectively, of our
total revenue from our five largest customers. The average term of our contracts with these customers is less than one year. We cannot assure you that we would be able to renew existing coal
supply contracts or enter into new contracts with major customers on acceptable terms, or at all, or that payments by major customers would not be materially delayed. If one or more of our
largest customers were to significantly reduce coal purchases from us, or if we are unable to continue to sell coal to them on terms as favorable to us as the terms under our current contracts,
or if our largest customers delay payments to us, our revenue and cash flows, as well as our liquidity, would materially decrease.
Accidents at our coal mines or neighboring coal mines could materially disrupt our business and operations and damage our reputation.
Our coal mining operations are subject to certain inherent safety risks that could lead to death or serious injuries, including
methane gas explosions, roof collapses, coal mine water discharge and ground falls. Accidents at coal mines may also result from insufficient attention to safety, maintenance and working
conditions. During the Track Record Period, we had separate accidents involving three employee fatalities, all of which occurred in 2010. Although we are endeavoring to minimize the number of
accidents at our coal mines, accidents involving death or serious injuries are unavoidable. The occurrence of accidents at our coal mines may result in substantial disruptions to our business
and operations, reputational harm, litigation, and investigations and sanctions by regulatory authorities, which could lead to substantial monetary penalties, onerous remediation orders and
production suspensions.
Accidents
that occur at our neighboring coal mines could also materially and adversely affect our coal mining operations. In response to a mining accident, the regulatory
authorities may suspend the production of all coal mines in the region where the mining accident occurred, regardless of whether those coal mines are owned by the mining company involved in the
accident. For example, certain coal
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mining
activities were suspended in Guizhou province on multiple occasions in 2012 and in 2013 in response to certain mining accidents in Guizhou province, which caused us to suffer significant
losses and production delays. Moreover, in response to an accident, the regulatory authorities may enact new safety regulations applicable to all coal mines in the region, leading to
substantially greater compliance costs.
As our coal mining operations are subject to seasonality, operating results in different periods of a year may not be comparable and our financial condition and
results of operation may be materially and adversely affected if our coal mining operations experience any interruptions during the periods normally associated with higher production output.
Our production output in the first quarter of each year is generally lower than our production output in other quarters, as our
coal mining operations are typically suspended for approximately three to five weeks during the lunar new year holidays. In addition, our production output in the third and fourth quarters of
each year is generally higher than our production output in other quarters, mainly as a result of higher demand and more favorable weather conditions for coal extraction. As a result, if our
coal mining activities during periods normally associated with higher coal production output experience any material interruptions or slowdowns, our coal production output for the year would
significantly decline and our financial condition and results of operations may be materially and adversely affected.
Our coal mining operations may be materially disrupted by operational risks and natural disasters for which we have limited insurance.
Our coal mining operations are subject to significant risks and hazards, including earthquakes and other natural disasters,
severe weather conditions, unexpected
maintenance or technical problems, key equipment failures, unexpected geological variations and underground mining risks such as mine collapse, gas leaks or explosions, fire and flooding. The
occurrence of these events may materially disrupt our coal production capacity, disrupt coal transportation or cause significant business interruptions, personal injuries, property or
environmental damage and reputation harm.
In
line with what we believe to be industry practice, we do not maintain any fire, liability or other property insurance covering our properties, equipment or inventories, and we
do not carry any business interruption insurance, transportation insurance or third party liability insurance to cover claims in respect of personal injuries or property or environmental damage
arising from accidents on our properties. Any uninsured losses and liabilities incurred by us may have a material adverse effect on our financial condition and results of operations.
A decrease in availability or increase in costs of electricity, water or other key supplies may significantly disrupt our business and operations as well as materially
and adversely affect our financial condition and results of operations.
Our coal mining operations require a reliable supply of electricity, water and other key materials and components, including
mining equipment, replacement parts, explosives and roof control materials, and our demand for these resources and materials is expected to grow as our business grows and our production capacity
increases. We obtain power supply from the China Southern power grid
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and
we obtain water primarily from surface and subsurface supplies, including rivers, reservoirs and springs. We have not entered into any long-term supply contracts or obtained any guarantees
of supply with respect to water, electricity or any of our key supplies. Any shortages or disruption in the availability of water, electricity or other key supplies could lead to delays and
suspensions of our production process, and any significant increase in the cost of these resources and supplies will increase our operating costs, may significantly disrupt our business and
operations and could have a material adverse effect on our financial condition and results of operations if we are not able to pass on the increased costs to our customers.
Our business, financial condition and results of operations could be materially and adversely affected if we experience any significant interruptions, capacity
shortages or cost increases with respect to our coal transportation or the Company cannot improve local road system to meet the demand under the Company's expansion plan.
We currently transport coal to our customers primarily by road using third party coal transportation services. To date, we have
not entered into any long-term contracts with or otherwise obtained any capacity guarantees or commitments from any provider of coal transportation services, and we cannot assure that we will
not experience coal transportation interruptions or capacity shortages. For many consumers of anthracite coal, particularly chemical plants, having a timely and reliable supply of anthracite
coal is critical for their business. As a result, our failure to deliver anthracite coal to our customers in a timely manner could cause significant damage to our customer relationships and our
reputation. Moreover, as we have not entered into any long-term contracts with any provider of coal transportation services, we cannot assure that coal transportation costs will not increase
significantly in the future, which may materially decrease the competitiveness of our anthracite coal as well as our profit margins.
The
transport infrastructures at or near our mines remains underdeveloped which limits our ability to efficiently transport our coal products to our target markets, including
Guangdong, Guangxi, Sichuan, Chongqing and Jiangxi. If we cannot improve the transport infrastructure at or near our mines in time or at all to meet the demand under our expansion plans, our
business, financial condition, results of operations and prospects would be materially and adversely affected.
We rely on third party contractors for the construction of our coal mines, and their failure to perform their obligations could have a material and adverse effect on
our business and prospects.
We have outsourced to third party contractors the construction of our coal mines. See
"Business — Suppliers, Third Party Contractors and Utilities". Although we maintain close supervision over our contractors, we cannot assure you that our
contractors will perform their obligations on time, to our satisfaction, or at all. Our contractors' failure to perform their obligations, meet our quality, safety and environmental protection
standards or comply with relevant laws, rules and regulations may result in liabilities for us and could severely damage our reputation. Furthermore, if we have any material dispute with our
contractors or if our relationship with our contractors deteriorates, our production capacity expansion plans could be materially and adversely affected.
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We depend on our key personnel, and our business and prospects could be materially and adversely affected if we lose their services.
Our success is significantly dependent on the continued service of our key executives and skilled employees. In particular,
Mr. Li Feilie, our chairman and chief executive officer, and the other individuals set forth in the section headed "Directors and Senior Management" are critical to the development of our
business and our strategic direction. If we lose the services of one or more of our key executives and skilled employees, we may not be able to locate suitable or qualified replacements, and we
may need to incur additional expenses to recruit and train new personnel, which could have a material adverse effect on our business and prospects. Moreover, as we expect to continue to expand
our operations, we will need to continue attracting and retaining experienced management and other skilled personnel.
Competition
in the PRC mining industry for personnel experienced in the acquisition, exploration and development of coal mines is intense, and the availability of suitable and
qualified candidates is limited. Competition for these individuals could cause us to offer higher compensation and other benefits in order to attract and retain them, which could materially
increase our operating costs. If we are unable to attract or retain the personnel required to achieve our business objectives, our financial condition and results of operations could be
materially and adversely affected.
The interests of our controlling shareholder may differ from those of our other shareholders.
Immediately following the Spin-off, Mr. Li Feilie, our chairman and chief executive officer, will directly and indirectly
own approximately 59.33% of our outstanding Shares. Accordingly, Mr. Li will have the ability to exercise significant control over our business, including matters
relating to:
- •
- the nomination and election of our Directors;
- •
- our management, particularly the composition of our senior management;
- •
- the issuance of new securities;
- •
- the timing and amount of dividend payments;
- •
- our business strategies and policies;
- •
- any plans relating to acquisitions, investments, divestitures or other significant corporate
transactions; and
- •
- amendments to our Articles of Association.
The
interests of Mr. Li may differ from your interest as a shareholder of our Company, and Mr. Li may take actions that may not be in the best interests of our
Company or our other shareholders.
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Moreover,
Mr. Li's controlling stake in our Company may discourage, delay or prevent a change in control or other business combination involving our Company, which could deprive you of an
opportunity to receive a premium for your Shares as part of a sale of our Company and may reduce the price of our Shares.
Failure by the Controlling Shareholders, Feishang Energy and Feishang Enterprise to fulfill their obligations under the Deed of Non-Competition could have a material
adverse effect on our business, financial condition, results of operations and prospects.
In connection with the Listing, the Controlling Shareholders, Feishang Energy and Feishang Enterprise entered into a Deed of
Non-Competition pursuant to which each of them has undertaken to:
- •
- not, and procure that their respective subsidiaries or parties controlled by them either solely or jointly with
another Controlling Shareholder or any other party will not, either on their own account or in conjunction with or on behalf of any person, firm or company, directly or indirectly, be interested
or engaged in or acquire or hold any right or interest (in each case whether as a shareholder, partner, agent or otherwise) in any business which directly or indirectly competes or may so
compete with the Core Businesses;
- •
- if any of them becomes aware of any business opportunity which directly or indirectly competes or may so compete
with the Core Businesses ("New Business Opportunity"), notify our Company of such business opportunity forthwith; and
- •
- use its best endeavors to procure that the New Business Opportunity is first offered to our Company on terms
and conditions that are fair and reasonable.
Feishang
Energy, an indirect wholly-owned subsidiary of Feishang Enterprise, is one of the entities in Guizhou province (including our Company) that has been assessed under the
Guizhou government's coal mine consolidation policy to be a consolidator of coal mines in Guizhou province. Accordingly, Feishang Energy has provided the above undertakings with respect to the
period beginning from the date of the Listing until the later of the date on which (a) it ceases to be qualified as a coal mine consolidator in Guizhou province and (b) it ceases
to be an subsidiary or party controlled by Controlling Shareholder either solely or jointly with another Controlling Shareholder or any other party of the Controlling Shareholders. Mr. Li
Feilie, our chairman and chief executive officer, owns approximately 60.74% of the outstanding shares of Feishang
Enterprise, and Feishang Enterprise has also provided the above undertakings with respect to the period from the date of the Listing until the later on which (a) it ceases to be an
affiliate of the Controlling Shareholders and (b) it ceases to control the Sanjiazhai Coal Mine.
For
the purpose of the Deed of Non-Competition, "Core Businesses" include the acquisition and exploitation of coal mining rights (including the exploration, construction,
development and operation of coal mines) located in Guizhou province in the PRC. Failure by the Controlling Shareholders and/or Feishang Energy to fulfill their obligations under the Deed of
Non-Competition could have a material adverse effect on our business, financial condition, results of operations and prospects. See "Relationship with Our Controlling
Shareholders — Deed of Non-Competition".
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If we are unable to renew the governmental approvals to use certain of our leased properties for coal mining purposes, our business and operations could be materially
disrupted.
As of the Latest Practicable Date, we leased 19 parcels of collectively-owned land with a total site area of approximately
470,821.0 square meters in connection with our coal mining operations. Our use of these properties for coal mining is subject to the approval of the local land and resources authorities. Each
approval is generally valid for one to two years and must be renewed thereafter. We cannot assure you that we will be able to renew these approvals in a timely manner or at all. If we are not able to
continue occupying and using these properties for coal mining purposes, our business and operations could be materially disrupted.
We may not be able to register our trademarks in Hong Kong and our trademarks may be infringed.
We will use certain trademarks including the logos "
", "
" and "
" for our future business operations. As
at the Latest Practicable Date, we have applied for the trademark registration of the portfolio of trademarks set out in the paragraph
headed "Statutory and General Information — Further Information About Our Business — Intellectual Property
Rights — Trademarks" set out in Appendix V to this listing document. However, there is no assurance that these applications for trademark registration in
Hong Kong will eventually be approved or that we would be granted exclusive rights to use these marks as registered trademarks in Hong Kong. If the trademarks including the logos "
", "
" and "
" could not be registered, or if the registration process is delayed, our trademarks may be infringed, which may affect our business, prospects, financial condition and results
of operations.
RISKS RELATING TO PRC'S COAL INDUSTRY
Our business, financial condition and results of operations are susceptible to the cyclical nature of the PRC anthracite coal market and vulnerable to fluctuations in
anthracite coal prices.
As substantially all of our revenue is derived from the sale of anthracite coal, our business, financial condition and results of
operations are substantially dependent upon the prices we charge for our anthracite coal. We price our anthracite coal by reference to prices in the domestic PRC anthracite coal markets, which is
highly cyclical and has in the past exhibited significant
fluctuations in prices due to various supply and demand factors. For example, anthracite coal prices in Guizhou province declined significantly in the second quarter of 2012 and again in the first
half of 2013 as a result of the general economic slowdown in the PRC, which reduced demand, as well as an increase in production capacity in Shanxi province, which increased supply. The decline in
anthracite coal prices in Guizhou province is expected to continue. To date, we have not engaged in any hedging transactions to manage our commodity price risk. The PRC anthracite coal market is
affected by numerous factors beyond our control, including:
- •
- general economic conditions in the PRC;
- •
- global and regional supply and demand for anthracite coal;
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- •
- competition from other energy sources or alternatives to anthracite coal;
- •
- abnormal weather conditions;
- •
- speculative anthracite coal trading;
- •
- the PRC Government's economic, energy, environmental, health and safety and other policies; and
- •
- fluctuations in the development and growth of industries in the PRC with high demand for anthracite coal, including the
power, chemical, iron and steel, and building materials industries.
Moreover,
technological developments may reduce the long-term demand for anthracite coal. In particular, certain chemical manufacturers have begun experimenting with alternative
synthesis processes that would allow the use of lower cost bituminous coal or natural gas instead of anthracite coal to produce ammonia and methanol, while certain iron and steel enterprises are
experimenting with using bituminous coal instead of anthracite coal in the steel production process. Although these processes have not yet been proven to be commercially viable, if cost-effective and
reliable alternatives to anthracite coal are developed in the future, the long-term demand for, and prices of, anthracite coal would suffer. Any substantial or extended decline in the market prices of
anthracite coal in the PRC could materially decrease our revenue and cash flows as well as increase our net loss. For the discussion on sensitivity analysis of the effects of increases or decreases in
the average selling price of our anthracite coal on our financial results, see "Financial Information — Market Risk
Disclosure — Commodity Price Risk".
We are subject to extensive regulation, and our business, financial condition, results of operations and prospects may be materially and adversely affected if we fail to
comply with applicable regulations or if existing regulations or other government policies change.
Our coal mining operations are subject to extensive regulation in the PRC
relating to:
- •
- the granting and renewal of coal mining rights;
- •
- the granting of safe production permits;
- •
- coal mining project approvals;
- •
- production capacity requirements;
- •
- resource recovery rate and water and soil preservation requirements;
- •
- environmental, safety and occupational health requirements;
- •
- government control over coal prices;
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- •
- taxes, duties and levies, including, among others, resource taxes, mining right usage fees, mineral resource compensatory
fees and the coal price levies; and
- •
- the allocation of coal transportation capacity on the national railway system.
Interpretation
of these regulations may change and new regulations may come into effect, which could disrupt or restrict our coal mining operations, reduce our competitiveness or require
us to incur substantial compliance costs. In particular, we are subject to increasingly stringent regulatory requirements with respect to coal mine safety. For example, Gouchang Coal Mine suspended
its operations from March to August 2012 to comply with certain newly implemented mine gas control requirements in Guizhou province. Furthermore, in 2011, as a result of the upgrade of drilling
and blasting mining methods to semi-mechanical longwall mining methods in anticipation of Guizhou government's requirements on mining methods, we incurred significant time and expense to redesign and
upgrade Liujiaba Coal Mine. We are also subject to extensive and increasingly stringent environmental laws, rules and regulations in the PRC. These laws, rules and regulations impose, among other
things, fees for the discharge of pollutants and waste substances, as well as require us to establish reserves for land reclamation and rehabilitation. Any failure to comply may result in fines,
restrictions and limits on our coal mining operations, as well as suspension or revocation of our business licenses.
Changes
in or implementation of government policies in relation to the consolidation of coal enterprises or coal mines may also have a material adverse effect on our business. For
example, in March 2013, the Guizhou government issued a coal mine consolidation policy which aims to, among other things, reduce the total number of coal enterprises and coal mines in Guizhou
province. As a result of this policy, the operations of Gouchang Coal Mine have been suspended by the Guizhou government since March 2013 pending the acquisition by us of a nearby coal mine and
Gouchang Coal Mine achieving certain production capacity targets in accordance with Guizhou province's coal mine consolidation policy. We cannot assure you that our acquisition of the coal mine near
Gouchang Coal Mine would be successful or that Gouchang Coal Mine would be able to resume production. In the six months ended June 30, 2013, we incurred an impairment loss on property, plant
and equipment of RMB184.4 million in connection with the suspension of Gouchang Coal Mine, and we may incur additional impairment losses in respect of Gouchang Coal Mine in the future if we are
unable to successfully resume operations. As of July 31, 2013, Gouchang Coal Mine had proved and probable reserve of 5.72 million tonnes, representing approximately 2.7% of our total
proved and probable reserve.
Regulatory
changes in the PRC could also significantly reduce the demand for, and the price of, anthracite coal. For example, in November 2011, the NDRC limited increases in the
contract price of thermal coal sold to certain power producers in the PRC to 5%, as well as imposed certain price limits on the spot prices of thermal coal. Although these measures were terminated in
January 2013, we cannot assure you that the price of thermal coal would not be subject to further price controls in the future. Moreover, the Guizhou government levies a coal price adjustment
fund levy on the coal sold by local coal producers and the rate of the coal price adjustment fund levy is subject to frequent changes based on prevailing government policies, which significantly
reduced the competitiveness of coal producers in Guizhou province. We cannot assure you that we will not be subject to further price restrictions, levies or additional regulations in the future, or
that future regulatory changes would not have a material adverse effect on our business or prospects.
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Competition in the PRC coal industry is intense, and we cannot assure you that we will be able to compete effectively.
The PRC coal industry is highly competitive, and we compete on the basis of many factors, including, coal quality and characteristics,
stability of supply, availability and cost of transportation, reliability and timeliness of delivery, customer service and price. Moreover, as there is a limited supply of desirable anthracite coal
reserves in the PRC, there is intense competition for mining rights among anthracite coal producers in the PRC. We face competition primarily from other anthracite coal enterprises in Guizhou
province. Many of our competitors have greater financial, marketing and distribution resources, lower operating costs, more advanced technologies, longer operating histories and greater brand
recognition than us. If we are unable to compete effectively in attracting and retaining customers as well as obtaining mining rights over coal reserves, our business, financial condition, results of
operations and prospects would be materially and adversely affected.
RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC
Changes in economic, political and social conditions in the PRC could have a material adverse effect on our business, financial condition, results of operations
and prospects.
Substantially all of our business and operations are conducted in the PRC. Accordingly, our business, financial condition, results of
operations and prospects are, to a significant degree, subject to the economic, political and social conditions in the PRC. The PRC economy differs from the economies of most developed countries in
many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC Government has implemented
measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in the PRC is still government-owned. In addition, the PRC Government continues to play a significant role in regulating
industry development through the implementation of industrial policies. In particular, the PRC coal industry is subject to extensive regulation. See
"Regulation — PRC Laws Relating to the Coal Industry". The PRC Government also exercises significant control over the economy through the allocation of resources,
controlling payment of foreign currency denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
Uncertainties with respect to the PRC legal system could have a material adverse effect on us.
Our business and operations are primarily conducted in the PRC and governed by PRC laws, rules and regulations. Our PRC subsidiaries
are generally subject to laws, rules and regulations applicable to foreign investments in the PRC and, in particular, laws applicable to wholly foreign owned enterprises. The PRC legal system is a
civil law system based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC Government has significantly enhanced
PRC legislation and regulations to provide protections to various forms of foreign investments in the PRC. However, the PRC has not developed a fully integrated legal system and recently enacted laws
and regulations may not sufficiently cover all aspects of economic activities in the PRC. As many of these laws, rules and regulations are continually
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evolving,
and because of the limited volume of published decisions, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and may not be as consistent or
predictable as in other more developed jurisdictions. In addition, the PRC legal system is based in part on government policies and administrative rules that may have retroactive effect. As a result,
we may not be aware of any violations by us until some time after the violation. Furthermore, the legal protections available to us under these laws, rules and regulations may be limited. Any
litigation or regulatory enforcement action in the PRC may be protracted and could result in substantial costs and diversion of resources and management attention.
Governmental control over currency conversion may affect the value of your investment and limit our ability to utilize our cash effectively.
The PRC Government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance
of currency out of the PRC. We receive substantially all of our revenue in Renminbi, which is currently not a freely convertible currency. Shortages in the availability of foreign currency may
restrict our ability to remit sufficient foreign currency to pay dividends, or otherwise satisfy any foreign currency dominated obligations we may incur. Under existing PRC foreign exchange
regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, may be made in foreign currencies without prior
approval from the SAFE by complying with certain procedural requirements. However, approval from the SAFE or its local branch may be required where Renminbi is to be converted into foreign currency
and remitted out of the PRC to pay capital expenses, such as offshore investments denominated in foreign currencies. The PRC Government may also at its discretion restrict access to foreign currencies
for current account transactions. In addition, since a significant amount of our future cash flow from operations will be denominated in Renminbi, any existing and future restrictions on currency
exchange may limit our ability to receive dividends and distributions from our subsidiaries in the PRC, purchase goods and services outside of the PRC or
otherwise fund any future business activities that may be conducted in foreign currencies. This could also affect the ability of our subsidiaries in the PRC to obtain foreign exchange through debt or
equity financing, including by means of loans or capital contributions from us.
We may rely on dividends and other distributions on equity paid by our operating subsidiaries in the PRC to fund our cash and financing requirements, and any limitation on
the ability of our operating subsidiaries in the PRC to pay dividends or make distributions to us could have a material adverse effect on our liquidity.
We are a holding company, and we rely on dividends and other distributions on equity paid by our operating subsidiaries in the PRC for
our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay certain operating expenses.
Under the applicable PRC laws, rules and regulations, dividends may be paid only out of distributable profits. We cannot assure you that our operating subsidiaries will generate sufficient earnings
and cash flow to pay dividends or otherwise distribute sufficient funds to enable us to meet our financial obligations or declare dividends. In particular, each of our subsidiaries in the PRC is
required under the applicable laws, rules and regulations to set aside a portion of its net income each year to fund certain statutory reserves. These reserves, together with the registered equity,
are not distributable as cash dividends. In addition, our bank borrowing or
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other
financing agreements may contain certain restrictions relating to the payment of dividends or other distributions. As a result, these subsidiaries are restricted in their ability to transfer a
portion of their respective net assets to their shareholders as dividends. Limitations on the ability of these subsidiaries in the PRC, such as Guizhou Puxin and Guizhou Fuyuantong, to pay dividends
or make distributions to us could limit our ability to grow our business, make investments or acquisitions, pay dividends to our shareholders, or otherwise fund and conduct our business.
Dividends received by holders of our Shares that are non-PRC enterprises and gains derived from the disposition of our Shares by such holders may become subject to PRC
taxation, which may materially reduce the value of investments in our Shares.
Under the PRC Enterprise Income Tax Law and its implementing rules, which became effective on January 1, 2008, a non-PRC
enterprise is generally subject to enterprise income tax at the rate of 10% with respect to PRC-sourced income, including dividends derived from sources within the PRC and gains derived from the
disposition of equity interests in a PRC company, subject to any reductions under any special arrangements or applicable treaty between the PRC and the jurisdiction of the relevant foreign
enterprise's residence. As the PRC Enterprise Income Tax Law and
its implementation rules are relatively new, there remains significant uncertainty as to their interpretation and application by the PRC tax authorities, including whether and how enterprise income
tax on dividends payable to and gains derived by holders of our Shares that are non-PRC enterprises may be collected. If we are considered a PRC resident enterprise, dividends we pay with respect to
our Shares, or the gain our Shareholders may realize from the transfer of our Shares, may be treated as income derived from sources within the PRC and be subject to PRC tax. If we are required under
the PRC Enterprise Income Tax Law and its implementing rules to withhold PRC income tax on dividends payable to our Shareholders that are non-PRC resident enterprises, or if our Shareholders are
required to pay PRC income tax on the transfer of our Shares, the value of such non-PRC enterprise holders' investments in our Shares may be materially reduced.
We may be subject to PRC enterprise income tax on our global income, or dividends we receive from our PRC subsidiary may be subject to PRC withholding tax, depending on
whether we are recognized as a resident enterprise in the PRC.
Pursuant to the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established under the laws of a foreign
country or region whose "de facto management body" is located within the PRC territory is considered a resident enterprise and will generally be subject to the enterprise income tax at the rate of 25%
on its global income. According to the Implementation Rules, "de facto management body" refers to a managing body that exercises, in substance, overall management and control over the production and
business, personnel, accounting and assets of an enterprise. As there is no official interpretation or application of the resident enterprise, it remains unclear how PRC tax authority will treat an
overseas company that is controlled by natural persons like us. In addition, if new rules and interpretations are issued in the future specifying the criteria for determining whether a foreign entity
controlled by a natural person is a resident enterprise under the PRC Enterprise Income Tax Law, we cannot assure you that we will not be deemed a PRC resident enterprise. If, in accordance with any
future rules, we were considered a PRC resident enterprise, we would be subject to the enterprise income tax at the rate of 25% on our global income and any dividend received by our non-resident
enterprise shareholder may be subject to 10% withholding tax. If we are
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considered
a non-resident enterprise under the PRC Enterprise Income Tax Law, we will not be subject to the enterprise income tax at the rate of 25% on our global income. In such case, however,
dividends we receive from our PRC subsidiaries will be subject to a PRC withholding tax of 10% or 5%, depending on the availability of the relevant tax treaty.
We may not be able to enjoy a reduced withholding tax rate under the special arrangement between Hong Kong and the PRC.
Under the PRC Enterprise Income Tax Law and its implementing rules, which became effective on January 1, 2008, a non-PRC
resident enterprise is generally subject to a withholding tax rate of 10% with respect to dividends paid by its subsidiaries in the PRC, subject to any reductions under any special arrangements or
applicable treaty between the PRC and the jurisdiction of the relevant foreign enterprise's residence. Under the Arrangement between the Mainland and Hong Kong Special Administrative Region for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (
), which became effective on
January 1, 2007, the withholding tax rate for dividends paid by a PRC resident enterprise to a Hong Kong resident enterprise may be lowered
to 5% if the Hong Kong resident enterprise owns at least 25% of the PRC resident enterprise. Nonetheless, according to the Circular of the State Administration of Taxation on Relevant Issues relating
to the Implementation of Dividend Clauses in Tax Treaties (
), which became effective on February 20, 2009, special tax treatments on
dividends paid by a PRC company under relevant tax treaties will not be available unless
certain conditions are satisfied. In addition, pursuant to the Administrative Measures for Non-residents to Enjoy Treatments under Tax Treaties (Trial) (
), which became effective on October 1, 2009, approvals from competent local tax authorities are required before an enterprise can enjoy the relevant tax treatments. See
"Regulation — PRC Laws relating to Taxation And Fee". Although Smartact is a Hong Kong resident enterprise which wholly owns Guizhou Fuyuantong, our holding
company in the PRC, we cannot assure you that it will be able to enjoy the reduced withholding tax rate under the special arrangement between Hong Kong and the PRC.
We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (
) ("SAT Circular 698") issued by the State Administration of Taxation ("SAT") on December 10, 2009 with retroactive effect from January 1, 2008,
where a non-PRC resident enterprise transfers its indirect equity interests in a PRC resident enterprise by disposing of its equity interests in an overseas holding company, or an "Indirect Transfer",
and such overseas holding company is located in a tax jurisdiction that has an effective tax rate less than 12.5% or does not tax foreign income of its residents, the non-PRC resident enterprise, as
the transferor, is required to report the Indirect Transfer to the relevant PRC tax authorities. Using a "substance over form" principle, the PRC tax authorities may
disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of avoiding PRC tax, in which case the gains derived from such
"Indirect Transfer" may be subject to PRC withholding tax at a rate of up to 10%. SAT Circular
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698
also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant
PRC tax authorities have the authority to make reasonable adjustments to the taxable income of the transaction.
There
is uncertainty as to the application of SAT Circular 698. For example, while the term "Indirect Transfer" is not clearly defined, it is understood that the relevant PRC tax
authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with the PRC. In addition, there is no formal declaration with regard to
how to determine whether an overseas holding company lacks a "reasonable commercial purpose" or was "established for the purpose of avoiding PRC tax". As a result, if we and/or our Shareholders are
deemed to be conducting any "Indirect Transfer", we and/or our Shareholders may become at risk of being taxed under SAT Circular 698 in the future and we and/or our Shareholders may be required
to expend valuable resources to comply with SAT Circular 698 or to establish that we and/or our Shareholders should not be taxed under SAT Circular 698.
PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders or our PRC subsidiaries to
liabilities or penalties, limit our ability to inject capital into our PRC subsidiaries or limit the ability of our PRC subsidiaries to distribute profits to us.
The SAFE issued a public notice in October 2005 ("SAFE Circular No. 75"), requiring PRC residents to register with the
local branch of the SAFE before establishing or controlling any company outside of the PRC for the purpose of capital financing with assets or equities of PRC companies, referred to in the notice as
an "offshore special purpose company". In addition, any PRC resident that is a shareholder of an offshore special purpose company is required to amend its registration with the SAFE with respect to
that offshore special purpose company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment, creation of any security interest over any assets
located in the PRC or any other material change in share capital. We may not be fully informed of the identities of all of our beneficial owners who are PRC residents. Moreover, we do not have control
over our beneficial owners and cannot assure you that all of our PRC resident beneficial owners will comply with SAFE Circular No. 75. The failure of our beneficial owners who are PRC residents
to register or amend their registrations with the SAFE in a timely manner pursuant to SAFE Circular No. 75 or the failure of future beneficial owners of our company who are PRC residents
to comply with the registration procedures set forth in SAFE Circular No. 75 may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions, and may also limit our
ability to contribute additional capital to our PRC subsidiaries, limit our PRC subsidiaries' ability to
distribute dividends to us or otherwise materially and adversely affect our business. See "Regulation — PRC Laws Relating to Foreign Exchange".
PRC regulation of loans to, and investments in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from
making loans or additional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.
Loans or additional capital contributions by our Company to our PRC subsidiaries are subject to PRC regulations and approvals.
For example:
56
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- •
- capital contributions by our Company to a PRC subsidiary must be approved by the MOFCOM or its local counterparts;
- •
- acquisition of onshore entities by us or our offshore subsidiaries must be approved by the MOFCOM or its local
counterparts; and
- •
- loans by us to a wholly foreign-owned subsidiary cannot exceed statutory limits and must be registered with SAFE or
its branches.
On
August 29, 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency
Capital of Foreign Invested Enterprises, or Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into Renminbi by restricting how the
converted Renminbi may be used. Circular 142 provides that the Renminbi capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes
within the business scope approved by the applicable governmental authority and, unless otherwise provided by law, such Renminbi capital may not be used for equity investments in the PRC. In addition,
SAFE strengthened its oversight of the
use of Renminbi capital converted from foreign currency registered capital of a foreign-invested company. The use of such Renminbi capital may not be altered without SAFE approval, and such Renminbi
capital may not, in any case, be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of Circular 142 could result in severe monetary or other penalties.
We
cannot assure you that we will be able to obtain requisite government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by
us to our PRC subsidiaries. If we fail to receive such registrations or approvals, our ability to fund our operations in the PRC would be limited, which could materially and adversely affect our
liquidity and our ability to expand our business.
You may experience difficulties in effecting service of legal process and enforcing judgments against us and our management.
Substantially all of our assets and our subsidiaries are located in the PRC. In addition, most of our Directors and officers reside
within the PRC, and the assets of certain Directors and officers are located within the PRC. As a result, it may not be possible to effect service of process within the United States or
elsewhere outside the PRC upon most of our Directors and officers, including with respect to matters arising under the U.S. federal securities laws or applicable state securities laws.
Moreover, the PRC does not have treaties providing for the reciprocal enforcement of judgments of courts with the United States, the United Kingdom, Japan or most other Western
countries. In addition, Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, recognition and enforcement in the PRC or Hong Kong of
judgments of a court in the United States and any of the other jurisdictions mentioned above in relation to any matter that is not subject to a binding arbitration provision may be difficult or
impossible. In addition, although we will be subject to the Listing Rules and the Takeovers Code upon the listing of our Shares on the Stock Exchange, the holders of Shares will not be able to bring
actions on the basis of violations of the Listing Rules and must rely on the Stock Exchange to enforce its rules.
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Natural disasters and health and public security hazards in the PRC may severely disrupt our business and operations and may have a material adverse effect on our financial
condition and results of operations.
In May 2008 and April 2013, earthquakes registering 8.0 and 6.6, respectively, on the Richter scale struck Sichuan
Province and certain other parts of the PRC,
devastating much of the affected areas and causing tens of thousands of deaths and widespread injuries. In addition, in September 2012, a series of earthquakes registering 4.8 to 5.6 on
the Richter scale struck Guizhou province and Yunnan province. Although these earthquakes did not materially affect our operations, they caused at least 80 deaths and significant and extensive
damage to factories, power lines, blackouts, transportation and communications disruptions and other losses in the affected areas. The PRC has also encountered incidents of severe acute respiratory
syndrome and the outbreak of influenza A (H1N1 and H7N9). We are unable to predict the effect, if any, that any future natural disasters and health and public security hazards may have on our
business. Any future natural disasters and health and public security hazards may, among other things, significantly disrupt our ability to adequately staff or otherwise operate our coal mines, limit
coal transportation, as well as generally disrupt our operations. Furthermore, natural disasters and health and public security hazards may severely restrict the level of economic activity in affected
areas, which may in turn materially and adversely affect our financial condition and results of operations.
RISKS RELATING TO THE SPIN-OFF
We have no history operating as an independent company, and we may incur significant expenses to create the corporate infrastructure necessary to operate as an independent
public company.
Prior to the Spin-off, we have relied on the corporate infrastructure of CHNR to support our business functions, including information
technology systems, human resource systems and legal support. The expenses related to establishing and maintaining this infrastructure were allocated among all of the businesses of CHNR. Following the
Spin-off, we will no longer have access to CHNR's corporate infrastructure, and we will need to establish our own corporate infrastructure or hire third parties to perform these functions on our
behalf. The costs associated with performing or outsourcing these functions may be significant and could have a material adverse effect on our financial condition and results of operations.
An active trading market for our Shares may not develop, and the trading price and volume of our Shares may fluctuate significantly.
Prior to the Listing, no public market for our Shares existed. We cannot assure you that an active and liquid trading market for our
Shares will develop or be sustained after the Listing or that we will be able to maintain the listing of our Shares. If an active and liquid trading market for our Shares does not develop or is not
sustained after the Listing, the trading price and liquidity of our Shares may be materially and adversely affected.
The
trading price and volume for our Shares may be highly volatile in response to factors beyond our control, including general market conditions of the capital markets in Hong Kong and
elsewhere in the world. Moreover, the price and trading volume for our Shares may be volatile for specific
58
Table of Contents
business
or other reasons. In particular, factors such as variations in our revenue, earnings and cash flow, announcements of new investments, acquisitions or discovery of new coal reserves,
fluctuations in the market prices for coal, as well as general economic, market or regulatory conditions, could cause large and sudden changes in the trading volume and price of our Shares.
Future sales or perceived sales of substantial amounts of our securities in the public market, including any future sale of our Shares by those Shareholders that are
currently subject to contractual or legal restrictions on Share transfers, could have a material adverse effect on the prevailing market price of our Shares and our ability to raise capital in the
future, and may result in dilution of your shareholding in our Company.
The market price of our Shares could decline as a result of future sales of substantial amounts of our Shares or other securities
relating to our Shares in the public market or the issuance of new Shares or other securities, or the perception that such sales or issuances may occur. Future sales, or perceived sales, of
substantial amounts of our securities, including any future offerings, could also materially and adversely affect our ability to raise capital in the future at a time and at a price we deem
appropriate. In addition, our Shareholders may experience dilution in their holdings to the extent we issue additional securities in future offerings.
In
connection with the Listing, each Controlling Shareholder has agreed, among other things, not to sell our Shares for six months after the Listing Date and has agreed to retain
sufficient Shares to remain as our Controlling Shareholder for six months after the Listing Date. However, we cannot assure you that our Controlling Shareholders will not dispose of any or all of the
Shares they may own now or in the future after the expiration of the applicable lock-up periods. Any future sales, or perceived sales, of substantial amounts of our Shares by our Controlling
Shareholders could cause the market price of our Shares to decrease significantly as well as materially hinder our ability to raise capital in the future.
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DIRECTORS AND PARTIES INVOLVED IN THE SPIN-OFF
DIRECTORS
|
|
|
|
|
| Name |
|
Residential Address |
|
Nationality |
| Chairman and Executive Director |
|
|
|
|
LI Feilie (
) |
|
Flat 5-1, Fragrance House
Ocean Garden
The Fifth Street, Ocean Garden
Taipa, Macao, PRC |
|
Chinese |
Executive Directors |
|
|
|
|
HAN Weibing (
) |
|
Flat 22A, Building 19
Shenzhen Riverist
Nanshan District, Shenzhen
Guangdong, PRC |
|
Chinese |
WAN Huojin (
) |
|
Flat 3, 23/F, Block 4
Longsheng Garden
Jinyang Wonderland
Guiyang, Guizhou
PRC |
|
Chinese |
TAM Cheuk Ho (
) |
|
Flat 21A, Butler Towers
1-5 Boyce Road
Jardine's Lookout
Hong Kong |
|
Chinese |
WONG Wah On Edward (
) |
|
Flat A, 9/F, Block 9
South Horizons
Ap Lei Chau
Hong Kong |
|
Chinese |
Independent Non-executive Directors |
|
|
|
|
LO Kin Cheung (
) |
|
Flat A, 11/F, Block 1
Sorrento, Kowloon
Hong Kong |
|
British |
HUANG Zuye (
) |
|
Flat 602, Block 13
Guizhou Coal Mine Design &
Research Institute Dashuigou
Huaxi District
Guiyang, Guizhou
PRC |
|
Chinese |
GU Jianshe (
) |
|
Flat 501, Block E2
Shiji Garden,
No. 270 Erqiao Road
Yunyan District
Guiyang, Guizhou
PRC |
|
Chinese |
60
Table of Contents
PARTIES INVOLVED IN THE SPIN-OFF
|
|
|
Joint Sponsors
(in alphabetical order) |
|
Jefferies Hong Kong Limited
22nd Floor, Cheung Kong Center
2 Queen's Road Central
Hong Kong |
|
|
Nomura International (Hong Kong) Limited
30th Floor, Two International Finance Centre
8 Finance Street Central
Hong Kong |
Legal Advisers to Our Company |
|
as to Hong Kong and U.S. law: |
|
|
Sullivan & Cromwell
28th Floor
Nine Queen's Road Central
Hong Kong |
|
|
as to PRC law: |
|
|
Commerce & Finance Law Offices
6th Floor, NCI Tower
A12 Jianguomenwai Avenue
Beijing, PRC |
|
|
as to British Virgin Islands law: |
|
|
Maples and Calder
53rd Floor, The Center
99 Queen's Road Central
Hong Kong |
Legal Advisers to the Joint Sponsors |
|
as to Hong Kong and U.S. law: |
|
|
Freshfields Bruckhaus Deringer
11th Floor, Two Exchange Square
8 Connaught Place Central
Hong Kong |
|
|
as to PRC law: |
|
|
Jingtian & Gongcheng
34th Floor, Tower 3, China Central Place
77 Jianguo Road, Chaoyang District
Beijing, PRC |
|
|
|
61
Table of Contents
|
|
|
| Auditors and Reporting Accountants |
|
Ernst & Young
22nd Floor, CITIC Tower
1 Tim Mei Avenue
Central, Hong Kong |
Property Valuer |
|
Peak Vision Appraisals Limited
12th Floor, Effectual Building
14-16 Hennessy Road
Wanchai
Hong Kong |
Competent Person |
|
Behre Dolbear Asia, Inc.
6430 S. Fiddler's Green Circle
Suite 250, Greenwood Village
CO USA 80111 |
Independent Market Consultant |
|
Shanxi Fenwei Energy Consulting Co., Ltd.
8th Floor, Tower A
Shanxi World Trade Center
111 Changzhi Road
Taiyuan, Shanxi
PRC |
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Table of Contents
CORPORATE INFORMATION
|
|
|
| Registered office |
|
Maples Corporate Services (BVI) Limited
Kingston Chambers, P.O. Box 173
Road Town, Tortola
BVI |
Headquarters in China |
|
54/F, International Chamber of Commerce Tower
168 Fuhua 3rd Road
Futian CBD, Shenzhen
Guangdong 518048
China |
Place of business in Hong Kong
registered under Part XI of
the Companies Ordinance |
|
Room 2205, Shun Tak Centre
200 Connaught Road Central
Sheung Wan
Hong Kong |
Company's website |
|
www.fsanthracite.com
(The information on the website does not form a part of this listing document) |
Company secretary |
|
Yue Ming Wai Bonaventure (FCS, FCPA)
Flat A, 11/F, Block 1
Royal Knoll, Fanling
New Territories
Hong Kong |
Authorized representatives |
|
Wong Wah On Edward
Flat A, 9/F, Block 9
South Horizons
Ap Lei Chau
Hong Kong |
|
|
Yue Ming Wai Bonaventure
Flat A, 11/F, Block 1
Royal Knoll, Fanling
New Territories
Hong Kong |
Audit committee |
|
Lo Kin Cheung (Chairman)
Huang Zuye
Gu Jianshe |
Remuneration committee |
|
Gu Jianshe (Chairman)
Lo Kin Cheung
Huang Zuye
Li Feilie
Han Weibing |
|
|
|
63
Table of Contents
|
|
|
| Nomination committee |
|
Huang Zuye (Chairman)
Lo Kin Cheung
Gu Jianshe
Li Feilie
Tam Cheuk Ho |
Corporate social responsibility committee |
|
Gu Jianshe (Chairman)
Wan Huojin
Han Weibing |
The British Virgin Islands
Unlisted Share Registrar and Transfer Office |
|
Maples Fund Services (Cayman) Limited
P.O. Box 1093,
Boundary Hall,
Cricket Square
Grand Cayman, KY1-1102,
Cayman Islands |
Hong Kong Branch Share Registrar |
|
Tricor Investor Services Limited |
Compliance adviser |
|
Cash Financial Services
Group Limited
9/F, Low Block,
Grand Millenium Plaza
181 Queen's Road Central
Hong Kong |
Principal banker |
|
China Minsheng Banking Corp., Ltd.
Tongju Yuanjing Building
Jianxin North Road
Jiangbei District
Chongqing, PRC |
|
|
China Merchants Bank
Electric Hub Building
No.284 Zhonghua North Road
Yunyan District
Guiyang, Guizhou, PRC |
|
|
Industrial and Commercial Bank of China
No. 70 Zhonghua Road
Chengguan Town
Jinsha County, Bijie, Guizhou, PRC |
64
Table of Contents
INDUSTRY OVERVIEW
This listing document contains information relating to the PRC economy, the PRC coal and power industries as well as the international coal market and other energy
markets. The information is derived from various publications, market data providers and other independent third party sources. We have also engaged Fenwei, an experienced consultant in the
energy sector in China and an Independent Third Party, to prepare a report to provide certain industry data for this section and elsewhere in this listing document. Fenwei was paid a total of
RMB320,000 in fees for this service.
Fenwei prepared its report based on its in-house database, independent third party reports and publicly available data from reputable industry organizations. Where necessary, Fenwei visited
companies operating in the industry to gather and synthesize information about market, prices and other relevant information.
We believe that the sources of the information in this section are appropriate sources for such information and have taken reasonable care in the
extraction, compilation and reproduction of the information presented in this section. We have no reason to believe that such information is false or misleading in any material respect or that
any part has been omitted that would render such information false or misleading in any material respect. Neither we, the Joint Sponsors nor any of our or their respective directors, officers or
representatives or any other person involved in the Listing have independently verified the information directly or indirectly derived from official government sources, or make any
representation as to the accuracy of the information from official government or other third party sources. Such information may not be consistent with and may not have been compiled with the
same degree of accuracy or completeness as other information compiled within or outside the PRC. Accordingly, the information derived from official government and other third party sources
contained herein may not be accurate and should not be unduly relied upon.
INTRODUCTION
Coal is a combustible, sedimentary, organic rock composed mainly of carbon, hydrogen and oxygen. It is a fossil fuel and the
primary energy source in the PRC. The "rank" of coal, which is determined by the degree of change undergone by coal as it matures from peat to coal, has an important bearing on its physical and
chemical properties as well as end use. Low-rank coal, such as lignite and sub-bituminous coal, is typically softer, friable material with a dull, earthy appearance. It is characterized by high
moisture levels and low carbon content, and consequently low energy content. High-rank coal, such as coking coal and anthracite coal, is generally harder and stronger and often has a black,
vitreous luster, and generally contains more carbon, has lower moisture content, and produces more energy than low-rank coal. The diagram below summarizes the primary types of coal and their
associated end-uses worldwide. See "— Overview of the Anthracite Coal Industry in the PRC — Uses of Anthracite Coal in the PRC" for the use of anthracite
coal in the PRC.
65
Table of Contents
Types of Coal
Source: World Coal Institute, The Coal Resource, BP Statistical Review of World
Energy (2013)
Anthracite Coal — The Highest-Rank Type of Coal
Under the Chinese Coal Classification Standard, anthracite coal is the highest-rank coal, containing volatile matter content of
10.0% or less and thus a high percentage of carbon. According to the SAWS and Fenwei, anthracite coal accounted for approximately 12% of total coal resources in China in 2012. As a result of
anthracite coal's relative quality and scarcity, it is generally able to command a higher selling price than other types of coal.
In
the process of determining whether the coal belongs to anthracite coal and its relevant classification, beneficiation (or coal washing) of raw coal (the result of
which is referred to as "float coal") is required in order to reduce the dry ash content to an acceptable level as necessary under the Chinese Coal Classification Standard. The Chinese Coal
Classification Standard categorizes anthracite coal into three classes based on volatile matter and helium content — WY1-class anthracite coal has a
volatile matter content of no more than 3.5% or helium content of no more than 2.0%; WY2-class anthracite coal has a volatile matter content of more than 3.5% and no more than 6.5% or helium
content of more than 2.0% and no
more than 3.0%; and WY3-class anthracite coal has a volatile matter content of more than 6.5% and no more than 10.0% or helium content of more than 3.0%. Under the Chinese Coal Classification
Standand, in case of a conflict between the classification of anthracite coal based on volatile matter content and helium content, the classification based on helium content will be used.
According to the Chinese Coal Granularity Classification Standard, large-lump anthracite coal has a diameter above 50 millimeters, mid-lump anthracite coal has a diameter between 25 and
50 millimeters, small-lump anthracite coal has a diameter between 13 and 25 millimeters and fine anthracite coal has a diameter below 13 millimeters.
66
Table of Contents
OVERVIEW OF THE ANTHRACITE COAL INDUSTRY IN THE PRC
The PRC's Anthracite Coal Resources
According to the SAWS and Fenwei, the PRC had anthracite coal resources of 134.2 billion tonnes in 2012, which accounted
for approximately 12% of the PRC's total coal resources. According to SAWS and Fenwei, approximately 70% of PRC's anthracite coal resources was located in Shanxi and Guizhou provinces
in 2012.
Anthracite Coal Supply & Demand in the PRC
From 2008 to 2012, domestic anthracite coal production in the PRC was insufficient to meet domestic demand, and as a result, the
PRC was a net importer of anthracite coal during the period. According to Fenwei, anthracite coal demand in the PRC is expected to continue rising in general due to estimated increases in the
demand in anthracite coal for industrial uses, and the supply deficit is expected to continue. Set forth below is the total supply and demand for anthracite coal in the PRC for the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
2012 |
|
CAGR |
|
|
|
(million tonnes, except for percentages)
|
|
Production |
|
|
446.7 |
|
|
426.0 |
|
|
496.0 |
|
|
530.7 |
|
|
534.4 |
|
|
4.6 |
% |
Net imports (or supply deficit) |
|
|
13.3 |
|
|
31.1 |
|
|
22.2 |
|
|
31.9 |
|
|
31.2 |
|
|
23.7 |
% |
Total supply |
|
|
460.0 |
|
|
457.1 |
|
|
518.2 |
|
|
562.6 |
|
|
565.6 |
|
|
5.3 |
% |
Total demand |
|
|
459.9 |
|
|
457.9 |
|
|
516.6 |
|
|
560.3 |
|
|
564.9 |
|
|
5.3 |
% |
Source: Fenwei
67
Table of Contents
The PRC's Anthracite Coal Production
According to Fenwei, the four major anthracite coal producing provinces in the PRC are Shanxi province, Henan province, Guizhou
province and Hunan province, which accounted for approximately 67% of the total anthracite coal production volume in the PRC in 2012. Shanxi province is the largest anthracite coal producer in the PRC
in terms of production volume, accounting for approximately 32% of the PRC's total anthracite coal production volume in 2012. Based on the data from Fenwei, although Guizhou province held
approximately 30% of total anthracite coal resources in the PRC, Guizhou province's anthracite coal production volume accounted for only 10% of total domestic production in 2012, due to the less
developed stage of exploration and production in Guizhou province. Set forth below is the breakdown by province of the anthracite coal production in the PRC in 2012:
Sources: SAWS; Fenwei
The PRC's Anthracite Coal Imports
The PRC is a net importer of anthracite coal. Based on the data from Fenwei, the PRC's net anthracite coal imports grew at a CAGR of
23.7% from 13.3 million tonnes in 2008 to 31.2 million tonnes in 2012. The PRC mainly imports anthracite coal from Vietnam, which accounted for 51% of the PRC's total anthracite coal
imports in 2012. Beginning in 2010, the PRC also began to import large volumes of anthracite coal from North Korea. In 2012, anthracite coal imports from North Korea accounted for 34% of the PRC's
total anthracite coal imports, the second largest source of import after Vietnam. Other sources of imports included Australia and Russia.
By
comparison, the volume of anthracite coal exports from the PRC has been low, at approximately four million tonnes per year over the period from 2008 to 2012, based on Fenwei's data.
The PRC primarily exports anthracite coal to South Korea and Japan.
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Table of Contents
Uses of Anthracite Coal in the PRC
Anthracite coal has applications in a number of different industries. In the PRC, end users generally characterize anthracite coal as
thermal coal, chemical coal or PCI coal. Set forth below is a summary of the key characteristics of thermal coal, chemical coal and PCI coal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal Type
|
|
Industry |
|
Coal Type
by Size |
|
Ash
Content
(%) |
|
Sulfur
Content
(%) |
|
Volatile
Matter
Content
(%) |
|
Calorific
Value
(MJ/Kg) |
|
Thermal Coal |
|
Power; Building Materials |
|
Fine |
|
|
20-30 |
|
|
1.0-3.0 |
|
|
6.5-10.0 |
|
|
21.0-24.0 |
|
Chemical Coal |
|
Chemical industry |
|
Lump/Fine |
|
|
<25 |
|
|
<2.0 |
|
|
£10 |
|
|
NA |
|
PCI Coal |
|
Iron and steel |
|
Fine |
|
|
<14 |
|
|
0.5-1 |
|
|
7-10 |
|
|
>24.5 |
|
Thermal coal primarily refers to fine anthracite coal used in the electric power industry for power generation and in the building
materials industry for cement production. Fine anthracite coal may generally be used directly as thermal coal without any coal-washing or other processing.
According
to Fenwei, in recent years, the installed capacity of the PRC's electric power industry has been expanding, driven by a growing economy and increasing fixed-asset investments.
According to Fenwei, thermal power accounted for 79% of the PRC's total power supply in 2012, of which approximately 15% was fueled by anthracite coal. Anthracite coal used for electric power
generation grew at a CAGR of 5.3% from 175.1 million tonnes in 2008 to 215.3 million tonnes in 2012.
In
the building materials industry, anthracite coal is used for cement production. According to Fenwei, anthracite coal used in the building materials industry grew at a CAGR of 7.1%
from 96.9 million tonnes in 2008 to 127.4 million tonnes in 2012 and is expected to remain relatively stable in the coming years.
Chemical coal refers to coal used for synthetic ammonia, methanol and other chemical production. Synthetic ammonia is the raw material
for urea production, and methanol is an important base chemical and may be used directly as fuel. Anthracite coal is a key raw material for synthetic ammonia and methanol production. Based on the data
from Fenwei, anthracite coal used in the chemical industry grew at a CAGR of 3.2% from 70.0 million tonnes in 2008 to 79.3 million tonnes in 2012. Depending on the usage and the desired
technical specifications, both anthracite coal lumps and fine anthracite coal may be used as chemical coal, and coal-washing may be required.
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Table of Contents
Some
chemical plants have experimented with using bituminous coal or natural gas as a substitute for anthracite coal to save costs. However, the use of bituminous coal requires the
restructuring of gasification furnaces and has a negative environmental impact, while the supply of natural gas in the PRC is limited. According to Fenwei, approximately 71% of synthetic ammonia and
approximately 70% of methanol in the PRC were produced from anthracite coal in 2012.
PCI coal is generally used for sintering, smelting and injection purposes in the pulverized coal injection process in iron production,
and it is produced from anthracite coal fines after coal-washing to achieve certain technical specifications. Iron and steel manufacturing plants are able to reduce costs by using PCI coal for blast
furnace injection instead of coke, which is produced from coking coal. PCI coal can be made from anthracite or bituminous coal or a combination of both. According to Fenwei, in 2012, approximately 60%
of PCI coal in the PRC was made from anthracite coal, compared with 80% in 2007, and the proportion of PCI coal made from anthracite coal is expected to continue to decline. However, anthracite coal
used in the iron and steel industry grew at a CAGR of 13.5% from 37.9 million tonnes in 2008 to 62.9 million tonnes in 2012.
OVERVIEW OF THE ANTHRACITE COAL INDUSTRY IN GUIZHOU PROVINCE
Anthracite Coal Resources & Distribution in Guizhou Province
According to the SAWS and Fenwei, in 2012, Guizhou province had 49.8 billion tonnes of coal resources, 80% of which were
anthracite coal, accounting for 30% of the PRC's total anthracite coal resources.
The
Guizhou coal market is highly fragmented. According to statistics from the Guizhou Administration of Coal Mine Safety, in June 2011, Guizhou province had 18 large coal
mines with annual production capacity of no less than 1.2 million tonnes and 70 medium-sized mines with an annual production capacity of 0.3 to 1.2 million tonnes. The production
volume of small coal mines with an annual production capacity of no more than 0.3 million tonnes accounted for 76% of the total coal production capacity in Guizhou province.
Coal Transportation in Guizhou Province
Guizhou province is located in southwest China. Coal in Guizhou province is transported by rail, road and waterway. According to
Fenwei, in 2012, the average transportation cost in Guizhou province per each tonne of coal was RMB0.5 to RMB1.0 per kilometer by road, RMB0.3 per kilometer by rail and RMB0.2 to
RMB0.3 per kilometer by waterway.
Guizhou
province is a key province for transferring cargo from the PRC's western provinces to its southern coastal area. There are four railway lines which run through Guizhou province
and the road network spans over 30,000 kilometers in Guizhou province, including five national roads and 30 provincial roads. Guiyang is at the center of Guizhou province's rail and road
networks, which extend to substantially all cities and counties in the province. The inland waterway system in Guizhou province consists of five primary out-of-provincial waterways linked to the
Yangtze River in northern Guizhou province and the Pearl River in southern Guizhou province.
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According
to Guizhou province's "678 highway network plan" Guizhou province intends to increase the total road mileage by at least 4,500 kilometers and construct a highway
in each county by 2015. This development is expected to significantly improve the transportation of coal by road in Guizhou province, particularly in the Bijie area, and it is also expected to reduce
the transportation costs. Guizhou province also plans to construct two waterway systems for out-of-province cargo transport by 2015, with one end connecting the Yangtze River in northern Guizhou
province and the other end connecting the Pearl River in southern Guizhou province.
TARGET MARKETS FOR GUIZHOU PROVINCE'S ANTHRACITE COAL
Anthracite Coal Supply & Demand in the Target Markets
According to the SAWS, Guizhou province is the largest anthracite coal producing province in southern China. Guizhou province has a
surplus of anthracite coal and is a net exporter of anthracite coal to other provinces in the PRC. Anthracite coal production in Guizhou province has historically exceeded local consumption, and this
trend is expected to continue. In addition to local consumption, other target markets for Guizhou province's anthracite coal are the neighboring provinces and municipalities of Guizhou province,
including Guangdong, Guangxi, Sichuan, Chongqing and Jiangxi. Demand for anthracite coal in these target markets has been growing faster than supply, resulting in a widened anthracite coal supply
deficit. As Guizhou province has a surplus of anthracite coal, it is in a position to supply to its neighboring provinces. Given the relative scarcity of anthracite coal and the growing economies of
the target markets, Fenwei expects the supply deficit of anthracite coal in the target markets to continue. Set forth below is a table containing the actual and estimated volume of anthracite coal
production, demand and surplus or deficit in Guizhou province and the target markets. The estimation was prepared by Fenwei based primarily on the 12th Five Year Plan for the Development of
Coal Industry of each of Guizhou province and such target markets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item
|
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
2012 |
|
CAGR
(2008-2012) |
|
2013E |
|
2014E |
|
2015E |
|
CAGR
(2013E-
2015E) |
|
|
|
(million tonnes, except percentages)
|
|
Guizhou province |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthracite coal production |
|
|
49.0 |
|
|
48.9 |
|
|
62.6 |
|
|
59.9 |
|
|
53.4 |
|
|
2.20 |
% |
|
54.5 |
|
|
56.5 |
|
|
58.8 |
|
|
3.87 |
% |
Anthracite coal demand |
|
|
29.7 |
|
|
34.3 |
|
|
35.9 |
|
|
39.3 |
|
|
40.8 |
|
|
8.31 |
% |
|
43.6 |
|
|
46.2 |
|
|
46.8 |
|
|
3.69 |
% |
Anthracite coal supply deficit/(surplus) |
|
|
-19.3 |
|
|
-14.6 |
|
|
-26.8 |
|
|
-20.6 |
|
|
-12.6 |
|
|
|
|
|
-10.9 |
|
|
-10.3 |
|
|
-11.9 |
|
|
|
|
Other Target Markets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthracite coal production |
|
|
56.8 |
|
|
54.5 |
|
|
52.3 |
|
|
54.9 |
|
|
55.8 |
|
|
-0.45 |
% |
|
53.2 |
|
|
51.3 |
|
|
48.9 |
|
|
-4.12 |
% |
Anthracite coal demand |
|
|
66.3 |
|
|
74.0 |
|
|
77.6 |
|
|
85.4 |
|
|
85.7 |
|
|
6.64 |
% |
|
80.4 |
|
|
81.5 |
|
|
81.2 |
|
|
0.51 |
% |
Anthracite coal supply deficit/(surplus) |
|
|
9.5 |
|
|
19.5 |
|
|
25.3 |
|
|
30.5 |
|
|
29.9 |
|
|
|
|
|
27.2 |
|
|
30.2 |
|
|
32.3 |
|
|
|
|
Source: Fenwei
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COAL PRICING IN GUIZHOU PROVINCE
Recent Guizhou Province's Anthracite Coal Prices
Anthracite coal prices in Guizhou province rose significantly in October 2011, mainly driven by a reduction in anthracite coal
supply as a result of extensive industry consolidation in the Guizhou province coal sector and strong demand growth driven by fast economic growth. The price of anthracite coal in Guizhou province
fell significantly in the second quarter of 2012 and again in the first half of 2013, primarily due to a slowdown in economic growth which constrained the growth of domestic demand, an increase in
anthracite coal production in Shanxi province following restructuring and consolidation of coal enterprises, and a rise in anthracite coal imports. Such decline may continue in Guizhou province
in the near future until 2014, which is expected to be in line with the coal price trend in the PRC.
Average Anthracite Coal Price (including value-added tax) in Guizhou Province
(January 2008 — October 2013) (RMB/tonne)
Source: China Coal Resource Website (www.sxcoal.com), Fenwei
- (1)
- Anshun large lump: ash 12%; volatility 7.5%; sulfur 0.9%; calorific value 6800kcal/kg (28.5MJ/kg)
- (2)
- Anshun
mid lump: ash 11%; volatility <10%; sulfur 1%; calorific value >7000kcal/kg (29.3MJ/kg)
- (3)
- Anshun
fine: ash 28%; volatility 6%; sulfur 0.4%; calorific value 5000kcal/kg (20.9MJ/kg)
- (4)
- Zhijin
PCI: ash <13.5%; volatility <10%; sulfur <0.8%; calorific value >6300kcal/kg (26.4MJ/kg)
- (5)
- Jinsha
small lump: ash 16-18%; volatility 6.5%; sulfur 0.4%; calorific value 6600kcal/kg (27.6MJ/kg)
The average prices for Anshun fine anthracite coal (mine-gate), Jinsha small lump anthracite (mine-gate), Anshun mid lump anthracite (mine-gate)
and Anshun large lump anthracite (mine-gate) relate to those for chemical coal (lump) and the average prices for Zhijin PCI (ex-works) relate to those for PCI coal. These prices are relevant to the
Company's proposed future product mix consisting of increased sales of chemical coal and PCI coal.
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Table of Contents
Factors Affecting Guizhou Province's Anthracite Coal Prices
According to Fenwei, prices of Guizhou province's anthracite coal are expected to increase gradually from 2015 in light of the
following factors, including:
- •
- anthracite coal's demand in Guizhou province and target market is expected to exceed its supply;
- •
- Guizhou province is expected to experience limited increase in anthracite coal's supply, primarily due to the PRC
government's policy of preserving scare anthracite coal resources;
- •
- the use of anthracite coal for chemical plants and steel makers is expected to experience sustainable growth in Guizhou
province;
- •
- an inflation rate of approximately 3% is assumed;
- •
- limited anthracite coal imports into the region: most of the anthracite coal imports into southwestern China originate
from Vietnam, which has limited anthracite coal resources and its government has expressed its intention to restrict anthracite coal exports;
- •
- a continuing supply deficit of anthracite coal in the PRC domestic market, as a result of the scarcity of anthracite coal
and limited domestic production capacity; and
- •
- improvements in transportation conditions within Guizhou province and between Guizhou province and its neighboring
provinces.
Furthermore,
the following factors may also contribute to a potential increase in anthracite coal prices in Guizhou province:
- •
- In 2012 and the first half of 2013, the PRC economy generally slowed down. However, with improving US and European
economies (China's largest export markets), the outlook for the PRC economy in 2015 and onwards may become positive.
- •
- According to Fenwei, anthracite coal prices may follow an upward trend in the long run from 2015 primarily due to
(i) anticipated improvement in the PRC and global economy and (ii) the increasing scarcity of minable anthracite coal reserves.
- •
- Although Shanxi and Inner Mongolia are key coal producing provinces in the PRC, they mainly produce thermal coal and are
geographically far from south and south-western China, where the Company, its customers and prospective customers are located.
However,
anthracite coal prices in Guizhou province may also experience certain downward pressure. In particular, future improvements in rail transportation conditions in the PRC,
especially the railway from Inner Mongolia to central China, may make it less expensive to transport coal from Inner Mongolia. In addition, coal production capacity in Shanxi may expand gradually
following the completion of its coal sector consolidation.
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Table of Contents
PRC GOVERNMENT POLICY TOWARDS THE COAL INDUSTRY
The 12th Five Year Plan for the PRC's Coal Industry
On March 18, 2012, the NDRC released the 12th Five Year Plan for Development of the Coal Industry, the national plan for
2011 to 2015 on coal mine construction, production capacity, and transportation via railway and port facilities in the PRC. The main objectives are
as follows:
- •
- Construct large-scale coal bases and coal enterprise groups, as well as large and modern coal mines. The goal is to have
20 large-scale coal enterprise groups accounting for over 60% of the nation's total coal production by 2015. In addition, ten of the 20 coal enterprise groups are expected to have total
annual production capacity of 100 million tonnes and the other ten coal enterprise groups are expected to have total annual production capacity of 50 million tonnes. Furthermore, large-,
medium- and small-sized mines are expected to account for 63%, 22% and 15%, respectively, of the nation's total coal production by 2015.
- •
- Keep coal production "controlled in the east, stable in the center and developing in the west of the PRC". Under the
12th Five Year Plan for Development of the Coal Industry, the "east" of PRC refers to the coastal provinces and municipals, as well as Jilin and Heilongjiang; the "center" of the PRC refers to
Hunan, Hubei, Jiangxi, Anhui, Henan, and Shanxi; and the "west" of the PRC refers to the rest of the areas of the PRC. The increase in the coal production capacity in the PRC was below the
government's plan in 2006 to 2010. Under such 12th Five Year Plan, increases in the coal production capacity are expected to continue in 2011 to 2015 in the east, center and west of the PRC,
which would account for 5.6%, 30.6% and 63.8%, respectively, of the nation's planned production capacity by 2015. The newly commenced coal mine construction in the east, center and west of the PRC is
expected to account for 3.3%, 25.0% and 71.7%, respectively, of the nation's total newly commenced coal mine construction in 2011 to 2015. By 2015, national production capacity is projected to be
4.1 billion tonnes per year, and the east, center and west of the PRC are expected to account for 12%, 35% and 53%, respectively, of the nation's total production capacity.
- •
- In 2015, rail transport demand for coal is predicted to be 2.6 billion tonnes, with planned capacity of
3 billion tonnes per year. Trans-provincial coal transport volume is estimated to be 1.66 billion tonnes by 2015, of which 1.58 billion tonnes are expected to be from Shanxi,
Shaanxi, Inner Mongolia, Ningxia and Gansu, 0.03 billion tonnes from Xinjiang, and 0.05 billion tonnes from Yunnan province and Guizhou province.
Consolidation Policy for the PRC's Coal Industry
The 12th Five Year Plan for the Development of the Coal Industry states that the primary objective during 2011 to 2015 is to
"promote merger and restructuring of coal enterprise groups, to develop large-scale enterprise groups". The State plans to accelerate resource consolidation and mergers and restructurings of coal
enterprise groups, which are expected to significantly elevate the concentration ratio of the PRC coal industry. According to the plan, from 2011 to 2015 the State will prioritize the construction of
large-scale coal bases, enterprise groups and modern mines. Moreover,
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under
the plan, there will be no more than a total of 4,000 coal enterprise groups nationwide and the average production capacity of each enterprise will exceed 1 million tonnes per
year. From 2011 to 2015, Shanxi province, Shaanxi province, Inner Mongolia, Ningxia province, Qinghai province, Gansu province, Xinjiang, Sichuan province, Guizhou province and Yunnan province plan to
accelerate the consolidation of mining properties and resources.
Coal Industry Policy in Guizhou Province
According to the 12th Five Year Plan for the Development of Coal Industry of Guizhou province, coal production is expected to
reach 182.33 million tonnes by 2015.
Guizhou province began consolidating its coal sector in 2005, with 346 coal mines closed that year and 425 coal mines
closed between 2006 to 2007. According to the 12th Five Year Plan for the Development of Coal Industry of Guizhou province released in January 2011, the Guizhou province government
announced a policy to reduce the target number of coal enterprise groups to 100 and the target number of coal mines to approximately 1,000, each with a production capacity of at least
1.5 million tonnes per year, by the end of 2015. This policy also aims to form one "extra-large" coal enterprise group producing at least 50 million tonnes of coal per year, two "large"
coal enterprise groups producing at least 30 million tonnes of coal per year, and 10 "medium" coal enterprise groups producing at least five million tonnes of coal per year.
On
March 22, 2013, the authorities in Guizhou province issued the Notice of the "Implementation Rules on Accelerating the Progress of Merging and Restructuring Coal Mining
Enterprises of Guizhou Province" (
), which aims to implement the aforementioned reductions of coal mining enterprises and coal mines. Coal
enterprises located in Bijie and Liupanshui counties are required to
have annual production capacities of no less than 2.0 million tonnes, and those located in the other areas of Guizhou province are required to have annual production capacities of no less than
1.5 million tonnes.
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Table of Contents
REGULATION
OVERVIEW
The coal industry in the PRC is subject to extensive regulations. These regulations govern investments in coal businesses, mining
rights, coal exploration, production, distribution, trading and transportation, as well as safety and environmental protection. In addition, coal operations in the PRC are subject to taxes
and levies.
PRC LAWS RELATING TO THE COAL INDUSTRY
Approval of Coal Mine Development Projects
In the PRC, coal mine development projects must be approved by the NDRC or its local counterparts, depending on the location and annual
production capacities of the project.
On
July 16, 2004, the State Council promulgated the Decision on Institutional Reform of Investment System (
) (the "Investment
Decision"), which significantly modified the government approval process for major investment projects in the PRC. Pursuant to the Investment
Decision, applications for coal mine development projects within the mining areas under the national plan are required to be submitted to the NDRC, and applications for other coal mine development
projects are required to be submitted to the competent investment department of the local government.
On
December 8, 2005, the NDRC issued the Notice on Strengthening the Management of Related Issues Concerning Basic Construction of Coal Projects (
), which was amended on December 12, 2012. Under the Coal Projects Notice, the NDRC delegated to its local counterparts the authority to approve coal mine development
projects which are within the mining areas under the national plan which have annual production capacities under 600,000 tonnes.
On
November 28, 2007, the NDRC issued the Notice on the Catalogue of Planning Coal Mining Areas Approved by the State (2007) (
(2007
)
), which was amended on December 12, 2012. Under the aforementioned Notice, the NDRC approved or delegated to its local counterparts the power of authority to approve
coal mine projects which are within the Catalogue of the mining areas under the national plan.
On
May 15, 2013, the State Council promulgated the Decision on Cancellation and Delegation of Certain Items Subject to Administrative Examination and Approval (
) (the "Decision on Administrative Examination and Approval"). According to the Decision on Administrative Examination and Approval, the competent investment department
of the provincial governments may approve applications for coal mine development projects which are within the mining areas under the national plan and have newly increased annual production
capacities under 1,200,000 tonnes.
Mining Operations
The Coal Law of the PRC (
), which became effective on December 1,
1996 and as amended on August 27, 2009 and April 22, 2011, sets forth certain requirements relating to coal
production, including requirements relating to the exploration of mineral resources, the approval of new mines, the issuance of production permits, the implementation of safety standards, the coal
trading, the protection of mining areas from destructive exploitation, the protection of miners and the administration and supervision of coal mining operations.
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Table of Contents
Under
the Mineral Resources Law of the PRC (
) (the "Mineral Resources Law"), which became effective on January 1, 1997 and as amended
on August 29, 1996, all mineral resources in PRC are owned by the
State. The Mineral Resources Law governs the supervision and administration of the mining and exploration of mineral resources. Under the Mineral Resources Law, the geology and mineral resources
bureau of each province, autonomous region and municipal government is responsible for the supervision and administration of the exploration, development and exploitation of mineral resources within
its jurisdiction. Businesses engaged in the exploration and exploitation of mineral resources are required to obtain exploration rights and mining rights from the competent land and resources
authorities.
Pursuant
to the Coal Law and the Mineral Resources Law, exploration and exploitation of coal is subject to the supervision by the MLR and the relevant local mineral resource bureaus and
coal administration departments. For example, coal exploration licenses and coal mining right permits are granted by the MLR or local mineral resource bureaus. Holders of mining right permits are
required to file annual reports with the relevant administrative authorities that issue the permits. A coal production permit is required before a coal producer may produce and sell coal in the PRC.
Furthermore, the production capacity of each coal mine is subject to annual review by the NDRC or local counterparts.
Under
the Procedures for the Registration of Mineral Resources Mining (
) (the "State Council Circular No. 241"), which became
effective on February 12, 1998, holders of mining right permits are required to submit applications
with the relevant registration authorities to change the scope of mining area, the main exploited mineral categories, exploitation modes and name of the mining enterprise, as well as transferring
mining rights. Mining right permits will terminate upon their expiration unless they are extended by relevant registration authorities.
Coal
mining businesses may be subject to administrative penalties for certain non-compliance. For example, conducting a coal mining business without a mining right permit, safety
production permit or coal production permit may result in cease-and-desist orders, disgorgement of profits and fines. In addition, coal mining businesses which exceed the production limit set forth in
the mining right permit or coal production permit may be subject to a one-time fine of up to RMB2.0 million on the coal mine, a fine of no more than RMB150,000 on the mine manager, other
administrative penalties and, in serious cases, revocation of coal production permit and mine managers' qualification certifications, as well as closure of the mine.
Under
the Coal Law and the Mineral Resources Law, coal producers are required to achieve certain reserves recovery rates, and failure to achieve the rates may result in penalties,
including the revocation of coal production permits.
It
is unlawful to conduct mining operations in areas authorized for exploitation by other mining operators, which may result in cease and desist orders, fines, forfeiture of relevant
products and proceeds and damage of losses suffered by authorized operators.
Coal
mining businesses which cause harm to others in the course of operations are liable to the affected parties and are required to take remedial measures. Under the Detailed Rules for
the Implementation of the Mineral Resources Law (
), a mine operator is required to follow certain procedures when closing a mine,
including submitting a mine closure geology report to the relevant authorities that approved
the opening of the mine.
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Table of Contents
Mining
rights are transferable subject to the approval of the relevant geological and mineral resources and land bureaus of the PRC. A mining right permit holder is entitled to and
obligated to conduct mining activities in the area specified in and within the term of the mining right permit. A mining right permit holder is also entitled to set up necessary production facilities
and acquire land use rights necessary for coal production. A mining right permit holder is required to (i) conduct reasonable exploitation and protect and fully utilize mineral resources,
(ii) pay resources taxes and resources compensation levies, (iii) comply with the laws and regulations relating to occupation safety, soil and water conservation and reclamation and
environmental protection, and (iv) submit mineral resource reserves and utilization reports to the relevant government authorities.
Pursuant
to the Coal Law, a coal mining business is required to obtain a coal production permit in order to sell self-produced coal. In addition, pursuant to the Measures of Supervision
of Coal Operation (
), a coal operation qualification certificate is required to be obtained before engaging in sales of coal products that
are not self-produced or self-processed.
The
National People's Congress Standing Committee passed certain amendments to the Coal Law, which became effective on June 29, 2013, including removing the requirements of
obtaining coal production permits and coal operation permits.
Pricing
Since the PRC Government eliminated price controls over the coal used for power generation in 2002, coal price has been mainly
influenced by the supply and demand of coal markets. Nonetheless, the PRC Government still has the right to implement certain temporary price intervention measures. For example, the NDRC issued the
Notice on Strengthening Adjustments of Thermal Coal Prices (
) on November 30, 2011, pursuant to which the NDRC implemented a
temporary price intervention measure on thermal coal sold to certain power producers by setting maximum
coal prices at key ports and distribution centers in January 2012. The temporary price intervention measure was terminated in January 2013 in accordance with the Notice on Terminating
Temporary Price Intervention Measures on Thermal Coal Prices (
) issued by the NDRC on December 18, 2012. Pursuant to the Price Law of
the PRC (
), which became effective on May 1, 1998, temporary price intervention measures may be introduced to limit coal price
increases.
Supply of thermal coal to power plants
On March 28, 2011, the NDRC issued the "Emergency Notice to Ensure the Stable Supply of Thermal Coal and the Stabilization of
the Price of Thermal Coal by NDRC" (
), which called for a stable supply of thermal coal in all coal producing provinces and districts.
Furthermore, according to the "Notice of Issuing the Provincial Thermal Coal
Supply Target for the
Year 2010 by the General Office of the Guizhou Provincial People's Government (Qianfubanfa (2010) No.4)" (
2010
(2010) 4
) issued on January 12, 2010, the "Notice of Issuing the Provincial Thermal Coal Supply Target for the Year 2011 by the General Office of the Provincial People's
Government (Qianfubanfa (2010) No.119)" (
2011
(2010) 119
) issued on December 17, 2010 and the "Notice of Implementing the
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Table of Contents
Provincial
Supply of Thermal Coal and Coal Consumed for Municipal Gas for Manufacture for the Year 2012 by the General Office of the Provincial People's Government (Qianfubanfa
(2011) No.127)" (
2012
(2011) 127(
)) issued on December 12, 2011 by the Guizhou government, the Guizhou government published the annual guidance
relating to the provision of certain minimum amounts of
thermal coal by coal enterprises in Guizhou province to power plants operating in Guizhou province in 2010, 2011 and 2012,
respectively. Under the Notice of Issuing the Provincial Thermal Coal Instructional Plan for the Year 2013 (Qianjingxinyunxing (2013) No.1) (
2013
) (
) (2013) 1
)) issued by the Guizhou Economic and Information Commission and the Energy Bureau of
Guizhou Province on January 5, 2013, coal mining enterprises located in Bijie City
and Liupanshui City are required to provide 17.25 million tonnes and 11.1 million tonnes of thermal coal, respectively, to power plants in Guizhou province in 2013. Such guidances are
aimed at ensuring adequate supply of thermal coal to power plants in Guizhou province.
Foreign Investments in Coal Mining Industry
Our business is not in an industry in which foreign investments are restricted or prohibited under the Catalogue of Industries for
Guiding Foreign Investments (Amended in 2011) (
(2011
)) (the "Catalogue") promulgated by the MOFCOM and the NDRC, which became effective on January 30, 2012. Under the Catalogue, exploration and mining of "special
and scarce" coal is an industry in which foreign investments are "restricted", which means, among other things, that businesses engaged in exploration of special and scarce coal are required to be
controlled by PRC persons. Although "special and scarce" coal is not defined in the Catalogue, there is an enumerated listed of "special and scarce" coal under the Interim Administrative Measures on
the Development and Utilization of Special and Scarce Coal (
) (the "Measures on Special and Scarce Coal") which were promulgated by
the NDRC and became effective on January 9, 2013. In Guizhou province, however, anthracite
coal does not fall within the enumerated list of "special and scarce" coal. The Measures on Special and Scarce Coal provide that businesses engaged in the development of "special and scarce" coal in
certain designated "special and scarce coal mining areas" are required to be controlled by PRC persons. None of our mines are located in the designated "special and scarce coal mine areas".
PRC LAWS RELATING TO ENVIRONMENTAL PROTECTION
General
Coal mining operations in the PRC are subject to extensive environmental regulations. Under the relevant laws, rules and regulations, a
business that discharges toxic and hazardous materials is required to comply with the applicable standards and report to and register with the relevant environmental protection authorities. Failure to
comply may result in warnings, enforcement orders and other penalties. Before a construction project commences, an environmental impact assessment report must be submitted to the relevant
environmental protection authorities for approval. An acceptance inspection by the relevant environmental protection authorities must be obtained before the completed construction project may commence
its operations.
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Table of Contents
Provisions on the Protection of the Geological Environment of Mines
According to the Provisions on the Protection of the Geologic Environment of Mines (
), which became effective on May 1, 2009, a mining right permit applicant is required to submit a plan relating to the protection and restoration of the mine's
geological environment to the competent land and resources authorities for approval. In addition, a mining right permit holder is required to pay a security deposit for the restoration of the
geological environment of mines and must be responsible for restoration of the mine's geological environment which is affected by its mining operation.
Regulations on Land Reclamation and its Implementing Measures
Pursuant to the Regulations on Land Reclamation (
), which became effective
on March 5, 2011 and the Implementing Measures of Regulations on Land Reclamation (
), which became effective on March 1, 2013, a
coal production enterprise must take measures to restore the land that has been damaged due to its coal mining operations.
The reclaimed land may be put into use only after the reclamation requirements are fulfilled and the relevant land administration authorities have completed an examination and acceptance. Failure to
comply with the reclamation requirements or restore the land in the mining areas may subject the coal production enterprise to fines, land reclamation fees, rejection of the application for land use
right, revocation of the mining right permit or, in serious cases, criminal liability.
PRC LAWS RELATING TO PRODUCTION SAFETY
The SAWS and the SACMS under the supervision of the SAWS are responsible for centralized supervision and monitoring of coal mine
safety. Pursuant to the Provisions on the Supervision of Safety Facilities for Coal Mine Construction Projects (
), the safety design and
procedures of a coal mine construction project must be examined and approved by the SACMS or its local branches. Before the commencement of operation
of the coal mine, coal mine equipment and conditions must pass relevant inspections and acceptance tests performed by SACMS or its local branches. The SACMS may conduct safety inspections of the
conditions of coal production businesses regularly pursuant to the Safety Production Law of the PRC (
), the Mining Safety Law of the PRC (
) and other relevant safety regulations. Coal production businesses that fail to meet relevant safety requirements may be subject to fines
and suspensions of operations.
Pursuant
to the requirements of the Measures for the Implementation of Safe Production Licenses of Coal Mine Enterprises (
), which became effective
on May 17, 2004, coal mines in operation must have a valid production safety
license issued by the SACMS or its provincial bureaus and comply with the safe production requirements set forth in the license. The production safety license has an initial term of three years,
subject to renewals upon satisfaction of relevant safe production requirements. Moreover, pursuant to the Special Provisions of the State Council on the Prevention of Coal Mine
Production Safety Accidents (
), which became effective on September 3, 2005, coal mine businesses are responsible for preventing
accidents at coal mines, and are required to have sufficient safety
equipment, facilities
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and
resources, appropriate accident prevention measures and a sound emergency contingency plan. Coal mine businesses must establish policies relating to the monitoring, inspection, handling and
reporting of potential safety risks. If any major potential safety risk of production set forth in the policies is identified, coal mine businesses should suspend their operations and eliminate
the risk.
On
July 19, 2010, the State Council issued the Notice of the General Office of the State Council on Further Improving Production Safety of Enterprises (
) (the "Production Safety Notice"). The Production Safety Notice requires enterprises such as coal mining enterprises to improve safety management, conduct frequent
safety inspections, enhance the responsibility and accountability of persons in charge of production and improve safety education and trainings.
The
Trial Rules on Mining Production Work-Related Safety Issues (
), which became effective on September 1, 2010, require coal mining
companies to submit to relevant safety authorities safety manuals, reports on evaluation of
work-related risks, means adopted for risk prevention and work safety measures.
Pursuant
to the Notice of "Ten Prohibitions" on Coal Mine Gas Prevention (
), which became effective on November 25, 2011, coal and gas
outburst mines with annual production capacities of 90,000 tonnes or less are required to suspend
production pending rectifications and assessments of gas prevention capability. Coal and gas outburst mines which fail to pass the assessment
are required to remain suspended pending rectifications, be consolidated with other mines with gas prevention capacity, or close down their operations.
On
December 26, 2011, the NEA issued the Administrative Measures regarding Assessment of Gas Prevention Capability of Coal Mining Enterprises (
) (the "Measures on Gas Prevention"). On March 5, 2012, the Office of the Guizhou Energy Bureau issued Opinions on Implementation of Assessment of Gas Prevention
Capability of Coal Mining Enterprises in Guizhou Province (
) (the "Opinions on Gas Prevention"). According to the Measures on Gas
Prevention and the Opinions on Gas Prevention, coal mining enterprises engaged in production and
construction of mines with high gas contents and coal and gas outburst mines in Guizhou province are required to apply for assessments of gas prevention capability. Gas prevention capability
assessments are required before applying for approval of construction projects of mines with high gas contents and coal and gas outburst mines or consolidating mines with high gas contents and coal
and gas outburst mines. Mines with high gas content and coal and gas outburst mines which fail to pass the assessments are required to suspend their operations pending rectifications, consolidate with
other mines with gas prevention capacity or close down their operations.
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PRC LAWS RELATING TO TAXATION AND FEES
Pursuant to the PRC Enterprise Income Tax Law (
) effective on
January 1, 2008 and its implementation rules, domestic enterprises and foreign invested enterprises are subject to enterprise income tax at a rate of 25%
on taxable income.
Under
the PRC Enterprise Income Tax Law, enterprises are categorized as resident enterprises and non-resident enterprises. A resident enterprise refers to an enterprise that is
incorporated under the PRC law, or that is incorporated under the law of a jurisdiction outside the PRC with its de facto
management body located within the PRC. Pursuant to the Regulation on the Implementation of the PRC Enterprise Income Tax Law (
), which
became effective on January 1, 2008, a "de facto management body" is defined as a managing body that exercises, in substance, overall management and control
over the production and business, personnel, accounting and assets of an enterprise. A non-resident enterprise refers to an enterprise which is incorporated under the law of a jurisdiction outside the
PRC with its de facto management body located outside of the PRC, but which has set up institutions or establishments in the PRC, or has income originating from the PRC without setting up any
institution or establishment in the PRC.
On
August 21, 2006, the PRC and Hong Kong entered into an Arrangement between the Mainland of the PRC and Hong Kong for Avoidance of Double Taxation of Income and Prevention of
Income Tax Evasion (
) (the "Income Tax Arrangement"). According to the Income Tax Arrangement, a withholding tax rate of 5% applies
to dividends paid by a PRC company to a corporate
recipient that is a Hong Kong resident and directly holds at least 25% equity interests in the PRC company. A withholding tax rate of 10% applies to dividends paid by a PRC company to a corporate
recipient that is a Hong Kong resident and holds less than 25% equity interests in the PRC company.
According
to the Circular of the State Administration of Taxation on Relevant Issues relating to the Implementation of Dividend Clauses in Tax Treaties (
), which became effective on February 20, 2009, special tax treatments on dividends paid by a PRC company under relevant tax treaties will not be available unless
certain conditions are satisfied. For example, the dividend recipient must be qualified under the relevant tax treaty, and must directly hold certain equity interest in and voting shares of the PRC
company distributing dividends as specified in the relevant treaty within 12 months prior to the dividends distribution. In addition, pursuant to the Administrative Measures for Non-residents
to Enjoy Treatments under Tax Treaties (Trial) (
), which became effective on October 1, 2009, approvals from competent local tax
authorities are required before an enterprise can enjoy the relevant
tax treatments.
Pursuant
to the Provisional Regulation of Resources Tax of the PRC (
), which became effective on January 1, 1994 and as amended on
September 30, 2011 and the Rules Administering Levy of Mine Resource Compensation Fees (
), which became effective on April 1,
1994 and as amended on July 3, 1997, coal mining businesses are subject to resources taxes and resources compensation fees.
Since 2004, the MOF and the SAT has increased coal resources tax rates in certain regions, including Guizhou province. According to the
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Detailed Rules for Implementation of the Interim Regulations of the People's Republic of China on Resource Tax (
) issued
by the Ministry of Finance and State Administration of Taxation on October 28, 2011 (effective on November 1, 2011), the rate of coal resources tax
(excluding coking coal) for Guizhou province is RMB2.5 per tonne.
PRC LAWS RELATING TO LAND
Under the Land Administration Law of the PRC (
), which became effective on
January 1, 1999 and amended on August 28, 2004, land in the PRC is either state-owned or collectively-owned, depending on the
location of the land. Land in the urban areas of a city or town is generally state-owned, and the land in the rural areas of a city or town and all rural land is generally collectively owned. Land is
subject to requisitions by the government if it is required by the public interest. Generally, the land use rights of collectively owned land may not be granted, assigned or leased to any party for
uses other than agricultural uses. In the case of temporary use of collectively-owned land for construction projects or by geological survey teams, approvals must be obtained from the relevant land
administrative authorities. The term of each such approval generally does not exceed two years. In addition, any person who uses the collectively-owned land for purposes other than agricultural uses
must enter into a contract with rural economic collective organizations or village committees, depending on who owns the land, and pay land compensation fees as provided in the contract.
PRC LAWS RELATING TO LABOR
Under the Labor Law of the PRC (
) and the Labor Contract Law of the PRC (
), labor relationships between the employers and the employees must be established by labor contracts, and the employers are subject to
certain obligations,
including:
- •
- prohibitions against requiring the employees to work overtime;
- •
- the obligation to timely pay the wages which are not less than minimum wages to the employees;
- •
- the obligation to establish and improve their systems for labor safety and sanitation, strictly abide by the applicable
rules and standards on labor safety and sanitation and educate employees on labor safety and sanitation; and
- •
- the obligation to provide employees with working conditions which meet the requirements for labor safety and sanitation
and provide employees with regular health examination.
Under
the Regulation of Insurance for Labor Injury (
), which became effective on January 1, 2004 and as amended in 2010, the Provisional
Insurance Measures for Maternity of Employees (
), which became effective on January 1, 1995, the Interim Regulation on the Collection
and Payment of Social Insurance Premiums (
), which became effective on January 22, 1999 and the Interim Provisions on Registration of
Social
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Insurance
(
), which became effective on March 19, 1999, employers are required to register with the competent social insurance authorities and
provide their employees with welfare
schemes covering pension insurance, unemployment insurance, maternity insurance, injury insurance and medical insurance.
Pursuant
to the Social Insurance Law of the PRC (
), which became effective on July 1, 2011, all employees are required to participate in basic
pension insurance, basic medical insurance schemes and unemployment
insurance, which must be contributed by both the employers and the employees. All employees are required to participate in work-related injury insurance and maternity insurance schemes, which must be
contributed by the employers. Employers are required to complete registrations with local social insurance authorities. Moreover, the employers must timely make all social insurance contributions.
Pursuant
to the Regulations on Management of Housing Fund (
), which became effective on April 3, 1999 and as amended in 2002, enterprises are
required to register with the competent administrative centers of housing fund and
open bank accounts for housing funds for their employees. Employers are also required to timely pay all housing fund contributions for their employees.
PRC LAWS RELATING TO FOREIGN EXCHANGE
Under the Regulations on Foreign Exchange Control of the PRC (
), which
became effective on April 1, 1996 and as amended on August 5, 2008, payments made in foreign currencies for international trades such as the sale or
purchase of goods are not subject to governmental control or restrictions. Certain organizations in the PRC such as foreign-invested enterprises may purchase, sell and remit foreign currencies at
certain banks authorized to engage in foreign exchange business by providing valid supporting documents to the banks. However, regulatory approvals are required for certain capital account
transactions such as overseas investments by a domestic company.
The
SAFE issued the Notice of the SAFE on Issues Relating to the Administration of Foreign Exchange on Fund Raisings by PRC Residents Through Offshore Special Purpose Vehicles and
Round-trip Investment (
) in October 2005 ("SAFE Circular No. 75"), requiring PRC residents to register with the competent local
branch of the SAFE before establishing or controlling any
company outside of the PRC for the purpose of capital financing with assets or equities in PRC companies, referred to in the notice as an "offshore special purpose company". In addition, any PRC
resident that is a shareholder of an offshore special purpose company is required to amend its registration with the local branch of the SAFE with respect to that offshore special purpose company in
connection with any increase or decrease of capital, transfer of shares, merger, division, long-term equity or debt investment, creation of any security interest over assets or any other material
change in share capital not involving a round-trip investment.
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PRC LAWS RELATING TO MINING RESOURCE CONSOLIDATION
On October 16, 2010, the General Office of the State Council forwarded NDRC's Certain Opinions on Accelerating the Merger and
Restructuring of Coal Mine Enterprises (
) (the "Opinions on Consolidations of Coal Mine Enterprises") to the governments of all
provinces, autonomous regions and municipalities of the PRC, and all ministries
and commissions of as well as departments administered directly under the State Council. The Opinions on Consolidations of Coal Mine Enterprises relate to accelerating the merger and restructuring of
coal mine enterprises and clarify certain important implications, guiding principles and main goals of accelerating the merger and restructuring of coal enterprises.
On
January 30, 2011, the General Office of the Guizhou Provincial government issued the "12th Five-Year Plan (2011-2015) for the Development of Coal Industry of Guizhou
Province" (
). Under this plan, the Guizhou government plans to form one coal enterprise group in Guizhou province that has annual
production capacity of 50 million tonnes and two
coal enterprise groups in Guizhou province each having total annual production capacities of 30 million tonnes. The plan also specified that the total number of the coal enterprise groups to be
maintained below 200.
Pursuant
to the Notice of the General Office of the Guizhou Provincial Government on Forwarding the "Instruction and Opinions on Accelerating the Progress of Merging and Restructuring
Coal Mining Enterprises" issued by the Energy Bureau of Guizhou Province (
) on April 15, 2011, the Guizhou government intends to
reduce the total number of coal mining enterprises, particularly the number of small coal mines through mergers
and restructuring.
The
Notice of the General Office of the Guizhou Provincial Government on Forwarding the "Plan for the Merger and Restructuring of Coal Mining Enterprises for Guizhou Province (Trial
Implementation)" was promulgated on December 17, 2012 (
) (the "2012 Coal Mining Enterprise Consolidation Notice"). In addition, the
Notice of the "Implementation Rules on Accelerating the Progress of Merging and Restructuring Coal
Mining Enterprises of Guizhou Province" (
) (the "2013 Coal Mining Enterprise Consolidation Notice") was promulgated on March 22,
2013. According to the 2012 Coal Mining Enterprise Consolidation Notice and the
2013 Coal Mining Enterprise Consolidation Notice, by 2015, the Guizhou government plans to achieve the following:
- •
- generally eliminate small-scaled coal mines with annual production capacities under 150,000 tonnes;
- •
- phase out coal and gas outburst mines with annual production capacities under 300,000 tonnes;
- •
- generally require the coal and gas outburst mines to maintain annual production capacities of at least
450,000 tonnes and the high gas mines to maintain annual production capacities of at least 300,000 tonnes;
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- •
- maintain the number of the coal mining groups below 100;
- •
- maintain the number of the mines to around 1,000; and
- •
- require the coal mining groups located in each of Bijie City and Liupanshui City to maintain aggregate annual production
capacities of at least 2,000,000 tonnes, respectively.
We
believe the 2012 Coal Mining Enterprise Consolidation Notice and the 2013 Coal Mining Enterprise Consolidation Notice will be a positive development for coal mining groups that
qualify as coal mine consolidators, including our Company. By reducing the number of coal mining groups and of small-scaled coal mines in Guizhou province, we believe the competition for acquiring
mining rights for desirable coal reserves in Guizhou province would be reduced. Moreover, the proposed phase-out of coal and gas outburst mines could improve safety conditions of coal mines in Guizhou
province, thereby potentially reducing the frequency of coal mining accidents and the associated production suspensions imposed by the Guizhou government on surrounding coal mines.
Under
the Notice of Issuing the Implementation Rules on Coal Mining Enterprises of Guizhou Province Merger and Reorganization Subject Qualification Declaration
Work (
) jointly issued by the Energy Bureau of Guizhou Province, the Guizhou Development and Reform Commission,
the Guizhou Economic and Information Commission, the Department of
Land and Resources of Guizhou Province, the Administration for Industry and Commerce of Guizhou Province, the Guizhou Administration of Work Safety and the Guizhou Administration of Coal Mine Safety
on January 8, 2013, a coal enterprise group is required to meet the following criteria in order to qualify as a coal mine consolidator in Guizhou province: (i) it must be an independent
legal person and is registered with the administration of commerce and industry department in Guizhou province; (ii) it must have obtained the safe production permit; (iii) it is
required to maintain annual design production capacity of at least 2,000,000 tonnes if it is located in Bijie City or Liupanshui City; and (iv) it must pass certain gas prevention
capability assessments if it owns and/or plans to acquire mines located in coal and gas outburst areas or outburst dangerous areas.
Under
the Notice of Issuing the Implementation Rules on Work for the Merger and Reorganization of Coal Mining Enterprises of Guizhou
Province (
) jointly promulgated by the Energy Bureau of Guizhou Province, the Guizhou Provincial Public Security
Department, the Department of Land and Resources of Guizhou Province, the
Environmental Protection Department of Guizhou Province, the Guizhou Provincial Water Resources Department, the Administration for Industry and Commerce of Guizhou Province, the Guizhou Administration
of Work Safety and the Guizhou Administration of Coal Mine Safety on March 22, 2013, a coal mining enterprise group which has been identified as a consolidator must report to the Guizhou
Provincial Coal Mining Enterprise Merger and Reorganization Work Leading Group Office (
) regarding potential merger and reorganization
activities. The consolidator qualifications of an officially designated consolidator are subject to review and examination on a
quarterly basis. If the officially designated consolidator no longer meets the requisite conditions for being a consolidator, its qualifications may be revoked by Guizhou Provincial Coal Mining
Enterprise Merger and Reorganization Work Leading Group (
).
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HISTORY AND DEVELOPMENT
HISTORY
Our Company was incorporated in January 2010 under the laws of BVI. We are a wholly-owned subsidiary of CHNR, a BVI company with
common shares listed on the NASDAQ Capital Market under the symbol "CHNR" and controlled by Mr. Li Feilie, our chairman and chief executive officer. CHNR has two business segments: base metals
exploration and mining and anthracite coal exploration and mining. CHNR's anthracite coal exploration and mining segment is operated through our Company. Please refer to the section headed "Business"
for the status of development of each of our seven anthracite coal mines.
On
December 31, 2013 the CHNR Board approved a conditional special interim dividend to the CHNR Shareholders to be satisfied by way of a distribution in specie of the
entire issued share capital of our Company to all CHNR Shareholders in proportion to their respective shareholdings in CHNR on the Distribution Record Date. Please refer to the section headed "The
Spin-off" for the details of, and reasons for, the Spin-off.
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OUR CORPORATE STRUCTURE
We are a holding company, and each of our anthracite coal mines is held through one of our wholly- or majority-owned subsidiaries. Set
forth below is our corporate structure immediately prior to the completion of the Spin-off:
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- (1)
- The
remaining 1% equity interest is held by Mr. Zheng Shengjian, an Independent Third Party.
- (2)
- The
remaining 1% equity interest is held by Mr. Huang Bin, an Independent Third Party.
- (3)
- The
remaining 1% equity interest is held by Mr. Cai Songqing, an Independent Third Party.
- (4)
- The
remaining 1% equity interest is held by Mr. Li Shenggen, an Independent Third Party.
- (5)
- The
remaining 30% equity interest is held by Yangpu Wanshun Energy Co. Ltd., which is an Independent Third Party incorporated in the PRC and
engaged in the business of trading of general machinery and non-ferrous metal, sales of raw ferrous metal and ferrous metal products, and development of energy technologies.
- (6)
- The
remaining 30% equity interest is held by Yangpu Wanshun Energy Co. Ltd., which is an Independent Third Party incorporated in the PRC and
engaged in the business of trading of general machinery and non-ferrous metal, sales of raw ferrous metal and ferrous metal products, and development of energy technologies.
- (7)
- CHNR's
metal mining operations comprise the acquisition and exploitation of mining rights, including the exploration, mineral extraction, processing and
sales of iron, zinc and other nonferrous metals extracted or produced at mines primarily located in Anhui province, the PRC.
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Set
forth below is our corporate structure immediately after the completion of the Spin-off:
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- (1)
- The
remaining 1% equity interest is held by Mr. Zheng Shengjian, an Independent Third Party.
- (2)
- The
remaining 1% equity interest is held by Mr. Huang Bin, an Independent Third Party.
- (3)
- The
remaining 1% equity interest is held by Mr. Cai Songqing, an Independent Third Party.
- (4)
- The
remaining 1% equity interest is held by Mr. Li Shenggen, an Independent Third Party.
- (5)
- The
remaining 30% equity interest is held by Yangpu Wanshun Energy Co. Ltd., an Independent Third Party.
- (6)
- The
remaining 30% equity interest is held by Yangpu Wanshun Energy Co. Ltd., an Independent Third Party.
- (7)
- CHNR's
metal mining operations comprise the acquisition and exploitation of mining rights, including the exploration, mineral extraction, processing and
sales of iron, zinc and other nonferrous metals extracted or produced at mines primarily located in Anhui province, the PRC.
CORPORATE TRANSACTIONS
Our corporate structure resulted from the Corporation Transactions pursuant to which the corporate entities that have historically
conducted our business were acquired by Feishang and subsequently transferred to us. The Corporate Transactions were completed in July 2011 and involved three
key steps:
- •
- the acquisition of Guizhou Puxin;
- •
- the acquisition of Guizhou Yongfu; and
- •
- the acquisition of Guizhou Dayun.
As
advised by our PRC legal advisors, Commerce & Finance Law Offices, we have obtained all the material approvals from the relevant authorities for our PRC subsidiaries directly
involved in the Corporation Transactions, and each of the transfers directly involving our PRC subsidiaries was properly and legally completed in all material respects.
Acquisition of Guizhou Puxin
Guizhou Puxin was established in January 2009 under the laws of the PRC. In March 2010, Guizhou Fuyuantong acquired 100%
of the equity interests in Guizhou Puxin from Yangpu Jindin Industrial Co. Ltd. and Mr. Zhang Xiaofeng, each of which was an Independent Third Party, for a consideration of
RMB150.0 million which represented the registered capital of Guizhou Puxin. The consideration was fully paid by July 2011. At the time of the acquisition, Guizhou Puxin had the following
five majority-owned subsidiaries:
- •
- Baiping Mining, a 70%-owned subsidiary which holds Baiping Coal Mine;
- •
- Xinsong Coal, a 99%-owned subsidiary which holds Liujiaba Coal Mine;
- •
- Linjiaao Coal, a 99%-owned subsidiary which holds Zhulinzhai Coal Mine;
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- •
- Gouchang Coal, a 99%-owned subsidiary which holds Gouchang Coal Mine; and
- •
- Dayuan Coal, a 99%-owned subsidiary which holds Dayuan Coal Mine.
The
consideration of RMB150.0 million was significantly lower than the fair value of Guizhou Puxin's net assets at the time of the acquisition, which was RMB774.1 million.
We believe Guizhou Fuyuantong was able to acquire Guizhou Puxin at a relatively low price because Guizhou Puxin was incurring losses and its coal mines were in the early stages of development at the
time of the acquisition, and Yangpu Jindin Industrial Co. Ltd. and Mr. Zhang were experiencing financial difficulties and were unable or unwilling to fund the capital expenditures
that would have been required to develop Guizhou Puxin's coal mines.
Guizhou
Puxin, together with its five subsidiaries, became our indirect subsidiaries in April 2010 when Smartact acquired 100% of the equity interests in Guizhou Fuyuantong from
Feishang for a consideration of RMB10.0 million. The consideration was determined based on the then net asset value of Guizhou Fuyuantong and was fully paid in July 2010.
Acquisition of Guizhou Yongfu
Guizhou Yongfu, which holds Yongsheng Coal Mine, was established in June 2005 under the laws of the PRC. In July 2008,
Yangpu Shuanghu, a company then controlled by Feishang, acquired 70% of the equity interests in Guizhou Yongfu from Mr. Li Qing, an Independent Third Party, for a consideration of
RMB11.8 million which represented 70% of the then registered capital of Guizhou Yongfu. The consideration was fully paid in July 2009. In August 2008, Newhold Investments Limited
("Newhold"), a company then wholly-owned by Feishang, acquired all of the equity interests in the holding company of Yangpu Shuanghu for a nominal value of HK$1.0 as part of internal group
restructuring. In January 2009, CHNR acquired all the issued shares of Newhold from Feishang for a total consideration of RMB287.7 million which was determined based on the volume of
coal resources. The consideration was fully paid by November 2009.
Guizhou
Yongfu became our indirect subsidiary in September 2010 when Guizhou Puxin acquired 70% of the equity interests in Guizhou Yongfu from Yangpu Shuanghu for a consideration
of RMB70.0 million, which represented 70% of the then registered capital of Guizhou Yongfu. The consideration was fully paid in October 2010. Yangpu Wanshun Energy Co. Ltd.
owns the remaining 30% equity interests in Guizhou Yongfu.
Acquisition of Guizhou Dayun
Guizhou Dayun, which holds Dayun Coal Mine, was established in April 2004 under the laws of the PRC. In June 2008, Yangpu
Dashi, a company then controlled by Feishang, acquired 100% of the equity interests in Guizhou Dayun from Yu Xiang, Wang Fang, Wang Yongzhi and Liu Min, each of whom was an Independent Third Party,
for a total consideration of RMB4.0 million which represented the then registered capital of Guizhou Dayun. The consideration was fully paid in December 2009. In July 2008,
Pineboom Investments Limited ("Pineboom"), a company then wholly-owned by Feishang, acquired all of the equity interests in the holding company of Yangpu Dashi for a nominal value of HK$1.0 as part of
internal group restructuring. In July 2009, CHNR acquired all the issued shares of Pineboom from Feishang for a total consideration of RMB154.4 million which was determined based on the
volume of coal resources. The consideration was fully paid by January 2010.
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Yangpu
Dashi and Guizhou Dayun became our indirect wholly-owned subsidiaries in July 2011 when Guizhou Puxin acquired 100% of the equity interests in Yangpu Dashi for a
consideration of RMB1.0 million, which was determined by the tax authorities in Guizhou province and was fully paid in September 2011.
OUR OTHER SUBSIDIARIES
As at the Latest Practicable Date, we had three other subsidiaries organized in the PRC. These
subsidiaries are:
- •
- Bijie Feishang, our wholly-owned subsidiary which was incorporated by Guizhou Puxin in October 2010 under the laws
of the PRC. Bijie Feishang was set up with the intention that it will hold and operate new coal mines that may be acquired by our Company subsequent to the completion of the Spin-off.
- •
- Jinsha Juli, our wholly-owned subsidiary which was incorporated by Guizhou Puxin and Bijie Feishang in
November 2012 under the laws of the PRC. Jinsha Juli was involved in the preparatory work for the construction of our coal beneficiation plant in Jinsha county.
- •
- Shenzhen Chixin, our wholly-owned subsidiary which was incorporated by Guizhou Puxin in July 2012 under the laws of
the PRC. Shenzhen Chixin provides management and consulting services to other companies within our Company.
INCREASE IN SHARE CAPITAL PRIOR TO DISTRIBUTION
In preparation for the Distribution, the Directors passed resolutions in writing on December 6, 2013 to approve the following
matters:
- •
- change of the authorized share capital of our Company from US$50,000 divided into 50,000 ordinary shares of US$1.00
each to HK$10,000,000 divided into 1,000,000,000 Shares of HK$0.01 each;
- •
- repurchase and cancellation of all issued shares of US$1.00 each from CHNR for US$1.00; and
- •
- issue of a total of 124,554,580 Shares of HK$0.01 each to CHNR for HK$98,380,000.
These
transactions were completed on December 12, 2013.
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THE SPIN-OFF
On
December 31, 2013 the CHNR Board approved a conditional special interim dividend to the CHNR Shareholders to be satisfied by way of a distribution in specie of the
entire issued share capital of our Company to all CHNR Shareholders in proportion to their respective shareholdings in CHNR on the Distribution Record Date. Pursuant to the Distribution, each CHNR
Shareholder will be entitled to five Shares for every CHNR Share held on the Distribution Record Date. After the completion of the Distribution, CHNR will no longer hold any Shares in
our Company.
The
Spin-off does not involve any offering of new Shares or a public offering of any other securities and no funds will be raised pursuant to the Spin-off. The Distribution is
conditional on the Listing Committee granting listing of, and permission to deal in, our Shares in issue on the Main Board of the Stock Exchange. If such condition is not satisfied, the Distribution
will not be made and the Spin-off will not take place. Share certificates will only become valid if the Distribution becomes unconditional.
Trades
on the Stock Exchange are required to be settled between exchange participants (as defined in the Listing Rules) through CCASS on the second Business Day after any trading day.
CCASS is the central depository of share certificates and provides a computerized book-entry settlement of share transactions between its participants. All activities under CCASS are subject to the
General Rules of CCASS and CCASS Operational Procedures in effect from time to time. In order to facilitate the trading of our Shares upon the Listing, we and CHNR have put in place arrangements where
any holders of record of CHNR Shares ("Record CHNR Shareholders") on the Distribution Record Date will be provided with the following three options to receive Shares:
Option 1 — Request the Share certificate to be issued in the name of the relevant stockbroker in Hong Kong, and have the Shares
deposited into CCASS for credit to the designated CCASS Participant's stock account of such stockbroker in Hong Kong.
Prior
to January 13, 2014, a Record CHNR Shareholder may contact his/her/its stockbroker outside Hong Kong and request for confirmation that it has custodial and nominee
arrangements with, and is able to trade on the Stock Exchange through, a stockbroker in Hong Kong. If the Record CHNR Shareholder's stockbroker outside Hong Kong is able to do so, the Record CHNR
Shareholder may, either himself/herself/itself or through such stockbroker, request that the Share certificate be issued in the name of the relevant stockbroker in Hong Kong and have the Shares be
deposited into CCASS for credit to the designated CCASS Participant's stock account of that stockbroker in Hong Kong. Record CHNR Shareholders should consult his/her/its stockbroker regarding the
timing, cost and procedures of having the Shares deposited into CCASS.
Option 2 — Request the Share Certificate to be issued in the name of a stockbroker in Hong Kong and have the Shares deposited into
CCASS for credit to the designated CCASS Participant's stock account of such stockbroker
If
the Record CHNR Shareholder has a brokerage account with a stockbroker in Hong Kong and wishes to hold his/her/its Shares through such account following the Listing, he/she/it may,
prior to January 13, 2014 and either himself/herself/itself or through such stockbroker,
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request
that the Share certificate be issued in the name of the relevant stockbroker in Hong Kong and have the Shares deposited into CCASS for credit to the designated CCASS Participant's stock
account of such stockbroker. Record CHNR Shareholders should consult his/her/its stockbroker regarding the timing, cost and procedures of having the Shares deposited into CCASS.
Option 3 — Request the Share certificate to be sent to the Record CHNR Shareholder directly (default option if no action is taken or no
option is selected)
If
the Record CHNR Shareholder wishes to receive the Share certificate in his/her/its own name and have the Share certificate sent to his/her/its address that appears on the register of
members of CHNR on the Distribution Record Date, he/she/it may, prior to January 13, 2014 and either himself/herself/itself or through his/her/its stockbroker, request that the Share
certificate be issued in his/her/its own name and be posted to his/her/its address on January 21, 2014, the Business Day before the Listing Date. Share certificates will
be posted on the same day to the address that appears on the register of members of CHNR on the Distribution Record Date for Record CHNR Shareholders who (i) do not take any action or
(ii) make no option selection by January 13, 2014. However, as the Share Certificate will only be posted on the Business Day before the Listing Date, it may not
arrive by the Listing Date due to delivery time and the Shares may not be deposited into CCASS in time for settlement of trades conducted on the Stock Exchange on the Listing Date.
If
a CHNR Shareholder wishes to trade the Shares on the Stock Exchange on or shortly after the Listing Date, we strongly recommend the CHNR Shareholder to select option 1 or 2
above. Under option 3, the CHNR Shareholder will receive Share certificates which will be posted only on the Business Day before the Listing Date. This may result in a lengthy period of time
after the Listing before the CHNR Shareholder can trade such Shares on the Stock Exchange.
CHNR
Shareholders who are holding CHNR common shares through a bank, broker, dealer, financial institution or other custodian or nominee ("Beneficial CHNR
Shareholders") are not registered holders of CHNR common shares and therefore do not appear on the register of members of CHNR. As Shares will be distributed under the
Distribution only to those Record CHNR Shareholders on the Distribution Record Date, there is no assurance that Beneficial CHNR Shareholders will be able to receive Shares on or prior to the Listing
Date, because the timing and manner of delivery of the Shares will depend on specific arrangements with their respective intermediaries. Beneficial CHNR Shareholders should therefore contact their
respective intermediaries (i) to coordinate the delivery of Shares under the Distribution or (ii) if they wish to become Record CHNR Shareholders to facilitate the receipt of Shares in the
Distribution under their own names or for credit to their designated CCASS Participant's stock account.
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The
reasons for the Spin-off include the following:
- •
- as CHNR's base metals exploration and mining business is fundamentally different from our Company's business, we believe
the Spin-off could result in more efficient and focused management for each of our Company and CHNR;
- •
- following the Spin-off, each of our Company and CHNR may adopt more effective incentive compensation arrangements,
including share-based compensation, that are more directly tied to its performance;
- •
- after the Spin-off, each of our Company and CHNR may adopt its own capital structure; and
- •
- we believe that after the Spin-off, the trading price of the shares of each of our Company and CHNR may more accurately
reflect its value, and any future capital raised by our Company or CHNR may more accurately reflect such company's cost of capital.
Neither
the Distribution nor the Spin-off is subject to the approval of CHNR Shareholders or NASDAQ.
The
Shares to be distributed under the Distribution is being registered under the U.S. Exchange Act pursuant to a registration statement on Form 20-F. After the completion
of the Spin-off, we will become subject to periodic reporting and other informational requirements of the U.S. Exchange Act applicable to "foreign private issuers" as defined therein.
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BUSINESS
Unless otherwise indicated, our coal resource and reserve estimates are based upon estimates made in accordance with the PRC law and were reviewed, reclassified and
substantiated by Behre Dolbear in July 2013 in accordance with the JORC Code. Unless otherwise specified, all technical data in this section are based on the Competent Person's Report
included in Appendix III — "Competent Person's Report". The resource and reserve data of the Company included in this listing document are determined
by measuring the raw coal extracted from
our coal mines, and in accordance with the Competent Person's Report, all of the coal reserves are included within the coal resource statements. The characteristics of our coal products are
assessed by measuring our raw coal after beneficiation (or coal washing) as may be required under the Chinese Coal Classification Standard. See "— Our Coal
Characteristics and Coal Products — Coal Classification".
OVERVIEW
We are a producer of anthracite coal based in Guizhou province of the PRC. We are primarily engaged in the acquisition,
construction and development of anthracite coal mines and the extraction and sale of anthracite coal. Our mining assets consist of seven underground anthracite coal mines in Guizhou province, of
which five have commenced commercial production, one is undergoing its pilot run phase and one is under construction. All of our anthracite coal mines are located in Guizhou province, which,
according to the SAWS and Fenwei, had the largest anthracite coal resources among the provinces in Southwest China as of December 31, 2012. The following table sets forth certain
information regarding our seven anthracite coal mines as of the date of this listing document other than information regarding the total proved and probable reserves and the estimated mine lives
of our anthracite coal mines, which were as of July 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthracite Coal Mine
|
|
Stage of Production |
|
Date of
Initial/Expected
Commercial
Production |
|
Total
Proved and
Probable
Reserves
(in million
tonnes) |
|
Permitted
Annual
Production
Capacity
(in tonnes)(1) |
|
Estimated
Mine Life(2)
(in years) |
|
Baiping Coal Mine |
|
Commercial production |
|
June 2009 |
|
|
22.48 |
|
|
150,000 |
|
|
37 |
|
Liujiaba Coal Mine |
|
Commercial production |
|
December 2012 |
|
|
13.60 |
|
|
300,000 |
|
|
23 |
|
Zhulinzhai Coal Mine |
|
Commercial production |
|
April 2012 |
|
|
9.56 |
|
|
300,000 |
|
|
21 |
|
Gouchang Coal Mine |
|
Commercial production (suspended)(3) |
|
April 2011 |
|
|
5.72 |
|
|
90,000 |
|
|
52 |
|
Yongsheng Coal Mine |
|
Pilot run |
|
March 2014 |
|
|
51.96 |
|
|
600,000 |
|
|
29 |
|
Dayuan Coal Mine |
|
Commercial production |
|
November 2013 |
|
|
8.26 |
|
|
300,000 |
|
|
18 |
|
Dayun Coal Mine |
|
Construction |
|
July 2015 |
|
|
97.29 |
|
|
600,000 |
|
|
54 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
208.87 |
|
|
2,340,000 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Represents
the annual production capacity as permitted under the relevant mining rights permits.
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- (2)
- Mine
life estimates are calculated by dividing proved and probable reserves by the optimized annual production capacity, which takes into account the
planned future increases in production capacity still in the design phase.
- (3)
- Operations
have been suspended at Gouchang Coal Mine since March 2013 pending the acquisition by us of a nearby coal mine and Gouchang Coal
Mine achieving certain production targets in accordance with Guizhou province's coal mine consolidation policy.
As of July 31, 2013, we had total proved and probable coal reserves of approximately 208.87 million tonnes and total permitted
annual production capacity of 2.34 million tonnes. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, we had revenues of RMB38.7 million,
RMB105.2 million, RMB141.9 million, RMB55.2 million and RMB54.7 million, respectively, and sold 166,362 tonnes, 314,058 tonnes, 437,010 tonnes,
148,539 tonnes and 187,432 tonnes of anthracite coal, respectively.
The
Chinese Coal Classification Standard categorizes anthracite coal into three classes based on volatile matter content and helium content. Substantially all of our coal is classified
as WY2-class or WY3-class anthracite coal under the Chinese Coal Classification Standard, with the majority being classified as WY3-class anthracite coal.
OUR STRENGTHS
We believe our principal strengths include the following:
Anthracite is a relatively scarce and valuable resource
Anthracite coal is a relatively scarce resource and accounted for approximately only 12% of the PRC's total coal resources in 2012,
according to the SAWS and Fenwei. Due to its low volatile matter content and other characteristics, anthracite coal generally emits less harmful pollutants than other types of coal upon combustion,
and it has a wide range of industrial applications. Anthracite coal may be used as chemical coal for synthetic ammonia and methanol production, as well as PCI coal for sintering, smelting and
injection purposes in the pulverized coal injection process in iron production. Anthracite coal may also be used as thermal coal for electric power generation as a cleaner energy source than other
types of coal.
Our high quality coal reserves
As July 31, 2013, we had total proved and probable coal reserves of approximately 208.87 million tonnes, substantially
all of which, following beneficiation (or coal washing) as required under the Chinese Coal Classification Standard, is expected to qualify as anthracite coal under such standard. Subject to any
required coal-washing and processing to achieve the desired technical specifications, we expect all of our anthracite coal will be suitable for use as chemical coal, while our anthracite coal from
Baiping Coal Mine, Dayun Coal Mine and Yongsheng Coal Mine is expected to be suitable for use as PCI coal. Generally, chemical coal and PCI coal are able to command significantly higher selling prices
than thermal coal. According to China Coal Resource, the average selling price in Guizhou province in 2012 of chemical coal, PCI coal and thermal coal was RMB486.0 to RMB1,007.0 per tonne
(depending on the type and characteristic of coal), RMB952.0 per tonne and RMB323.0 per tonne, respectively. We believe the suitability of our anthracite coal reserves for use in
higher-value industrial applications positions us well for future growth.
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We are located in Guizhou province, which has one of the largest anthracite coal resources in the PRC
We believe our location in Guizhou province positions us favorably for future growth. Guizhou province has one of the largest
anthracite coal resources in the PRC. According to the SAWS and Fenwei, Guizhou province was estimated to have approximately 40 billion tonnes of anthracite coal resources in 2012, ranking
first among provinces in Southwest China and second among all provinces in the PRC. Guizhou province's neighboring provinces and municipalities, including Guangdong, Sichuan, Guangxi, Jiangxi and
Chongqing, are large net consumers of anthracite coal. According to the Fenwei, in 2010, 2011 and 2012, Guangdong, Sichuan, Guangxi, Jiangxi and Chongqing together purchased 25.3 million
tonnes, 30.5 million tonnes and 29.9 million tonnes, respectively, of anthracite coal from other provinces and overseas markets. Furthermore, Guizhou province's transportation network
has been expanding, and we expect that the cost and time of transporting anthracite coal to customers both within Guizhou province and outside Guizhou province will reduce in the future. Under the
"678 Highway Network Plan" announced by the Guizhou Department of Transportation in 2009, Guizhou province plans to construct a highway in each county in Guizhou province and increase its
highway network by 4,500 kilometers by 2015. In addition, the Guizhou government has announced plans to construct two waterway transportation systems to connect Yangtze River in northern
Guizhou province to the Pearl River in southern Guizhou province by 2015.
We are well-positioned to capitalize on industry consolidation opportunities in Guizhou
In recent years, the Guizhou government has introduced a number of measures to encourage the consolidation of the coal mining industry.
In particular, under the "Twelfth Five-year Plan on the Development of the Coal Industry" and relevant notices issued by the local government authorities, the Guizhou government introduced a number of
incentives to encourage coal-mining enterprises that meet certain criteria to acquire smaller coal mines in Guizhou province, including tax incentives, reduced mining right premiums and certain
subsidies for mine upgrades. Moreover, the Guizhou government announced in 2013 plans to, eliminate small-scaled coal mines in Guizhou province with an annual production capacity below
150,000 tonnes, reduce the total number of coal mining groups in Guizhou province to below 100, and reduce the total number of coal mines in Guizhou province to approximately 1,000 by
2015. See "Regulation — PRC Laws relating to Mining Resource Consolidation". Furthermore, in the past we have successfully completed the acquisitions of coal
mining companies that constitute part of our Company. See "History and Development — Corporate Transactions". As we are expected to become one of the non-state
owned coal-mining companies in Guizhou province that meet the requirements to act as a consolidator in connection with the Guizhou province's coal industry consolidation process, we believe we are
well-positioned to grow our business as a result of the Guizhou government's coal industry consolidation policy. See "Relationship with our Controlling
Shareholders — Feishang Energy and Guizhou Puxin and their statuses as coal mine consolidators in Guizhou province".
Experienced management team
Our management team has extensive experience in coal mine acquisition, management, construction, development, operation and safety. In
particular, Mr. Li Feilie, our chairman and chief executive officer, led the successful acquisition of each of our seven anthracite coal mines and has
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extensive
experience in the acquisition and corporate management of coal mines. Mr. Han Weibing, our executive Director and chief operating officer, has extensive knowledge and experience in
coal mining management and operations. Mr. Wan Huojin, our chief technical officer and chief engineer, has over 40 years of experience in coal mine development and operations, and had
acted as the head of Fengcheng Mining Bureau of Jiangxi Province between 2001 and 2007 before joining us. Mr. Wan also obtained several awards for improvements to certain coal mining techniques
he implemented and a number of awards in recognition of his contribution to the coal mining industry. Furthermore, Mr. Wan and several other executive officers have extensive experience in
managing mines with high gas contents and other difficult geologic conditions in Jiangxi province. Moreover, each of Mr. Cai Zhenghui, Mr. Teng Biao, Mr. Liao Diansheng,
Mr. Hu Lubao, Mr. Wu Ziping, Mr. Cheng Wenkun and Mr. Lan Xiaosheng has over 20 years or more years of relevant experience in the coal-mining industry. See "Our
Directors and Senior Management".
BUSINESS STRATEGIES
We aim to grow our business by focusing on the following strategies:
Achieve profitability through sales of higher margin chemical and PCI coal and increasing our production output
We intend to significantly increase our sales of chemical coal, as well as begin selling PCI coal. In the past, our ability to sell
chemical or PCI coal has been constrained by our production capacity. In particular, our annual coal production levels were determined based in large part on the Guizhou government's annual guidance
relating to the provision of certain minimum amounts of thermal coal to power plants operating in Guizhou province, which took up a significant portion of our production capacity and limited our
ability to sell other types of anthracite coal. See "Regulation — PRC Laws relating to the Coal Industry — Supply of thermal
coal to power plants". To increase our production capacity, we are aiming to commence commercial production at Yongsheng Coal Mine and Dayun Coal Mine in March 2014 and July 2015,
respectively. Moreover, each of Yongsheng Coal Mine and Dayun Coal Mine is expected to have a permitted annual production capacity of 600,000 tonnes upon commercial production, is located in
close proximity to Baiping Coal Mine in Jinsha county. We believe the close proximity of these three mines, which are expected to have an aggregate permitted annual production capacity of
1,350,000 tonnes upon commercial production, could create significant economies of scale through the sharing of transportation, coal processing, logistics and other services.
Strengthen our sales and marketing networks
We intend to strengthen our sales and marketing network to build our reputation in the Guizhou province's anthracite coal market and
develop a stable and loyal customer base. In particular, we plan to deepen our existing relationships with our chemical coal customers and begin developing PCI coal customers. To date, we have entered
into four cooperation arrangements with large chemical companies located near our anthracite coal mines, and we intend to establish additional cooperation relationships by increasing the size of our
sales and marketing teams to target potential chemical coal and PCI coal customers.
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Table of Contents
Create a more vertically integrated business
We are in the process of constructing a coal beneficiation plant in Jinsha county to process our anthracite coal into PCI coal as well
as to produce chemical coal with certain technical specifications. The coal beneficiation plant is expected to be built on a site adjacent to Yongsheng Coal Mine. We plan to construct the coal
beneficiation plant in two phases with a planned aggregate annual coal-washing capacity of 1.2 million tonnes. The first phase of the coal beneficiation plant is expected to achieve an annual
coal-washing capacity of 600,000 tonnes, and the second phase is expected to increase the annual coal-washing capacity to 1.2 million tonnes. The construction of the first phase
commenced in September 2013 and is expected to be completed by April 2014. The construction of the second phase is expected to commence in January 2015 and complete by June 2015. See
"— Our Anthracite Coal Mines — Our Expansion Plans — The Beneficiation Plant".
We
are also contemplating constructing a port along the Wujiang River near Yongsheng Coal Mine to facilitate the transportation of the anthracite coal we produce at our mines in Jinsha
county. Upon completion, the port is expected to allow us to transport the coal produced by Yongsheng Coal Mine by waterway, and provide us access to markets such as Guangdong, Guangxi, Sichuan,
Chongqing and Jiangxi. See "— Our Anthracite Coal Mines — Our Expansion Plans — The Shipping Port".
We
believe that with a more vertically integrated business model and increased capacity for coal processing and transportation, we will be able to reduce our costs, better serve our
existing customers and broaden our customer base.
Enhance our operational efficiency and cost control
We aim to improve our operational efficiency to control costs and increase profitability. We intend to upgrade our mining equipment and
technology to increase our recovery rate, adopt more efficient mining methods to reduce production costs, as well as increase our production capacity to achieve greater economies of scale. In
particular, we plan to increase the size of our coal mine tunnels to increase extraction efficiency, as well as gradually upgrade our mines to utilize mechanical longwall mining methods to reduce
labor costs. We are also seeking to adopt enhanced project management and budgeting systems to improve the efficiency of our coal mine construction and coal production processes.
Enhance the environmental and occupational health and safety standards of our operations
We believe that it is our corporate social responsibility to improve our environmental and occupational health and safety standards.
Moreover, improving our environmental and occupational health and safety standards could also reduce the probability of fines, administrative penalties and other disruptions to our operations. With
respect to environmental protection, we plan to improve our wastewater disposal system, provide training to our employees to promote environmental awareness, and set aside an annual budget for
expenses relating to our environmental protection efforts. Regarding occupational health and safety, we are currently in the process of implementing a six-part safety system at each of our operating
coal mines which consists of the following components: an
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electronic
safety monitoring system; a wireless tracking system that tracks the location of our underground workers; emergency exits; emergency water supplies; emergency underground communication
equipment; and compressed air stations that provide emergency underground oxygen supplies.
Increase our anthracite coal production capacity in the long-term through mine optimization plans and acquisitions of high quality anthracite coal mines
With the exception of Gouchang Coal Mine, we are currently contemplating mine optimization plans to upgrade and expand the production
capacity of all of our anthracite coal mines by expanding our mines or upgrading our mining infrastructure, methods and equipment. We expect our optimization plans will begin in 2015 and, after their
expected completion in December 2018, we expect to be able to achieve an aggregate annual production capacity of 5.81 million tonnes. We also intend to selectively pursue acquisitions of
high quality anthracite coal reserves and coal mines in Guizhou province. As we are expected to meet the requirements for a consolidator to take part in Guizhou province's coal industry consolidation
process, we intend to leverage our senior management's experience and business networks in Guizhou province to seek attractive acquisition targets in the Bijie and Liupanshui regions of Guizhou
province that may be acquired at competitive prices. See "Relationship with our Controlling Shareholders — Feishang Energy and Guizhou Puxin and their statuses as
coal mine consolidators in Guizhou province". We evaluate
potential acquisition targets based on factors such as the geographic location of the mine, the quality and quantity of anthracite coal reserves, the stage of development of the mine, mining
conditions, and potential synergies with our existing business operations.
OUR COAL CHARACTERISTICS AND COAL PRODUCTS
Coal Classification
Under the Chinese Coal Classification Standard, anthracite coal is defined as coal that has a volatile matter content of 10.0% or less.
In the process of determining whether the coal belongs to anthracite coal and its relevant classification, beneficiation (or coal washing) of raw coal (the result of which is referred to
as "float coal") is required in order to reduce the dry ash contents to an acceptable level as necessary under the Chinese Coal Classification Standard. Following beneficiation of the raw coal at each
of our mines under the Chinese Coal Classification Standard, all of the float coal at each of our mines may be classified as anthracite coal. The reserve data of the Company included in this listing
document are determined by measuring the raw coal extracted from our coal mines.
The
Chinese Coal Classification Standard categorizes anthracite coal into three classes based on volatile matter content and helium content. Substantially all of our coal is classified
as WY2-class or WY3-class anthracite coal under the Chinese Coal Classification Standard, with the majority being classified as WY3-class anthracite coal.
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Coal Characteristics
The commercial value of coal is determined in part by its characteristics, including:
- •
- Heat Value. Heat value refers to the energy released by
coal during combustion. In general, the carbon content of coal supplies most of its heat value. Heat value is a key characteristic in the determination of coal quality.
- •
- Moisture Content. Moisture content of coal varies by the
type of coal, the region where it is mined and the location of the coal within a seam. In general, coal with lower moisture content is more valuable, as moisture content decreases the heat value and
increases the weight of the coal, thereby making it more expensive to transport.
- •
- Sulfur Content. The PRC has regulations that limit the
amount of sulfur dioxide that may be emitted as a result of combustion, and the chemical composition and concentration of sulfur in coal affects the amount of sulfur dioxide produced in combustion.
Coal-fueled power plants may reduce sulfur dioxide emissions by burning coal with low sulfur content. As a result, coal with lower sulfur content is generally more valuable than coal with high sulfur
content. Coal-washing and processing may reduce the sulfur content of coal.
- •
- Ash Content. Ash is the inorganic residue remaining after
the combustion of coal. Ash content is an important characteristic of coal because it impacts boiler performance of electric generating plants and determines the suitability of the coal for
end users.
- •
- Volatile Matter Content. Volatile matter refers to the
matters that are released from coal at high temperatures, other than moisture. Under the Chinese Coal Classification Standard, coal is classified into lignite coal, bituminous coal and anthracite coal
based on volatile matter content.
The
following table sets forth the weighted average coal quality of our proved and probable coal reserves at each of our mines other than information regarding volatile matter content,
which was based on simple average coal quality:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Characteristic
|
|
Baiping
Coal Mine |
|
Liujiaba
Coal Mine |
|
Zhulinzhai
Coal Mine |
|
Gouchang
Coal Mine |
|
Dayun
Coal Mine |
|
Yongsheng
Coal Mine |
|
Dayuan
Coal Mine |
|
Heat value (MJ/kg) |
|
|
28.33 |
|
|
23.95 |
|
|
28.14 |
|
|
27.80 |
|
|
28.03 |
|
|
28.62 |
|
|
25.79 |
|
Moisture content (%) |
|
|
2.47 |
|
|
1.38 |
|
|
1.87 |
|
|
3.86 |
|
|
2.40 |
|
|
2.28 |
|
|
1.15 |
|
Sulfur content (%) |
|
|
2.35 |
|
|
2.30 |
|
|
1.81 |
|
|
1.10 |
|
|
2.12 |
|
|
1.27 |
|
|
1.16 |
|
Ash content (%) |
|
|
19.04 |
|
|
25.03 |
|
|
21.84 |
|
|
20.46 |
|
|
18.27 |
|
|
17.95 |
|
|
24.60 |
|
Volatile matter content (%)(1) |
|
|
7.28 |
|
|
8.81 |
|
|
8.84 |
|
|
6.06 |
|
|
7.33 |
|
|
8.16 |
|
|
7.46 |
|
- (1)
- Measured
based on our float coal, or the raw coal after beneficiation (or coal washing) as may be required under the Chinese Coal Classification
Standard, at each mine.
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Coal Products
In the PRC, end users generally characterize anthracite coal as thermal coal, chemical coal or PCI coal. Thermal coal is generally used
in the electric power industry for power generation and in the construction industry for cement production. Chemical coal is generally used for the production of synthetic ammonia and methanol, and
PCI coal is generally used for sintering, smelting and injection purposes in the pulverized coal injection process in iron production. While certain types of anthracite coal may be sold directly as
chemical coal without coal-washing, other types of anthracite coal need to be washed and processed before they may be sold as chemical coal in order to achieve appropriate technical specifications,
including heat value, moisture content, ash content and sulfur content. In contrast, in order to be sold as PCI coal, anthracite coal must first be washed and processed. In the PRC, chemical coal and
PCI coal are able to generally command higher selling prices and higher profit margins than thermal coal. According to China Coal Resource, the average selling price of thermal coal in Guizhou
province in 2012 was RMB323.0 per tonne, compared to RMB486.0 to RMB1,007.0 per tonne for chemical coal (depending on the type and characteristic of coal) and RMB952.0 per tonne
for PCI coal.
Subject
to having been washed and processed to the extent necessary, we generally expect that the anthracite coal produced from our mines will be suitable to be sold as thermal coal and
chemical coal, while the anthracite coal produced from our Baiping Coal Mine, Dayun Coal Mine and Yongsheng Coal Mine is generally expected to be suitable to be sold as PCI coal. However, each of our
coal mines contains a number of faults, and coal extracted from fault areas may be unsuitable for use as chemical or PCI coal. See "Risk Factors — Unanticipated
faults of our coal mines could materially and adversely affect our production output, coal quality and mining operations".
Prior
to 2011, we sold substantially all of the coal produced from our mines as thermal coal. In 2011, 2012 and the six months ended June 30, 2013, we derived approximately 5%, 5%
and 1.2% of our revenue from the sale of chemical coal we produced, respectively, while our remaining revenue in each of these years was derived from the sale of thermal coal we produced and coal
sourced from third parties. Subject to market conditions and the Guizhou government's annual guidance on supply of thermal coal to power plants, we intend to significantly increase our sales of
chemical coal in the future and begin selling PCI coal in 2014. Although we plan to outsource coal processing to third party coal beneficiation plants as appropriate, we have entered into a memorandum
of understanding with the People's Government of Jinsha county in Guizhou province to construct a coal beneficiation plant to process our coal into PCI coal and to produce chemical coal with certain
technical specifications. See "— Our Anthracite Coal Mines — Our Expansion Plans — The
Beneficiation Plant".
As
of the Latest Practicable Date, we have entered into four non-binding cooperation arrangements relating to the sale of chemical coal. Some of the key terms of these cooperation
agreements are as follows:
- •
- The counterparties under the cooperation arrangements recognize that the relevant mines of Guizhou Puxin produce quality
chemical coal;
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- •
- Guizhou Puxin and the counterparties under the cooperation arrangements agree to maintain preferred customer and supplier
relationships and so long as the terms and conditions offered by each of them match those offered by other third parties, they would enter into agreements in respect of coal supply;
- •
- Guizhou Puxin and the counterparties under the cooperation arrangements also agree that in the case where there is a
shortage of supply of coal, Guizhou Puxin would sell coal to such counterparties on a preferred basis from one or more of Guizhou Puxin's coal mines and that when the coal market experiences slow
phases or when there is an oversupply of coal in the market, such counterparties would purchase coal from Guizhou Puxin on a preferred basis;
- •
- Guizhou Puxin also agreed that in normal circumstances, it would supply, on a preferred basis, such amount of coal that
the counterparties under the cooperation arrangements request on a monthly basis to ensure that the coal supply agreements are fully performed and that the counterparties agreed to make payment for
such coal on time.
Nonetheless,
we have not yet entered into any binding agreement for the sale of chemical coal or PCI coal. Our annual coal production levels were determined based in large part on the
Guizhou government's annual guidance relating to the provision of certain minimum amounts of thermal coal to power plants in Guizhou province, which has taken up a significant portion of our
production capacity.
In 2010, 2011 and 2012 and the six months ended June 30, 2013, in response to the Guizhou government's annual guidance, we produced and sold 136,000 tonnes, 202,000 tonnes,
382,000 tonnes and 171,000 tonnes, respectively, of thermal coal to be supplied to power plants in Guizhou province. In 2013, we plan to produce approximately 360,000 tonnes of
thermal coal in response to the Guizhou government's annual guidance. See "Regulation — PRC Laws relating to the Coal
Industry — Supply of thermal coal to power plants". We believe that by increasing our production capacity, we will be able to sell a larger percentage of our
anthracite coal as chemical or PCI coal. Our ability to effectively produce, market and sell our anthracite coal as chemical coal or PCI coal is, however, subject to a number of uncertainties. See
"Risk Factors — Risks Relating to Our Business — We may not be able to successfully produce, market and sell chemical and
PCI coal, which could materially and adversely affect our business and prospects".
During
the Track Record Period, we derived our revenue primarily from the sale of coal we produced. From time to time, we also engaged in coal trading activities by selling coal that we
purchased from third party suppliers. In 2011, 2012 and the six months ended June 30, 2012 and 2013, revenue from sales of third party coal was RMB33.1 million, RMB1.1 million,
RMB1.1 million and nil, respectively, representing 31.5%, 0.8%, 2.0% and nil, respectively, of our total revenue. We did not engage in any coal trading activities in 2010, and we do not intend
to engage in any significant coal trading activities in the future.
OUR ANTHRACITE COAL MINES
We currently have seven anthracite coal mines. Five of our anthracite coal mines, including Baiping Coal Mine, Liujiaba Coal Mine,
Zhulinzhai Coal Mine, Gouchang Coal Mine and Dayuan Coal Mine, have commenced commercial production. However, operations at Gouchang Coal Mine
105
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have
been suspended since March 2013 under Guizhou province's coal mine consolidation policy. With respect to our other two anthracite coal mines that have not commenced commercial production,
Yongsheng Coal Mine is currently undergoing its pilot run phase, while Dayun Coal Mine is currently under construction. Yongsheng Coal Mine and Dayun Coal Mine are expected to commence commercial
production in March 2014 and July 2015, respectively.
All
of our anthracite coal mines are underground anthracite coal mines located in the Zhina Coal District and the Qianbei Coal District in Guizhou province. The following maps show the
location of our anthracite coal mines as of the date of this listing document:
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The
following table sets forth certain information relating to each of our seven anthracite coal mines as of the date of this listing document (unless otherwise indicated):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Production |
|
Under Construction |
|
Mine
|
|
Baiping
Coal Mine |
|
Liujiaba
Coal Mine |
|
Zhulinzhai
Coal Mine |
|
Gouchang
Coal Mine |
|
Dayuan
Coal Mine |
|
Yongsheng
Coal Mine |
|
Dayun
Coal Mine |
|
Location (within Guizhou province, PRC) |
|
|
Jinsha county, Qianbei Coal District |
|
|
Liuzhi Special District, Zhina Coal District |
|
|
Liuzhi Special District, Zhina Coal District |
|
|
Nayong County, Zhina Coal District |
|
|
Nayong county, Zhina Coal District |
|
|
Jinsha county, Qianbei Coal District |
|
|
Jinsha county, Qianbei Coal District |
|
Date of initial/expected commercial production |
|
|
June 2009 |
|
|
December 2012 |
|
|
April 2012 |
|
|
April 2011 |
(1) |
|
November 2013 |
|
|
March 2014 |
|
|
July 2015 |
|
Mining area (square kilometers) |
|
|
3.0143 |
|
|
3.7891 |
|
|
1.4104 |
|
|
1.7198 |
|
|
1.6490 |
|
|
18.2340 |
|
|
16.9035 |
|
Number of mineable seams |
|
|
5 |
|
|
3 |
|
|
5 |
|
|
5 |
|
|
4 |
|
|
5 |
|
|
4 |
|
Designed annual production capacity (tonnes) |
|
|
300,000 |
|
|
300,000 |
|
|
300,000 |
|
|
110,000 |
|
|
300,000 |
|
|
900,000 |
|
|
900,000 |
|
Permitted annual production capacity (tonnes)(2) |
|
|
150,000 |
|
|
300,000 |
|
|
300,000 |
|
|
90,000 |
|
|
300,000 |
|
|
600,000 |
|
|
600,000 |
|
Expiry date of the mining right |
|
|
August 2014 |
|
|
September 2019 |
|
|
July 2018 |
|
|
April 2017 |
|
|
March 2023 |
|
|
November 2027 |
|
|
March 2031 |
|
Reserve data (as of July 31, 2013) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved reserve (million tonnes) |
|
|
3.44 |
|
|
2.08 |
|
|
2.15 |
|
|
1.87 |
|
|
2.99 |
|
|
3.77 |
|
|
12.50 |
|
Probable reserve (million tonnes) |
|
|
19.04 |
|
|
11.52 |
|
|
7.41 |
|
|
3.85 |
|
|
5.27 |
|
|
48.19 |
|
|
84.79 |
|
Total proved and probable reserve (million tonnes) |
|
|
22.48 |
|
|
13.60 |
|
|
9.56 |
|
|
5.72 |
|
|
8.26 |
|
|
51.96 |
|
|
97.29 |
|
Total cost of property, plant and equipment as of December 31, 2012 (RMB in millions)(3) |
|
|
307.2 |
|
|
374.0 |
|
|
358.5 |
|
|
252.7 |
|
|
307.3 |
|
|
541.8 |
|
|
145.3 |
|
Age of the mining equipment(4) (year) |
|
|
1-5 |
|
|
1-3 |
|
|
1-5 |
|
|
1-5 |
|
|
1-4 |
|
|
1-2 |
|
|
1-2 |
|
- (1)
- Operations
have been suspended since March 2013 under Guizhou province's coal mine consolidation policy.
- (2)
- This
represents the annual production capacity as permitted under the relevant mining rights permits.
- (3)
- The
cost is net of applicable accumulated amortization and depreciation.
- (4)
- Mining
equipment is owned by us except for the mechanical longwall mining equipment at Yongsheng Coal Mine we lease from third parties.
As of July 31, 2013, we had total proved and probable coal reserves of approximately 208.87 million tonnes and total permitted
annual production capacity of 2.34 million tonnes. The reserve data of the Company included in the listing document are determined by measuring the raw coal extracted from our coal mines. See
"— Our Coal Characteristics and Coal Products — Coal Classification".
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Mines in commercial production
Baiping Coal Mine is our third largest mine as measured by proved and probable coal reserves. We operate Baiping Coal Mine through our
70%-owned subsidiary, Baiping Mining. Baiping Coal Mine covers an area of 3.0143 square kilometers and is located in Jinsha county,
Qianbei Coal District. As of July 31, 2013, Baiping Coal Mine had total proved and probable coal reserves of 22.48 million tonnes.
Baiping
Coal Mine commenced commercial production in June 2009 and completed a technical system upgrade in March 2011. The current mining right permit for Baiping Coal Mine
allows for an annual production capacity of 150,000 tonnes. The mining right premium of RMB3.4 million for Baiping Coal Mine had been fully paid as of December 31, 2010.
In
2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, Baiping Coal Mine produced 65,046 tonnes, 159,185 tonnes, 292,000 tonnes,
109,944 tonnes and 118,386 tonnes of anthracite coal, respectively. In 2011 and 2012, the amount of anthracite coal produced by Baiping Coal Mine exceeded its permitted annual production
capacity of 150,000 tonnes under its mining right permit and coal production permit. In January and July 2013, the Energy Bureau of Guizhou Province issued confirmation letters, stating
that (i) it did not consider there was any over-production prior to 2012, (ii) it would not impose any penalties against Baiping Mining or its employees or impose any other measures
(including but not limited to, revocation of the coal production permit or suspension of coal mining operations) in respect of over-production in 2012 or thereafter, as Baiping Coal Mine has undergone
certain technological improvements after its coal production permit was issued, such that its actual production capacity and ventilation systems exceeded the design specifications set forth in its
coal production permit and could support an annual production output of 290,000 tonnes, and (iii) it would support our application for the relevant permits with an annual production
capacity of 300,000 tonnes or more. The Energy Bureau of Guizhou Province further confirmed orally that it considered the overproduction at Baiping Coal Mine in 2011 to be minimal and the
production output in years prior to 2011 were within the permitted annual production capacity. Between December 2012 and January 2013, we also received confirmation letters from the
Water Conservation Office of Bijie City, the Water Resources Department of Guizhou Province, the Guizhou Administration of Coal Mine Safety and the Environmental Protection Department of Guizhou
Province. These confirmation letters either agreed with the January 2013 confirmation letter issued by the Energy Bureau of Guizhou Province or confirmed there would be no penalties imposed on
Baiping Mining and/or Baiping Mining's employees as a result of the over-production at Baiping Coal Mine. Our PRC legal advisors, Commerce & Finance Law Offices, have advised us that such
confirmation letters were issued by the competent government authorities and are legally valid.
We
plan to continue producing anthracite coal at Baiping Coal Mine, and may produce anthracite coal in excess of its permitted production capacity as our annual production levels were
determined based in large part on the Guizhou government's annual guidance relating to the provision of certain minimum amounts of thermal coal to power plants operating in Guizhou province. See
"Regulation — PRC Laws relating to the Coal Industry — Supply of thermal coal to power plants". We had informed the relevant
governmental authorities prior to producing anthracite coal in excess of Baiping Coal
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Mine's
permitted production capacity, and the relevant governmental authorities had approved such over-production. In 2010, 2011 and 2012, the Guizhou government had requested Baiping Coal Mine to
supply a minimum of 60,000 tonnes, 120,000 tonnes and 230,000 tonnes, respectively, of thermal coal to power plants in Guizhou province. In 2013, the Guizhou government had
requested Baiping Coal Mine to supply a minimum of 230,000 tonnes of thermal coal to power plants in Guizhou province and we plan to produce approximately 230,000 tonnes of thermal coal in response to
the request. Any change in the policies or positions adopted by the Guizhou government authorities in respect of over-production and target production capacities to produce and sell a minimum amount
of thermal coal may affect these plans as well as our compliance with applicable laws, rules and regulations. We have applied for a 300,000 tonnes mining right permit for Baiping Coal Mine and
we expect to obtain the permit in June 2014. See "— Regulatory Compliance". After receiving such permit, we do not expect Baiping Coal Mine will continue to produce
anthracite coal in excess of its permitted production capacity.
We operate Liujiaba Coal Mine through our 99%-owned subsidiary, Xinsong Coal. Liujiaba Coal Mine covers an area of 3.7891 square
kilometers and is located in Liuzhi Special District, Zhina Coal District. As of July 31, 2013, Liujiaba Coal Mine had total proved and probable coal reserves of 13.60 million tonnes.
Commencement of commercial production at Liujiaba Mine had been delayed as a result of Guizhou province's requirement for certain coal mines using drilling and blasting mining methods to upgrade to
semi-mechanical longwall mining methods in 2011, which required us to incur significant time and expense to redesign and upgrade Liujiaba Coal Mine. Liujiaba Coal Mine commenced commercial production
in December 2012 with a permitted annual production capacity of 300,000 tonnes. The mining right premium of RMB26.0 million for Liujiaba Coal Mine had been fully paid by
May 2011. In 2012 and the six months ended June 30, 2012 and 2013, Liujiaba Coal Mine produced 25,680 tonnes, nil and 50,649 tonnes of anthracite coal, respectively.
We operate Zhulinzhai Coal Mine through our 99%-owned subsidiary, Linjiaao Coal. Zhulinzhai Coal Mine covers an area of
1.4104 square kilometers and is located in Liuzhi Special District, Zhina Coal District. As of July 31, 2013, Zhulinzhai Coal Mine had total proved and probable coal reserves of
9.56 million tonnes. Zhulinzhai Coal Mine commenced commercial production
in April 2012 with a permitted annual production capacity of 300,000 tonnes. The mining right premium for Zhulinzhai Coal Mine is RMB19.9 million, of which RMB16.7 million
had been paid by August 30, 2012 and the remaining balance of RMB3.2 million has been paid in August 2013.
In
2012 and the six months ended June 30, 2012 and 2013, Zhulinzhai Coal Mine produced 65,111 tonnes, 21,041 tonnes and 19,682 tonnes of anthracite coal,
respectively. Coal production at Zhulinzhai Coal Mine has been slowed down by the relocation of local residents affected by the mine's operations. We have entered into relocation agreements with the
local residents pursuant to which they agreed to relocate after receiving additional compensation and we expect to complete the relocation by March 2014 with the assistance of the local
government. The additional compensation is
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approximately
RMB0.1 million, which we agreed to pay by March 2014. The directors of the Company are of the view that the payment of the additional compensation will not have a material adverse
effect on the Company's business, financial condition and results of operations. Since January 2013, Zhulinzhai Coal Mine has been undergoing certain mine safety upgrades, which has also
limited its production output.
We operate Gouchang Coal Mine through our 99%-owned subsidiary, Gouchang Coal. Gouchang Coal Mine covers an area of
1.7198 square kilometers and is located in Nayong county, Zhina Coal District. As of July 31, 2013, Gouchang Coal Mine had total proved and probable coal reserves of 5.72 million
tonnes. Gouchang Coal Mine commenced commercial production in April 2011 with a permitted annual production capacity of 90,000 tonnes, and produced 96,068 tonnes,
53,362 tonnes, 14,782 tonnes and 3,872 tonnes of anthracite coal in 2011, 2012 and the six months ended June 30, 2012 and 2013, respectively. The mining right premium of
RMB11.8 million for Gouchang Coal Mine had been fully paid as of May 2012.
Gouchang
Coal Mine suspended its operations from March to August 2012 to comply with certain newly implemented mine gas control requirements in Guizhou province. Since
March 2013, operations at Gouchang Coal Mine have been suspended under Guizhou province's coal mine consolidation policy pending the acquisition by us of a nearby coal mine and Gouchang Coal
Mine achieving certain production capacity targets in accordance with Guizhou province's coal mine consolidation policy. We
are currently considering acquiring Dongdi coal mine, which is adjacent to Gouchang Coal Mine. According to the website of the Energy Bureau of Guizhou Province, Dongdi coal mine has estimated coal
resources of 13.09 million tonnes as measured in accordance with the PRC Solid Mineral Resources/Reserves Classification Code as of August 2011 and a planned annual production capacity
of 300,000 tonnes. To our knowledge, Dongdi coal mine has not yet commenced commercial production. We have not begun any formal negotiations with the owner of Dongdi coal mine in relation to
the acquisition and the estimated cost for theacquisition remains unknown at this stage. However, we are aiming to complete the acquisition of Dongdi coal mine by March 2015 and resume
operations at Gouchang Coal Mine by the end of 2015. As of the Latest Practicable Date, Gouchang Coal Mine has not re-commenced operations. See "Regulation — PRC
Laws Relating to Mining Resource Consolidation".
We hold Dayuan Coal Mine through our 99%-owned subsidiary, Dayuan Coal. As of July 31, 2013, Dayuan Coal Mine had total proved
and probable coal reserves of 8.26 million tonnes. The current mining right permit for Dayuan Coal Mine allows for an annual production capacity of 300,000 tonnes. The mining right premium of
RMB13.4 million for Dayuan Coal Mine was fully paid as of October 2011.
The
construction of Dayuan Coal Mine commenced in June 2009. Dayuan Coal Mine had commenced its pilot run phase in July 2013 and has commenced commercial production in November 2013.
Construction progress of Dayuan Coal Mine had been delayed by certain changes in the governmental approval process for obtaining mining right permits.
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Mines under construction
Yongsheng Coal Mine is our second largest mine as measured by proved and probable coal reserves. We hold Yongsheng Coal Mine through
our 70%-owned subsidiary, Guizhou Yongfu. Yongsheng Coal Mine covers an area of 18.2340 square kilometers and is located in the Qianbei Coal District. As of July 31, 2013, Yongsheng Coal
Mine had total proved and probable coal reserves of 51.96 million tonnes. The current mining right permit for Yongsheng Coal Mine allows for an annual production capacity of
600,000 tonnes.
The
construction of Yongsheng Coal Mine commenced in November 2008. Construction progress had been delayed in 2012 mainly because we encountered several large karst caves at the
mine site, which slowed down construction. Construction was further delayed in 2013 as we were required by the Jinsha County Administration of Coal Mine Safety in July 2013 to suspend the
construction of one of the two mine faces at Yongsheng Coal Mine to install gas ventilation tunnels. The construction of the mine face resumed in October 2013 after gas ventilation tunnels were
installed. Yongsheng Coal Mine is currently undergoing its pilot run phase, and commercial production is expected to commence in March 2014. The estimated amount of capital expenditure for the
construction of Yongsheng Coal Mine is RMB596.3 million, of which we have paid RMB437.2 million as of June 30, 2013.
The
mining right premium for Yongsheng Coal Mine is RMB89.5 million, of which RMB36.0 million had been paid by December 2012. The balance of RMB53.5 million
will be payable in five installments over a five-year period from 2013 to 2017.
Dayun Coal Mine is our largest mine as measured by proved and probable coal reserves. We hold Dayun Coal Mine through our wholly-owned
subsidiary, Guizhou Dayun. Dayun Coal Mine covers an area of 16.9035 square kilometers and is located in Jinsha county, Qianbei Coal District. As of July 31, 2013, Dayun Coal Mine had
total proved and probable reserves of 97.29 million tonnes. The current mining right permit for Dayun Coal Mine allows for an annual production capacity of 600,000 tonnes.
The
construction of Dayun Coal Mine commenced in May 2012 and commercial production is expected to commence in July 2015. Construction progress of Dayun Coal Mine has been
slowed down by the relocation of local residents affected by construction. We expect the relocation process with the assistance of the local government will be completed by June 2014. The estimated
amount of capital expenditure for the construction of Dayun Coal Mine is RMB385.3 million, of which RMB138.6 million had been paid as of June 30, 2013.
The
mining right premium for Dayun Coal Mine is RMB73.0 million, of which RMB38.0 million had been paid by March 2013 and the remaining balance of
RMB35.0 million will be payable in three installments over a three-year period from 2014 to 2016.
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Our Expansion Plans
Among the seven anthracite coal mines of the Company, five anthracite coal mines, including Baiping Coal Mine, Liujiaba Coal Mine,
Zhulinzhai Coal Mine, Gouchang Coal Mine (currently suspended since March 2013 under Guizhou province's coal mine consolidation policy) and Dayuan Coal Mine, have commenced commercial production and
two anthracite coal mines, including Yongsheng Coal Mine and Dayun Coal Mine, are expected to commence commercial production in March 2014 and July 2015, respectively.
In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, we incurred operating losses of RMB54.5 million,
RMB23.0 million, RMB36.6 million, RMB11.3 million and RMB231.7 million, respectively, and, disregarding the effects of a RMB624.1 million non-recurring gain relating
to the acquisition of Guizhou Puxin in 2010, we would have incurred net losses in each of those periods. The losses incurred during the Track Record Period were primarily due to the following
reasons:
- •
- Substantial pre-production activities during the Track Record
Period. During the Track Record Period, only four of our seven anthracite coal mines have commenced commercial production. Of these four
mines, the Liujiaba Coal Mine only commenced commercial production in April 2012 and Zhulinzhai Coal Mine only commenced commercial production in December 2012. Accordingly, for a majority of the
Track Record Period, these mines remained in the construction phase and only Baiping Coal Mine was in commercial production throughout the Track Record Period. Gouchang Coal Mine commenced production
in 2011 but was suspended since March 2013 pending the completion of an acquisition of a nearby coal mine in accordance with the mine consolidation policies of Guizhou province.
- •
- Our largest mines remain in pre-commercial production
phases. Our largest mine in terms of proved and probable coal reserves, Dayun Coal Mine, is still under construction. Yongsheng Coal
Mine, our second largest mine in terms of proved and probable coal reserves, was under construction for most of 2013 and the mine face and gas ventilation tunnels were recently completed, and
commenced a pilot run in June 2013. Given our two largest mines remain in the pre-commercial production stage, our annual production output of coal remains very small. As of July 31, 2013, we
had total proved and probable coal reserves of approximately 208.87 million tonnes. However, our total permitted annual production capacity remained at only 2.34 million tonnes as of the
same date.
- •
- Significant capital expenditures and associated debt and financing costs incurred during the Track
Record Period. In 2010, 2011, 2012 and the six months ended June 30, 2013, we incurred capital expenditures of RMB219.7 million, RMB341.5 million,
RMB360.2 million and RMB139.3 million, respectively. Such capital expenditures relate primarily to the construction of our anthracite coal mines, purchase of mining-related equipment and
machinery and pre-payments for land use rights for our anthracite coal mines. In order to
112
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fund
these capital expenditures, we incurred significant debt and associated financing costs. In 2010, 2011, 2012 and the six months ended June 30, 2013, we incurred finance costs for bank
borrowings and mining rights payables (including the capitalized interest) of RMB21.8 million, RMB60.9 million, RMB89.4 million and RMB56.2 million, respectively. These
capital expenditures and the associated finance costs have contributed in part to our historical losses.
- •
- Impairment loss for Gouchang Coal Mine for the six months ended June 30,
2013. During the six months ended June 30, 2013, we incurred an impairment loss on property, plant and equipment of
RMB184.4 million in connection with the suspension of Gouchang Coal Mine. This represented a one-off and non-recurring impairment loss and we do not expect any further material impairment
losses to be made in respect of Gouchang Coal Mine.
- •
- Constrained ability to sell chemical coal or PCI coal due to small annual production
output. As mentioned above, given our two largest mines remain in pre-commercial production stage, our current annual coal production output remains very small. We have from
time to time provided a minimum amount of our anthracite coal as thermal coal to power plants operating in Guizhou province in response to the Guizhou government's annual guidance, which historically
has taken up a significant portion of our production output. In 2010, 2011 and 2012 and the six months ended June 30, 2013, we produced and sold 136,000 tonnes, 202,000 tonnes, 382,000 tonnes
and 171,000 tonnes, respectively, of thermal coal to power plants in Guizhou province in response to the Guizhou government's annual guidance. In 2013, we plan to produce approximately 360,000 tonnes
of thermal coal in response to the Guizhou government's annual guidance. This has constrained our ability to sell chemical or PCI coal which are able to generally command higher selling prices and
higher profit margins than thermal coal.
- •
- Fluctuation in anthracite coal prices. Our gross margin,
which is equal to gross profit divided by revenue, decreased from 44.9% in the six months ended June 30, 2012 to 27.0% in the same period in 2013, primarily due to a significant decrease in the
average selling price of our self-produced coal. In the six months ended June 30, 2012 and 2013, the average selling price of the anthracite coal we produced was RMB368.3 and RMB291.9 per
tonne, respectively. While the anthracite coal production in Guizhou province continued to decrease during the Track Record Period, from 62.6 million tonnes in 2010, to 59.9 million
tonnes in 2011 and 53.4 million tonnes in 2012, our sale of anthracite coal continued to increase, from 166,362 tonnes in 2010, to 314,058 tonnes in 2011 and 437,010 tonnes in 2012.
See
"Financial Information — Results of Operations".
113
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In order to improve our financial conditions in the future, we intend to carry out the following plans before the end of
2015:
- •
- Expansion of Baiping Coal Mine, Liujiaba Coal Mine, Zhulinzhai Coal Mine and Dayuan Coal
Mine. In order for us to increase our sales of chemical coal, we will need to increase our annual production output. To achieve this, we
plan to increase our total annual production capacity of approximately 890,000 tonnes for 2013 to 1,680,000 tonnes for 2014 and 2,900,000 tonnes for 2015, respectively, through the expansion of
Baiping Coal Mine, Liujiaba Coal Mine, Zhulinzhai Coal Mine and Dayuan Coal Mine and by accelerating the construction of Dayun Coal Mine. We plan to apply for necessary licenses and permits for higher
permitted annual production capacities for certain of our coal mines from 2014 in addition to the licenses and permits for Baiping Coal Mine that have been applied for. The estimated commencement of
commercial production of Yongsheng Coal Mine in March 2014 is also expected to increase our annual production output.
- •
- Complete the construction of a coal beneficiation plant in Jinsha
county. In order to sell the anthracite coal from our anthracite coal mines as PCI coal and as chemical coal with certain technical
specifications, the coal would need to be washed. The construction of the coal beneficiation plant in Jinsha county (which is close to the Yongsheng Coal Mine) is expected to further enhance the
quality of the anthracite coal we produce and to enable the sale of such coal as higher margin chemical coal and PCI coal.
- •
- Construct a shipping port along the Wujiang River. We
currently transport coal to our customers primarily by road using third party coal transportation services. Such costs are borne by our customers. To become more competitive, we are constructing a
shipping port along the Wujiang River which is expected to (i) allow us to transport coal from our anthracite coal mines by waterway which will be more efficient and reliable than road
transportation; and (ii) provide us with access to anthracite coal net importing provinces, such as Guangdong and Guangxi.
- •
- Increase the sale of self-produced chemical coal and PCI
coal. By increasing our total annual production output and with the addition of our own coal beneficiation plant, we will be in a
position to increase our sale of anthracite coal as chemical coal and PCI coal, which we believe will greatly improve our financial performance.
Based
on their estimates, the Directors believe that following the completion of the expansion plans, our Company may achieve operating profits for 2015, having regard to the factors and
conditions affecting the business, results of operations and financial conditions of the Company as disclosed in this listing document.
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In
2013, 2014 and 2015, we expect to incur approximately RMB379.3 million, RMB257.2 million and RMB201.2 million, respectively, of capital expenditures to carry out
the above plans, which are expected to be funded primarily through interest-bearing bank loans and other borrowings. See "Financial Information — Liquidity and Capital
Resources — Working Capital" and "Financial Information — Liquidity and Capital Resources — Capital Expenditure".
The
following table highlights the key milestones for our expansion plans as of the date of the listing document:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Major development activities/plan |
|
Forecast
total annual
production
capacity
(in tonnes) |
|
Forecast
total coal
processing
capacity
(in tonnes) |
|
Forecast
total annual
coal shipping
capacity
(in tonnes) |
|
Forecast
capital
expenditure
(RMB in
millions) |
|
Primary source
of funding |
2013 |
|
• Commenced the construction
of the beneficiation plant in September 2013
•
Achieved commercial production at Dayuan Coal Mine in November 2013
• Continue expanding annual coal production capacity at the coal mines in commercial production |
|
|
890,000 |
|
|
0 |
|
|
0 |
|
|
379.3 |
|
Bank and other borrowings |
2014 |
|
• To commence commercial
production at Yongsheng Coal Mine in March 2014
•
To complete the construction of the first phase of the beneficiation plant in April 2014
• To commence the construction of the first phase of the shipping port in May 2014
• To complete the construction of the first phase of the shipping port in
December 2014
• To continue expanding annual coal
production capacity at the coal mines in commercial production |
|
|
1,680,000 |
|
|
600,000 |
|
|
500,000 |
|
|
257.2 |
|
Bank and other borrowings |
2015 |
|
• To commence the
construction of the second phase of the beneficiation plant in January 2015
• To complete the construction of the second phase of the beneficiation plant in June 2015
• To achieve commercial production
at Dayun Coal Mine in July 2015
• To commence the construction of the second phase of the shipping port in July 2015
• To complete the construction of the second phase of the shipping port by the end of 2015
• To continue expanding annual coal production capacity at the coal mines in
commercial production |
|
|
2,900,000 |
|
|
1,200,000 |
|
|
1,000,000 |
|
|
201.2 |
|
Bank and other borrowings |
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Table of Contents
Plans for Achieving Commercial Production
The following table sets forth the development status, estimated timeline and estimated capital expenditure required to achieve commercial production as of the
Latest Practicable Date for Yongsheng Coal Mine and Dayun Coal Mine:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Capital
Expenditure
Required to Achieve
Commercial
Production as of
the Latest
Practicable Date
(RMB in millions) |
|
|
|
|
|
Material Permits
to be Obtained
before
Commercial
Production |
|
|
|
Expected Timeline |
|
|
|
Permitted
Annual
Production
Capacity (in tonnes) |
|
|
|
Mines under
Construction
|
|
Development Status |
|
Material Approval Process |
|
Expected Time |
|
Yongsheng Coal Mine |
|
|
600,000 |
|
• Safe production
permit |
|
• Completed major
construction
• Completed quality
authentication
• Completed on-site inspection
for pilot run
• Undergoing pilot run
phase |
|
• Obtain approval of safety
facilities acceptance
• Complete the environmental
acceptance inspection
• Obtain safe production
permit
• Commence commercial
production |
|
• January 2014
• February 2014
• March 2014
• March 2014 |
|
|
47.9 |
|
Dayun Coal Mine |
|
|
600,000 |
|
• Safe production
permit |
|
• Undergoing major
construction phase |
|
• Complete quality
authentication
• Obtain approval of pilot
run
• Obtain approval of safety
facilities acceptance
• Complete the environmental
acceptance inspection
• Obtain safe production
permit
• Commence commercial
production |
|
• September 2014
• November 2014
• May 2015
• July 2015
• July 2015
• July 2015 |
|
|
222.2 |
|
116
Table of Contents
We are in the process of constructing a coal beneficiation plant in Jinsha county to process our anthracite coal into PCI coal as well
as to produce chemical coal with certain technical specifications. The coal beneficiation plant is expected to be built on a site adjacent to Yongsheng Coal Mine. We plan to construct the coal
beneficiation plant in two phases with a planned aggregate annual coal-washing capacity of 1.2 million tonnes. The first phase of the coal beneficiation plant is expected to achieve an annual
coal-washing capacity of 600,000 tonnes, and the second phase is expected to increase the annual coal-washing capacity to 1.2 million tonnes. The construction of the first phase commenced in
September 2013 and is expected to be completed by April 2014. The construction of the second phase is expected to commence in January 2015 and complete by June 2015. The estimated capital expenditure
for the coal beneficiation plant is RMB73.5 million, of which we had paid RMB5.9 million as of June 30, 2013. We have fulfilled the initial funding requirement with our internal
financial resources, and we are seeking financing from external sources, including banks to meet further funding requirements.
Prior
to the construction of our coal beneficiation plant, we are required to make filings with the relevant local NDRC and safety authorities, as well as obtain certain approvals or
permits from certain other local regulatory authorities, including the relevant local environmental protection authorities, land and resources authorities, urban and rural planning authorities, and
housing and urban and rural construction authorities. We have already made the local NDRC filing and obtained the approvals of the local environmental protection authorities. Although the requisite
filings, approvals or permits from the other local regulatory authorities are currently pending, we have received confirmation letters from these authorities in respect of the commencement of
construction of our coal beneficiation plant, and we do not expect any material difficulties in completing and/or obtaining the requisite filings, approvals and/or permits. These filings, approvals
and/or permits relating to construction are expected to be obtained or completed by April 2014 when the first phase of the construction of the coal beneficiation plant is expected to be completed.
We are also contemplating constructing a port along the Wujiang River near Yongsheng Coal Mine to facilitate the transportation of the
anthracite coal we produce at our mines in Jinsha county. Upon completion, the port is expected to allow us to transport the coal produced by Yongsheng Coal Mine by waterway, and provide us with
access to markets such as Guangdong, Guangxi, Sichuan, Chongqing and Jiangxi.
We
plan to construct the port in two phases with a planned aggregate annual transportation capacity of one million tonnes. The first phase of the port is expected to achieve an annual
transportation capacity of 500,000 tonnes, and the second phase is expected to increase the annual transportation capacity to one million tonnes. The first phase is expected to commence in May 2014
and complete by the end of 2014. The second phase is expected to commence in July 2015 and complete by the end of 2015. The estimated capital expenditure for the port is RMB11.7 million and we
plan to introduce two other parties to participate in the construction and operation of the port. We plan to contribute 55% of the estimated capital expenditure, which amounts to
RMB6.4 million, by using our internal financial resources with the remaining capital expenditures to be provided by the
117
Table of Contents
other
two parties. The construction of the port is subject to our Company obtaining from the relevant governmental authorities, among other things, construction project approval, a coastline use
permit, a hydraulic operation safety permit, a port operations permit and surface and underwater construction operation permits.
Our future profitability will significantly depend on our ability to produce, market and sell chemical coal and PCI coal, which
generally command higher average selling prices and have higher margins than thermal coal. In 2011, 2012 and the six months ended June 30, 2013, we derived approximately 5%, 5% and 1.2%,
respectively, of our revenue from the sale of self-produced chemical coal, and we have not yet commenced selling any PCI coal.
As
part of our strategy, we intend to significantly increase our sales of chemical coal, and we intend to begin selling PCI coal in 2014. In particular, we plan to, partly through our
planned beneficiation plant, increase our sales of chemical coal from 2% of the total sales for 2013, to 22% for 2014 and 61% for 2015 and increase our sales of PCI coal from nil for 2013, to 8% for
2014 and 21% for 2015.
OPTIMIZATION PLANS
In order to increase our production capacity, we plan to optimize all of our currently operating anthracite coal mines by improving
mine layout and upgrading mine infrastructure and equipment. We expect our optimization plans will begin in 2015 and, after their expected completion in December 2018, we expect to be able to
achieve an aggregate annual production capacity of 5.81 million tonnes. The estimated cost of the optimization plans is RMB807.5 million.
MINING RIGHTS AND OTHER PERMITS
Under PRC law, prior to June 29, 2013, each coal mine in the PRC must obtain certain permits prior to commencing commercial
production, including the following key permits:
- •
- a mining right permit;
- •
- a safe production permit; and
- •
- a coal production permit.
Typically,
the safe production permit and the coal production permit will not be issued until the mining right permit has been issued, a pilot run of one to six months following the
completion of construction of the coal mine has been completed and the relevant government authorities have completed certain safety inspections. In addition to these permits, prior to commencing
commercial production, coal mines in the PRC are required to complete an environmental trial run and an environmental acceptance inspection. In Guizhou province, in general, mining right permits are
issued by the Guizhou Provincial Department of Land and Resources, safe production permits are issued by
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Table of Contents
the
Guizhou Administration of Coal Mine Safety and coal production permits are issued by the Energy Bureau of Guizhou Province. Most mining right premiums in general will be payable by the permit
holder to the relevant land and resources authorities pursuant to an installment payment plan with the authorities after a mining right permit has been issued.
Effective
on June 29, 2013, the National People's Congress Standing Committee passed certain amendments to the Coal Law which among other thing, removed the requirement of
obtaining coal production permits. Detailed implementation rules have not yet been promulgated.
The
following table sets forth certain information regarding our mining right permits, safe production permits and coal production permits as of the Latest Practicable Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining Right Permit |
|
Safe Production Permit |
|
Coal Production Permit(5) |
|
Mine
|
|
Holder/permit number |
|
Permit
date
(month/year) |
|
Expiration
date
(month/year) |
|
Permit
date
(month/year) |
|
Expiration
date
(month/year) |
|
Permit
date
(month/year) |
|
Expiration
date
(month/year) |
|
Baiping Coal Mine(1) |
|
Baiping Mining/ C5200002011111120121064 |
|
November 2011 |
|
August 2014 |
|
|
May 2012 |
|
|
May 2015 |
|
|
June 2009 |
|
|
June 2020 |
|
Liujiaba Coal Mine |
|
Xinsong Coal/ C5200002009091120036374(2) |
|
March 2011 |
|
September 2019 |
|
|
November 2012 |
|
|
November 2015 |
|
|
December 2012 |
|
|
December 2037 |
|
Zhulinzhai Coal Mine |
|
Linjiaao Coal/ C5200002011031120108782 |
|
April 2011 |
|
July 2018 |
|
|
March 2012 |
|
|
March 2015 |
|
|
April 2012 |
|
|
April 2031 |
|
Gouchang Coal Mine |
|
Gouchang Coal/ C5200002009121120048406 |
|
April 2011 |
|
April 2017 |
|
|
April 2011 |
|
|
April 2014 |
|
|
April 2011 |
|
|
April 2045 |
|
Yongsheng Coal Mine |
|
Guizhou Yongfu/ C5200002012021120124117(3) |
|
February 2012 |
|
November 2027 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Dayuan Coal Mine |
|
Dayuan Coal/ 5200002011051120118585 |
|
March 2013 |
|
March 2023 |
|
|
November 2013 |
|
|
November 2016 |
|
|
— |
|
|
— |
|
Dayun Coal Mine |
|
Guizhou Dayun/ C5200002011031120112455(4) |
|
March 2011 |
|
March 2031 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
- (1)
- In
2011 and 2012, the actual production output of Baiping Coal Mine exceeded its permitted annual production capacity under its mining right permit and coal
production permit. See "— Our Anthracite Coal Mines — Mines in Commercial Production — Baiping Coal
Mine". We have applied for a mining right permit with an annual production capacity of 300,000 tonnes for Baiping Coal Mine by 2013 and we expect to obtain such permit in 2014.
- (2)
- The
mining right has been pledged to China Minsheng Bank.
- (3)
- The
mining right has been pledged to China Minsheng Bank and Bank of China.
- (4)
- The
mining right has been pledged to China Merchants Bank.
- (5)
- The
National People's Congress Standing Committee passed certain amendments to the Coal Law, which became effective on June 29, 2013, including
removing the requirement of obtaining coal production permits.
Under the relevant mineral resources regulations of the PRC, if residual coal reserves which have been recorded with relevant land and resource
authorities remain after the term of a mining right permit expires, the holder of the mining right may, subject to certain conditions, apply for an extension
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Table of Contents
of
the mining right permit. There is no minimum residual reserve requirement for the extension of mining right permits. If any of our mines has any residual coal reserves when the relevant mining
right permit expires, we intend to submit an application to renew the mining right permit. Our PRC legal advisors, Commerce & Finance Law Offices, have advised us that, provided that the
current PRC laws, regulations and mining industry policies remain unchanged and we have complied with all substantive and procedural requirements under the PRC laws, rules and regulations, as well as
all requests of the competent authorities at the relevant time, there would not be material legal impediments in renewing our mining right permits.
MINING OPERATIONS AND PROCESSES
The following diagram illustrates the main processes in our mining operations.
Mine construction
The three main stages of mine construction include:
- •
- Pre-construction work. Pre-construction work provides the
foundation for future mine construction and planning for overall construction management, and includes leveling the land on which the mine is located and stripping the topsoil, and connecting the land
to the water, electricity, road transportation and telecommunications networks.
- •
- Shaft engineering and civil engineering. After
pre-construction work has been completed, we begin constructing inclined mine shafts to reach the coal seams. We use a number of shaft engineering and civil engineering techniques in constructing our
mine shaft, including drilling and blasting and slagging and tunneling techniques. We primarily use shotcrete and rock bolt techniques to support our shaft walls.
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Table of Contents
- •
- Electrical equipment installation and complementary production system
engineering: Concurrent with shaft engineering and civil engineering, we install electrical equipment and complementary production systems, including the power supply system,
draft system, drainage system, pressure ventilation system, elevation and transportation system, gas drainage system and monitoring system.
We
have entered into agreements with third party contractors for the construction of our anthracite coal mines. See "— Suppliers, Third Party Contractors and
Utilities". Depending on the mine design plan and the technical standards, it generally takes two to five years to complete the
construction of an anthracite coal mine. Prior to the full commencement of commercial production, we may be able to produce and sell a limited amount of coal produced during mine construction process.
Coal extraction
Each of our anthracite coal mines currently utilizes manual longwall mining, semi-mechanical longwall mining or mechanical longwall
mining methods to extract coal. Longwall mining refers to extracting coal from long rectangular blocks of the coal seams. Manual longwall mining refers to drilling holes in the mining face, placing
explosives and detonating the explosives to extract the coal. Mechanical and semi-mechanical longwall mining involve using a mechanical shearers in coal extraction. Coal that has been extracted by the
mechanical shearer is then loaded on to a mine conveyor system for delivery to the surface. In mechanical longwall mining, the mine roof is held up during the extraction process by automatic hydraulic
roof supports, while in semi-mechanical longwall mining, the mine roof is held up by hydraulic roof supports that are operated manually. The time required for coal extraction depends primarily on the
nature of the mine, including the amount of anthracite coal reserves, the mining method adopted, the geological conditions of the mine and the size of the mining face. We generally transport the
anthracite coal extracted from our mines to the ground surface on a daily basis. The following table sets forth the current extraction method of each of our anthracite coal mines:
|
|
|
Anthracite Coal Mine
|
|
Extraction Method |
| Baiping Coal Mine |
|
Manual longwall |
| Liujiaba Coal Mine |
|
Semi-mechanical longwall |
| Zhulinzhai Coal Mine |
|
Manual longwall |
| Gouchang Coal Mine |
|
Manual longwall |
| Dayun Coal Mine |
|
Mechanical longwall |
| Yongsheng Coal Mine |
|
Mechanical longwall |
| Dayuan Coal Mine |
|
Semi-mechanical longwall |
Due
to our relative inexperience with mechanical longwall mining, production ramp-up time for our mechanical longwall mines may be longer than expected. We intend to minimize the risk of
ramp-up delays by requesting the mining equipment manufacturers' service representatives to be present during the start-up phase to provide training to our employees. Moreover, we intend to rotate our
trained employees from mines which have used mechanical longwall mining systems to mines where mechanical longwall mining systems are being introduced for the first time.
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Table of Contents
Waste disposal and reclamation
Our mining operations seek to ensure that waste gas, waste water and industrial residue are disposed of in accordance with the relevant
legal requirements of the PRC. In addition, we are required by PRC law to reclaim and restore mining sites to their prior condition after completion of mining operations. Reclamation activity
typically involves the removal of buildings, equipment, machinery and other physical remnants of mining, the restoration of land features in
mined-out areas, dumping sites and other mining area, and the contouring, covering and re-vegetation of waste rock piles and other disturbed areas. We expect the waste disposal and reclamation process
will take approximately six months to complete.
NON-IFRS FINANCIAL MEASURES
Cash Operating Costs
Cash operating cost is not a measure calculated in accordance with IFRS and is being disclosed in this listing document pursuant to the
requirements of the Hong Kong Stock Exchange. We believe cash operating cost is a relevant and useful measure to our investors, as it is used by our management as a gauge of our production costs and
for purposes of internal reporting and planning in connection with our liquidity and cash requirements.
Our
cash operating costs consist primarily of wages and labor, costs of materials, power and maintenance. Our total cash operating costs increased from RMB102.7 per tonne of saleable
coal produced in 2010 to RMB123.9 in 2011, primarily due to the increase in the cost of wages and labor. Our total cash operating costs increased from RMB123.9 per tonne of saleable coal produced in
2011 to RMB156.7 in 2012, primarily due to the increase in the cost of materials. We expect total cash operating costs to be approximately RMB156.0 upon the completion of the optimization phase
construction of our anthracite coal mines. Set forth below are our cash operating costs of our coal mines that were in commercial production in 2010, 2011, 2012 and the six months ended
June 30, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Cash Operating Costs
(RMB/Tonne of Saleable Coal Produced) |
|
Category
|
|
Year ended December 31, 2010 |
|
Year ended December 31, 2011 |
|
Year ended
December 31, 2012 |
|
Six months ended
June 30, 2013 |
|
Wages and labor |
|
|
62.7 |
|
|
83.2 |
|
|
88.9 |
|
|
100.7 |
|
Materials |
|
|
28.8 |
|
|
26.1 |
|
|
47.5 |
|
|
44.8 |
|
Power |
|
|
7.6 |
|
|
9.4 |
|
|
11.5 |
|
|
16.0 |
|
Maintenance |
|
|
1.2 |
|
|
1.6 |
|
|
1.7 |
|
|
1.5 |
|
Other |
|
|
2.4 |
|
|
3.6 |
|
|
7.1 |
|
|
5.6 |
|
| |
|
|
|
|
|
|
|
|
|
Total cash operating costs |
|
|
102.7 |
|
|
123.9 |
|
|
156.7 |
|
|
168.6 |
|
| |
|
|
|
|
|
|
|
|
|
Set
forth below is a reconciliation of our cash operating costs to cost of sales for the periods indicated which the Company believes to be the most directly comparable IFRS financial
measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
2010 |
|
Year ended
December 31,
2011 |
|
Year ended
December 31,
2012 |
|
Six months
ended June 30,
2013 |
|
|
|
(RMB in thousands)
|
|
Cost of sales(1) |
|
|
25,453 |
|
|
74,289 |
|
|
95,889 |
|
|
39,953 |
|
Opening coal balance |
|
|
(1,794 |
) |
|
(2,456 |
) |
|
(2,262 |
) |
|
(4,873 |
) |
Ending coal balance |
|
|
2,456 |
|
|
2,262 |
|
|
4,873 |
|
|
6,968 |
|
Price adjustment fund |
|
|
(2,624 |
) |
|
(4,995 |
) |
|
(12,116 |
) |
|
(2,792 |
) |
Sales taxes |
|
|
(1,856 |
) |
|
(1,812 |
) |
|
(3,897 |
) |
|
(1,834 |
) |
Cost of third party coal sold |
|
|
— |
|
|
(30,229 |
) |
|
(1,110 |
) |
|
— |
|
Inventory write-down |
|
|
— |
|
|
— |
|
|
— |
|
|
984 |
|
Non-cash operating costs |
|
|
(5,303 |
) |
|
(5,259 |
) |
|
(12,934 |
) |
|
(5,949 |
) |
| |
|
|
|
|
|
|
|
|
|
Total cash operating costs |
|
|
16,332 |
|
|
31,800 |
|
|
68,443 |
|
|
32,457 |
|
| |
|
|
|
|
|
|
|
|
|
- (1)
- Cost
of sales is the amount presented in our consolidated financial statements included in
Appendix I — "Accountants' Report of the Company".
122
Table of Contents
SALES AND MARKETING
We currently sell most of our anthracite coal as thermal coal to power producers in Guizhou province. We also sell a small amount of
our anthracite coal to chemical plants. As we have not entered into any long-term sales contracts, we sell our anthracite coal in the spot market. We generally price our anthracite coal based on the
prevailing market prices in Guizhou province, the anthracite coal type and quality, and our sales volume and the length of our relationship with the customer. The market prices of anthracite coal have
a significant effect on our average selling price. See "Financial Information — Market Risk Disclosure — Commodity Price
Risk". In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, the average selling price of the anthracite coal we produced was RMB232.4, RMB296.4, RMB323.6, RMB368.3 and
RMB291.9 per tonne, respectively.
In
2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our five largest customers accounted for approximately 66.6%, 73.5%, 56.7%, 73.7% and 72.8%, respectively, of
our total revenue and our largest customer accounted for approximately 29.7%, 29.2%, 24.1%, 55.3% and 24.5%, respectively, of our total revenue. In 2010, 2011, 2012 and the six months ended
June 30, 2012 and 2013, five, four, four, five and five of our five largest customers, respectively, were power producers purchasing thermal coal from us. As of June 30, 2013, the length
of our relationships with five largest customers ranged from one to five years. Prior to 2011, we derived substantially all of our revenue from the sale of thermal coal. We believe that by increasing
our sales of chemical coal and beginning selling PCI coal, we may be able to reduce our dependency on a limited group of large customers. None of our Directors, their associates or our Shareholders
are related to or owns any interest in any of our five largest customers.
As
of June 30, 2013, we had a dedicated sales and marketing team consisting of 12 employees. Our sales and marketing team is responsible for establishing sales networks,
providing customer support and collecting payments from customers.
COAL TRANSPORTATION
Substantially all of the anthracite coal we sell is transported to our customers by road. Most of our customers request us to arrange
for transportation, in which case we generally invoice them for the cost of transportation on a cost-plus basis over the mine gate price of our anthracite coal, which is the sales price of anthracite
coal sold at the producing mine. We have not entered into any long-term contracts with the providers of transportation services. All of our anthracite coal mines are accessible by road. The Company is
in the process of improving the condition of the road connecting certain of its anthracite coal mines Yongsheng Coal Mine and Dayuan Coal Mine, Liujiaba Coal Mine, Zhulinzhai Coal Mine, including and
the public roadway. In addition, the Competent Person also observed that improvement of local haul roads is being undertaken.
We
are contemplating the construction of a port along the Wujiang River. Upon completion, the port is expected to allow us to transport the coal produced by Yongsheng Coal Mine by
waterway, and provide us access to markets such as Guangdong, Guangxi, Sichuan, Chongqing and Jiangxi. See "— Our Anthracite Coal Mines — Our Expansion
Plans — The Shipping Port". The Company believes that the existing transportation infrastructure together with its future improvements and the proposed shipping port are expected to
be sufficient for the Company's future expansion.
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Table of Contents
Prior
to the Latest Practicable Date, we did not experience any transportation disruptions that had a material adverse effect on our business, financial condition and results
of operations.
SUPPLIERS, THIRD PARTY CONTRACTORS AND UTILITIES
The main suppliers for our mining operations include third party contractors and suppliers of ancillary materials used in our mining
operations. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our purchases from our five largest suppliers were approximately RMB98.2 million,
RMB109.0 million, RMB127.7 million, RMB45.7 million and RMB37.2 million, respectively, representing approximately 57.1%, 49.8%, 42.5%, 36.3% and 26.5%, respectively, of our
total purchases. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our largest supplier accounted for approximately 19.3%, 18.2%, 15.7%, 14.7% and 9.8%, respectively, of our
total purchases. Each of our five largest suppliers is a third party contractor. As of the Latest Practicable Date, none of our Directors, their associates or our Shareholders are related to or owns
any interest in any of the five largest suppliers.
Third Party Contractors
We enter into agreements with third party contractors for the construction of our coal mines from time to time. In 2010, 2011, 2012 and
the six months ended June 30, 2012 and 2013, we had 14, 20, 28, 26 and 20 third party contractors, respectively. Each of these third party contractors is an Independent Third Party, and,
to our knowledge, each of them have the relevant licenses and permits to conduct the activities for which they are engaged except for one individual third party contractor we engaged in 2012 who did
not have the relevant licenses or permits. We engaged this individual third party contractor to expedite the construction process and reduce the construction cost of Yongsheng Coal Mine. Such
contractor was involved in the tunneling of two mining faces of Yongsheng Coal Mine. We examined the licenses and permits of such contractor prior to its engagement, and we obtained an undertaking
from such contractor that all the necessary licenses and permits would be obtained within a period of three months after the engagement. Pursuant to the undertaking, such contractor is liable to
compensate us for any fines or penalties imposed on us arising from or as a result of the engagement. We subsequently terminated our engagement with such
contractor in 2013 and did not encounter any quality or safety problems on the construction work performed. Under the Regulations on the Administration of Construction Project
Quality
issued by the State Council on January 30, 2000, a company which engages a third party contractor without the appropriate
qualifications may be required to take
remedial actions and is subject to a fine of between RMB500,000 and RMB1 million. The persons within the company who are directly responsible for the engagement may be subject to an additional
fine ranging from 5% to 10% of the total fine imposed on the company. In order to ensure that our third party contractors have the required licenses and permits in the future, we have improved our
internal control policies with respect to the selection of third party contractors and equipment suppliers. First, we will inspect the licenses and permits of potential third party contractors before
requesting them to submit a bid. In addition, we will re-examine the licenses and permits of potential third party contractors during the evaluation or competitive-bid stage to ensure that the
short-listed third party contractor remains qualified. We also plan to regularly examine our third party contractors' licenses and permits after their engagement throughout the contract term.
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In
2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our purchases from our third party contractors were RMB104.8 million, RMB145.5 million,
RMB144.0 million, RMB77.0 million and RMB51.6 million, respectively. As of June 30, 2013, our relationships with third party contractors ranged from one to five years. We
have not engaged any third party contractors to provide services other than for the construction of our coal mines and our coal beneficiation plant.
We
select our contractors through a bidding process to ensure that our contracts are entered into on competitive terms. In the bidding process, we focus on the bidders' skills,
expertise, experience and reputation, in addition to the bidding price. Our contracts with third party contractors typically require our contractors to comply with applicable laws, rules and
regulations as well as our technical and safety standards, and that they perform their work under our supervision. Moreover, our contracts with third party contractors typically require the contractor
to bear all losses or liabilities incurred as a result of the contractors' failure to maintain proper safety standards. We generally pay our contractors on a monthly basis based on the percentage of
work they have completed. Upon the completion of work by our contractors, we carry out detailed inspection prior to acceptance of the work. During the Track Record Period, we did not experience any
material suspensions or delays in mine construction as a result of any sub-standard work or improper act of our contractors. If any of our existing third party contractors discontinues their services,
we believe we will be able to engage a replacement contractor on similar terms and conditions.
As
advised by our PRC legal advisors, we are not required to purchase social insurance for the employees of the contractors as they are not considered to be our employees under the
applicable PRC
laws and regulations. We do not maintain any insurance policy to cover possible losses, damage or costs resulting from accidents, fault or omission of the contractors and its employees.
Suppliers of Ancillary Materials
The key ancillary materials used in our mining operations include replacement parts, steel, cement, explosives, fuel and lubricants. We
generally do not enter into long-term supply agreements with respect to our ancillary materials and we are not dependent on any single supplier. We typically select the supplier based on various
factors, including the quality and safety standard of their products, their ability to reliably meet our supply requirements, their credit terms and their after-sales service. We have not experienced
any shortage of supplies during the Track Record Period.
Utilities
We consume a significant amount of electricity at our mining operations. All of our anthracite coal mines receive power supply from the
China Southern power grid. We have not experienced any significant interruptions in our electricity supply during the Track Record Period. In 2010, 2011, 2012 and the six months ended June 30,
2013, respectively, our electricity cost ranged from RMB5.6 to RMB13.7 per tonne, RMB8.2 to RMB11.4 per tonne, RMB7.5 to RMB22.7 per tonne, and RMB10.1 to RMB45.6 per
tonne, respectively.
We
obtain water for our mining operations from surface and subsurface supplies, including rivers, reservoirs and springs. We also reuse water discharged during our mining operations, and
filter and reuse waste water in our anthracite coal production activities. Our PRC legal advisors, Commerce
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Table of Contents
&
Finance Law Offices, advised us that, all of our five coal mines under the commercial production stage have obtained water withdrawal permits and according to relevant PRC laws, the other two coals
mines, Dayun Coal Mine and Yongsheng Coal Mine, are not required to obtain water withdrawal permits prior to completing project acceptance inspection and commencing commercial production. We have not
experienced any significant interruptions in our water supply during the Track Record Period. During the Track Record Period, the Company incurred a total of less than RMB40,000 for water
supply. The Company's usage of water is not subject to any claims by indigenous groups which would have affected its ability to access sufficient water for its operation.
We
have not entered into any hedging arrangements to manage fluctuations in the prices of supplies and raw materials. Whether we can pass on significant increases in the cost of supplies
and raw materials will depend on market conditions.
COAL TRADING
In addition to our primary business of selling anthracite coal produced from our mines, we have from time to time engaged in coal
trading activities by selling coal that we purchased from third party suppliers since January 2011 in order to take advantage of coal price fluctuations during the ramp-up of our production
capacity. In 2011 and 2012, revenue from sales of third party coal was RMB33.1 million and RMB1.1 million, respectively, representing 31.5% and 0.8%, respectively, of our total revenue.
The decrease of revenue from sales of third party coal as a percentage of our total revenue in 2012 was primarily due to an increase in sales of our self-produced coal, which in turn resulted from an
increase in the production output of Baiping Coal Mine in 2012 and the commencement of commercial production at Zhulinzhai Coal Mine and Liujiaba Coal Mine in April and December 2012,
respectively. We did not sell any third party coal in 2013 and we do not expect sales of third party coal to account for a significant part of our revenue in the future.
COMPETITION
The PRC anthracite coal market is highly fragmented. We primarily compete with other anthracite coal enterprises in Guizhou province.
Competitive factors in the PRC anthracite coal industry include coal quality and characteristics, stability of supply, pricing, availability and cost of transportation, reliability and timeliness of
delivery and customer service. See "Risk Factors — Risks Relating to Our Business — Competition in the PRC coal industry is
intense, and we cannot assure you that we will be able to compete effectively".
ENVIRONMENTAL MATTERS
Our operations are subject to environmental laws, rules and regulations relating to, among others, gas and water emissions, hazardous
substances and waste management. See
"Regulation — PRC Laws Relating to Environmental Protection". According to the relevant PRC laws and regulations governing land reclamation, coal enterprises are
required to restore the land that has been damaged by coal mining operations. See "Regulation — PRC Laws Relating to Environmental
Protection — Regulations On Land Reclamation and Its Implementing Measures". We set aside restricted cash and
126
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place
cash with the relevant government authorities for the purpose of our future environmental rehabilitation obligations as well as the settlement of asset retirement obligations. See "Financial
Information — Critical Accounting Policies and Estimates — Provision for Asset Retirement Obligations".
Except
as disclosed in "— Regulatory Compliance" in this listing document, we have not committed any material breaches of any environmental laws, rules or
regulations applicable to us. Our environmental protection systems and facilities comply with applicable PRC national and local environmental protection laws, rules and regulations. As of the Latest
Practicable Date, we were not subject to any material environmental claims, lawsuits, penalties or disciplinary actions.
We
emphasize environmental protection at our operations and have made significant financial commitments towards the construction of environmental protection facilities and the
establishment of a sound environmental protection management and monitoring system. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our cost of compliance with applicable
environmental laws, rules and regulations were approximately RMB6.6 million, RMB8.3 million, RMB11.6 million, RMB4.6 million and RMB7.8 million, respectively. In
2013, we expect to spend an additional RMB19.2 million for compliance with environmental obligations. The cost of compliance with environmental obligations is expected to increase in 2013 as we
expect to incur significant costs in the construction of environmental protection facilities at Yongsheng Coal Mine and Dayuan Coal Mine, and we expect the environmental acceptance inspections of
three of our other anthracite coal mines will be conducted in 2014.
OCCUPATIONAL HEALTH AND SAFETY
We are committed to reducing our employee fatality rate and maintaining high safety standards at our anthracite coal mines. We have
implemented a number of occupational health and safety measures to ensure compliance with PRC regulatory requirements. We have installed methane gas drainage facilities and mine fans at all of our
anthracite coal mines in commercial production, and each of our anthracite coal mines in commercial production has a 24-hour control room to monitor mine conditions, a rescue room to facilitate the
rescue and recovery of victims in the event of mine accidents and a safety management team that performs regular safety inspections. All of our mine safety managers are experienced personnel with the
relevant safety and management
qualifications issued by the Guizhou government. We also have an internal safety management manual for mine operations and have adopted detailed safety procedures pursuant to the State Coal Mine
Safety Guidelines. We conduct regular safety training sessions for our employees, including mine managers, methane inspectors, blasters, electricians, coal miners and other workers, to improve their
safety awareness and knowledge, and we also arrange periodic health checks for our employees. Since February 2013, we have implemented a six-part safety system at each of our operating coal
mines consisting of the following components: an electronic safety monitoring system; a wireless tracking system that tracks the location of our underground workers; emergency exits; emergency water
supplies; emergency underground communication equipment; and compressed air stations that provide emergency underground oxygen supplies.
In
2010, we had separate accidents involving three employee fatalities at our anthracite coal mines, representing a fatality rate of 17.7 fatalities per million tonnes of coal
produced. These
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fatalities
occurred at Baiping Coal Mine, Gouchang Coal Mine and Dayuan Coal Mine and were related to our employees' violations of our work safety rules in relation to roof operations, mine car
operations and personal protective equipment. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, compensation in an aggregate amount of RMB1.62 million,
RMB0.32 million, RMB0.44 million, RMB0.28 million and nil, respectively, was paid in connection with employee accidents. Of these amounts, in each of 2010, 2011, 2012 and the six
months ended June 30, 2012 and 2013: (i) RMB0.94 million, RMB0.16 million, RMB0.18 million, RMB0.13 million and nil, respectively, was paid by the Company;
(ii) RMB0.50 million, RMB0.16 million, RMB0.26 million, RMB0.16 million and nil, respectively, was covered by social insurance claims; and
(iii) RMB0.18 million, nil, nil, nil and nil, respectively, was covered by commercial insurance claims. See "Risk Factors — Risks Relating to Our
Business — Accidents at our coal mines or neighboring coal mines could materially disrupt our business and operations and damage our reputation". Since
September 2010, we did not have any additional employee fatalities at our anthracite coal mines. According to the SAWS, the average coal mine fatality rates in the PRC in 2010, 2011 and 2012
were 0.749, 0.564 and 0.374 fatalities per million tonnes of coal produced, respectively. During the Track Record Period, we did not experience any incidents whereby production at any of our
anthracite coal mines was suspended due to safety issues regarding our own operations.
In
an effort to improve our mine safety, we have implemented various initiatives since August 2010 to enhance our safety standards. We have established a safety management
committee and a safety supervision department responsible for conducting safety inspections of our coal mines. The safety management committee members consist of the chairman, Mr. Huang Zuye,
the vice-chairman, Mr. Wan Huojin, and the other members, consisting of Mr. Hu Lubao, Mr. Cai Zhenghui, Mr. Lan Xiaosheng, Mr. Jia Zhigang, Mr. Wu Ziping and
Mr. Cheng Wenkun. A majority of the committee members have coal mine safety management related experience. See "Directors and Senior Management". We have also revised our operational procedures
and improved our field management by replacing wooden support structures in our mines with metal support structures to prevent the occurrence of roof collapses. In addition, we have adopted regular
inspection and maintenance measures, installed new safety equipment and facilities, established additional operational safety guidelines, implemented production safety systems and enhanced training
efforts. We have also retained five registered safety
engineers consisting of two dedicated safety personnel, two coal mine managers and one chief engineer, to ensure safety at our coal mines. The Directors believe that these safety initiatives are
adequate and effective. Our PRC legal advisors, Commerce & Finance Law Offices, are of the opinion that our Company has complied with the relevant occupational health and safety laws and
regulations in all material respects based on the confirmation letters issued by the relevant county level Administrations of Work Safety and the Guizhou Administration of Coal Mine Safety. The
Company's internal control consultant has conducted an assessment on the Company's internal control policies relating to coal mine safety management and has not observed any material issues in the
relevant internal control policies. The Competent Person, Behre Dolbear, also reviewed the Company's records in relation to the mining accidents and interviewed the relevant management members to
understand the safety measures implemented by the Company to prevent future mining accidents and fatalities. The Competent Person also confirmed that such preventive measures are substantially in
compliance with relevant governmental regulations or mandatory guidelines.
In
2011, the municipal government of Jinsha county selected our "culture corridor" at Baiping Coal Mine as a model facility for the promotion of safety. The "culture corridor" is a
hallway in the
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mine
with various safety instructions, procedures and reminders posted on the walls. In addition, Yongsheng Coal Mine received the "Advanced Enterprise for Work Safety in 2012" award from Jinsha
county and our chief manager of Baiping Coal Mine also received the "Best Work Safety Employee in 2012" award from Jinsha county.
RISK MANAGEMENT
We have adopted a risk management policy to manage our operational risks. Under our risk management policy, our key risk management
objectives include:
- •
- developing a comprehensive risk management strategy for our Company;
- •
- recognizing different types of risks and developing appropriate risk management strategies based on the type
of risk;
- •
- identifying, monitoring and managing risk and our risk tolerance level; and
- •
- balancing risk management with the development of our Company.
Under
our risk management policy, our Board of Directors is responsible for establishing the key risk management principles and objectives, while our chief executive officer is
responsible for establishing risk management measures and reviewing material risks within our Company. We have established a compliance and audit department which is expected to be responsible for
implementing our risk management efforts, and each of our operating PRC subsidiaries has a designated risk management department which is expected to be responsible for coordinating and supervising
our risk management efforts within the subsidiary.
QUALITY CONTROL
To ensure that our anthracite coal meets the requirements of our customers, we have established three laboratories to test the quality
of our coal. The laboratories are staffed by six quality control employees responsible for monitoring our anthracite coal production process, conducting inspection and testing of our anthracite coal
and performing on-site inspections at our anthracite coal mines.
RESEARCH AND DEVELOPMENT
We did not incur any significant amounts on company-sponsored research or development activities during the Track Record Period.
INTELLECTUAL PROPERTY
We believe that our operation is not materially dependent on our ownership of any intellectual property rights. We have submitted three
applications with the Trade Marks Registry of Hong Kong for registration. See "Appendix V — Statutory and General
Information — (e) Further Information About Our Business — B. Intellectual Property Rights".
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Table of Contents
PROPERTIES
The following table sets forth certain information about the interests in the properties owned by or leased to us in the PRC as of November 1, 2013,
prepared by Peak Vision Appraisals Limited, an independent property valuation company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Description and Location |
|
Holding
Entity |
|
Use &
Occupancy |
|
Approximate
Total Site
Area (sq.m.) |
|
Approximate
Total Gross Floor Area
(sq.m.) |
|
Details of approved usage/
Details of lease |
|
Expiry date
of approved
temporary
usage/land use
rights/rent free
term/lease |
|
Restrictions
on use |
|
Material
encumbrances |
|
Material
environmental
issues,
litigation,
breaches,
defects |
|
Plans for
construction
improvement
in the next
12 months |
|
Interest
attributable to
the Company |
|
1 The mining site and various structures of the Dayun Coal Mine located at Jinqiao Village, Gaoping Township, Jinsha County, Bijie City, Guizhou Province, the PRC |
|
Guizhou Dayun |
|
The mining site & ancillary facilities for Dayun Coal Mine |
|
|
132,490.00 |
|
|
1,467.80
(excluding approximately 4,456.07 sq.m. under construction) |
|
Jinsha County State-owned Land Resources Bureau (the "Bureau") has confirmed:
(i) As per the approval document issued by the People's Government of Guizhou Province dated December 31, 2011, approval has been given for the land of the property, with a total site area of 132,490 sq.m., to be allocated to
Guizhou Dayun for construction of the Dayun Mine. The Bureau is currently processing the change of land use from collective agricultural land to construction use land, and after completing this change, will issue the Certificate of State-owned Land
Use of the property to Guizhou Dayun upon going through relevant procedures and the submitting of required documents by Guizhou Dayun.
(ii) Guizhou Dayun is currently using a portion of the property with a site area of 120,326.07 sq.m., which has been approved for temporary usage.
There is no premium payable for the change of land use at this stage. The land use right contract we plan to enter into with the Jinsha County State-owned Land Resources Bureau will provide for the amount of and timing for the payment of the premium
for the land use right. Subject to the land use right contract that is expected to be entered into by the Company and the Jinsha County State-owned Land Resources Bureau, the amount of the premium for the land use right is estimated to be
RMB10.0 million to RMB20.0 million.
Pursuant to a confirmation letter issued by Jinsha County Housing and Urban Construction Bureau dated April 22, 2013, approval has been given for the usage of the temporary structures which are completed having a total gross floor area of
130.39 sq.m. and the temporary structures under construction having a total gross floor area of 5,793.48 sq.m. of the property.
Pursuant to a confirmation letter issued by Jinsha County Urban Planning Bureau dated April 22, 2013, the property does not fall within the town planning of Gaoping Township and is therefore basically not affected by the said construction
planning. |
|
January 13, 2014 in respect of the portion of the property with a site area of 120,326.07 sq.m. |
|
|
For operation of Dayun Coal Mine |
|
None |
|
None |
|
Various structures with a total gross floor area of 4,456.07 sq.m. are under construction and expected to be completed in 2013. |
|
100% |
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Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Description and Location |
|
Holding
Entity |
|
Use &
Occupancy |
|
Approximate
Total Site
Area (sq.m.) |
|
Approximate
Total Gross Floor Area
(sq.m.) |
|
Details of approved usage/
Details of lease |
|
Expiry date
of approved
temporary
usage/land use
rights/rent free
term/lease |
|
Restrictions
on use |
|
Material
encumbrances |
|
Material
environmental
issues,
litigation,
breaches,
defects |
|
Plans for
construction
improvement
in the next
12 months |
|
Interest
attributable to
the Company |
|
2 The mining site and 14 structures of the Yongsheng Coal Mine located at Qianshun Village, Huajue Township, Jinsha County, Bijie City, Guizhou Province, the PRC |
|
Guizhou Yongfu |
|
The mining site, industrial production facilities, staff quarters, office & ancillary facilities for Yongsheng Coal Mine |
|
|
148,804.00 |
|
|
12,326.33 |
|
Jinsha County State-owned Land Resources Bureau has given consent to the temporary usage of the property with a site area of 148,804.00 sq.m.
Pursuant to a confirmation letter issued by Jinsha County Housing and Urban Construction Bureau dated April 22, 2013, approval has been given for the usage of the temporary structures of the property having a total gross floor area of
12,326.33 sq.m.
Pursuant to a confirmation letter issued by Jinsha County Urban Planning Bureau dated April 22, 2013, the property does not fall within the town planning of Gaoping Township and Huajue Township and is therefore basically not affected by the said
construction planning. |
|
January 21, 2014 |
|
|
For operation of Yongsheng Coal Mine |
|
None |
|
None |
|
None |
|
70% |
|
3 The mining site and 29 structures of the Baiping Coal Mine located at Lianhe Village, Gaoping Township, Jinsha County, Bijie City, Guizhou Province, the PRC |
|
Baiping Mining |
|
The mining site, industrial production facilities, staff quarters, office & ancillary facilities for Baiping Coal Mine |
|
|
41,993.54 |
|
|
19,793.17 |
|
Jinsha County State-owned Land Resources Bureau has given consent to the temporary usage of a portion of the property with a site area of 10,877 sq.m. and has given consent to the temporary usage of the remaining
portion of the property with a site area of 31,116.54 sq.m.
Pursuant to a confirmation letter issued by Jinsha County Housing and Urban Construction Bureau dated April 22, 2013, approval has been given for the usage of the temporary structures of the property having a total gross floor area of
19,793.17 sq.m.
Pursuant to a confirmation letter issued by Jinsha County Urban Planning Bureau dated April 22, 2013, the property does not fall within the town planning of Gaoping Township and is therefore basically not affected by the said construction
planning. |
|
May 30, 2014 in respect of the portion of the property with a site area of 10,877 sq.m.; and January 13, 2014 in respect of the remaining portion. |
|
|
For operation of Baiping Coal Mine |
|
None |
|
None |
|
None |
|
70% |
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Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Description and Location |
|
Holding
Entity |
|
Use &
Occupancy |
|
Approximate
Total Site
Area (sq.m.) |
|
Approximate
Total Gross Floor Area
(sq.m.) |
|
Details of approved usage/
Details of lease |
|
Expiry date
of approved
temporary
usage/land use
rights/rent free
term/lease |
|
Restrictions
on use |
|
Material
encumbrances |
|
Material
environmental
issues,
litigation,
breaches,
defects |
|
Plans for
construction
improvement
in the next
12 months |
|
Interest
attributable to
the Company |
|
4 The mining site and 21 structures of the Dayuan Coal mine located at Pingdong Village, Xinfang Township, Nayong County, Bijie City, Guizhou Province, the PRC |
|
Dayuan Coal |
|
The mining site, industrial production facilities, staff quarters, office & ancillary facilities for Dayuan Coal Mine |
|
|
66,847.00 |
|
|
5,060.19
(excluding approximately 1,187.59 sq.m. under construction) |
|
Nayong County State-owned Land Resources Bureau has given consent to the temporary usage of a portion of the property with a site area of 4,528.32 sq.m. and has given consent to the temporary usage of the
remaining portion of the property with a site area of 62,318.68 sq.m.
Pursuant to a confirmation letter issued by Nayong County State-owned Land Resources Bureau dated January 14, 2013, Dayuan Coal is currently using a site area of 62,318.68 sq.m. of the aforesaid remaining portion of the property, which has
been approved for temporary usage.
Pursuant to two confirmation letters issued by Nayong County Housing and Urban Construction Bureau and Nayong County Urban Planning Bureau, both dated April 7, 2013, approvals have been given for the usage of the temporary structures of the
property having a total gross floor area of 5,060.19 sq.m. and the temporary structures under construction having a gross floor area of 1,187.59 sq.m. of the property. |
|
February 19, 2014 in respect of the portion of the property with a site area of 4,528.32 sq.m.; and January 13, 2015 in respect of the remaining portion. |
|
|
For operation of Dayun Coal Mine |
|
None |
|
None |
|
A complex with a gross floor area of 1,187.59 sq.m. is under construction and expected to be completed in 2013. |
|
99% |
|
5 The mining site and 17 structures of the Gouchang Coal Mine located at Gouchang Village, Kunzhai Township, Nayong County, Bijie City, Guizhou Province, the PRC |
|
Gouchang Coal |
|
The mining site, industrial production facilities, staff quarters, office & ancillary facilities for Gouchang Coal Mine |
|
|
43,476.22 |
|
|
4,534.80 |
|
Nayong County State-owned Land Resources Bureau has given consent to the temporary usage of a portion of the property with a site area of 11,329.35 sq.m. and has given consent to the temporary usage of the
remaining portion of the property with a site area of 32,146.87 sq.m.
Pursuant to two confirmation letters issued by Nayong County Housing and Urban Construction Bureau and Nayong County Urban Planning Bureau, both dated April 7, 2013, approvals have been given for the usage of the temporary structures of the
property having a total gross floor area of 4,534.8 sq.m. |
|
May 23, 2014 in respect of the portion of the property with a site area of 11,329.35 sq.m.; and January 13, 2014 in respect of the remaining portion. |
|
|
For operation of Gouchang Coal Mine |
|
None |
|
None |
|
None |
|
99% |
|
6 The mining site and 18 structures of the Zhulinzhai Coal Mine located at Tianba Village, Xinhua Township, Liuzhi Special Zone, Liupanshui City, Guizhou Province, the PRC |
|
Linjiaao Coal |
|
The mining site, industrial production facilities, staff quarters, office & ancillary facilities for Zhulinzhai Coal Mine |
|
|
37,913.13 |
|
|
4,461.28 |
|
Liuzhi Special Zone State-owned Land Resources Bureau has given consent to the temporary usage of a portion of the property with a site area of 5,014 sq.m. and has given consent to the temporary usage of the
remaining portion of the property with a site area of 32,899.13 sq.m.
Pursuant to the confirmation letter issued by Liuzhi Special Zone Housing and Urban Construction Bureau dated March 25, 2013, approval has been given for the usage of the temporary structures of the property having a total gross floor area of
4,461.28 sq.m. |
|
November 25, 2014 in respect of the portion of the property with a site area of 5,014 sq.m.; and February 28, 2015 in respect of the remaining portion. |
|
|
For operation of Zhulinzhai Coal Mine |
|
None |
|
None |
|
None |
|
99% |
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Table of Contents
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Description and Location |
|
Holding
Entity |
|
Use &
Occupancy |
|
Approximate
Total Site
Area (sq.m.) |
|
Approximate
Total Gross Floor Area
(sq.m.) |
|
Details of approved usage/
Details of lease |
|
Expiry date
of approved
temporary
usage/land use
rights/rent free
term/lease |
|
Restrictions
on use |
|
Material
encumbrances |
|
Material
environmental
issues,
litigation,
breaches,
defects |
|
Plans for
construction
improvement
in the next
12 months |
|
Interest
attributable to
the Company |
|
7 The mining site and 26 structures of the Liujiaba Coal Mine located at Tianba Village, Xinhua Township, Liuzhi Special Zone, Liupanshui City, Guizhou Province, the PRC |
|
Xinsong Coal |
|
The mining site, industrial production facilities, staff quarters, office & ancillary facilities for Liujiaba Coal Mine |
|
|
49,278.25 |
|
|
8,398.75 |
|
Liuzhi Special Zone State-owned Land Resources Bureau has given consent to the temporary usage of a portion of the property with a site area of 2,369 sq.m. and has given consent to the temporary usage of the
remaining portion of the property with a site area of 46,909.25 sq.m.
Pursuant to the confirmation letter issued by Liuzhi Special Zone Housing and Urban Construction Bureau dated March 25, 2013, approval has been given for the usage of the temporary structures of the property having a total gross floor area of
8,398.75 sq.m. |
|
February 4, 2015 in respect of the portion of the property with a site area of 2,369 sq.m.; and February 28, 2015 in respect of the remaining portion. |
|
|
For operation of Liujiaba Coal Mine |
|
None |
|
None |
|
None |
|
99% |
|
8 An industrial complex under development comprising a parcel of land with various structures under construction thereon located at Qianshun Village, Huajue Township, Jinsha County, Bijie City, Guizhou
Province, the PRC |
|
Jinsha Juli |
|
To be used as the industrial production facilities, storage, staff quarters, office & ancillary facilities for the coal washing plant held by Jinsha Juli |
|
|
52,113.33 |
|
|
Various structures of the property which are under construction are planned to have a total gross floor area of approximately 15,140.00 sq.m. |
|
Jinsha County State-owned Land Resources Bureau has confirmed that Jinsha Juli is in the process of obtaining the grant of state-owned land use rights for the property, and the relevant procedures will be carried out
in due course, including issue of the Certificate of State-owned Land Use Rights.
Jinsha County Rural Planning Bureau and Jinsha County Housing and Rural Construction Bureau have confirmed that the relevant procedures for the structures under construction on the property will be carried out in due course, including issue of the
Certificate for Construction Land Use Planning, Certificate for Construction and Engineering Planning and Certificate for Commencing Construction for the property, after the relevant procedures of obtaining the state-owned land use rights of the
property have been completed.
The above bureaus have confirmed that Jinsha Juli will not be subject to penalties before obtaining the relevant title certificates. |
|
To be confirmed after Jinsha Juli has obtained relevant title certificates. |
|
|
Not specified |
|
None |
|
None |
|
Various structures with a total gross floor area of 15,140.00 sq.m. are under construction and expected to be completed by mid 2014. |
|
100% |
|
9 Units 1 to 3 on Level 25, Block B2, Phase 2, Qilong Central Business Building, Business and Financial District, Jinyang New District, Guiyang City, Guizhou Province, the
PRC |
|
Guizhou Puxin |
|
The office, staff quarters, and ancillary facilities of Guizhou Puxin for use by the Company |
|
|
100.70 |
|
|
865.92 |
|
3 Certificates of Building Ownership have been issued to Guizhou Puxin for office use of the property with a total gross floor area of 865.92 sq.m.
3 Certificates of State-owned Land Use Rights have been issued to Guizhou Puxin for commercial use of the property with a total apportioned site area of approximately 100.70 sq.m. |
|
November 30, 2043 |
|
|
Office |
|
None |
|
None |
|
None |
|
100% |
133
Table of Contents
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| Description and Location |
|
Holding
Entity |
|
Use &
Occupancy |
|
Approximate
Total Site
Area (sq.m.) |
|
Approximate
Total Gross Floor Area
(sq.m.) |
|
Details of
approved usage/
Details of lease |
|
Expiry date
of approved
temporary
usage/land use
rights/rent free
term/lease |
|
Restrictions
on use |
|
Material
encumbrances |
|
Material
environmental
issues,
litigation,
breaches,
defects |
|
Plans for
construction
improvement
in the next
12 months |
|
Interest
attributable to
the Company |
|
10 A unit located at No. 97 Changan Street, Jinsha County, Bijie City, Guizhou Province, the PRC |
|
Guizhou Dayun |
|
The office, staff quarters, and ancillary facilities of Guizhou Dayun for use by the Company |
|
|
N/A |
|
|
109.72 |
|
Leased by Guizhou Dayun pursuant to a tenancy agreement for a yearly rental of RMB20,000. |
|
February 18, 2015 |
|
|
Not specified |
|
The landlord has not obtained title documents or other title certificates and therefore it cannot be confirmed whether the landlord has the right to lease the property to the Company for use.
The usage of the property has been changed from residential use to office use and it cannot be confirmed whether the interested owners have consented to the change.
The aforesaid change in the usage of the property has not been registered with the relevant PRC government administrative department. The Company may be required to submit the registration at the request of relevant authorities and will be subject to
a fine should registration not take place within a specified period.
The tenancy agreement has not been submitted to the relevant PRC government administrative department for registration. The Company may be required to submit the registration at the request of relevant authorities and may be subject to a fine should
registration not take place within a specified period. |
|
None |
|
None |
|
100% |
134
Table of Contents
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|
| Description and Location |
|
Holding
Entity |
|
Use &
Occupancy |
|
Approximate
Total Site
Area (sq.m.) |
|
Approximate
Total Gross Floor Area
(sq.m.) |
|
Details of
approved usage/
Details of lease |
|
Expiry date
of approved
temporary
usage/land use
rights/rent free
term/lease |
|
Restrictions
on use |
|
Material
encumbrances |
|
Material
environmental
issues,
litigation,
breaches,
defects |
|
Plans for
construction
improvement
in the next
12 months |
|
Interest
attributable to
the Company |
|
11 A unit located at No. 283 Luoma Street, Chengguan Town, Jinsha County, Bijie City, Guizhou Province, the PRC |
|
Jinsha Juli |
|
The office, staff quarters, and ancillary facilities of Jinsha Juli for use by the Company |
|
|
N/A |
|
|
126.15 |
|
Leased by Jinsha Juli pursuant agreement rental of to a tenancy for a yearly rental of RMB18,000. |
|
November 19, 2016 |
|
|
Not specified |
|
The usage of the property has been changed from residential use to office use and it cannot be owners have consented to the change.
The aforesaid change in the usage of the property has not been registered with the relevant PRC government administrative department. The Company may be required to submit the registration at the request of relevant authorities and will be subject to
a fine should registration not take place within a specified period.
The tenancy agreement has not been submitted to the relevant PRC government administrative department for registration. The Company may be required to submit the registration at the request of relevant authorities and may be subject to a fine should
registration not take place within a specified period. |
|
None |
|
None |
|
100% |
|
12 A unit located at No. 1 Huang Shan Chong, Yunyan District, Guiyang City, Guizhou Province, the PRC |
|
Guizhou Fuyuantong |
|
The office and ancillary facilities of Guizhou Fuyuantong for use by the Company |
|
|
N/A |
|
|
196.00 |
|
Leased by Guizhou Fuyuantong pursuant to a tenancy agreement for a monthly rental of RMB1,000. |
|
March 10, 2014 |
|
|
Not specified |
|
The landlord has not obtained title documents or other title certificates and therefore it cannot be confirmed whether the landlord has the right to lease the property to the Company for use.
The tenancy agreement has not been submitted to the relevant PRC government administrative department for registration. The Company may be required to submit the registration at the request of relevant authorities and may be subject to a fine should
registration not take place within a specified period. |
|
None |
|
None |
|
100% |
|
13 Room 503C, Block B, Xinyingwan Anzhi District, Yangpu Economic Development Zone, Hainan Province, the PRC |
|
Yangpu Dashi |
|
The office of Yangpu Dashi for use by the Company |
|
|
N/A |
|
|
38.00 |
|
Yangpu Economic Development Zone Xinganzhong District Office Xinyingwan Neighbourhood Committee has agreed to provide the property to Yangpu Dashi for a rent free term of ten years. |
|
March 22, 2015 |
|
|
Not specified |
|
The landlord has not obtained title documents or other title certificates and therefore it cannot be confirmed whether the landlord has the right to provide the property to the Company for use. |
|
None |
|
None |
|
100% |
135
Table of Contents
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|
| Description and Location |
|
Holding
Entity |
|
Use &
Occupancy |
|
Approximate
Total Site
Area (sq.m.) |
|
Approximate
Total Gross Floor Area
(sq.m.) |
|
Details of
approved usage/
Details of lease |
|
Expiry date
of approved
temporary
usage/land use
rights/rent free
term/lease |
|
Restrictions
on use |
|
Material
encumbrances |
|
Material
environmental
issues,
litigation,
breaches,
defects |
|
Plans for
construction
improvement
in the next
12 months |
|
Interest
attributable to
the Company |
| |
14 Room 1317, Level 13, Block C, Biyang Main Road Administrative Center, Bijie City, Guizhou Province, the PRC |
|
Bijie Feishang |
|
The registered office of Bijie Feishang |
|
|
N/A |
|
|
21.60 |
|
Guizhou Province Bijie Diqu Industrial and Energy Council has agreed to provide the property rent free to Bijie Feishang as its registered address |
|
Undefined |
|
|
Not specified |
|
The landlord has not obtained title documents or other title certificates and therefore it cannot be confirmed whether the landlord has the right to provide the property to the Company for use. |
|
None |
|
None |
|
100% |
|
15 Unit 01-H, Level 54, Shenzhen International Chamber of Commerce Centre, located at the intersection of Fuhua Third Road and Yitian Road, Futian District, Shenzhen, the PRC |
|
Shenzhen Chixin |
|
The office of Shenzhen Chixin for use by the Company |
|
|
N/A |
|
|
106.00 |
|
Leased by Shenzhen Chixin pursuant to a tenancy agreement for a term of 3 years for a monthly rental of RMB19,080 (year 1), RMB20,225 (year 2) and RMB21,439 (year 3). |
|
April 30, 2016 |
|
|
Office |
|
The landlord has not obtained title documents or other title certificates and therefore it cannot be confirmed whether the landlord has the right to lease the property to the Company for use. |
|
None |
|
None |
|
100% |
|
16 A portion of No. 2205, 22nd Floor, West Tower, Shun Tak Centre, Nos. 168-200 Connaught Road Central, Hong Kong |
|
The Company |
|
The registered office of the Company |
|
|
N/A |
|
|
118.87 (1,279.5 sq.ft.) |
|
Anka Consultants Limited has agreed to licence the property to the Company for a rent free term of 8 months, excluding government rent, government rates, management fees and other expenses. |
|
June 30, 2014 |
|
|
Office |
|
None |
|
None |
|
None |
|
100% |
136
Table of Contents
In respect of the approvals for the temporary usage stated in the above table which are to expire in months of the date of the listing document, we are in process
of applying for new approvals that would extend the usage. According to the confirmation letters issued by the relevant PRC land resources authorities, extension of the temporary usage in the above
table will be timely approved upon applications of the Company's relevant PRC subsidiaries. Based on such confirmation letters, our PRC legal advisors, Commerce & Finance Law Offices, have
advised us that there should be no material legal impediments to obtaining the new approvals for such temporary usage.
Our
Directors confirm that none of our property interests is individually material to us in terms of income contribution or rental expense, and no property interest owned by our Company
is held by us for property activities.
According
to Rule 5.01B(2) of the Listing Rules, the listing document is exempted from the requirement to produce a valuation report with respect to all of our interests in land
or buildings because, as of
June 30, 2013, none of the properties held or leased by us has a carrying amount of 15% or more of our combined total assets.
Owned properties
As of the Latest Practicable Date, we owned three properties with a total gross floor area of 865.9 square meters, all of which
are used as office space. We have obtained building ownership certificates and the related land use right certificates for each of these properties. All of these properties are located
in Guizhou province.
As
of the Latest Practicable Date, the carrying amount of our property interests was RMB10.1 million, representing less than 15% of our total assets.
Temporary structures
As of the Latest Practicable Date, we constructed 128 temporary structures with a total gross floor area of
61,686.0 square meters within the areas of our seven anthracite coal mines for use in our mining operations. We have obtained the relevant confirmation letters issued by the local authorities
in the Jinsha County, Nayong County and Liuzhi Special District confirming that they will not impose any penalties in connection with the construction of these temporary structures, and that our
subsidiaries may continue to use the temporary structures in accordance with the current uses. Our PRC legal advisors, Commerce & Finance Law Offices, have advised that these authorities are
the competent authorities to issue the confirmation letters and such confirmation letters should not be subject to challenge by higher governmental authorities.
137
Table of Contents
Leased properties
As of the Latest Practicable Date, we leased seven properties (including two rent free properties) with a total gross floor area of
approximately 716.3 square meters in Guizhou province, Hainan, Shenzhen and Hong Kong for uses as office space. The leases underlying these properties have certain
defects:
- •
- The lessors of five of these properties do not have the relevant building ownership certificates. If the lessors do not
have lawful rights to these properties, we may not be able to continue to occupy and use such properties.
- •
- The lease agreements of three of these properties have not been registered with the relevant PRC authorities, which may
result in correction orders by the relevant authorities and subject us to a fine of RMB1,000 to RMB10,000.
- •
- Two of these properties are residential properties. Our use of these properties as office space without obtaining relevant
consents may subject us to correction orders by the relevant authorities and a daily fine of RMB5 to RMB20 per square meter.
Our
Directors do not believe that these four properties are critical to our operations.
With
respect to the land for our anthracite coal mines, we have leased 19 parcels of collectively-owned land with a total site area of approximately 470,821.0 square
meters. These parcels of land cover all of our anthracite coal mines. Although in general the term of the leases is approximately 20 years with renewal right exercisable by us, our use of these
properties for coal mining is subject to the Guizhou government's approval, and each approval is generally valid for only one to two years and must be renewed thereafter. We have already obtained the
relevant approvals for all 19 parcels of leased land, and we have also obtained confirmation letters from the relevant government authorities in Guizhou province confirming that they will not
revoke their approval and that they will, upon the expiration of the current approvals, grant additional approvals for our continued use of the leased land for coal mining. Our PRC legal advisors,
Commerce & Finance Law Offices, have advised that we are entitled to use these 19 parcels of leased land for coal mining in accordance with the terms in the relevant leases, approvals
and confirmation letters.
We
are in the process of obtaining the land use right certificates for the land we use in Dayun Coal Mine, which cover a total area of 132,490.0 square meters. We have obtained
the relevant confirmation letter from Jinsha County Land and Resources Bureau in Guizhou province confirming that the relevant land requisition is being processed and the authority did not anticipate
any material legal impediments in obtaining the land use right. Our PRC legal advisors, Commerce & Finance Law Offices, have advised that the authority is the competent authority to issue the
confirmation letter and such confirmation letter should not be subject to challenge by higher governmental authorities.
138
Table of Contents
INSURANCE
We make social insurance contributions and carry basic occupational injury, medical, pension, unemployment and maternity insurance for
our employees. In line with what we believe to be industry practice, we do not maintain any fire, liability or other property insurance covering our properties, equipment or inventories, and we do not
carry any business interruption insurance, transportation insurance or third party liability insurance to cover claims in respect of personal injuries or property or environmental damage arising from
accidents on our properties. See "Risk Factors — Risks Relating to Our Business — Our coal mining operations may be
materially disrupted by operational risks and natural disasters for which we have limited insurance".
139
Table of Contents
REGULATORY COMPLIANCE
Sets forth below is a summary of our material non-compliance incidents during the Track Record Period. Where internal control measures are adopted by the Company
to avoid re-occurrence of the non-compliance incidents in the future, the Directors believe that such measures are adequate and effective.
|
|
|
|
|
|
|
Non-Compliance
|
|
Reason |
|
Legal Consequences/
Potential Maximum Penalties |
|
Rectification Actions/Preventive Measures |
| In 2012, Baiping Coal Mine produced 292,000 tonnes of anthracite coal, which significantly exceeded its annual production capacity of 150,000 tonnes as permitted under its mining right permit and coal production
permit. |
|
The over-production was due to our annual production levels being determined based in large part on the Guizhou government's annual guidance relating to the provision of certain minimum amounts of thermal coal to power
plants operating in Guizhou province. |
|
A coal mine that produces coal in excess of its permitted annual production capacity may be subject to administrative penalties, including a fine of up to RMB2.0 million on the relevant coal mine, a fine of up to
RMB150,000 on the mine manager and, in serious cases, revocation of the coal production permit and the mine manager's qualification certification, as well as mine closure. |
|
• In January and
July 2013, the Energy Bureau of Guizhou Province issued confirmation letters stating (i) it would not impose any penalties or other measures (including but not limited to revocation of the coal production permit or suspension of coal mining
operations) against Baiping Mining or its employees in respect of any over-production in 2012 or thereafter, as Baiping Coal Mine has undergone certain technological improvements after its coal production permit was issued, such that its actual
production capacity and ventilation abilities exceeded the design specifications |
140
Table of Contents
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|
|
|
|
|
|
|
|
Non-Compliance
|
|
Reason |
|
Legal Consequences/
Potential Maximum Penalties |
|
Rectification Actions/Preventive Measures |
| |
|
|
|
|
|
|
|
set forth in its coal production permit and could support an annual production output of 290,000 tonnes, and (ii) it would support our application for the relevant permits with an annual production capacity of
300,000 tonnes or more. Between December 2012 and January 2013, we also received confirmation letters from the Water Conservation Office of Bijie City, the Water Resources Department of Guizhou Province, the Guizhou Administration of
Coal Mine Safety and the Environmental Protection Department of Guizhou Province. |
| |
|
|
|
|
|
|
|
These confirmation letters either agreed with the January 2013 confirmation letter issued by the Energy Bureau of Guizhou Province or confirmed there would be no penalties imposed on Baiping Mining and/or Baiping
Mining's employees as a result of the over-production at Baiping Coal Mine. We plan to continue producing anthracite coal at Baiping Coal Mine, and may produce anthracite coal in excess of its permitted production capacity as our annual production
levels were determined based in large part on the Guizhou government's annual guidance relating to the provision of certain minimum amounts of thermal coal to power plants operating in Guizhou province. See "Regulation — PRC Laws
relating to the Coal Industry — Supply of thermal coal to power plants". Our PRC legal advisors, Commerce & Finance Law Offices, have advised us that the Company has obtained all material confirmations from the relevant PRC
authorities for its over-production at Baiping Coal Mine and that such confirmation letters were issued by the competent government authorities and are legally valid. We have applied for a 300,000 tonnes mining right permit for Baiping Coal Mine
and we expect |
141
Table of Contents
|
|
|
|
|
|
|
|
|
Non-Compliance
|
|
Reason |
|
Legal Consequences/
Potential Maximum Penalties |
|
Rectification Actions/Preventive Measures |
| |
|
|
|
|
|
|
|
to obtain such permit in June 2014. After receiving such permit, we do not expect Baiping Coal Mine will continue to produce anthracite coal in excess of its permitted production capacity. |
| None of our five anthracite coal mines in commercial production have completed its environmental trial run or the environmental acceptance inspection by the relevant government authorities prior to commencing
commercial |
|
The relevant environmental acceptance inspection and trial run procedures are conditions to the issuance of the coal production permit. As we had already received the coal production permit and completed the
required |
|
Failure to complete the required environmental trial run or the environmental acceptance inspection prior to commencing commercial production may result in production suspension and a fine of up to RMB100,000. |
|
• |
|
In January and July 2013 and November 2013, the relevant Guizhou government authorities issued confirmation letters stating that no penalties would be imposed on any of our four anthracite coal mines that have
commenced commercial production. Our PRC legal advisors, Commerce & Finance Law Offices, have advised us that such confirmation letters were issued by the competent government authorities and are legally valid. |
| production. |
|
environmental impact assessments and construction of necessary environmental facilities for each of the four anthracite coal mines before their commencement of commercial production, we were of the view that commencing
commercial production at each of these mines without having completed the environmental acceptance inspections or trial runs would not otherwise affect our ability to continue to comply with the relevant environmental laws. |
|
|
|
• |
|
We adopted an internal policy on environmental protection management measures in June 2013 and established an environmental protection committee in August 2013 to improve the coordinated development of our coal
mines, expedite the required environmental acceptance inspections and improve compliance with applicable environmental and safety standards. The environmental protection committee members consist of the chairman, Mr. Huang Zuye, the
vice-chairman, Mr. Wan Huojin, and the other members, including Mr. Jia Zhigang, Mr. Hu Lubao, Mr. Liao Diansheng, Mr. Lan Xiaosheng, Mr. Zhang Ye and Mr. Lin Quanlong. See "Directors and Senior
Management". |
142
Table of Contents
|
|
|
|
|
|
|
Non-Compliance
|
|
Reason |
|
Legal Consequences/
Potential Maximum Penalties |
|
Rectification Actions/Preventive Measures |
| |
|
|
|
|
|
• Prior to commencing
commercial production at each of these four anthracite coal mines, we have undertaken to the Guizhou Energy Bureau that we will comply with all relevant environmental laws, rules and regulations or apply for environmental acceptance inspections
immediately following our completion of inspections for obtaining coal production permits. We are in the process of applying for environmental acceptance inspections for each of our coal mines that has commenced commercial production, with the
exception of Gouchang Coal Mine, which has suspended operations. As advised by our PRC legal advisors, Commerce & Finance Law Offices, there will be no material legal impediments to the process of obtaining the relevant approvals to complete
the environmental acceptance inspections if we are able to meet all the conditions and requirements under PRC law or imposed by relevant authorities and undergo the relevant procedures, including submitting the requisite documents. We expect the
environmental acceptance inspections for these coal mines to be completed by 2014. |
| |
|
|
|
|
|
• Our compliance and audit
department closely monitors our mining operations to make sure they are conducted in accordance with the applicable laws, rules and regulations. |
143
Table of Contents
|
|
|
|
|
|
|
Non-Compliance
|
|
Reason |
|
Legal Consequences/
Potential Maximum Penalties |
|
Rectification Actions/Preventive Measures |
| During the Track Record Period, certain of our subsidiaries did not timely complete their social insurance registrations and pay social insurance contributions for employees in full. |
|
The failure to complete the social insurance registrations and pay social insurance contributions was primarily due to our employees' reluctance to participate into the social insurance program which they believe will not
offer the benefit they desire and the general practice in Guizhou province's coal mining industry of not making registrations or paying social insurance contributions. Moreover, social insurance contributions may not be transferred between cities or
provinces. Many of our employees are from provinces other than Guizhou province and have already paid their social insurance contributions in their home provinces. As a result, some of our employees are unwilling to register for and continue to pay
social insurance contributions in Guizhou province, as contributions paid in Guizhou province may not be transferable to their home provinces. |
|
• An employer that fails to
timely complete its social insurance registration may be subject to a penalty of up to three times the amount of social insurance contribution that the employer would have been required to pay had it timely completed its registration.
• An employer that fails to
timely pay its social insurance contributions may be subject to an additional daily penalty equal to 0.05% of the unpaid contributions and a penalty of up to three times the amount of unpaid social insurance contribution in certain
situations. |
|
• In March, April and
May 2013, the relevant Guizhou government authorities issued confirmation letters stating that they would not impose any penalties in respect of our subsidiaries' failure to timely complete their social insurance registrations or pay their
social insurance contributions in full. The confirmation letters also stated that the unpaid contributions of our subsidiaries were waived. Our PRC legal advisors, Commerce & Finance Law Offices have advised us that the confirmation letters
have been issued by the competent government authorities and are legally valid.
• As of the Latest Practicable
Date, all of our subsidiaries have completed their social insurance registrations, and since April 2013, all of our subsidiaries have made their social insurance contributions in full and there is no outstanding contribution.
• To avoid non-compliance in the
future, we have implemented a stricter internal policy in March 2013 requiring all of our subsidiaries to register for social insurance and pay social insurance contributions in full for each new employee in a timely manner. We conduct monthly
inspections on our employees' social insurance contribution payments. |
144
Table of Contents
|
|
|
|
|
|
|
Non-Compliance
|
|
Reason |
|
Legal Consequences/
Potential Maximum Penalties |
|
Rectification Actions/Preventive Measures |
| During the Track Record Period, certain of our subsidiaries did not timely complete their housing provident fund registrations and pay the required housing provident fund contribution for employees in full. |
|
The failure to complete the housing provident fund registrations and pay the required housing provident fund contributions was primarily due to our employees' reluctance to participate into the housing provident fund
program which they believe will not offer the benefit they desire and the general practice in Guizhou province's coal mining industry of not making registrations or paying housing provident fund contributions. Moreover, housing provident fund
contributions may not be transferred between cities or provinces. Many of our employees are from provinces other than Guizhou province and have already paid their and housing provident fund contributions in their home provinces. As a result, some of
our employees are unwilling to register for and continue to pay and housing provident fund contributions in Guizhou province, as contributions paid in Guizhou province may not be transferable to their home provinces. |
|
An employer that fails to timely complete its housing provident fund registration or pay its housing provident fund contribution may be subject to a penalty of up to RMB50,000 and court enforcement order in certain
situations. |
|
• In March and
April 2013, the relevant Guizhou government authorities issued confirmation letters stating that they would not impose any penalties in respect of our subsidiaries' failure to timely complete their housing provident fund registrations or pay
their housing provident fund contributions in full. The confirmation letters also stated that the unpaid contributions of our subsidiaries were waived. Our PRC legal advisors, Commerce & Finance Law Offices, have advised us that the
confirmation letters have been issued by the competent government authorities and are legally valid.
• As of the Latest Practicable
Date, all of our subsidiaries have completed their housing provident fund registrations, and since April 2013, all of our subsidiaries have made their housing provident fund contributions in full and no outstanding contribution remains to be
made.
• To avoid non-compliance in the
future, we have implemented a stricter internal policy in March 2013 requiring all of our subsidiaries to register for housing provident fund and pay housing provident fund contributions for each new employee in a timely manner. We conduct
monthly inspections on our employees' housing provident fund contribution payments. |
145
Table of Contents
|
|
|
|
|
|
|
Non-Compliance
|
|
Reason |
|
Legal Consequences/
Potential Maximum Penalties |
|
Rectification Actions/Preventive Measures |
| During the Track Record Period, certain of our subsidiaries made non-interest bearing intercompany loans to our other subsidiaries in the PRC in contravention of applicable PRC regulations on intercompany
lending. |
|
We entered into non-interest bearing intercompany loans primarily because it was cost-efficient to utilize group financial resources. The legal consequence of entering into the loans whereby there were no profits received
by the lender is not specified under any PRC law, rule or regulation. |
|
Under PRC laws, a corporation that directly lends money to another corporation may be subject to a fine of up to five times of the amount of the profits received by lender. |
|
• Prior to the Listing, all
of the intercompany loans among our subsidiaries have been terminated and replaced with entrusted loans. These entrusted loans were made available by Feishang Management, certain of our subsidiaries or Independent Third Parties as the entrusting
party, through China Minsheng Bank as the lender, to our other subsidiaries as the borrower. See "Relationship with Our Controlling Shareholders — Independence from Our Controlling Shareholders — Financial Independence".
The provision of entrusted loans is in line with the practice generally adopted by corporations in the PRC and our PRC legal advisers, Commerce & Finance Law Offices, have advised us that such entrusted loans do not contravene any PRC laws,
rules or regulations. |
146
Table of Contents
Except as disclosed under the section headed "— Regulatory Compliance" in this listing document, our PRC legal advisors
are of the view that, as of the Latest Practicable Date, we were in compliance with applicable laws, rules and regulations in all material respects and that we had obtained all necessary licenses,
approvals and permits that are material for our business operations in the PRC.
We
have implemented an internal policy which strictly prohibits over-production at our coal mines since June 2011. Under this policy, our annual extraction plans and monthly
production plans are required to
be formulated in strict accordance with the requirements imposed by the relevant regulatory authorities to ensure that the planned production output remains within the permitted production capacity as
set out in the mining right permits or otherwise authorized by the relevant government authorities from time to time. Each coal mine will be required to submit its production data to the relevant
department of the Company on a daily basis, and coal production will be suspended immediately if the actual production output exceeds the planned production output. Similarly, each coal mine will be
required to submit its cumulative production data to the senior management of the Company on a monthly basis, and coal production will be suspended if the cumulative actual production output is about
to exceed the permitted production capacity. In addition, the compliance and audit department of the Company will conduct regular spot checks in order to ensure that these measures are effectively
implemented.
EMPLOYEES
As of the Latest Practicable Date, we had a total of 362 employees based in Guizhou province and Shenzhen. The following table
sets forth the number of our employees based on their function:
|
|
|
|
|
Function
|
|
Number of employees (1) |
|
Administration and management |
|
|
102 |
|
Accounting |
|
|
42 |
|
Procurement and sales |
|
|
32 |
|
Production |
|
|
186 |
|
| |
|
|
|
Total |
|
|
362 |
|
| |
|
|
|
- (1)
- Do
not include workers provided by third party labor agencies.
As of December 31, 2010, 2011 and 2012 and June 30, 2013, we had 1,048, 1,139, 1,656 and 333 employees, respectively. In
order to reduce administration cost as well as due to the suspension of the operations of Gouchang Coal Mine, we significantly reduced the number of our employees and started using mining workers
provided by a third party labor agency since March 2013.
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As
we believe having a well-trained and motivated workforce is important to our business, we have adopted a recruitment policy that aims to attract and retain motivated and qualified
employees. Our mining employees receive training through orientation training sessions as well as on-the-job training by our more experienced technical personnel. Moreover, our coal mine managers
receive additional technical and managerial training, and we offer certain of our employees the opportunity to attend external training sessions held by colleges and governmental organizations.
Our
employees are employed under employment contracts that set forth, among other things, the employee's responsibilities, remuneration and grounds for termination of employment.
In
addition to our own employees, we entered into an arrangement with a third party labor agency in December 2012 to provide mining workers. These workers are employed by the
labor agency but are supervised directly by us. As of June 30, 2013, we had 1,412 workers provided by the third party labor agency. As advised by our PRC legal advisors,
Commerce & Finance Law Offices, the arrangement is in compliance with the applicable PRC laws and regulations in all material respects.
LEGAL PROCEEDINGS
As of the Latest Practicable Date, we were not involved in any pending or threatened litigation, arbitration or claim of material
importance, and no litigation, arbitration or claim of material importance is known to our Directors to be pending or threatened by or against us, that would have a material adverse effect on our
financial condition and results of operations or our rights to conduct exploration or mining activities.
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FINANCIAL INFORMATION
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements as
included in Appendix I — "Accountants' Report of the Company," which has been prepared in accordance with IFRS as issued by the IASB. The following
discussion and analysis contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking
statements due to various factors, including
those set forth under the sections "Forward-Looking Statements," "Risk Factors" and elsewhere in this listing document.
OVERVIEW
We are a producer of anthracite coal based in Guizhou province of the PRC. We are primarily engaged in the acquisition,
construction and development of anthracite coal mines and the extraction and sale of anthracite coal. Our mining assets consist of seven underground anthracite coal mines in Guizhou province, of
which five have commenced commercial production. In particular:
- •
- Baiping Coal Mine, Liujiaba Coal Mine, Zhulinzhai Coal Mine and Dauyan Coal Mine are in commercial production;
- •
- Gouchang Coal Mine has commenced commercial production, but its operations have been suspended since
March 2013 under the Guizhou government's mine consolidation policy;
- •
- Yongsheng Coal Mine is in its pilot run phase; and
- •
- Dayun Coal Mine is undergoing construction.
As
of July 31, 2013, we had total proved and probable coal reserves of approximately 208.87 million tonnes and total permitted annual production capacity of
approximately 2.34 million tonnes. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, we had revenues of RMB38.7 million, RMB105.2 million,
RMB141.9 million, RMB55.2 million and RMB54.7 million, respectively, and sold 166,362 tonnes, 314,058 tonnes, 437,010 tonnes, 148,539 tonnes and
187,432 tonnes of anthracite coal, respectively.
OUR CORPORATE TRANSACTIONS
Our Company was incorporated on January 6, 2010 as a wholly-owned subsidiary of Feishang. Prior to the Corporate
Transactions, our business was conducted by various corporate entities controlled by Feishang. On July 12, 2011, the Corporate Transactions were completed pursuant to which the corporate
entities that have historically conducted our business were transferred to us and became our Company's subsidiaries. See "History and Development". As Feishang controlled these corporate
entities before our Corporate Transactions and continued to control our Company after the Corporate Transactions, we have accounted for our Corporate Transactions as business combinations under
common control using merger accounting. All of the information in this listing document, including the consolidated financial statements included in
Appendix I — "Accountants' Report of the Company," has been prepared as if our Company had been in existence since January 1, 2010 and as
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if
we had owned each of our current subsidiaries since the date on which such subsidiary came under the control of Feishang. The assets, liabilities and results of operations of our subsidiaries
were consolidated using Feishang's historical carrying amounts, and no amount was recognized in respect of goodwill or any other additional assets or liabilities, and no adjustments were made to
reflect fair values as a result of the Corporate Transactions with the exception of the acquisition of Guizhou Puxin. The financial information and financial statements included in this listing
document may not reflect what our historical financial condition and results of operations would have been if we had actually operated on a stand-alone basis since January 1, 2010, and
they are not necessarily indicative of our future financial condition and results of operations.
LIMITED OPERATING AND PRODUCTION HISTORY
We have seven underground anthracite coal mines in Guizhou province, of which five have commenced commercial production, one is
undergoing its pilot run phase and one is under construction. Baiping Coal Mine, Gouchang Coal Mine (currently suspended), Zhulinzhai Coal Mine, Liujiaba Coal Mine and Dayuan Coal Mine commenced
commercial production in June 2009, April 2011, April 2012, December 2012 and November 2013, respectively. We have a limited operating and production history for you
to use as a basis for
evaluating our business. We did not have any commercial production of coal until the acquisition of Guizhou Puxin in March 2010. You should consider our prospects in light of the risks,
expenses and difficulties frequently encountered by companies in an early stage of development, particularly companies in a highly regulated and cyclical industry such as the PRC
coal industry.
In
each of 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, we incurred operating losses and had negative net cash flows from operating activities. We also
incurred net losses in each of 2011, 2012 and the six months ended June 30, 2012 and 2013 and, disregarding the effects of a RMB624.1 million non-recurring bargain purchase gain
relating to the acquisition of Guizhou Puxin in 2010, we would have also incurred a net loss in 2010. We may continue to incur losses and have negative net cash flows from operating activities
in the future.
FACTORS AFFECTING OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Production Output
Our future operating results will be dependent on our ability to increase our production output. We believe the increased
production output would allow us to increase our revenue, as well as create economies of scale that could reduce our average production costs per tonne and increase our profitability. Our annual
production output grew from 159,074 tonnes in 2010 to 436,153 tonnes in 2012. We plan on increasing our production by achieving commercial production at Yongsheng Coal Mine and
Dayuan Coal Mine and, in the long term, increasing our production capacity at Baiping Coal Mine, Liujiaba Coal Mine, Zhulinzhai Coal Mine and Dayuan Coal Mine. Our ability to successfully expand
our production output, however, is subject to a number of significant risks and uncertainties, including, among other things, constraints on production capacity, changing government regulations
and our relationship with the local community. See "Risk Factors — Risks Relating to Our Business — If we are unable
to successfully expand our coal production capacity, our business and prospects would be materially and adversely affected".
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Our
production output is subject to seasonality. Typically, our production output in the first quarter of each year is generally lower than our production output in other quarters,
as our coal mining operations are typically suspended for approximately three to five weeks during the lunar new year holidays. In addition, our production output in the third and fourth
quarters of each year is generally higher than our production output in other quarters, mainly as a result of higher demand and more favorable weather conditions for coal extraction.
Industry Supply and Demand of Anthracite Coal
The supply and demand of anthracite coal in Guizhou province have a significant impact on the sales volume and average selling
price of our anthracite coal. Although we expect the demand for anthracite coal in the PRC to generally increase in the long-term, the Guizhou province's anthracite coal market is highly
cyclical and demand and pricing trends in Guizhou province may differ significantly from the demand and pricing trends elsewhere in the PRC. For example, although anthracite coal prices in
Guizhou province in 2012 were higher than 2011, there were significant fluctuations in coal prices within the PRC in 2012. In particular, anthracite coal prices in Guizhou province declined
significantly in the second quarter of 2012 and again in the first half of 2013 as a result of a slowdown of economic growth in the PRC as well as an increase in production capacity in Shanxi
province. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, the average selling price of the anthracite coal we produced was RMB232.4, RMB296.4, RMB323.6, RMB368.3 and
RMB291.9 per tonne, respectively. In general, the Guizhou province's anthracite coal markets are affected by many factors beyond our control,
including:
- •
- general economic conditions in Guizhou province as well as the PRC;
- •
- regional supply and demand for anthracite coal;
- •
- competition from other energy sources or alternatives to anthracite coal;
- •
- abnormal weather conditions;
- •
- speculative coal trading;
- •
- the respective economic, energy, environmental, health and safety and other policies of the Guizhou province and PRC
governments; and
- •
- fluctuations in the development and growth of industries with high demand for anthracite coal, including the power,
chemical, iron and steel, and building materials industries.
Product Mix
Anthracite coal is typically sold as thermal coal, chemical coal or PCI coal. Generally, thermal coal has lower average selling
prices and lower margins than chemical coal and PCI coal. According to China Coal Resource, the average selling price of thermal coal in Guizhou province in 2012 was
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RMB323.0
per tonne, compared to RMB486.0 to RMB1,007.0 per tonne for chemical coal (depending on the type and characteristic of coal) and RMB952.0 per tonne for PCI coal.
Accordingly, our ability to produce, market and sell our anthracite coal as chemical coal or PCI coal will have a significant impact on our revenue and profitability.
Prior
to 2011, we derived substantially all of our revenue from the sale of thermal coal. In 2011, 2012 and the six months ended June 30, 2012 and 2013, we derived
approximately 5%, 5%, nil and 1.2% of our revenue from the sale of chemical coal we produced. Subject to market conditions and the Guizhou government's annual guidance on supply of thermal coal
to power plants, we intend to significantly increase our sales of chemical coal in the future and begin selling PCI coal in 2014. Our ability to sell chemical coal or PCI coal has been
constrained as our annual production levels were determined based in large part on the Guizhou government's annual guidance relating to the provision of certain minimum amounts of thermal coal
to power plants operating in Guizhou province, which has taken up a significant portion of our production capacity. See "Regulation — PRC Laws relating to
the Coal Industry — Supply of thermal coal to power plants". We believe that by increasing our production capacity, we will be able to sell a larger
percentage of our anthracite coal as chemical or PCI coal. However, our ability to effectively produce and sell chemical coal and PCI coal is subject to a number of risks and uncertainties. See
"Risk Factors — Risks Relating to Our Business — We may not be able to successfully produce, market and sell chemical
and PCI coal, which could materially and adversely affect our business and prospects". To date, we only have entered into four non-binding cooperation arrangements relating to the sale of
chemical coal, and we have not entered into any binding agreement for the sale of chemical coal or PCI coal.
Financing Arrangements
Coal mining is a capital intensive business, and we will need a substantial amount of cash to meet our working capital
requirements and expand our production capacity. As we have not generated any net cash flows from our operating activities, we have relied on, and will continue to rely on, short-term and
long-term borrowings to finance our operations and capital expenditures. Our finance costs for bank borrowings and mining right payables (including capitalized interest) increased from
RMB21.8 million in 2010 to RMB60.9 million in 2011 and RMB89.4 million in 2012, and increased from RMB41.4 million for the six months ended June 30, 2012 to
RMB56.2 million in the same period in 2013, and we expect our finance costs to continue to increase in the future. In the past, we have financed a significant portion of our cash
requirements with non-interest bearing loans from companies controlled by Mr. Li Feilie, our chairman and chief executive officer. If these loans had been interest-bearing, our finance
costs would have been significantly higher. In March 2013, we repaid a significant portion of the non-interest bearing loans from companies controlled by Mr. Li Feilie with
interest-bearing bank and other borrowings, and we do not anticipate receiving additional non-interest bearing loans from our related parties in the future. In July 2013, we obtained a
legally binding commitment letter from China Minsheng Bank to provide a term loan with an aggregate principal amount of up to RMB1.6 billion that may be drawn down on or before
January 29, 2015, subject to certain conditions. In addition, in October 2013, we obtained a legally binding commitment letter from China Merchants Bank to provide a term loan with
an aggregate
principal amount of up to RMB350 million that may be drawn down on or before March 10, 2015, subject to certain conditions. See "— Liquidity and Capital
Reserves". As of October 31, 2013, the total outstanding amount of our non-interest bearing loans was RMB131.0 million.
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Regulatory Environment
Coal mining is a highly regulated industry in the PRC, and the regulatory regime applicable to our operations is rapidly
evolving. In particular, in response to a number of highly-publicized mining-related accidents and fatalities, the PRC regulatory authorities have recently taken a number of measures to improve
mine safety, some of which have significantly affected our business and operations. For example, Gouchang Coal Mine was required to suspend its operations from March 2012 to
August 2012 under certain newly implemented mine gas control requirements in Guizhou province. Moreover, in 2012, the Guizhou government required certain coal mines utilizing drilling and
blasting mining methods to upgrade to semi-mechanical longwall mining methods, which required us to incur significant time and expense to redesign and upgrade Liujiaba Coal Mine. In addition to
mine safety measures, regulatory authorities in the PRC may also impose various taxes, duties, levies or take other actions as part of the PRC's overall economic, environmental or energy
policies. For example, the Guizhou government levies a coal price adjustment fund levy on the coal sold by local coal producers and the rate of the coal price adjustment fund levy is subject to
changes from time to time based on prevailing government policies. Furthermore, under the coal mine consolidation policy promulgated by the Guizhou government in March 2013, operations at
Gouchang Coal Mine have been suspended since March 2013 pending the acquisition by us of a nearby coal mine and Gouchang Coal Mine achieving certain production capacity requirements in
accordance with Guizhou province's coal mining consolidation policy. These regulatory developments have significantly affected our pricing, production capacity, production costs and capacity
expansion schedule, and we expect that our business, financial condition and results of operations will continue to be significantly affected by future regulatory developments.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are set forth in note 2.4 to our consolidated financial statements included in
Appendix I — "Accountants' Report of the Company". The preparation of our consolidated financial statements requires our management to make
judgments, estimates and assumptions that affect the amount reported in our consolidated financial statements. These judgments, estimates and assumptions are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the circumstances, and actual results could differ significantly. We have identified the following
accounting policies as critical to an understanding of our financial condition and results of operations, because the application of these policies requires significant management judgments,
estimates and assumptions, and the reporting of materially different amounts could result if different judgments were made or different estimates or assumptions were used.
Impairment of Property, Plant and Equipment
Long-lived assets, such as property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts may not be recoverable. An impairment loss for a long-lived asset is recognized for the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of the asset's fair value less costs to sell the asset and the asset's value in use. When our management estimates the recoverable amount of an
asset, various assumptions are made, including the future cash flows
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expected
to be associated with the asset and the applicable discount rate. If future events do not correspond to these assumptions, the recoverable amounts may need to be revised, which may lead
to impairment losses and adversely affect our financial condition and results of operations. In the six months ended June 30, 2013, we recognized impairment losses on property, plant and
equipment of RMB184.4 million in connection with the suspension of Gouchang Coal Mine since March 2013.
Units-of-Production Depreciation for Mining-Related Assets
Mining-related assets, including mining rights and mining-related buildings, mining structures and mining-related machinery and
equipment, are depreciated or amortized using the units-of-production method based on the actual units of coal production over the estimated coal reserves of our mines. As a result, changes in
our coal reserve estimates could significantly affect our financial condition and results of operations. In particular, a reduction in our estimated coal reserves would increase depreciation and
amortization expenses per unit of coal production and reduce our gross margins as well as increase our losses. See the section entitled "— Critical Accounting Policies
and Estimates — Reserve Estimates".
Useful Lives of Non-Mining Related Property, Plant and Equipment
Non-mining related property, plant and equipment are depreciated over their estimated useful lives using the straight-line
method. The useful life of an asset is the period over which the asset is expected to be available for use, and our management estimates the useful lives of our non-mining related property,
plant and equipment based on a collective assessment of technology and industry conditions as well as historical experience with similar assets. The estimated useful lives of non-mining related
property, plant and equipment are reviewed periodically and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence or legal or
other limits on the use of such assets. Changes in such estimates could significantly affect our financial condition and results of operations. In particular, a reduction in the estimated useful
lives of non-mining related property, plant and equipment would increase depreciation expenses and reduce operating income, as well as result in write-off or write-down of obsolete assets in
certain cases. The estimated useful lives of our non-mining related property, plant and equipment are as follows:
|
|
|
|
|
Estimated Useful Lives |
Non-mining related buildings |
|
15-35 years |
Non-mining related machinery and equipment |
|
5-15 years |
Motor vehicles |
|
5-8 years |
Reserve Estimates
Proved and probable coal reserve estimates are estimates of the amount of coal that can be economically and legally extracted from our
mines. In estimating our coal reserves, our management reviews recent production and technical information of each mine, considers the potential for unforeseen geological and technical difficulties,
and makes various assumptions and estimates relating
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to
the price of coal, production costs, transportation costs of coal and expected recovery rates. Our management reviews our coal reserve estimates annually or when information becomes available that
indicates our coal reserve estimates would need to be revised. For example, during the course of our operations, additional geological or other information may become available that would require our
management to update certain assumptions it used in estimating our coal reserves. Changes to coal reserve estimates could significantly affect our financial condition and results of operations. In
particular, a change in our estimated coal reserves could have the following effects:
- •
- reduce the carrying values of certain of our assets, including mining rights, due to changes in the estimated future cash
flows associated with such assets;
- •
- increase depreciation or amortization expenses relating to assets that are depreciated or amortized using the
units-of-production method based on our estimated coal reserves;
- •
- asset retirement obligations and related accretion expenses may be affected if estimates of the expected timing and cost
of our asset retirement expenditures are affected by changes in our estimates of coal reserves; and
- •
- reduce the carrying value of deferred tax assets due to changes in the estimated likelihood of recovery of the
tax benefits.
Impairment of Trade and Other Receivables
We recognize a provision for impairment of our trade and other receivables when there is objective evidence that we will not be able to
collect all of the amounts due under the terms of our invoice, including the probability of insolvency or significant financial difficulties of the customer, as well as significant changes in the
technological, economic or legal environment that may have an adverse effect on the customer. Our management takes into account our historical write-off experience, the age of the receivable, the
credit history of the customer and current market conditions when making a provision, and our management will reassess our provisions at the end of each reporting period. If the customer's financial
condition deteriorates or if its repayment ability is lower than we had anticipated, our impairment losses may increase, and our financial condition and results of operations, as well as liquidity,
would be materially and adversely affected. Historically, we have not experienced any impairment losses from our trade and other receivables. During the Track Record Period, we have not made any
provisions for impairment of trade and other receivables.
Income Taxes
There are certain transactions for which the ultimate tax determination is uncertain during the ordinary course of business. We
recognize tax liabilities based on estimates of whether additional taxes will be due. If the final tax outcome of certain transactions is different from the amounts that were initially recognized, the
difference will impact the income tax and deferred tax provisions in the period in which the determination was made.
Deferred
tax is provided, using the liability method, based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in our
consolidated financial
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statements.
Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted and which are expected to apply when the related deferred income tax asset is
realized or the deferred income tax liability is settled. In addition, deferred tax assets are recognized only to the extent it is probable that we would have sufficient future taxable income against
which any deductible temporary differences, unused tax credits or unused tax losses could be utilized. If the actual or expected tax rates and laws in the future are different from our original
estimates, or if our actual or expected future taxable income is lower than we had estimated, the carrying amount of deferred tax assets and liabilities would be affected in the period in which such
estimates have changed.
Provision for Asset Retirement Obligations
Asset retirement obligations are the present value of the expenditures that we expect to incur in relation to the closure of our mines
following the exhaustion of their coal reserves, including dismantling mining structures and restoring the land.
Provisions
for asset retirement obligations are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, and it is probable that an
outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Our
assessment of potential liabilities and estimate of necessary reserves for rehabilitation are based on: (i) our assessment of the applicable environmental laws, policies
and/or standards promulgated by the PRC governmental authorities; and (ii) our calculations of the amount and timing of future cash expenditures needed to fulfil our assessed obligations.
Expenditure estimates are adjusted for inflation and market risk premium, and then discounted at a rate that reflects the current market assessments of the time value of money and the risks specific
to the liability such that the amount of provision reflects the present value of the expenditures expected to be required to fulfil the obligation. We recognize asset retirement obligations according
to IAS 37, and record a corresponding asset in the period in which the liability is incurred. The asset is depreciated using the units-of-production method by the actual unit of production over
the estimated proved and probable reserves of the coal mines. After the initial recognition of an asset retirement obligation, it is accreted to reflect the increase in the present value of our
expected expenditures due to the passage of time, and a corresponding accretion expense will be recognized as financial cost.
Asset
retirement obligations are determined based on our management's past experience, its estimates of the timing and amount of the future expenditures, its expectations of future
regulatory requirements, as well as various assumptions regarding the applicable discount rate to be used for purposes of calculating the present value. Our management regularly reviews our asset
retirement obligations, which will be revised if any of our management's estimates, expectations or assumptions change. Changes of these estimates, expectations and assumptions could result in an
adjustment of the carrying value of the asset retirement obligations as well as changes to the related accretion expenses. The Company's policy for making provision for asset retirement obligations,
to the knowledge of the Company, is in line with those of comparable coal mining companies in the PRC.
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While
we believe that our asset retirement provisions are adequate, the amounts estimated for future liabilities may differ materially from the costs that will actually be incurred to
rehabilitate our mine sites in the future. In particular, changes in environmental laws and regulations may increase the costs of environmental rehabilitation.
Our
provision for asset retirement obligation was RMB5.5 million, RMB6.0 million, RMB7.1 million and RMB7.8 million as at December 31, 2010, 2011 and
2012 and June 30, 2013, respectively. Based on the proved and probable reserves of the coal mines as of June 30, 2013, the provision for asset retirement obligation per tonne of coal
reserve was approximately RMB0.04.
DESCRIPTION OF THE KEY COMPONENTS OF OUR RESULTS OF OPERATIONS
Revenue
We generate our revenue primarily from the production and sale of anthracite coal. In 2011 and 2012, we also generated a portion of our
revenue from sales of anthracite coal purchased from third parties, as we engaged in coal trading activities to take advantage of coal price fluctuations during the ramp-up of our production capacity.
In 2011 and 2012, revenue from sales of third party anthracite coal was RMB33.1 million and RMB1.1 million, respectively, representing 31.5% and 0.8%, respectively, of our revenue in
those years. We do not expect to generate any significant revenue from sales of third party coal in the future.
We
sell a significant portion of our anthracite coal as thermal coal to power producers in Guizhou province. As a result, we are dependent on a limited number of customers for a
substantial portion of our revenue. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, we derived 66.6%, 73.5%, 56.7%, 73.7% and 72.8%, respectively, of our revenue from
anthracite coal sales to our five largest customers. We believe that by diversifying our product mix to include increased sales of chemical coal and sales of PCI coal, our dependency on a limited
number of large customers will decrease.
We
recognize revenue from the sale of anthracite coal when the significant risks and rewards of ownership have passed to the customer and when collectability is reasonably assured. The
point at which the significant risks and rewards of ownership is deemed to have passed to the customer is determined based on the terms of the sale. Typically, we recognize revenue upon delivery to
and acceptance of our anthracite coal by our customers. Unless we receive payment in full at the time revenue is recognized for the sale, we would record the receivable in respect of the sale as a
trade receivable. We offer a credit term of up to three months to customers. Our trade receivables are non-interest bearing, and we do not hold any collateral over our trade receivables. For customers
with whom we have no prior trading history, we generally require immediate cash payment or advance payment.
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Most
of our customers request us to arrange for transportation of the anthracite coal they purchase from us. We generally charge our customers separately for the cost of transportation
and record as revenue any excess of the amount we collect over the cost of arranging the transportation. In some circumstances, the amount we charge our customers for the cost of transportation may be
less than our cost of arranging the transportation, in which case we would deduct the amount of the deficiency against the revenue recognized for the corresponding sale.
We
recognize revenue net of value-added taxes. All of the anthracite coal we sell is subject to a value-added tax of 17.0% in the PRC. Pursuant to applicable PRC regulations, we add
value-added taxes to the invoiced price of our sales, and we remit the value-added taxes we collect from our customers to the PRC tax authorities, subject to applicable deductions. The difference
between the amount of value-added taxes we collect and the amount of value-added taxes we pay is recorded in our consolidated statements of financial position as prepayments, deposits and other
receivables, or other payables and accrued liabilities, as applicable.
We
are also required by the Guizhou government to pay a coal price adjustment fund levy on the anthracite coal we sell. The invoiced price of our anthracite coal sales may be inclusive
or exclusive of this levy, depending on negotiations with the customer on a case-by-case basis. Any coal price adjustment fund levy we recover from our customers will be included in our revenue, and
any coal price adjustment fund levy we are required to pay to the Guizhou government will be included in our cost of sales.
Cost of Sales
The following table sets forth a breakdown of our costs of sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six month ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
(RMB in thousands)
|
|
Cost of inventories sold |
|
|
19,413 |
|
|
65,808 |
|
|
66,963 |
|
|
21,593 |
|
|
29,001 |
|
Price adjustment fund |
|
|
2,624 |
|
|
4,995 |
|
|
12,116 |
|
|
7,135 |
|
|
2,792 |
|
Sales tax and surcharge |
|
|
1,856 |
|
|
1,812 |
|
|
3,897 |
|
|
1,216 |
|
|
1,834 |
|
Utilization of safety fund and production maintenance fund |
|
|
1,560 |
|
|
1,674 |
|
|
12,913 |
|
|
452 |
|
|
6,326 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
25,453 |
|
|
74,289 |
|
|
95,889 |
|
|
30,396 |
|
|
39,953 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
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In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, cost of sales was RMB25.5 million, RMB74.3 million,
RMB95.9 million, RMB30.4 million and RMB40.0 million, respectively. Our cost of sales consists primarily the cost of sales of our self-produced coal,
which include:
- •
- Cost of inventories sold, including (i) direct labor costs for personnel involved in our coal mining operations,
(ii) depreciation and amortization expenses of mining-related assets, (iii) cost of materials consisting of explosives, mine roof support materials, steel, cement and diesel fuel and
(iv) other miscellaneous cost of sales consisting of the cost of utilities, repair and maintenance expenses and overhead;
- •
- Price adjustment fund levy;
- •
- Sales tax and surcharge; and
- •
- Utilization of safety fund and production maintenance fund.
In
2011 and 2012, our cost of sales also included the cost of purchasing third party coal in connection with our coal trading activities. In 2011 and 2012, cost of purchasing third party
coal was RMB30.2 million and RMB1.1 million, respectively, representing approximately 40.7% and 1.2%, respectively, of our total cost of sales. We did not sell any third party coal
after 2012.
We
believe our product mix will be one of the most important factors in determining our cost of sales as a percentage of our revenue. In particular, chemical coal and PCI coal, which
generally command significantly higher average selling prices than thermal coal, do not cost significantly more to produce than thermal coal. We currently sell most of our anthracite coal as thermal
coal, and we cannot assure you that we will be able to successfully produce and sell chemical coal or PCI coal. See "Risk Factors — Risks Relating to Our
Business — We may not be able to successfully produce, market and sell chemical and PCI coal, which could materially and adversely affect our business
and prospects".
Selling and Distribution Expenses
Our selling and distribution expenses primarily consist of salaries and benefits for our sales staff, travel expenses and other
miscellaneous selling expenses. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, selling and distribution expenses were RMB2.9 million, RMB2.9 million,
RMB3.7 million, RMB1.4 million and RMB2.7 million, respectively, representing 7.5%, 2.8%, 2.6%, 2.6% and 5.0%, respectively, of our revenue. As we intend to increase our marketing
and sales of chemical coal, we expect our selling and distribution expenses to increase in future periods.
159
Table of Contents
Administrative Expenses
The following table sets forth a breakdown of our administrative expenses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
(RMB in thousands)
|
|
Wages and labor |
|
|
34,771 |
|
|
22,499 |
|
|
33,342 |
|
|
15,045 |
|
|
18,068 |
|
Public relation |
|
|
5,055 |
|
|
8,504 |
|
|
12,034 |
|
|
5,120 |
|
|
6,671 |
|
Office expenses |
|
|
4,308 |
|
|
5,720 |
|
|
6,843 |
|
|
3,537 |
|
|
3,285 |
|
Depreciation and amortisation |
|
|
715 |
|
|
1,895 |
|
|
2,820 |
|
|
1,604 |
|
|
1,611 |
|
Taxes |
|
|
3,988 |
|
|
2,678 |
|
|
4,336 |
|
|
1,544 |
|
|
2,766 |
|
Maintenance |
|
|
1,427 |
|
|
2,501 |
|
|
3,325 |
|
|
1,285 |
|
|
2,014 |
|
Professional service fee |
|
|
1,418 |
|
|
759 |
|
|
9,544 |
|
|
1,841 |
|
|
15,387 |
|
Loss on suspension of production |
|
|
— |
|
|
— |
|
|
3,278 |
|
|
2,948 |
|
|
6,476 |
|
Others |
|
|
4,140 |
|
|
4,876 |
|
|
1,812 |
|
|
1,051 |
|
|
1,145 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
55,822 |
|
|
49,432 |
|
|
77,334 |
|
|
33,975 |
|
|
57,423 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Our
administrative expenses consist mainly of salaries and benefits for our management and administrative personnel, depreciation and amortization expenses for our non-mining related
assets, losses resulting from suspensions of mining operations, professional advisor fees, travel and entertainment expenses, miscellaneous office expenses and utilities. In 2010, our administrative
expenses also included share-based compensation expenses of RMB17.0 million relating to share options granted to Mr. Li Feilie by CHNR to purchase 1,000,000 shares of CHNR. The
options were granted in January 2008 and the related share-based compensation expenses were amortized over three years from 2008 to 2010. We did not have any share-based compensation expenses
in 2011 or 2012. See note 28 to our consolidated financial statements included in Appendix I — "Accountants' Report of the Company".
Our administrative expenses increased by 69.0% from RMB34.0 million in the six months ended June 30, 2012 to RMB57.4 million in the same period in 2013. This increase primarily
reflected expenses incurred in connection with the preparation for the Listing, losses incurred from the suspension of production at Gouchang Coal Mine since March 2013, as well as higher
payroll expenses for our administrative staff following the expansion.
160
Table of Contents
In
2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our administrative expenses were RMB55.8 million, RMB49.4 million, RMB77.3 million,
RMB34.0 million and RMB57.4 million, respectively, representing 144.4%, 47.0%, 54.5%, 61.6% and 104.9%, respectively, of our revenue. We expect our administrative expenses to increase in
the future as our business and production capacity expands. Moreover, after the completion of our Listing, we will become a stand-alone independent public company and will incur significantly higher
levels of legal, accounting, compliance and other administrative expenses than we did as a wholly-owned subsidiary of CHNR. Also, as we intend to adopt the Share Option Scheme after the completion of
the Listing to incentivize our management and employees, we expect our share-based compensation expenses to increase significantly in the future.
Impairment Loss on Property, Plant and Equipment
We incurred impairment loss on property, plant and equipment of RMB184.4 million in the six months ended June 30, 2013 in
connection with the suspension of Gouchang Coal Mine since March 2013. After considering the estimated length of time of suspension, and the estimated production capacity upon resumption of
operation, of Gouchang Coal Mine, our management determined that RMB184.4 million of the carrying amount of Gouchang Coal Mine's total non-current assets of RMB256.6 million may not be
recoverable. Our management determined the recoverable value of Gouchang Coal Mine primarily based on the mine's fair value less cost of disposal using pre-tax cash flow projections, adopting certain
key assumptions based on the mine's past performance and the management's expectations on market developments, applying a discount rate of 15.05%, and assuming that the Gouchang Coal Mine could resume
operations by the end of 2015. See "— Critical Accounting Policies And Estimates — Impairment of Property,
Plant and Equipment". We may recognize additional impairment losses with respect to Gouchang Coal Mine in the future.
Other Operating Expenses
Our other operating expenses primarily consist of mine pre-development expenses, administrative penalties and fines, relocation
compensation paid to local residents, as well as other miscellaneous levies and charges. In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our other operating expenses were
RMB9.0 million, RMB1.5 million, RMB1.6 million, RMB0.6 million and 1.9 million, respectively, representing 23.3%, 1.5%, 1.1%, 1.2% and 3.4%, respectively, of
our revenue.
161
Table of Contents
Finance Costs
The following table sets forth a breakdown of our finance costs for the years indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
(RMB in thousands)
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
Interest on interest-bearing bank and other borrowings |
|
|
15,987 |
|
|
48,980 |
|
|
83,490 |
|
|
38,208 |
|
|
52,934 |
|
Interest on payable for mining rights |
|
|
5,845 |
|
|
11,908 |
|
|
5,892 |
|
|
3,231 |
|
|
3,235 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
21,832 |
|
|
60,888 |
|
|
89,382 |
|
|
41,439 |
|
|
56,169 |
|
Less: capitalized interest |
|
|
(16,224 |
) |
|
(30,065 |
) |
|
(45,609 |
) |
|
(21,155 |
) |
|
(20,446 |
) |
Bank charges |
|
|
90 |
|
|
475 |
|
|
123 |
|
|
72 |
|
|
46 |
|
Entrusted loan commission fee |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,612 |
|
Accretion expenses |
|
|
309 |
|
|
543 |
|
|
637 |
|
|
299 |
|
|
350 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,007 |
|
|
31,841 |
|
|
44,533 |
|
|
20,655 |
|
|
43,731 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Interest
on interest-bearing loans is the largest component of our finance costs. Our interest-bearing bank and other borrowings consist of short-term and long-term bank and other
borrowings. As of December 31, 2010, 2011 and 2012 and June 30, 2013, we had total outstanding interest-bearing loans of RMB418.7 million, RMB735.9 million,
RMB1,013.5 million and 1,759.3 million, respectively, with effective interest rates ranging from 5.94% to 8.32%, 6.22% to 9.84%, 5.94% to 9.47% and 6.40% to 9.00%, respectively. We
expect our interest on interest-bearing bank and other borrowings to increase significantly in future periods, as we intend to increase our short-term and long-term borrowings to fund our operations
and capital expenditures. In March and May 2013, we entered into a RMB400.0 million one-year bank loan (bearing a floating annual interest rate of 20% above the one-year base lending
rate published by the PBOC) with China Minsheng Bank and a RMB300.0 million 8.00% two-year entrustment loan with Huachuang Securities, respectively, to refinance certain of our non-interest
bearing loans from companies controlled by Mr. Li Feilie.
Interest
on payable for mining rights relates to our interest expense under our installment payment plans with the Guizhou Provincial Department of Land and Resources in respect of our
mining right
permits. The interest rate applicable to these installment payment plans is determined annually based on the PBOC's official benchmark interest rates.
Capitalized
interest relates to borrowing costs that directly relate to the acquisition or construction of coal mines that have not commenced commercial production. These borrowing costs
are capitalized as part of the cost of the coal mine and not expensed in the period they are incurred. Once commercial production has commenced, however, these borrowing costs may no longer be
capitalized and must be expensed in the period incurred. As a result, if we achieve commercial production at additional coal mines in the future, our finance costs may increase.
162
Table of Contents
Bank
charges include miscellaneous fees and charges in connection with our long-term and short-term bank borrowings. As we replaced certain of our intra-company loans with entrustment
loans since March 2013, we expect our bank charges to increase in future periods.
Entrusted
loan commission fees includes miscellaneous fees and charges in connection with entrusted loans.
Accretion
expenses reflect the increase in the present value of our asset retirement obligations due to the passage of time. Accretion expenses are expected to generally increase over
time and may be affected by changes in estimates and assumptions regarding the applicable discount rates as well as changes to our estimated asset retirement obligations. See
"— Critical Accounting Policies — Asset Retirement Obligations".
Our
finance costs increased significantly from RMB20.7 million in the six months ended June 30, 2012 to RMB43.7 million in the same period in 2013, principally due
to a 38.5% increase in interest expenses on interest-bearing bank and other borrowings from RMB38.2 million in the six months ended June 30, 2012 to RMB52.9 million in the same
period in 2013. We expect our finance costs to increase in 2013 compared to 2012. If we are unable to capitalize certain finance cost, our increase in finance costs may continue to be substantial in
the foreseeable future primarily due to the debt and financing costs associated with the capital expenditures that we expect to incur for our expansion plans.
Gain on Bargain Purchase of a Subsidiary
In March 2010, we acquired Guizhou Puxin for a cash consideration of RMB150.0 million, which was less than the fair value
of its net assets of RMB774.1 million at the time of the acquisition. As a result, we recognized a one-time gain on bargain purchase of RMB624.1 million in connection with the
transaction. The bargain purchase gain arose from the distressed sale by the unrelated third parties primarily due to the consolidation of smaller coal mines by the PRC government. This gain is
non-recurring and non-cash and should not be viewed as indicative of our future earnings. See "History and Development".
Net non-operating expense
Net non-operating expense primarily consists of losses on disposal of non-current assets and certain required sponsorships and
contributions to the community and certain government organizations. In 2010, 2011, 2012 and the six months ended June 30, 2012, our net non-operating expense was RMB1.6 million,
RMB0.9 million, RMB2.2 million and RMB1.8 million, respectively. In the six months ended June 30, 2013, our net non-operating income was RMB1.2 million.
163
Table of Contents
Taxation
Our Company is not subject to any income or capital gains tax under the current laws of the British Virgin Islands. There are currently
no dividend withholding taxes in the British Virgin Islands.
We have one subsidiary, Smartact, incorporated in Hong Kong. Under current Hong Kong laws, companies incorporated in Hong Kong are
subject to profits tax at a rate of 16.5%. We have not made any provision for Hong Kong profits tax as we did not have any assessable profits arising in Hong Kong in 2010, 2011, 2012 or the six months
ended June 30, 2013, and Smartact is exempt from foreign-derived income. There are currently no dividend withholding taxes in Hong Kong.
On March 16, 2007, the PRC National People's Congress adopted the PRC Enterprise Income Tax Law, which became effective on
January 1, 2008. Under the PRC Enterprise Income Tax Law, our PRC subsidiaries are subject to annual enterprise income tax at a rate equal to 25% of their taxable income. Under the PRC
Enterprise Income Tax Law, all dividends paid by our PRC subsidiaries to Smartact are subject to a 5% or 10% withholding tax depending on the availability of the relevant tax treaty. No such dividends
were paid in 2010, 2011 or 2012.
In
2010, 2011, 2012 and the six months ended June 30, 2013, the effective tax rates were 1.09%, -17.7%, 18.4% and 18.5%, respectively. The changes in the effective tax
rates during the Track Record Period primarily reflect different requirements by the Guizhou province's local taxation bureau on enterprise income tax determination and, in the case of 2010, the gain
on bargain purchase of Guizhou Puxin. Prior to 2012, certain of our PRC subsidiaries, including Dayuan Coal, Gouchang Coal, Baiping Mining, Xinsong Coal and Linjiaao Coal were required by the Guizhou
province's local taxation bureau to pay enterprise income tax at a rate of 25% of their "deemed profits" rather than 25% of their taxable income as determined under the PRC Enterprise Income Tax Law.
The "deemed profits" of these subsidiaries, which were determined based on the actual revenue of these subsidiaries less certain "deemed expenses" as determined by the Guizhou province's local
taxation bureau, were significantly higher than their taxable income. As a result, in periods prior to 2012, these PRC subsidiaries paid a higher amount of enterprise income tax than what the PRC
Enterprise Income Tax law would have otherwise required, including the additional amounts of enterprise income tax of
RMB1.8 million in 2010 and RMB1.5 million in 2011, which would not be required under the PRC Enterprise Income Tax law. In 2012, the Guizhou province's local taxation bureau confirmed in
writing that these PRC subsidiaries should have only been subject to income tax at a rate of 25% of their taxable income as determined under the PRC Enterprise Income Tax Law since
January 2011. As a result, we recognized deferred tax assets for prior year tax losses in the amount of RMB15.3 million in 2012. According to the Guizhou province's local taxation
bureaus, it had been the general practice to require enterprises to pay enterprise income tax based on "deemed profits". See note 12 to our consolidated financial statements included in
Appendix I — "Accountants' Report of the Company".
164
Table of Contents
RESULTS OF OPERATIONS
You should read the summary historical consolidated financial statements set forth below in conjunction with our consolidated financial
statements included in the Appendix I — "Accountants' Report of the Company," together with the accompanying notes, which have been prepared in accordance
with IFRS as issued by the IASB. The summary historical consolidated income statements for the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2012 and
2013 and the selected consolidated statements of financial position as of December 31, 2010, 2011 and 2012 and June 30, 2013 set forth below are derived from our consolidated financial
statements, including the notes thereto, set forth in Appendix I — "Accountants' Report of the Company".
Consolidated Income Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(RMB in thousands, except per share data)
|
|
Revenue |
|
|
38,668 |
|
|
105,211 |
|
|
141,939 |
|
|
55,156 |
|
|
54,716 |
|
Cost of sales |
|
|
(25,453 |
) |
|
(74,289 |
) |
|
(95,889 |
) |
|
(30,396 |
) |
|
(39,953 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
13,215 |
|
|
30,922 |
|
|
46,050 |
|
|
24,760 |
|
|
14,763 |
|
Selling and distribution expenses |
|
|
(2,918 |
) |
|
(2,930 |
) |
|
(3,694 |
) |
|
(1,412 |
) |
|
(2,728 |
) |
Administrative expense |
|
|
(55,822 |
) |
|
(49,432 |
) |
|
(77,334 |
) |
|
(33,975 |
) |
|
(57,423 |
) |
Impairment loss on property, plant and equipment |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(184,417 |
) |
Other operating expenses |
|
|
(9,020 |
) |
|
(1,545 |
) |
|
(1,624 |
) |
|
(643 |
) |
|
(1,880 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Operating Loss |
|
|
(54,545 |
) |
|
(22,985 |
) |
|
(36,602 |
) |
|
(11,270 |
) |
|
(231,685 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
(6,007 |
) |
|
(31,841 |
) |
|
(44,533 |
) |
|
(20,655 |
) |
|
(43,731 |
) |
Interest income |
|
|
115 |
|
|
564 |
|
|
1,048 |
|
|
814 |
|
|
977 |
|
Gain on bargain purchase of a subsidiary |
|
|
624,148 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-operating income / (expenses), net |
|
|
(1,577 |
) |
|
(888 |
) |
|
(2,179 |
) |
|
(1,810 |
) |
|
1,215 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Profit / (Loss) before Income Tax |
|
|
562,134 |
|
|
(55,150 |
) |
|
(82,266 |
) |
|
(32,921 |
) |
|
(273,224 |
) |
Income tax (expense) / benefit |
|
|
(6,141 |
) |
|
(9,750 |
) |
|
15,210 |
|
|
(5,784 |
) |
|
50,468 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Profit / (Loss) for the Year / Period |
|
|
555,993 |
|
|
(64,900 |
) |
|
(67,056 |
) |
|
(38,705 |
) |
|
(222,756 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner of the Company |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
Non-controlling interests |
|
|
(6,439 |
) |
|
(735 |
) |
|
8,256 |
|
|
2,156 |
|
|
(809 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
555,993 |
|
|
(64,900 |
) |
|
(67,056 |
) |
|
(38,705 |
) |
|
(222,756 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings / (Losses) per Share attributable to Owner of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
562,432 |
|
|
(64,165 |
) |
|
(75,312 |
) |
|
(40,861 |
) |
|
(221,947 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
165
Table of Contents
Consolidated Statements of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
(RMB in thousands)
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
1,789,275 |
|
|
2,030,611 |
|
|
2,327,641 |
|
|
2,287,056 |
|
Rehabilitation fund |
|
|
19,507 |
|
|
23,018 |
|
|
29,894 |
|
|
41,783 |
|
Prepayments, deposits and other receivables |
|
|
15,510 |
|
|
71,846 |
|
|
115,821 |
|
|
117,039 |
|
Deferred tax assets |
|
|
— |
|
|
— |
|
|
3,752 |
|
|
5,365 |
|
| |
|
|
|
|
|
|
|
|
|
Total Non-Current Assets |
|
|
1,824,292 |
|
|
2,125,475 |
|
|
2,477,108 |
|
|
2,451,243 |
|
| |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
5,324 |
|
|
5,328 |
|
|
11,266 |
|
|
15,080 |
|
Trade and bills receivables |
|
|
5,577 |
|
|
30,356 |
|
|
48,967 |
|
|
46,298 |
|
Corporate income tax refundable |
|
|
— |
|
|
— |
|
|
3,901 |
|
|
6,436 |
|
Prepayments, deposits and other receivables |
|
|
19,839 |
|
|
28,759 |
|
|
33,554 |
|
|
37,226 |
|
Restricted bank deposits |
|
|
— |
|
|
21,000 |
|
|
7,082 |
|
|
— |
|
Term deposits with an original maturity over three months |
|
|
— |
|
|
20,000 |
|
|
20,000 |
|
|
— |
|
Cash and cash equivalents |
|
|
76,482 |
|
|
73,642 |
|
|
160,984 |
|
|
140,812 |
|
| |
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
107,222 |
|
|
179,085 |
|
|
285,754 |
|
|
245,852 |
|
| |
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
1,931,514 |
|
|
2,304,560 |
|
|
2,762,862 |
|
|
2,697,095 |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and bills payables |
|
|
80,017 |
|
|
69,402 |
|
|
103,798 |
|
|
97,737 |
|
Other payables and accrued liabilities |
|
|
26,369 |
|
|
36,406 |
|
|
60,155 |
|
|
58,124 |
|
Interest-bearing bank and other borrowings |
|
|
100,000 |
|
|
225,000 |
|
|
443,900 |
|
|
861,900 |
|
Due to related companies |
|
|
314,235 |
|
|
451,380 |
|
|
672,401 |
|
|
140,633 |
|
Interest payable |
|
|
4,253 |
|
|
5,979 |
|
|
9,093 |
|
|
11,195 |
|
Income tax payable |
|
|
240 |
|
|
402 |
|
|
950 |
|
|
— |
|
Mining rights payables |
|
|
19,192 |
|
|
22,612 |
|
|
25,568 |
|
|
31,368 |
|
| |
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
544,306 |
|
|
811,181 |
|
|
1,315,865 |
|
|
1,200,957 |
|
| |
|
|
|
|
|
|
|
|
|
Non-Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing bank and other borrowings |
|
|
318,742 |
|
|
510,886 |
|
|
569,630 |
|
|
897,449 |
|
Interest payable |
|
|
13,205 |
|
|
18,205 |
|
|
17,894 |
|
|
18,788 |
|
Deferred tax liabilities |
|
|
285,849 |
|
|
289,416 |
|
|
267,004 |
|
|
216,332 |
|
Mining rights payables |
|
|
132,966 |
|
|
103,378 |
|
|
77,810 |
|
|
66,150 |
|
Asset retirement obligations |
|
|
5,482 |
|
|
6,025 |
|
|
7,064 |
|
|
7,848 |
|
| |
|
|
|
|
|
|
|
|
|
166
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
(RMB in thousands)
|
|
Total Non-Current Liabilities |
|
|
756,244 |
|
|
927,910 |
|
|
939,402 |
|
|
1,206,567 |
|
| |
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
1,300,550 |
|
|
1,739,091 |
|
|
2,255,267 |
|
|
2,407,524 |
|
| |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued capital |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Reserves |
|
|
554,831 |
|
|
479,784 |
|
|
413,654 |
|
|
196,439 |
|
| |
|
|
|
|
|
|
|
|
|
Equity Attributable to Owner of the Company |
|
|
554,831 |
|
|
479,784 |
|
|
413,654 |
|
|
196,439 |
|
Non-Controlling Interests |
|
|
76,133 |
|
|
85,685 |
|
|
93,941 |
|
|
93,132 |
|
| |
|
|
|
|
|
|
|
|
|
Total Equity |
|
|
630,964 |
|
|
565,469 |
|
|
507,595 |
|
|
289,571 |
|
| |
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
|
1,931,514 |
|
|
2,304,560 |
|
|
2,762,862 |
|
|
2,697,095 |
|
| |
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012
Our revenue decreased by 0.8% from RMB55.2 million in the six months ended June 30, 2012 to RMB54.7 million in the
same period in 2013. This reflected a decrease in revenue from sales of third party coal from RMB1.1 million in the six months ended June 30, 2012 to nil in the same period in 2013 as we
discontinued our coal trading activities. The effect of this decrease was partially offset by a 1.3% increase in revenue from sales of self-produced coal from RMB54.0 million in the six months
ended June 30, 2012 to RMB54.7 million in the same period in 2013. The increase in revenue from sales of self-produced coal resulted from an increase in sales volume, which was partially
offset by a decrease in average selling price. Sales volume of self-produced coal increased from 146,734 tonnes in the six months ended June 30, 2012 to 187,432 tonnes in the same
period in 2013, principally as a result of an increase in the production output of Baiping Coal Mine
and the commencement of commercial production of Liujiaba Coal Mine in December 2012, which was partially offset by a decrease in the production output that resulted from the suspension of the
Gouchang Coal Mine since March 2013. Average selling price for self-produced coal decreased from RMB368.3 per tonne in the six months ended June 30, 2012 to RMB291.9 in the
same period in 2013, principally as a result of the significant decline in the market price of coal in Guizhou province in the first half of 2013.
Our cost of sales increased by 31.4% from RMB30.4 million in the six months ended June 30, 2012 to RMB40.0 million
in the same period in 2013. This was primarily due to our increased sales volume.
As
a percentage of revenue, cost of sales increased from 55.1% in the six months ended June 30, 2012 to 73.0% in the same period in 2013. For our self-produced coal, cost of sales
as a percentage of revenue increased from 54.2% in the six months ended June 30, 2012 to 73.0% in the same period in 2013, mainly as a result of a significant decrease in the average selling
price of our self-produced coal.
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As a result of the foregoing, our gross profit, which is equal to revenue less cost of sales, decreased by 40.4% from
RMB24.8 million in the six months ended June 30, 2012 to RMB14.8 million in the same period in 2013. Our gross margin, which is equal to gross profit divided by revenue, decreased
from 44.9% in the six months ended June 30, 2012 to 27.0% in the same period in 2013, primarily due to a significant decrease in the average selling price of our self-produced coal. Gross
margin for sales of our self-produced coal decreased from 45.8% in the six months ended June 30, 2012 to 27.0% in the same period in 2013.
Our selling and distribution expenses increased by 93.2% from RMB1.4 million in the six months ended June 30, 2012 to
RMB2.7 million in the same period in 2013, primarily due to an increase in payroll expense for our sales staff and an increase in our sales and marketing activities as we increased our
production output. As a percentage of revenue, sales and distribution expenses increased from 2.6% in the six months ended June 30, 2012 to 5.0% in the same period in 2013.
Our administrative expenses increased by 69.0% from RMB34.0 million in the six months ended June 30, 2012 to
RMB57.4 million in the same period in 2013. This increase primarily reflected expenses incurred in connection with the preparation for the Listing, losses incurred from the suspension of
production at Gouchang Coal Mine since March 2013, as well as higher payroll expenses for our administrative staff following the expansion. As a percentage of revenue, administrative expenses
increased from 61.6% in the six months ended June 30, 2012 to 104.9% in the same period in 2013.
Impairment Loss on Property, Plant and Equipment
We incurred an impairment loss on property, plant and equipment of RMB184.4 million in the six months ended June 30, 2013
in connection with the suspension of Gouchang Coal Mine. We did not incur any impairment losses in the same period in 2012.
Our other operating expenses increased from RMB0.6 million in the six months ended June 30, 2012 to RMB1.9 million
in the same period in 2013, primarily as a result of the recognition of a provision for inventory impairment in connection with the suspension of the Gouchang Coal Mine and the incurrence of certain
miscellaneous levies and charges at the Baiping Coal Mine, which were partially offset by a decrease in administrative fines and penalties. Other operating expenses
in the six months ended June 30, 2012 consisted mainly of administrative penalties and fines, which primarily related to our safety facilities and miscellaneous charges related to temporary use
of land, while other operating expenses in the same period in 2013 consisted mainly of miscellaneous levies and charges and provisions for impairment of inventory. As a percentage of revenue, other
operating expenses increased from 1.2% in the six months ended June 30, 2012 to 3.4% in the same period in 2013.
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As a result of the foregoing, our operating loss increased significantly from RMB11.3 million in the six months ended
June 30, 2012 to RMB231.7 million in the same period in 2013.
Our finance costs increased significantly from RMB20.7 million in the six months ended June 30, 2012 to
RMB43.7 million in the same period in 2013, principally due to a 38.5% increase in interest expenses on interest-bearing bank and other borrowings from RMB38.2 million in the six months
ended June 30, 2012 to RMB52.9 million in the same period in 2013. Interest expenses on interest-bearing bank and other borrowings increased primarily because we significantly increased
our bank borrowings from RMB943.1 million as of June 30, 2012 to RMB1,759.3 million as of June 30, 2013.
We
also incurred entrusted loan commission fees of RMB7.6 million in the six months ended June 30, 2013 as we replaced our intercompany loans with entrusted loans to comply
with PRC legal requirements. We did not have any entrusted loans or incur any entrusted loan commission fees in the six months ended June 30, 2012.
Our interest income increased by 20.0% from RMB0.8 million in the six months ended June 30, 2012 to RMB1.0 million
in the same period in 2013, mainly as a result of an increase in the average balance of our bank deposits in the six months ended June 30, 2013 and, to a lesser extent, an increase in the
average yield of our bank deposits.
We had net non-operating expense of RMB1.8 million in the six months ended June 30, 2012, compared to net non-operating
income of RMB1.2 million in the same period in 2013. Our net non-operating expense in the six months ended June 30, 2012 primarily included sponsorships and contributions to the
community and certain government organizations as well as losses on disposal of certain property, plant and equipment. The net non-operating income in the six months ended June 30, 2013
primarily reflected the reversal of certain payables after the relevant government authorities issued confirmation letters confirming that we did not have any outstanding social security fund or
housing provident fund contributions.
As a result of the foregoing, our loss before income tax increased significantly from RMB32.9 million in the six months ended
June 30, 2012 to RMB273.2 million in the same period in 2013.
We had an income tax benefit of RMB50.5 million in the six months ended June 30, 2013, compared to an income tax expense
of RMB5.8 million in the same period in 2012. Our income tax
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benefit in the six months ended June 30, 2013 was primarily attributable to our loss before tax of RMB273.2 million in that period, which resulted in the
recognition of deferred tax assets. Although we also incurred a loss before tax in the six months ended June 30, 2012, we incurred income tax expenses in that period primarily because certain
of our PRC subsidiaries were required by the Guizhou province's local taxation bureau to pay tax at a rate of 25% of their "deemed profits", which resulted in these PRC subsidiaries paying a
significantly higher amount of tax than otherwise required under the PRC Enterprise Income Tax Law. See "— Description of Key Components of Our Results of
Operations — Income Tax — PRC Income Tax".
As a result of the foregoing, our loss for the year increased significantly from RMB38.7 million in the six months ended
June 30, 2012 to RMB222.8 million in the same period in 2013.
Profit attributable to non-controlling interests was RMB2.2 million in the six months ended June 30, 2012, compared to
loss attributable to non-controlling interests of RMB0.8 million in the same period in 2013. The loss attributable to non-controlling interests in the six months ended June 30, 2013
mainly reflected the minority shareholders' share of the financial results of Gouchang Coal, which recorded a larger loss, and the financial results of Baiping Mining, which recorded a
lower profit.
Loss
attributable to owner of our Company increased significantly from RMB40.9 million in the six months ended June 30, 2012 to RMB221.9 million in the same period
in 2013.
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Our revenue increased by 34.9% from RMB105.2 million in 2011 to RMB141.9 million in 2012. This reflected a 95.3% increase
in revenue from sales of self-produced coal from RMB72.1 million in 2011 to RMB140.8 million in 2012, which was partially offset by a 96.6% decrease in revenue from sales of third party
coal from RMB33.1 million in 2011 to RMB1.1 million in 2012. The increase in revenue from sales of self-produced coal resulted from an increase in sales
volume as well as an increase in average selling price. Sales volume of self-produced coal increased from 243,247 tonnes in 2011 to 435,205 tonnes in 2012, principally as a result of an
increase in the production output of Baiping Coal Mine in 2012 and the commencement of commercial production at Zhulinzhai Coal Mine in April 2012 and Liujiaba Coal Mine in
December 2012, partially offset by the suspension of production at Gouchang Coal Mine from March to August 2012 under certain newly implemented mine gas control requirements in Guizhou
province. The average selling price of self-produced coal increased from RMB296.4 per tonne in 2011 to RMB323.6 per tonne in 2012, mainly due to the higher market prices of anthracite
coal in the PRC in 2012. Revenue from the sales of third party coal decreased, primarily as a result of a decrease in sales volume from 70,811 tonnes in 2011 to 1,805 tonnes in 2012. We
do not intend to engage in any significant coal trading activities in the future.
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Our cost of sales increased by 29.1% from RMB74.3 million in 2011 to RMB95.9 million in 2012. This was primarily due to
our increased sales volume. As a percentage of revenue, cost of sales decreased from 70.6% in 2011 to 67.6% in 2012. Cost of sales as a percentage of revenue decreased in 2012 principally due to a
significant reduction of our coal trading activities, which had lower profit margins than selling self-produced coal. For our self-produced coal, cost of sales as a percentage of revenue increased
from 61.1% in 2011 to 67.3% in 2012. This was mainly the result of an increase in the cost of materials, particularly the cost of explosives and mine roof support materials. For our sales of
third-party coal, cost of sales as a percentage of revenue increased from 91.3% in 2011 to 99.3% in 2012. This was mainly due to differences in coal quality and market conditions.
As a result of the foregoing, our gross profit, which is equal to revenue less cost of sales, increased by 48.9% from
RMB30.9 million in 2011 to RMB46.1 million in 2012. Our gross margin, which is equal to gross profit divided by revenue, increased from 29.4% in 2011 to 32.4% in 2012, primarily due to a
significant reduction of our coal trading activities, which had lower profit margins than selling self-produced coal. Gross margin for sales of our self-produced coal decreased from 38.9% in 2011 to
32.7% in 2012, and gross margin for sales of third-party coal decreased from 8.7% in 2011 to 0.7% in 2012.
Our selling and distribution expenses increased by 26.1% from RMB2.9 million in 2011 to RMB3.7 million in 2012, primarily
due to an increase in our sales and marketing activities as we increased our production output. As a percentage of revenue, sales and distribution expenses decreased from 2.8% in 2011 to 2.6%
in 2012.
Our administrative expenses increased by 56.4% from RMB49.4 million in 2011 to RMB77.3 million in 2012. This increase
primarily reflected higher salaries and benefits expenses for our administrative staff, as we increased the number of our administrative staff in 2012 to support the growth of our business, losses
incurred from the suspension of production at Gouchang Coal Mine from March to August 2012, as well as expenses incurred in connection with the preparation for the Listing. As a percentage of
revenue, administrative expenses increased from 47.0% in 2011 to 54.5% in 2012.
Our other operating expenses increased from RMB1.5 million in 2011 to RMB1.6 million in 2012. Other operating expenses in
2011 consisted mainly of administrative penalties and fines, which primarily related to our safety facilities and miscellaneous charges related to temporary use of land, while other operating expenses
in 2012 consisted mainly of miscellaneous levies and charges. As a percentage of revenue, other operating expenses decreased from 1.5% in 2011 to 1.1% in 2012.
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As a result of the foregoing, our operating loss increased by 59.2% from RMB23.0 million in 2011 to RMB36.6 million
in 2012.
Our finance costs increased by 39.9% from RMB31.8 million in 2011 to RMB44.5 million in 2012, principally due to a 70.5%
increase in interest expenses on interest-bearing bank and other borrowings from RMB49.0 million in 2011 to RMB83.5 million in 2012. Interest expenses on interest-bearing bank and other
borrowings increased primarily because we significantly increased our bank borrowings from RMB735.9 million as of December 31, 2011 to RMB1,013.5 million as of December 31,
2012, and the average interest rate on our outstanding bank borrowings increased from 8.0% in 2011 to 8.5% in 2012. The increase in interest expenses was partially offset by a higher level of
capitalized interest in 2012 as compared to 2011, as well as a decrease in interest on payable for mining rights. The higher level of capitalized interest in 2012 was mainly the result of an increase
in bank borrowings for funding coal mine construction. Interest on payables for mining rights decreased in 2012 primarily because the mining right premiums for Liujiaba Coal Mine and Gouchang Coal
Mine were fully paid in 2012.
Our interest income increased by 85.8% from RMB0.6 million in 2011 to RMB1.0 million in 2012, mainly as a result of an
increase in the average balance of our bank deposits in 2012 and, to a lesser extent, an increase in the average yield of our bank deposits.
Our net non-operating expense increased significantly from RMB0.9 million in 2011 to RMB2.2 million in 2012, primarily
reflecting an increase in sponsorships and contributions to the community and certain government organizations.
As a result of the foregoing, our loss before income tax increased by 49.2% from RMB55.2 million in 2011 to
RMB82.3 million in 2012.
We had an income tax benefit of RMB15.2 million in 2012, compared to an income tax expense of RMB9.8 million in 2011. Our
income tax benefit in 2012 primarily reflected the recognition of deferred tax assets of RMB15.3 million, as the Guizhou province's local taxation bureau confirmed in 2012 that certain of our
PRC subsidiaries should have been subject to income tax at a rate of 25% of their taxable income as determined under the PRC Enterprise Income Tax Law since January 2011, rather than 25% of
their "deemed profits". Prior to 2012, certain of our PRC subsidiaries were required by the Guizhou province's local taxation bureau to pay tax at a rate of 25% of their "deemed profits",
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which
resulted in these PRC subsidiaries paying a significantly higher amount of tax than otherwise required under the PRC Enterprise Income Tax Law. See "— Description of the
Key Components of Our Results of Operations — Taxation — PRC Income Tax". Our income tax expense in 2011 mainly reflected
the enterprise income tax payable by certain of our PRC subsidiaries as determined based on their "deemed profits".
As a result of the foregoing, our loss for the year increased by 3.3% from RMB64.9 million in 2011 to RMB67.1 million
in 2012.
Loss attributable to non-controlling interests was RMB0.7 million in 2011, compared to profit attributable to non-controlling
interests of RMB8.3 million in 2012. The profit attributable to non-controlling interests in 2012 mainly reflected the minority shareholders' share of the financial results of Baiping Mining,
which recorded a profit in 2012.
Loss
attributable to owner of our Company increased by 17.4% from RMB64.2 million in 2011 to RMB75.3 million in 2012.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Our revenue increased significantly from RMB38.7 million in 2010 to RMB105.2 million in 2011, reflecting a 86.4% increase
in revenue from sales of self-produced coal from RMB38.7 million in 2010 to RMB72.1 million in 2011, as well as the commencement of our coal trading activities in January 2011.
The increase in revenue from sales of self-produced coal was the result of an increase in sales volume as well as an increase in average selling price. Sales volume of self-produced coal increased
from 166,362 tonnes in 2010 to 243,247 tonnes in 2011, principally as a result of the commencement of commercial production at Gouchang Coal Mine in April 2011 and an increase in
production output at Baiping Coal Mine. The average selling price of self-produced coal increased from RMB232.4 per tonne in 2010 to RMB296.4 per tonne in 2011, mainly due to the general
increase in the market prices of anthracite coal in the PRC. In 2011, we generated RMB33.1 million in revenue from the sale of 70,811 tonnes of third party coal as part of our coal
trading activities.
Our cost of sales increased significantly from RMB25.5 million in 2010 to RMB74.3 million in 2011. This was principally
the result of our increased sales volume. As a percentage of revenue, cost of sales increased from 65.8% in 2010 to 70.6% in 2011. Cost of sales as a percentage of revenue increased in 2011 mainly due
to the commencement of our coal trading activities in January 2011, which had lower profit margins than selling self-produced coal. For our self-produced coal, cost of
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Table of Contents
sales
as a percentage of revenue decreased from 65.8% in 2010 to 61.1% in 2011. This was primarily due to an increase in the average selling price of our self-produced coal, as well as greater
economies of scale realized from our higher production volume. For our sales of third-party coal, cost of sales as a percentage of revenue was 91.3% in 2011.
As a result of the foregoing, our gross profit increased significantly from RMB13.2 million in 2010 to RMB30.9 million in
2011. Our gross margin decreased from 34.2% in 2010 to 29.4% in 2011, primarily due to the commencement of our coal trading activities in January 2011, which had lower profit margins than selling
self-produced coal. Gross margin for sales of our self-produced coal increased from 34.2% in 2010 to 38.9% in 2011, and gross margin for sales of third-party coal was 8.7% in 2011.
Our selling and distribution expenses were RMB2.9 million in both 2010 and 2011, as we did not materially change our sales and
marketing activities or the size of our sales
and marketing personnel. As a percentage of revenue, sales and distribution expenses were 7.5% in 2010 and 2.8% in 2011.
Our administrative expenses decreased by 11.4% from RMB55.8 million in 2010 to RMB49.4 million in 2011, primarily because
no share-based compensation expense was recognized. In 2010, our administrative expenses included share-based compensation expenses of RMB17.0 million allocated from CHNR in connection with the
share options granted in 2008 to Mr. Li Feilie to purchase 1,000,000 shares of CHNR. This was partially offset by an increase in salaries and benefits for our administrative staff, as we
increased the number of our administrative staff in 2011 to support the growth of our business. As a percentage of revenue, administrative expenses decreased from 144.4% in 2010 to 47.0%
in 2011.
Our other operating expenses decreased by 82.9% from RMB9.0 million in 2010 to RMB1.5 million in 2011, mainly because we
were subject to less administrative penalties and fines. In 2010 and 2011, our administrative penalties and fines related primarily to late payment of mining right premium and mine accidents and to a
lesser extent, non-compliant safety equipment. Our operating expenses in 2010 were also significantly affected by mine pre-development expenses we incurred totaling RMB1.7 million in respect of
Dayun Coal Mine and RMB3.2 million in compensation we paid to certain local residents at Dayuan Coal Mine. As a percentage of revenue, other expenses decreased from 23.3% in 2010 to 1.5%
in 2011.
As a result of the foregoing, our operating loss decreased by 57.9% from RMB54.5 million in 2010 to RMB23.0 million
in 2011.
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Table of Contents
Our finance costs increased significantly from RMB6.0 million in 2010 to RMB31.8 million in 2011. This increase was
principally due to a significant increase in interest expenses on interest-bearing bank and other borrowings from RMB16.0 million in 2010 to RMB49.0 million in 2011, as well as a
significant increase in interest on payable for mining rights from RMB5.8 million in 2010 to RMB11.9 million in 2011. Interest expenses on interest-bearing bank and other borrowings
increased primarily because of an increase in our bank borrowings from RMB418.7 million as of December 31, 2010 to RMB735.9 million as of December 31, 2011, as well as an
increase in the average interest rate on our outstanding bank borrowings from 7.1% in 2010 to 8.0% in 2011. Interest on payables for mining rights increased mainly because of the commencement of
paying interest on payables for mining rights for Dayun Coal Mine. These increases were partially offset by a higher level of capitalized interest in 2011 as compared to 2010. The higher level of
capitalized interest in 2011 was mainly the result of an increase in bank borrowings for funding coal mine construction.
Our interest income increased from RMB0.1 million in 2010 to RMB0.6 million in 2011, mainly as a result of an increase in
the average level of our bank deposits and, to a lesser extent, an increase in the average yield of our bank deposits.
In 2010, we recognized a non-recurring gain on bargain purchase of RMB624.1 million in connection with our acquisition of
Guizhou Puxin. We did not recognize a similar gain in 2011.
Non-operating Expense, Net
Our net non-operating expense decreased by 43.7% from RMB1.6 million in 2010 to RMB0.9 million in 2011, primarily because
of lower amounts in sponsorships and contributions to the community and certain government organizations.
As a result of the foregoing, we recorded a profit before income tax of RMB562.1 million in 2010 and a loss before income tax of
RMB55.2 million in 2011. Disregarding the effects of the RMB624.1 million non-recurring time gain on the bargain purchase of Guizhou Puxin, we would have incurred a loss before income
tax of RMB62.0 million in 2010.
Our income tax expense increased by 58.8% from RMB6.1 million in 2010 to RMB9.8 million in 2011, primarily as a result of
an increase in the "deemed profits" of certain of our PRC subsidiaries. See "— Description of the Key Components of Our Results of
Operations — Taxation — PRC Income Tax".
175
Table of Contents
As a result of the foregoing, we recorded a profit of RMB556.0 million in 2010 and a loss of RMB64.9 million
in 2011.
Loss attributable to non-controlling interests decreased significantly from RMB6.4 million in 2010 to RMB0.7 million in
2011. Although the Company had a profit of RMB556.0 million in 2010, there was a loss attributable to non-controlling interests in 2010 because the non-controlling interests were mainly related
to the minority shareholders of Baiping Mining and Guizhou Yongfu, which did not benefit from the RMB624.1 million non-recurring gain on the bargain purchase of Guizhou Puxin.
Profit
attributable to owner of our Company was RMB562.4 million in 2010, compared to a loss attributable to owner of our Company of RMB64.2 million in 2011.
LIQUIDITY AND CAPITAL RESOURCES
We need a substantial amount of cash to fund our operations and capital expenditures. In each of 2010, 2011, 2012 and the six months
ended June 30, 2012 and 2013, we had negative net cash flows from operations. In the past, we had primarily funded our operations and capital expenditures with non-interest bearing borrowings
from companies controlled by Mr. Li Feilie, as well as short-term and long-term bank and other borrowings. Since March 2013, we began to refinance a significant portion of the
non-interest bearing borrowings from companies controlled by Mr. Li Feilie with interest-bearing bank and other borrowings, and we do not anticipate receiving additional non-interest bearing
loans from our related companies in the future. As of June 30, 2013, we had cash and cash equivalents of RMB140.8 million.
Since
June 30, 2013, we have incurred certain additional bank and other borrowings. Moreover, in July 2013, we obtained a legally binding commitment letter from China
Minsheng Bank to provide a term loan with an aggregate principal amount of up to RMB1.6 billion that may be drawn down on or before January 29, 2015, subject to certain conditions, and
in October 2013, we obtained a legally binding
commitment letter from China Merchants Bank to provide a term loan with an aggregate principal amount of up to RMB350 million that may be drawn down on or before March 10, 2015, subject
to certain conditions. See "— Indebtedness — Interest-Bearing Loans".
176
Table of Contents
Cash Flows
The following table sets forth our cash flows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
Six months ended June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
(RMB in thousands)
|
|
Net cash flows used in operating activities |
|
|
(39,724 |
) |
|
(62,562 |
) |
|
(70,648 |
) |
|
(11,552 |
) |
|
(124,509 |
) |
Net cash flows used in investing activities |
|
|
(239,205 |
) |
|
(464,669 |
) |
|
(385,152 |
) |
|
(182,832 |
) |
|
(119,313 |
) |
Net cash flows from financing activities |
|
|
303,735 |
|
|
524,372 |
|
|
542,810 |
|
|
352,523 |
|
|
223,397 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
|
24,806 |
|
|
(2,859 |
) |
|
87,010 |
|
|
158,139 |
|
|
(20,425 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
To date, we have experienced significant negative net cash flows from operating activities. In 2010, 2011, 2012 and the six months
ended June 30, 2012 and 2013, net cash used in operating activities was RMB39.7 million, RMB62.6 million, RMB70.6 million, RMB11.6 million and
RMB124.5 million, respectively, as adjusted for non-cash items. In 2010, net cash used in operating activities primarily reflected our profit before income tax of RMB562.1 million, as
adjusted for the RMB624.1 million non-cash gain on the bargain purchase of Guizhou Puxin. In each of 2011, 2012 and the six months ended June 30, 2012, our net cash used in operating
activities were largely attributable to our loss before income tax, which were RMB55.2 million, RMB82.3 million and RMB32.9 million, respectively, in each case as adjusted for
certain non-cash items. In the six months ended June 30, 2013, our net cash used in operating activities mainly reflected our loss before income tax of RMB273.2 million, as adjusted for
the non-cash impairment loss on property, plant and equipment of RMB184.4 million related to the suspension of Gouchang Coal Mine and other adjustments for non-cash items, including the
significant decreases in trade and bills payables and other payable and accrued liabilities that resulted from our settlement of certain payables in respect of mining equipment purchases for Xinsong
Coal Mine. See our consolidated statements of cash flows in Appendix I — "Accountants' Report of the Company" for a reconciliation of our net cash used in
operating activities to profit/(loss) before income tax.
In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, net cash used in investing activities was
RMB239.2 million, RMB464.7 million, RMB385.2 million, RMB182.8 million and RMB119.3 million, respectively. Net cash used in investing activities in each of these
periods
177
Table of Contents
primarily
related to the construction and development of our coal mines and purchases of mining-related equipment and machinery, except that in 2011, net cash used in investing activities also
included a RMB140.1 million payment in respect of the balance of the purchase price for the acquisition of Guizhou Puxin.
In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, net cash generated from financing activities was
RMB303.7 million, RMB524.4 million, RMB542.8 million, RMB352.5 million and RMB223.4 million, respectively. Net cash from financing activities during these periods
mainly reflected the proceeds from bank borrowings and from non-interest bearing borrowings from companies controlled by Mr. Li Feilie.
Capital Expenditure
Our capital expenditures were RMB219.7 million, RMB341.5 million, RMB360.2 million, RMB202.9 million and
RMB139.3 million in 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, respectively. From June 30, 2013 to October 31, 2013, our capital expenditures
were estimated to be RMB85.1 million. Our capital expenditures mainly related to the construction of our coal mines, purchase of mining-related equipment and machinery and pre-payments for land
use rights for our coal mines.
We
expect to pay approximately an aggregate of RMB636.5 million in 2013 and 2014 for capital expenditures. These estimated capital expenditures are expected to be used primarily
for construction of Dayuan Coal Mine, Dayun Coal Mine and Yongsheng Coal Mine, the construction of a coal beneficiation plant in Jinsha county and the construction of a port along the Wujiang River
near Yongsheng coal Mine. Our current plan with respect to capital expenditures is subject to a number of uncertainties and may change due to various reasons, including delays in construction work,
unanticipated increases in cost of construction, changes in construction scope and completion time, adverse weather conditions, unexpected changes to applicable regulatory requirements and other
unforeseen difficulties. We periodically review our capital expenditure plans and may make adjustments from time to time.
We
expect to fund our capital expenditures in 2013 and 2014 through interest-bearing bank and other borrowings. See "— Indebtedness".
178
Table of Contents
Working Capital
The table below sets forth our current assets and current liabilities as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of October 31, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
|
|
(RMB in thousands)
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
5,324 |
|
|
5,328 |
|
|
11,266 |
|
|
24,229 |
|
Trade and bills receivables |
|
|
5,577 |
|
|
30,356 |
|
|
48,967 |
|
|
46,393 |
|
Corporate income tax refundable |
|
|
— |
|
|
— |
|
|
3,901 |
|
|
10,688 |
|
Prepayments, deposits and other receivables |
|
|
19,839 |
|
|
28,759 |
|
|
33,554 |
|
|
45,893 |
|
Restricted bank deposits |
|
|
— |
|
|
21,000 |
|
|
7,082 |
|
|
4,920 |
|
Term deposits with an original maturity over three months |
|
|
— |
|
|
20,000 |
|
|
20,000 |
|
|
16,000 |
|
Cash and cash equivalents |
|
|
76,482 |
|
|
73,642 |
|
|
160,984 |
|
|
234,785 |
|
| |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and bills payables |
|
|
80,017 |
|
|
69,402 |
|
|
103,798 |
|
|
101,391 |
|
Other payables and accrued liabilities |
|
|
26,369 |
|
|
36,406 |
|
|
60,155 |
|
|
59,240 |
|
Interest-bearing bank and other borrowings |
|
|
100,000 |
|
|
225,000 |
|
|
443,900 |
|
|
993,108 |
|
Due to related companies |
|
|
314,235 |
|
|
451,380 |
|
|
672,401 |
|
|
164,421 |
|
Interest payable |
|
|
4,253 |
|
|
5,979 |
|
|
9,093 |
|
|
19,248 |
|
Income tax payable |
|
|
240 |
|
|
402 |
|
|
950 |
|
|
11,250 |
|
Mining rights payables |
|
|
19,192 |
|
|
22,612 |
|
|
25,568 |
|
|
28,168 |
|
| |
|
|
|
|
|
|
|
|
|
Net Current Liabilities |
|
|
437,084 |
|
|
632,096 |
|
|
1,030,111 |
|
|
993,918 |
|
| |
|
|
|
|
|
|
|
|
|
As of December 31, 2012 and October 31, 2013, we had net current liabilities of RMB1,030.1 million and
RMB993.9 million, respectively. We intend to fund our cash requirements with additional short-term and long-term bank and other borrowings. As of October 31, 2013, we had
RMB260.0 million of undrawn commitments under our long-term credit facilities. In July 2013, we obtained a legally binding
commitment letter from China Minsheng Bank to provide a term loan with an aggregate principal amount of up to RMB1.6 billion that may be drawn down on or before January 29, 2015, subject
to certain conditions. In addition, in October 2013, we obtained a legally binding commitment letter from China Merchants Bank to provide a term loan with an aggregate principal amount of up to
RMB350 million that may be drawn down on or before March 10, 2015, subject to certain conditions. Our Directors confirmed that they were not aware of any restrictions that would limit
our ability to draw down on our undrawn commitments of the RMB260.0 million under our long-term credit
179
Table of Contents
facilities as well as the undrawn commitment of RMB1.6 billion under the commitment letter from China Minsheng Bank and the undrawn commitment of RMB350 million
under the commitment letter from China Merchants Bank. Taking into account the financial resources available to us, including RMB260.0 million of undrawn commitments under our long-term credit
facilities as of the October 31, 2013, the total of RMB1.95 billion of undrawn commitments provided by China Minsheng Bank and China Merchants Bank and the estimated cash
requirements, and in the absence of unforeseen circumstances, our Directors believe that we will have 125% of the working capital required to fund our operations for at least the next
12 months.
The
following table sets forth our existing and estimated source of funding and estimated major working capital requirements for the 12 months from the date of the listing
document:
|
|
|
|
|
|
|
(RMB million) |
|
Source of funding: |
|
|
|
|
Cash and cash equivalents as of October 31, 2013 |
|
|
234.8 |
|
Undrawn commitments under long-term credit facilities as of October 31, 2013 |
|
|
260.0 |
|
Undrawn commitments provided by China Minsheng Bank and China Merchants Bank as of October 31, 2013 |
|
|
1,950.0 |
|
| |
|
|
|
Total |
|
|
2,444.8 |
|
| |
|
|
|
Estimated working capital requirements from January 1, 2014 to December 31, 2014 |
|
|
1,842.7 |
|
| |
|
|
|
INDEBTEDNESS
Loans From Related Companies
As of December 31, 2010, 2011 and 2012 and June 30, 2013, our loans from companies controlled by Mr. Li Feilie
were RMB314.2 million, RMB451.4 million, RMB672.4 million and RMB140.6 million, respectively. These loans were non-interest bearing, unsecured and payable on demand. In
2013, we repaid a significant portion of our loans from related companies with interest-bearing bank and other borrowings. The Company plans to settle these loans before the Listing, other than the
Entrusted Loan made available by Feishang Management in the amount of RMB131.0 million which is expected to be settled as soon as possible and in any event no later than six months after the
Listing. The Entrusted Loan is an exempt continuing connected transaction. See "Connected Transactions — Exempt Continuing Connected
Transactions — Entrusted Loan". As of October 31, 2013, our outstanding loans from companies controlled by Mr. Li was
RMB164.4 million.
Interest-Bearing Loans
Our interest-bearing loans consist of short-term and long-term bank and other borrowings.
As
of June 30, 2013, the total outstanding amount of our short-term bank and other borrowings and the current portion of our outstanding long-term bank borrowings were
RMB861.9 million. Certain of our outstanding short-term bank and other borrowings were guaranteed by Mr. Li Feilie and/or companies controlled by him. Our short-term bank and other
borrowings typically have floating interest rates. As of June 30, 2013, the effective interest rates on our outstanding short-term bank borrowings ranged from 6.30% to 9.00%.
180
Table of Contents
As
of June 30, 2013, we had total outstanding long-term bank borrowings (excluding the current portion) of RMB897.4 million. We obtained our long-term bank borrowings from
various financial institutions under several credit facilities. Certain of our long-term bank borrowings are guaranteed by Mr. Li Feilie and/or companies controlled by him and certain of our
long-term bank borrowings are secured by pledges of our mining rights, equity interests in Guizhou Puxin and Guizhou Dayun and certain of our time deposits. As of October 31, 2013, the total
amount of outstanding bank borrowings that were guaranteed by Mr. Li and/or companies controlled by him was approximately
RMB1,111.7 million, representing approximately 56.5% of our total outstanding borrowings. We have obtained in-principle consents from Bank of Chongqing, China Minsheng Bank, China
Merchants Bank, Bank of Communications, Industrial and Commercial Bank of China and Huachuang Securities to release the guarantees for at least RMB1,375.0 million of the borrowings, to be
effective upon the Listing and subject to the completion of certain administrative procedures of the banks, which is expected to be completed in approximately one to three months after the Listing.
See "Relationship With Our Controlling Shareholders — Independence From Our Controlling Shareholders — Financial
Independence". Our long-term bank borrowings typically have floating interest rates. As of June 30, 2013, the effective interest rates on our outstanding long-term bank borrowings ranged from
6.40% to 8.52%. Our long-term bank borrowings agreements contain restrictive covenants providing for certain restrictions relating to, among others, mergers and consolidations, incurrence of
additional indebtedness or guarantees, disposals of a substantial portion of our assets, significant changes in the ownership of our subsidiaries and payment of dividends or other distributions.
In
July 2013, we entered into a RMB105.0 million 7.38% three-year entrusted loan with China Minsheng Bank, which has been fully drawn down.
In
July 2013, we obtained a legally binding commitment letter from China Minsheng Bank to provide a term loan with an aggregate principal amount of up to RMB1.6 billion
that may be drawn down on or before January 29, 2015, subject to certain conditions. These conditions include the absence of material adverse changes to our Company's financial position, which
in turn requires, among others, that the revenue of our Company for the year in which the loan is drawn down must not decrease by more than 50% as compared to the immediately preceding year, that our
Company's total interest-bearing debt to asset ratio shall not exceed 90%, and that we do not have a poor credit record. According to a letter we received from China Minsheng Bank in
September 2013 explaining the July 2013 commitment letter, China Minsheng Bank will carry out internal financial assessment procedures on our Company prior to loan drawdown, which will
be conducted based on the internal credit rating system of China Minsheng Bank. In the event that our Company's credit rating is assessed by China Minsheng Bank to be "BBB-" or below,
China Minsheng Bank will not approve the drawdown. The credit rating of our Company is currently assessed by China Minsheng Bank to be "A," which is three ratings higher than "BBB-". The
interest rate of the loan will be determined based on the prevailing market conditions at the time of drawdown. The interest rates generally charged by China Minsheng Bank are the PBOC's official
benchmark interest rates plus a premium of 20% to 30%.
181
Table of Contents
In
August 2013, we entered into a RMB76.0 million 7.29% one-year entrusted loan with China Industrial International Trust Limited, an Independent Third Party, which has
been fully drawn down. The loan is to finance the working capital of Guizhou Puxin and secured by a RMB16.0 million bank deposit of Guizhou Puxin.
In
August 2013, we entered into a RMB100.0 million 6.60% one-year bank loan with China Minsheng Bank, which has been fully drawn down. The loan is guaranteed by WFID and
Pingxiang Iron & Steel Co. Ltd. ("Pingxiang"), and secured by the pledge of shares in Guizhou Puxin. Prior to 2013, Pingxiang was a
related company controlled by Mr. Li Feilie. Upon its disposition, and securred by the pledge of shares in Guizhou Puxin by Mr. Li in January 2013, Pingxiang became an Independent
Third Party. In October 2013, we entered into a RMB150.0 million 6.00% one-year bank loan with China Minsheng Bank, which has been fully drawn down. The loan is guaranteed by WFID
and Pingxiang, and secured by the pledge of shares in Guizhou Puxin. The guarantees provided by WFID under these loans constitute exempt continuing connected transactions. See "Connected
Transactions — Exempt Continuing Connected Transactions — Connected Guarantees" and "Relationship with Our Controlling
Shareholders — Independence from our Controlling Shareholders — Financial Independence". Pingxiang was a company controlled
by Mr. Li Feilie until January 2013 when it was sold to an independent third party. Prior to the disposal of Pingxiang, it had granted guarantees in favor of lending banks in respect of loans
to the various affiliates of Feishang Enterprises, including our Company. In return, members of the Feishang Enterprise group have also granted guarantees in favor of lending banks in respect of loans
taken out by Pingxiang. Following the disposal of Pingxiang, with a view to maintaining the good faith commercial relationship with us and given our generally good credit, Pingxiang continues to
(although it is not obliged to) provide guarantees for our loans.
In
addition, in October 2013, we obtained a legally binding commitment letter from China Merchants Bank to provide a term loan with an aggregate principal amount of up to
RMB350 million that may be drawn down before March 10, 2015, subject to certain conditions, including a repayment term of not less than one year for each draw down.
In
October 2013, we entered into a RMB30.0 million 6.72% six-month bank loan with China Everbright Bank, which has been fully drawn down. The loan is guaranteed by Feishang
Enterprise.
In
December 2013 we repaid all of the outstanding loans of RMB33.4 million owed to CHNR and as a result, we have repaid all outstanding loans owed to CHNR as of the Latest
Practicable Date.
For
additional information on bank and other borrowings, see note 36 to our consolidated financial statements included in
Appendix I — "Accountants' Report of the Company".
During
the Track Record Period and as of the Latest Practicable Date, the Directors confirmed that we had no material defaults in relation to our bank borrowings or breaches of covenants
in the bank borrowings, or payment of trade or non-trade payables.
182
Table of Contents
As
of October 31, 2013, we had RMB260.0 million of undrawn commitments under our long-term credit facilities.
As
of October 31, 2013, our outstanding interest-bearing loans were RMB1,966.5 million.
The
Directors have confirmed that unless otherwise disclosed under the section headed "— Indebtedness" in the listing document there has not been any material
change in our indebtedness since June 30, 2013.
Mining Rights Payables
Mining rights payables are payables under our installment payment plans with the Guizhou Provincial Department of Land and Resources
for the acquisition of our mining rights. Interest on our outstanding mining rights are determined annually by reference to the official benchmark interest rates published by the PBOC. As of
June 30, 2013, the interest rate on our outstanding mining rights payables ranged from 6.00% to 6.55%.
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations as of June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
Total |
|
On
demand |
|
Within
1 year |
|
2-3
years |
|
4-5
years |
|
After
5 years |
|
|
|
(RMB in thousands)
|
|
Interest-bearing bank and other borrowings |
|
|
2,023,332 |
|
|
— |
|
|
978,168 |
|
|
544,666 |
|
|
500,498 |
|
|
— |
|
Mining rights payables |
|
|
136,740 |
|
|
— |
|
|
38,976 |
|
|
30,613 |
|
|
67,151 |
|
|
— |
|
Due to related companies |
|
|
140,633 |
|
|
140,633 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Capital commitments, contracted but not provided for |
|
|
88,961 |
|
|
— |
|
|
88,961 |
|
|
— |
|
|
— |
|
|
— |
|
Operating leases commitments |
|
|
1,879 |
|
|
— |
|
|
936 |
|
|
943 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,391,545 |
|
|
140,633 |
|
|
1,107,041 |
|
|
576,222 |
|
|
567,649 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
The capital commitments are expected to be funded by external borrowings from banks and internal financial resources.
183
Table of Contents
CONTINGENT LIABILITIES
As the Latest Practicable Date, except for bank borrowings disclosed above and intra-group liabilities, we did not have any loan
capital or debt securities issued or agreed to be
issued, outstanding bank overdrafts and liabilities under acceptances or other similar indebtedness, debentures, mortgages, charges or loans or acceptance credits, finance leases or hire purchase
commitments or guarantees or material contingent liabilities.
LISTING EXPENSES
We had incurred expenses in connection with the Listing of RMB9.1 million in 2012 and RMB14.2 million in the six months
ended June 30, 2013, which were accounted for as our administrative expenses. We expect to further incur an additional RMB37.9 million to RMB43.6 million of expenses in connection
with the Listing, which are subject to adjustments to be agreed by the Company, the Joint Sponsors and other parties. We expect the additional listing expense to significantly increase our expected
loss in 2013.
KEY FINANCIAL RATIOS
The table below sets forth our key financial ratios as of or for the dates or for the periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the year ended
December 31, |
|
As of or for the
six months ended
June 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2012 |
|
2013 |
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
Inventory turnover days(1) |
|
|
49 |
|
|
26 |
|
|
31 |
|
|
45 |
|
|
59 |
|
Average trade and bill payable turnover days(2) |
|
|
660 |
|
|
362 |
|
|
325 |
|
|
428 |
|
|
454 |
|
Average trade and bill receivable turnover days(3) |
|
|
29 |
|
|
61 |
|
|
101 |
|
|
75 |
|
|
157 |
|
Gearing ratio(4) |
|
|
47.5 |
% |
|
60.4 |
% |
|
68.8 |
% |
|
66.6 |
% |
|
86.5 |
% |
Debt to equity ratio(5) |
|
|
90.5 |
% |
|
152.4 |
% |
|
220.0 |
% |
|
199.8 |
% |
|
641.2 |
% |
Gross margin(6) |
|
|
34.2 |
% |
|
29.4 |
% |
|
32.4 |
% |
|
44.9 |
% |
|
27.0 |
% |
- (1)
- Inventory
turnover days are calculated by dividing the arithmetic mean of the opening and closing balances of inventories for the year by cost of sales in
that year and multiplying by 360 days. As we did not have any commercial production until March 18, 2010, inventory turnover days in 2010 is calculated by dividing the arithmetic mean of
the balance of inventories as of March 18 and December 31, 2010 by cost of sales for the period beginning on March 18, 2010 and ending on December 31, 2010, and multiplying
by 280 days.
- (2)
- The
average trade and bill payable turnover days are calculated by dividing the arithmetic mean of opening and ending balance of trade and bill payable for
the year by cost of sales in the year and then multiplying by 360 days. As we did
184
Table of Contents
not have any commercial production until March 18, 2010, the average trade and bill payables turnover days in 2010 is calculated by
dividing the arithmetic mean of the balance of trade and bill payables as of March 18 and December 31, 2010 by cost of sales for the period beginning on March 18, 2010 and ending
on December 31, 2010, and multiplying by 280 days.
- (3)
- The
average trade and bill receivable turnover days are calculated by dividing the arithmetic mean of opening and ending balance of trade and bill
receivables for the year by revenue in that year and then multiplying by 360 days. As we did not have any commercial production until March 18, 2010, the average trade and bill
receivables turnover days in 2010 is calculated by dividing the arithmetic mean of the balance of trade and bill receivables as of March 18 and December 31, 2010 by revenue for the
period beginning on March 18, 2010 and ending on December 31, 2010, and multiplying by 280 days.
- (4)
- Gearing
ratio is calculated by dividing total interest-bearing debt by total capital at the end of the year and multiplying by 100%. Interest-bearing debt
includes interest-bearing bank and other borrowings and mining rights payables. Capital includes total equity and interest-bearing debt.
- (5)
- Debt
to equity ratio is calculated by dividing total interest-bearing debt by total equity (based on book value without any revaluation) at the end of the
year and multiplying by 100%. Interest-bearing debt includes interest-bearing bank and other borrowings and mining rights payables.
- (6)
- Gross
margin is calculated by dividing gross profit by revenue at the end of the year and multiplying by 100%.
Inventory turnover days
In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our inventory turnover days were 49 days,
26 days, 31 days, 45 days and 59 days, respectively. Our inventory turnover days was higher in 2010 than in 2011 and 2012 mainly because of lower sales. Our inventory
turnover days was higher in the six months ended June 30, 2013 than in the same period in 2012, mainly because of the inventory which remained at Gouchang Coal Mine due to the suspension of
operations since March 2013.
Inventories
are stated at the lower of cost and net realizable value. Cost is determined by the weighted-average method, and net realizable value is determined based on the estimated
selling prices less the estimated costs for the sale. These estimates are based on the current market conditions and our historical experience for selling products of similar nature. Management
reassesses these estimates at the end of each reporting period. In the six months ended June 30, 2013 we made provisions for impairment of inventory at Gouchang Coal Mine due to its suspension
of operations since March 2013.
As
of December 31, 2010, 2011, 2012 and June 30, 2013, we had RMB5.3 million, RMB5.3 million, RMB11.3 million and RMB15.1 million of
inventories. The increase in inventory in 2012 and was primarily the result of the commencement of commercial production at Zhulinzhai Coal Mine in April 2012, and the increase in inventory in
the six months ended June 30, 2013 was primarily the result of the commencement of commercial operations at Liujiaba Coal Mine in December 2012. As of June 30, 2013, we recognized
a provision for inventory impairment of RMB1.0 million in connection with the suspension of the Gouchang Coal Mine.
185
Table of Contents
Set
forth below is breakdown of our inventory as of June 30, 2013 and the usage thereof as of September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
June 30, 2013 |
|
Subsequent usage
as of September 30,
2013 |
|
Subsequent usage
as of September 30,
2013 |
|
|
|
(RMB in thousands)
|
|
(in %)
|
|
|
|
|
|
(unaudited)
|
|
|
|
Spare parts and consumables |
|
|
8,112 |
|
|
5,489 |
|
|
67.7 |
% |
Coal |
|
|
6,968 |
|
|
4,568 |
|
|
65.6 |
% |
| |
|
|
|
|
|
|
|
Total |
|
|
15,080 |
|
|
10,057 |
|
|
66.7 |
% |
| |
|
|
|
|
|
|
|
Average Trade and Bill Payable Turnover Days
In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our average trade and bill payable turnover days were
660 days, 362 days, 325 days, 428 days and 454 days, respectively. Our average trade and bill payable turnover days are relatively high in each of these periods
because a significant portion of our trade and bill payables related to construction, which generally have longer payment periods. Our average trade and bill payable turnover days were significantly
higher in 2010 than in other periods primarily because we had a higher portion of payables relating to construction and other non-operating activities, as we had more mines under construction. Our
suppliers generally offer a credit term of three to six months other than suppliers related to construction.
As
of December 31, 2010, 2011 and 2012 and June 30, 2013, we had RMB80.0 million, RMB69.4 million, RMB103.8 million and RMB97.7 million of
outstanding trade and bill payables. The decline in outstanding trade and bill payables from December 31, 2010 to December 31, 2011 was mainly due to the settlement of certain
construction payables in respect of Liujiaba Coal Mine and Zhulinzhai Coal Mine. The increase in trade and bill payables from December 31, 2011 to December 31, 2012 was principally
related to payables for equipment purchases for the Liujiaba Coal Mine and the construction of the Yongsheng Coal Mine. The decrease in trade and bill payables from December 31, 2012 to
June 30, 2013 was primarily due to the settlement of certain payables in respect of equipment purchases at the Xinsong Coal Mine. We did not have any material disputes with our suppliers
during the Track Record Period.
Average Trade and Bill Receivable Turnover Days
In 2010, 2011, 2012 and the six months ended June 30, 2012 and 2013, our average trade and bill receivable turnover days were
29 days, 61 days, 101 days, 75 days and 157 days, respectively. Our average trade and bill receivable turnover days has been increasing throughout the Track Record
Period due to certain of our power producer customers taking a longer amount of time to settle payments due to certain operating difficulties. Moreover, in the six months ended June 30, 2013,
payment from one of our largest five customers was late. We ultimately collected the full payment in September 2013.
186
Table of Contents
Our
provisioning policy for the impairment of trade and bill receivables is determined by our management based on the credit history of our customers and current market conditions. The
provision amounts of provision are reassessed at the end of each reporting period. During the Track Record Period, we have not made any provisions for impairment of trade and bill receivables.
As
of December 31, 2010, 2011 and 2012 and June 30, 2013, we had RMB5.6 million, RMB30.4 million, RMB49.0 million and RMB46.3 million of
outstanding trade and bill receivables. The increase in trade receivables are in line with the growth of our business and revenues. Set forth below is the aging analysis of our outstanding trade
receivables as of the dates indicated and the subsequent settlement thereof as of September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of
June 30, |
|
Subsequent
settlement as
of September 30, |
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2013 |
|
|
|
(RMB in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
Within 3 months |
|
|
5,577 |
|
|
17,485 |
|
|
36,996 |
|
|
32,666 |
|
|
27,342 |
|
3 to 6 months |
|
|
— |
|
|
10,776 |
|
|
909 |
|
|
3,117 |
|
|
229 |
|
7 to 12 months |
|
|
— |
|
|
1,095 |
|
|
254 |
|
|
4,197 |
|
|
2,759 |
|
Over 12 months |
|
|
— |
|
|
— |
|
|
7 |
|
|
18 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,577 |
|
|
29,356 |
|
|
38,166 |
|
|
39,998 |
|
|
30,330 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Gearing Ratio
As of December 31, 2010, 2011 and 2012 and June 30, 2013, our gearing ratio was 47.5%, 60.4%, 68.8% and 86.5%,
respectively. Our gearing ratio increased throughout the Track Record Period as we increased our interest-bearing borrowings to support the growth of our business and meet our capital expenditure
requirements.
Debt to Equity Ratio
As of December 31, 2010, 2011 and 2012 and June 30, 2013, our debt to equity ratio was 90.5%, 152.4%, 220.0% and 641.2%,
respectively. Our debt to equity ratio increased throughout the Track Record Period as we increased our interest-bearing borrowings to support the growth of our business and meet our capital
expenditure requirements. In particular, our interest-bearing bank and other borrowings increased from RMB418.7 million as of December 31, 2010 to RMB735.9 million as of
December 31, 2011, RMB1,013.5 million as of December 31, 2012 and RMB1,759.3 million as of June 30, 2013.
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Table of Contents
Gross Margin
In 2010, 2011 and 2012 and the six months ended June 30, 2012 and 2013, our gross margin was 34.2%, 29.4%, 32.4%, 44.9% and
27.0%, respectively.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information was prepared and included in the listing document in accordance with the
requirements of the Stock Exchange and the Listing Rules and does not meet the requirements of Article 11 of Regulation S-X under the Exchange Act.
The
following is an illustrative statement of unaudited pro forma adjusted consolidated net tangible assets of the Company as of June 30, 2013 which has been prepared in accordance with
paragraph 4.29 of the Listing Rules for the purpose of illustrating the effect of (i) the issuance of 124,554,580 shares with a par value of HK$0.01 each to CHNR at a total consideration of HK$98.4
million as of December 12, 2013, the repurchase of the original issued one share of US$1.00 at par and cancellation of the class of 50,000 ordinary shares with a par value of US$1.00 each ("Changes in
Share Capital") and (ii) the occurrence of all the outstanding listing expenses between RMB37.9 million and RMB43.6 million pursuant to the completion of the listing by introduction on the Main Board
of the Stock Exchange ("Listing Expenses"). Please refer to the section headed "A. Unaudited Pro Forma Adjusted Consolidated Net Tangible Assets" in Appendix VII to this listing document which has
been prepared for the purpose of illustrating the financial effects of certain changes in our share capital and the occurrence of certain listing expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
tangible assets
attributable to owner
of the Company as of
June 30, 2013(1) |
|
Changes In Share
Capital(2) |
|
Listing Expenses(3) |
|
Unaudited pro forma
adjusted consolidated
net tangible assets attributable to owner of the Company |
|
Unaudited pro forma
adjusted consolidated
net tangible assets
per share attributable to owner of the Company(4) |
|
(RMB in thousands)
|
|
(RMB in thousands)
|
|
(RMB in thousands)
|
|
(RMB in thousands)
|
|
RMB per share
|
|
| |
196,439 |
|
|
77,538 |
|
|
(40,745 |
) |
|
233,232 |
|
|
1.87 |
|
Notes:
- (1)
- The
audited consolidated net tangible assets attributable to owner of the Company as at June 30, 2013 is arrived at after deducting non-controlling
interests of RMB93.1 million from the audited consolidated net assets of RMB289.6 million as at June 30, 2013, as shown in the Accountants' Report, the text of which is set out in
Appendix I to this listing document.
- (2)
- On
December 6, 2013, the Company increased its authorized share capital under which it may issue an aggregate of: (i) a maximum of
50,000 shares of one class with a par value of US$1.00 each; and (ii) a maximum of 1,000,000,000 ordinary shares of one class with a par value of HK$0.01 each (the "Listco
Shares"), pursuant to which CHNR completed the subscription for 124,554,580 Listco Shares of the Company with a par value of HK$0.01 each at a total consideration of HK$98.4 million as
of December 12, 2013. Subsequently on December 12, 2013, the Company repurchased the one share with a par value of US$1.00 in the Company held by CHNR at par and simultaneously, the
Company reduced its authorized but unissued share capital by the cancellation of the entire class of 50,000 ordinary shares with a par value of US$1.00 each.
- (3)
- The
amount represents estimated expenses relating to the Listing expected to be incurred by the Group subsequent to June 30, 2013 which mainly
include professional fees for
188
Table of Contents
the
Joint Sponsors, the Company's legal advisers and reporting accountants and other listing related expenses. The amount represents the best estimate of the Directors based on the arithmetic mean of
the range of expected listing expenses from RMB37.9 million to RMB43.6 million as disclosed under the caption "Financial Information — Listing
Expenses" to the listing document.
- (4)
- The
unaudited pro forma consolidated net tangible assets per Share attributable to owner of the Company is arrived at after the adjustments as
described in note 2 and note 3 above and is based on 124,554,580 shares as if the shares had been issued as of January 1, 2013.
- (5)
- No
other adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets to reflect any trading results or other
transactions of the Company entered into subsequent to June 30, 2013.
- (6)
- The
translation of HK dollars to Renminbi has been made at the rate of HK$1.2688 to RMB1.00, the People's Bank of China Rate prevailing on
December 12, 2013. No representation is made that the HK dollar amounts have been, could have been or could be converted to Renminbi, or vice versa, at that rate or at any other rates or
at all.
The following unaudited pro forma adjusted losses per share of the Company for the six months ended June 30, 2013 has been prepared in accordance
with Rule 4.29 of the Listing Rules, on the basis of the notes set forth below, for the purpose of illustrating the effect of the occurrence of all the outstanding Listing Expenses. Please refer to
the section headed "B. Unaudited Pro Forma Adjusted Losses Per Share" in Appendix VII to this listing document which has been prepared for the purpose of illustrating the financial effects of the
occurrence of certain listing expenses.
|
|
|
|
|
|
|
RMB in thousands |
|
Audited consolidated losses attributable to owner of the Company(1) |
|
|
(221,947 |
) |
Listing Expenses(2) |
|
|
(40,745 |
) |
Adjusted consolidated losses attributable to owner of the Company |
|
|
(262,692 |
) |
Unaudited pro forma adjusted losses per share attributable to owner of the Company(3) |
|
|
(2.11 |
) |
Notes:
- (1)
- The
consolidated net loss attributable to owner of the Company for the six months ended June 30, 2013 is extracted from the consolidated income
statements as shown in the Accountants' Report, the text of which is set out in Appendix I to this listing document.
- (2)
- The
amount represents estimated expenses relating to the Listing expected to be incurred by the Group subsequent to June 30, 2013 which mainly
include professional fees for the Joint Sponsors, the Company's legal advisers and reporting accountants and other listing related expenses. The amount represents the best estimate of the Directors
based on the arithmetic mean of the range of expected listing expenses from RMB37.9 million to RMB43.6 million as disclosed under the caption "Financial
Information — Listing Expenses" to the listing document.
- (3)
- The
calculation of the adjusted pro forma losses per share attributable to owner of the Company is based on the adjusted consolidated losses
attributable to owner of the Company for the six months ended June 30, 2013 and on the assumptions that the Company had completed the listing by introduction on the Main Board of the Stock
Exchange, pursuant to which the outstanding listing expenses had been incurred on January 1, 2013 and the 124,554,580 shares had been issued to CHNR on January 1, 2013.
OFF-BALANCE SHEET ARRANGEMENTS
As of the Latest Practicable Date, we did not have any material off-balance sheet arrangements. We have not entered, and do not intend
to enter, into any derivative transactions for trading purposes.
189
Table of Contents
MARKET RISK DISCLOSURE
We are exposed to various types of market risks in the ordinary course of business, including credit risk, foreign currency risk,
interest rate risk and liquidity risk. We have not used any derivatives or other instruments for hedging purposes.
Credit Risk
We are exposed to credit risk in connection with our trade receivables, bill receivables and our cash deposits.
Our trade receivables are mainly derived from anthracite coal sales and are typically unsecured. We mitigate the credit risks relating
to our trade receivables by performing credit evaluations and monitoring outstanding balances of our trade receivables regularly. We recognize impairment for trade receivables primarily based on our
historical write-off experience, the age of the outstanding balances and other factors regarding the specific customer's credit-worthiness and current market conditions. We have not recognized any
provision for impairment of trade receivables in 2010, 2011, 2012 or the six months ended June 30, 2013. Our largest five customers accounted for 66.6%, 73.5%, 56.7% and 72.8% of our revenue in
2010, 2011, 2012 and the six months ended June 30, 2013, respectively. Our outstanding trade receivables from our largest five customers accounted for 59.4%, 84.2%, 87.2% and 53.6% of our total
trade receivables in 2010, 2011, 2012 and the six months ended June 30, 2013, respectively.
Bill receivables represent letters of credit obtained by our customers to finance purchases which have been presented to banks for
payment after delivery of goods to customers. As of June 30, 2013, all of the bills underlying our outstanding bills receivables were issued by financial institutions. Bill receivables
typically have a term of maturity of six months.
We maintain our cash and cash deposits primarily with PRC state-owned banks and Hong Kong-based financial institutions which we believe
are of high credit quality. We perform periodic evaluations of the relative credit standing of those financial institutions.
190
Table of Contents
Commodity Price Risk
Our main exposure to commodity price risk relates to fluctuations in the average selling prices of anthracite coal, which are affected
to a significant extent by the market price of anthracite coal in Guizhou province. Anthracite coal prices can fluctuate significantly and are affected by many factors beyond our control. We have not
engaged in any hedging transactions to manage our commodity price risk. Set forth below is a sensitivity analysis illustrating the effects of a 30% increase or decrease in the average selling price of
our anthracite coal on our revenue and gross profit for the periods indicated. The Company believes that the 30% increase or decrease in the average selling price under the sensitivity analysis has
covered the historical fluctuation of the average selling price of the anthracite coal we produced during the Track Record Period.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30, 2013 |
|
Coal Price |
|
|
|
Actual |
|
+ 30% |
|
-30% |
|
|
|
(RMB in millions, except percentages)
|
|
Total revenue |
|
|
54.7 |
|
|
16.4 |
|
|
(16.4) |
|
% Change |
|
|
|
|
|
30 |
% |
|
(30) |
% |
Gross profit |
|
|
14.8 |
|
|
16.4 |
|
|
(16.4) |
|
% Change |
|
|
|
|
|
111.1 |
% |
|
(111.1) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30, 2012 |
|
Coal Price |
|
|
|
Actual |
|
+ 30% |
|
-30% |
|
|
|
(RMB in millions, except percentages)
|
|
|
|
(unaudited)
|
|
|
|
|
|
Total revenue |
|
|
55.2 |
|
|
16.5 |
|
|
(16.5) |
|
% Change |
|
|
|
|
|
30.0 |
% |
|
(30.0) |
% |
Gross profit |
|
|
24.8 |
|
|
16.5 |
|
|
(16.5) |
|
% Change |
|
|
|
|
|
66.6 |
% |
|
(66.6) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31, 2012 |
|
Coal Price |
|
|
|
Actual |
|
+ 30% |
|
-30% |
|
|
|
(RMB in millions, except percentages)
|
|
Total revenue |
|
|
141.9 |
|
|
42.6 |
|
|
(42.6) |
|
% Change |
|
|
|
|
|
30.0 |
% |
|
(30.0) |
% |
Gross profit |
|
|
46.1 |
|
|
42.6 |
|
|
(42.6) |
|
% Change |
|
|
|
|
|
92.5 |
% |
|
(92.5) |
% |
191
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31, 2011 |
|
Coal Price |
|
|
|
Actual |
|
+ 30% |
|
-30% |
|
|
|
(RMB in millions, except percentages)
|
|
Total revenue |
|
|
105.2 |
|
|
31.6 |
|
|
(31.6) |
|
% Change |
|
|
|
|
|
30.0 |
% |
|
(30.0) |
% |
Gross profit |
|
|
30.9 |
|
|
31.6 |
|
|
(31.6) |
|
% Change |
|
|
|
|
|
102.2 |
% |
|
(102.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31, 2010 |
|
Coal Price |
|
|
|
Actual |
|
+ 30% |
|
-30% |
|
|
|
(RMB in millions, except percentages)
|
|
Total revenue |
|
|
38.7 |
|
|
11.6 |
|
|
(11.6) |
|
% Change |
|
|
|
|
|
30.0 |
% |
|
(30.0) |
% |
Gross profit |
|
|
13.2 |
|
|
11.6 |
|
|
(11.6) |
|
% Change |
|
|
|
|
|
87.8 |
% |
|
(87.8) |
% |
Foreign Currency Risk
Our financial statements are presented in, and our functional currency is, Renminbi. The Renminbi is not freely convertible into
foreign currencies. The SAFE, under the authority of the PBOC, controls the conversion of Renminbi into foreign currencies. The value of Renminbi is subject to changes in PRC Government policies and
international economic and political developments which affect the supply and demand of Renminbi. All foreign exchange transactions take place either through the PBOC or other banks authorized to buy
and sell foreign currencies at the exchange rates quoted by the PBOC.
Interest Rate Risk
Our exposure to the interest rate risk arises primarily from our long-term obligations with floating interest rates, including certain
long-term bank and other borrowings and mining rights payables. We have not entered into any interest rate swaps or any other hedging transactions to manage our interest rate risks. As of
June 30, 2013, 68.03% of the total outstanding principal amounts of our bank and other borrowings, and all of our mining right payables, had floating interest rates. Set forth
192
Table of Contents
below
is a sensitivity analysis illustrating the effects of a 100 basis point increase or decrease in interest rates on our long-term interest-bearing bank and other borrowings and mining right
payables and on our profit before tax for the periods indicated:
|
|
|
|
|
|
|
|
|
|
Increase/(decrease)
in basis points |
|
Increase/(decrease)
in profit before tax |
|
|
|
|
|
(RMB in thousands)
|
|
Year ended December 31, 2010 |
|
|
100 |
|
|
(668 |
) |
|
|
|
(100 |
) |
|
668 |
|
Year ended December 31, 2011 |
|
|
100 |
|
|
(2,841 |
) |
|
|
|
(100 |
) |
|
2,841 |
|
Year ended December 31, 2012 |
|
|
100 |
|
|
(4,289 |
) |
|
|
|
(100 |
) |
|
4,289 |
|
Six months ended June 30, 2013 |
|
|
100 |
|
|
(5,530 |
) |
|
|
|
(100 |
) |
|
5,530 |
|
Liquidity Risk
We manage our liquidity risk by regularly monitoring our liquidity requirements and compliance with debt covenants to ensure that we
maintain sufficient cash and cash equivalents to meet our liquidity requirements. Set forth below is the maturity profile of our financial liabilities based on contractual undiscounted payments as of
the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
On
demand |
|
Less than
1 year |
|
1 to 5
years |
|
More than
5 years |
|
Total |
|
|
|
(RMB in thousands)
|
|
Trade and bills payables |
|
|
— |
|
|
97,737 |
|
|
— |
|
|
— |
|
|
97,737 |
|
Other payables and accrued liabilities |
|
|
— |
|
|
29,684 |
|
|
— |
|
|
— |
|
|
29,684 |
|
Interest-bearing bank and other borrowings |
|
|
— |
|
|
978,168 |
|
|
1,045,164 |
|
|
— |
|
|
2,023,332 |
|
Due to related companies |
|
|
140,633 |
|
|
— |
|
|
— |
|
|
— |
|
|
140,633 |
|
Mining rights payable |
|
|
— |
|
|
38,976 |
|
|
97,764 |
|
|
— |
|
|
136,740 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
140,633 |
|
|
1,144,565 |
|
|
1,142,928 |
|
|
— |
|
|
2,428,126 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
193
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
On
demand |
|
Less than
1 year |
|
1 to 5
years |
|
More than
5 years |
|
Total |
|
|
|
(RMB in thousands)
|
|
Trade and bills payable |
|
|
— |
|
|
103,798 |
|
|
— |
|
|
— |
|
|
103,798 |
|
Other payables and accrued liabilities |
|
|
— |
|
|
22,022 |
|
|
— |
|
|
— |
|
|
22,022 |
|
Interest-bearing bank and other borrowings |
|
|
— |
|
|
508,388 |
|
|
654,212 |
|
|
— |
|
|
1,162,600 |
|
Due to related companies |
|
|
672,401 |
|
|
— |
|
|
— |
|
|
— |
|
|
672,401 |
|
Mining rights payable |
|
|
— |
|
|
32,234 |
|
|
110,524 |
|
|
— |
|
|
142,758 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
672,401 |
|
|
666,442 |
|
|
764,736 |
|
|
— |
|
|
2,103,579 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2011
|
|
On
demand |
|
Less than
1 year |
|
1 to 5
years |
|
More than
5 years |
|
Total |
|
|
|
(RMB in thousands)
|
|
Trade and bills payable |
|
|
— |
|
|
69,402 |
|
|
— |
|
|
— |
|
|
69,402 |
|
Other payables and accrued liabilities |
|
|
— |
|
|
9,964 |
|
|
— |
|
|
— |
|
|
9,964 |
|
Interest-bearing bank and other borrowings |
|
|
— |
|
|
277,992 |
|
|
557,015 |
|
|
49,146 |
|
|
884,153 |
|
Due to related companies |
|
|
451,380 |
|
|
— |
|
|
— |
|
|
— |
|
|
451,380 |
|
Mining rights payable |
|
|
— |
|
|
27,644 |
|
|
121,529 |
|
|
18,256 |
|
|
167,429 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
451,380 |
|
|
385,002 |
|
|
678,544 |
|
|
67,402 |
|
|
1,582,328 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010
|
|
On
demand |
|
Less than
1 year |
|
1 to 5
years |
|
More than
5 years |
|
Total |
|
|
|
(RMB in thousands)
|
|
Trade and bills payable |
|
|
— |
|
|
80,017 |
|
|
— |
|
|
— |
|
|
80,017 |
|
Other payables and accrued liabilities |
|
|
— |
|
|
8,700 |
|
|
— |
|
|
— |
|
|
8,700 |
|
Interest-bearing bank and other borrowings |
|
|
— |
|
|
134,357 |
|
|
270,000 |
|
|
48,742 |
|
|
453,099 |
|
Due to related companies |
|
|
314,235 |
|
|
— |
|
|
— |
|
|
— |
|
|
314,235 |
|
Mining rights payable |
|
|
— |
|
|
22,980 |
|
|
118,758 |
|
|
46,513 |
|
|
188,251 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
314,235 |
|
|
246,054 |
|
|
388,758 |
|
|
95,255 |
|
|
1,044,302 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
STATEMENT OF NET CURRENT LIABILITIES
As of October 31, 2013, we had net current liabilities of RMB993.9 million. See "— Liquidity and
Capital Resources — Working Capital" for a discussion of our net current liabilities.
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Table of Contents
DISCLOSURE REQUIRED UNDER THE LISTING RULES
As of the Latest Practicable Date, we are not aware of any circumstances that would give rise to a disclosure required under
Rules 13.13 to 13.19 of the Listing Rules.
DIVIDEND POLICY
We have not declared or paid any dividends since our incorporation, and we have no current intention of declaring or paying any
dividends after the completion of the Listing. However, the determination to pay dividends will be made at the direction of our board of directors and will be based on our profits, cash flows,
financial condition, capital requirements and other conditions that our board of directors deems relevant. The payment of dividends may be limited by legal restrictions and agreements that we may
enter into in the future.
See
"Summary of BVI company law and taxation" included in Appendix IV — "Summary of the Constitution of Our Company and British Virgin
Islands Companies Law".
RECENT ACCOUNTING PRONOUNCEMENTS
See note 2.3 to our consolidated financial statements included in
Appendix I — "Accountants' Report of the Company".
NO MATERIAL ADVERSE CHANGE
The Directors have confirmed there has been no material adverse change in our financial position or prospects since
June 30, 2013.
195
Table of Contents
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
OUR CONTROLLING SHAREHOLDERS AND THEIR RETAINED BUSINESSES
As of the Latest Practicable Date, Mr. Li Feilie, through its 100% shareholding in Laitan Investments, indirectly held 100% of
the issued share capital of Feishang, which in turn held approximately 58.13% of the issued share capital of CHNR. Mr. Li also directly held approximately 1.2% of the issued share capital of
CHNR as of the Latest Practicable Date.
The
Distribution will be satisfied wholly by way of a distribution in specie to all CHNR Shareholders of an aggregate of 124,554,580 Shares, representing 100% of the issued
share capital of our Company, in proportion to their respective shareholdings in CHNR on the Distribution Record Date. Pursuant to the Distribution, the CHNR Shareholders will be entitled to five
Shares for every CHNR Share held on the Distribution Record Date. As a result, following completion of the Spin-off, although CHNR will no longer hold any interest in our Company, Mr. Li
Feilie, Laitan Investments and Feishang will continue to be our Controlling Shareholders and the controlling shareholders of CHNR. In addition to his interests in CHNR and our Company, Mr. Li
also engages in other businesses through his approximately 60.74% interest in Feishang Enterprise. The nonferrous metal and non-metal mineral mining business of our Controlling Shareholders do not
compete with our business. Our directors are of the view that (i) there is generally insignificant competition between our core business and our Controlling Shareholders' meager-lean coal
business, and (ii) adequate measures have been put in place by our Group to ensure that there is insignificant competition between our core business and the operations of
Feishang Energy.
Nonferrous metal and non-metal mineral mining
- •
- Copper. Feishang Enterprise, through its subsidiary, holds
49% of the equity interest in Wuhu Hengxin Copper Industrial Group Co., Ltd., which in turn holds 28.74% of the equity interest in Anhui Xinke
New Materials Co. Ltd., a company whose shares are listed on the Shanghai Stock Exchange. Wuhu Hengxin Copper Industrial Group Co., Ltd. is engaged in the copper
refining business and Anhui Xinke New Materials Co. Ltd. is involved in the production of copper-based alloy materials.
- •
- Iron, zinc and other nonferrous metals. In addition to
coal mining operations which are conducted through our Company, CHNR is also engaged in the exploration, mineral extraction, processing and sales of iron, zinc and other nonferrous metals extracted or
produced at mines primarily located in Anhui province of the PRC. These operations are conducted by Wuhu Feishang and Yunnan Feishang, through which the CHNR Group owns and has the right to operate
Yangchong Mine, Sichong Mine, Baiguochong Mine and Luojiachong Mine.
- •
- Non-metals minerals. Anhui Xinke
New Materials Co. Ltd., a company which is held as to 28.74% by Wuhu Hengxin Copper Industrial Group Co., Ltd. which in turn is held as to 49% by Feishang Enterprise
through its subsidiaries, also produces and sells non-metal minerals and materials such as carbon fiber reinforced metal matrix composite, rare and precious metals, and porcelain. In addition,
Feishang, through its indirect subsidiary, Wuhu Feishang Non-Metal Materials Co., Ltd., mines, produces and sells bentonite.
196
Table of Contents
Meager-lean coal
Feishang Enterprise, pursuant to a trust arrangement, controls 100% of the equity interest in Guizhou Jusheng
Energy Co., Ltd. which in turn owns and operates the Sanjiazhai Mine. The Sanjiazhai Mine is a meager-lean coal mine located in Liuzhi county of Guizhou province. The Sanjiazhai Mine was
acquired by Feishang Enterprise on November 29, 2010 to provide upstream supply coking coal to its steel business. Feishang Enterprise has subsequently sold its steel business in 2013. Feishang
Energy, which has been preliminarily designated as a coal mine consolidator, is in the process of acquiring the Sanjiazhai Mine from Feishang Enterprise in accordance with relevant PRC laws, rules,
regulations and mine consolidation policies and is expected to complete the acquisition in 2014. Feishang Enterprise has also been attempting to sell the Sanjiazhai Mine following the sale of its
steel business but it has been unable to do so at a reasonable price. The Sanjiazhai Mine will not form a
part of our business upon completion of the Spin-off for the following reasons:
- •
- The Sanjiazhai Mine produces meager-lean coal rather than anthracite coal as produced by our anthracite coal mines.
- •
- The Sanjiazhai Mine is located in the Shuicheng District, which is designated as a "special and scarce coal mine area"
under the Interim Administrative Measures on the Development and Utilization of Special and Scarce Coal (NDRC Order No. 16)
(
16
) (the "Measures on Special and Scarce Coal"). Under the Measures on Special and Scarce Coal, the development in "special and scarce coal mine areas" must be controlled
(directly and indirectly) by PRC parties. As a result, the Company can not acquire and control the Sanjiazhai Mine as our Controlling Shareholder is ultimately controlled by companies incorporated
outside the PRC.
- •
- As of June 30, 2013, the Sanjiazhai Mine remained in the pilot run stage and is expected to commence commercial
production in 2014. The Sanjiazhai Mine does not satisfy the listing requirements under Chapter 18 of the Listing Rules for the following reasons:
- •
- the Directors do not consider Sanjiazhai Mine to hold a meaningful portfolio of coal. It only has an estimated annual
production capacity of 150,000 tonnes of meager-lean coal and total estimated resources of 8.42 million tonnes under the PRC Solid Mineral Resources Reserves Classification Code.
- •
- In 2010, 2011 and 2012, the unaudited revenue of the Sanjiazhai Mine was RMB35.0 million, nil and nil,
respectively. During the Track Record Period, the Sanjiazhai Mine continued to incur losses. As of December 31, 2010, 2011 and 2012, the unaudited net assets of the Sanjiazhai Mine were
RMB10.0 million, RMB5.7 million and RMB9.0 million, respectively. The Sanjiazhai Mine is expected to continue incurring losses before its commercial production. The above
unaudited financial information of the Sanjiazhai Mine was derived from the management accounts of the Sanjiazhai Mine.
197
Table of Contents
- •
- The Sanjiazhai Mine is held by Feishang Enterprise under a trust arrangement pursuant to which the trustee, a PRC
individual, agreed to acquire and hold the interest in the Sanjiazhai Mine for the benefit of Feishang Enterprise for purpose of negotiating a lower acquisition price. Although Feishang Enterprise is
a domestic PRC company, the controlling shareholder of Feishang Enterprise, Mr. Li Feilie, has become a Macau resident. As a result, it is unclear whether Feishang Enterprise is subject to the
restrictions on foreign investment under the Catalogue and the Measures on Special and Scarce Coal. Furthermore, the trust arrangement was entered into before the Measures on Special and Scarce Coal
came into effect and, as a result, it is unclear whether the Measures on Special and Scarce Coal will apply to the trust arrangement retrospectively. Based on the foregoing, our PRC legal advisers,
Commerce & Finance Law Offices, has advised us that it remains uncertain whether such trust arrangement will be valid under the PRC law and regulations. Accordingly, Feishang Enterprise may not
be able to legally transfer valid title in the Sanjiazhai Mine to our Group and therefore unable to meet the requirements under Rule 18.03(1) of the Listing Rules.
- •
- As mentioned above, our Group is not a PRC party and is not permitted to own or control the Sanjiazhai Mine. If the
Sanjiazhai Mine is transferred to us, we would not be in compliance with PRC laws.
- •
- Feishang Enterprise has been attempting to sell the Sanjiazhai Mine. Although it has not been successful in doing so,
Feishang Enterprise is continuing to locate buyers for the Sanjiazhai Mine. In the meantime, Feishang Enterprise is in the process of selling the Sanjiazhai Mine to Feishang Energy as Feishang Energy
has been preliminarily designated as a coal mine consolidator.
Our
Directors believe that there is generally insignificant competition between our core business and the operations of the Sanjiazhai Mine for the following
reasons:
- •
- The Sanjiazhai Mine produces meager-lean coal, which is primarily supplied to coal processing plants and coking plants in
Shuicheng city for the production of coking coal, whereas our Company produces anthracite coal, which is mainly sold to power plants and occasionally to chemical plants. Coking coal is not part of our
Group's product mix.
- •
- The Sanjiazhai Mine is limited in scale with an expected resources of 8.42 million tonnes of meager-lean coal under
the PRC Solid Mineral Resources/Reserves Classification Code, compared to our Company's proved and probable reserves of approximately 208.87 million tonnes.
- •
- The coal characteristics and intended uses of meager-lean coal and anthracite coal are different. According to the Chinese
Coal Classification Standard, meager lean coal has volatile matter content between 10% to 20%. Our anthracite coal is primarily being sold as thermal coal and chemical coal, while meager lean coal
produced from the Sanjiazhai Mine will only be sold as coking coal, which is not part of our product mix. Although during the Track Record Period, we have not produced any PCI coal, we intend
198
Table of Contents
to
begin selling PCI coal in 2014 and significantly increase our sales of chemical coal as part of our strategy. In particular, we plan to increase our sales of chemical coal from 4% of the total
sales for 2013, to 22% for 2014 and 61% for 2015 and increase our sales of PCI coal from nil for 2013, to 8% for 2014 and 21% for 2015. The sales of thermal coal are expected to decrease from 96% for
2013 to 70% for 2014 and 18% for 2015. Although meager lean coal may be used as PCI coal, meager lean coal produced at the Sanjiazhai Mine has never been sold as PCI coal and neither Feishang Energy
nor Feishang Enterprise has the capability to process meager lean coal produced from the Sanjiazhai Mine for use as PCI coal. As a result, the production of meager lean coal and sale of coking coal do
not
form part of our core business and the ownership by Feishang Enterprise of the Sanjiazhai Mine does not result in a breach of the Deed of Non-Competition by the Controlling Shareholder. Accordingly,
the Directors are of the view that there is generally insignificant competition between our core business and the operations of the Sanjiazhai Mine.
It
is expected that the Sanjiazhai Mine will, once it begins commercial production, produce meager-lean coal and sell them to coal processing plants and coking plants. On the other hand,
we expect to continue to produce anthracite coal and sell the vast majority of our anthracite coal as chemical coal and thermal coal, with the rest as PCI coal. We currently do not have any plan to
expand into the meager-lean coal business given the different end uses of meager-lean coal, compared to anthracite coal. If we intend to expand into the meager-lean coal business in the future, we
will be entitled under the Deed of Non-Competition to exercise our pre-emptive right to acquire the Sanjiazhai Mine.
Feishang Energy and Guizhou Puxin and their statuses as coal mine consolidators in Guizhou Province
Feishang Energy and Guizhou Puxin have been assessed to qualify as coal mine consolidators in Guizhou province. There is no restriction
on the number of coal mines that can be acquired by Guizhou Puxin in Guizhou province. The details of such assessment are set out in the confirmation letters issued by the Energy Bureau of Guizhou
Province and the Leading Group Office of Guizhou Province on Coal Enterprises Consolidation (the "Leading Group Office") on July 16, 2013 and August 23, 2013, respectively (the
"Confirmation Letter"). For the reasons set forth below, our Controlling Shareholders and our Group are of the view that it would be in our Group's best interests that Feishang Energy be officially
designated and continue to be designated as a coal mine consolidator.
The Confirmation Letter confirmed the following:
- •
- Feishang Energy, an indirect wholly-owned subsidiary of Feishang Enterprise, is one of the coal enterprises that have been
assessed as meeting the requirements to be a coal mine consolidator in Guizhou under the notice published by the Leading Group Office on February 28, 2013.
199
Table of Contents
- •
- Guizhou Puxin (including its subsidiaries and their anthracite coal mines) is an affiliated entity of Feishang Energy.
Guizhou Puxin has been assessed to have met the basic requirements to qualify as a coal mine consolidator in Guizhou province.
- •
- If two or more entities under the same control altogether have been assessed to satisfy the coal mine consolidator
requirements, only one entity will be officially designated as being a coal mine consolidator pursuant to the principles and policies in respect of the assessment of coal mine consolidator status.
Notwithstanding this, Guizhou Puxin, as an affiliated entity of Feishang Energy, will be deemed as a coal mine consolidator after Feishang Energy has been officially designated as a coal mine
consolidator.
- •
- Accordingly, Guizhou Puxin (including its subsidiaries and their anthracite coal mines) would not be subject to
consolidation or be required to close down under Guizhou province's consolidation policies.
- •
- Upon the request of the relevant government authorities in Guizhou province to acquire or consolidate another coal mine or
coal enterprise in Guizhou province (the "Consolidation Opportunity"), the ultimate beneficial shareholder of Feishang Energy and Guizhou Puxin has the full discretion to determine either one
of them to be the primary acquirer. See "— Deed of Non-Competition — Options to purchase" and "— Deed of
Non-Competition — Rights of first refusal and first offer".
Although
Guizhou Puxin (including its subsidiaries and their anthracite coal mines) would not be the subject of or be subject to acquisition or consolidation by other third party coal
mine consolidators in Guizhou province, its subsidiaries or their anthracite coal mines may still be required to temporarily suspend operations under relevant PRC laws and regulations. For example,
under the "Notice of the
Implementation Rules on Accelerating the Progress of Merging and Restructuring Coal Mining Enterprises of Guizhou Province" (
), coal mines which do not meet certain production capacities or gas outburst requirements are required to suspend operations pending consolidation arrangements. Moreover, as
Gouchang Coal Mine's permitted annual production capacity is 90,000 tonnes which is below the 300,000 tonnes as required under relevant laws for mines of its characteristics, operations at Gouchang
Coal Mine have been suspended since March 2013 pending our acquisition of a nearby coal mine and Gouchang Coal Mine achieving certain production capacity targets under the "Notice of the
Implementation Rules on Accelerating the Progress of Merging and Restructuring Coal Mining Enterprises of Guizhou Province".
Our
PRC legal advisors, Commerce & Finance Law Offices, advise that the Energy Bureau of Guizhou Province is competent to provide its confirmation upon its consultation with the
Leading Group and the Energy Bureau of Guizhou Province confirmed it has consulted the Leading Group on its confirmation and that the Leading Group Office is the competent authority to issue its
confirmation letter.
The
consolidator qualifications of an officially designated consolidator are subject to review and examination on a quarterly basis. If the officially designated consolidator no longer
meets the requisite conditions for being a consolidator, its qualifications may be revoked by Guizhou Province Coal
200
Table of Contents
Mining
Enterprise Merger and Reorganization Work Leading Group (
) (the "Leading Group"). Although Feishang Energy has been preliminarily
designated as a coal mine consolidator in Guizhou, it has not been officially designated as such. As a
result, there will not be any review or revocation of the qualifications for Feishang Energy. See "Regulation — PRC Laws Relating to Mining Resource
Consolidation". Feishang Energy has been assessed as meeting the conditions to be a coal mine consolidator in Guizhou. To the Company's knowledge, Feishang Energy is expected to be officially
designated as a coal mine consolidator by the end of 2014 upon the formal approval by the Leading Group.
Reasons for retaining Feishang Energy as a coal mine consolidator and exclusion of Feishang Energy from our Group
Feishang Energy will be retained as a coal mine consolidator but we have excluded Feishang Energy from our Group for the following
reasons:
- •
- An officially designated coal mine consolidator is obliged to (but does not have the right to), upon the request of the
relevant government authorities in Guizhou province, acquire or consolidate such adjacent coal mines or coal enterprises as designated by such government authorities, whether or not they are desirable
targets. Our Directors were of the view that it would not be in our Group's best interests to officially designate Guizhou Puxin as a coal mine consolidator based on the following
reasons:
- –
- if Guizhou Puxin is officially designated as a coal mine consolidator, it would not be able to exercise any discretion
over which coal mine or coal enterprise to consolidate or acquire;
- –
- by having Feishang Energy to be officially designated by the Guizhou government as a coal mine consolidator and through
adequate measures and agreements between Feishang Energy and our Group to ensure any potential competition is kept at an insignificant level (details of which are set out in "measures taken to ensure
any potential competition is kept at an insignificant level" below), our Directors are of the view that on the one hand, we would be able to enjoy the flexibility in selecting desirable and suitable
targets for our future development but on the other hand, would not be under any obligation to acquire or consolidate targets that we consider to be unsuitable or undesirable. For example, as we are
not a PRC party and are not permitted to own any "special or scarce" mines under the Measures on Special and Scarce Coal, if the relevant government authorities requires the coal mine consolidator to
acquire or consolidate such "special or scarce" coal mines, such obligations can be fulfilled instead by Feishang Energy; and
- •
- Our Directors are of the view that it would not adversely affect our Group's interests to officially designate Feishang
Energy as a coal mine consolidator. According to the Confirmation Letter issued by the Leading Group Office, only one entity among entities under common control by the same person can be officially
designated as a coal mine consolidator. The Leading Group Office has recognized that Guizhou Puxin is an independent enterprise and legal entity that has met the basic requirements to qualify as a
201
Table of Contents
coal
mine consolidator in Guizhou province and will be deemed as such following Feishang Energy's official designation as a coal mine consolidator. As a result, we will still be able to qualify and
obtain official designation as a coal mine consolidator in the event the Group is no longer an affiliated entity of Feishang Energy. Accordingly, our Directors are of the view that Guizhou Puxin will
not be disqualified from being a coal mine consolidator solely as a result of changes to its affiliated relationship with Feishang Energy. Notwithstanding this, our Controlling Shareholders have
undertaken that they will not dispose of their equity interests in Feishang Energy if such disposal could adversely affects Guizhou Puxin's deemed qualification as a coal mine consolidator.
Measures taken to ensure any potential competition is kept at an insignificant level
Notwithstanding that Feishang Energy will not form part of our Group following the Listing, our Directors believe that competition
between our Group and the Controlling Shareholders will not significantly increase and there is generally insignificant potential competition between our core business and the operations of Feishang
Energy due to the following measures that have been put in place:
- •
- Feishang Energy has provided certain non-competition undertakings in our favor, the details of which are set out in
"— Deed of Non-Competition". Such undertakings will take effect on the Listing Date and will remain in full force and be terminated until the later of the date on which
(a) Feishang Energy ceases to be qualified as a coal mine consolidator in Guizhou province and (b) Feishang Energy ceases to be an subsidiary or party controlled by Controlling
Shareholder either solely or jointly with another Controlling Shareholder or any other party of the Controlling Shareholders.
- •
- As a result of Feishang Energy's non-competition undertakings and Guizhou Puxin's status as a deemed consolidator of coal
mines and coal enterprises in Guizhou province:
- –
- Feishang Energy may not engage in businesses that directly or indirectly compete with our core businesses.
- –
- Feishang Energy must give us the first opportunity to utilize any Consolidation Opportunity and to use its best endeavours
to procure that such opportunities are first offered to us.
- –
- We (through Guizhou Puxin) may selectively pursue Consolidation Opportunities which are appropriate for our business and
operations of producing high quality anthracite coal products.
- –
- We (through Guizhou Puxin) may further exercise our right to purchase from Feishang Energy any interest in coal mines or
coal enterprises which was first offered to, but had not been acquired by, Guizhou Puxin and are acquired by Feishang Energy, as and when we consider such opportunities to be appropriate for our
business and operations of producing high quality anthracite coal products. Our PRC legal advisors,
202
Table of Contents
Commerce &
Finance Law Offices, have advised us that, the non-competition undertaking with respect to Feishang Energy's covenant of selling coal mines or coal enterprises to Guizhou Puxin when
appropriate, is not in violation of the existing and applicable PRC laws, regulations and policies if the target coal mines or coal enterprises are permitted to be transferred to a foreign invested
enterprise such as Guizhou Puxin according to relevant PRC laws, regulations and policies.
In
addition, notwithstanding Feishang Energy's official designation as a coal mine consolidator in the future:
- •
- As of the Latest Practicable Date, other than the Sanjiazhai Mine, the Controlling Shareholders (including Feishang
Enterprises and Feishang Energy) do not own or control any other coal mines;
- •
- the Controlling Shareholders have been locating buyers for the Sanjiazhai Mine;
- •
- Feishang Energy, upon its being officially designated as a coal mine consolidator, may facilitate our Group's continued
development in the coal mining business and to ensure that on the one hand, our Group enjoys the status and ability to consolidate and acquire coal mines suitable for our further development and on
the other hand, our Group will not be obliged to acquire or consolidate coal mines which are unsuitable or undesirable for us or which we are not permitted to own or control under relevant laws.
In
assessing whether our Company should take up new business opportunities or exercise its pre-emptive rights under the Deed of Non-Competition, our independent non-executive Directors
will consider a variety of factors, including: (i) whether the costs of taking up the new business opportunities or exercising the pre-emptive rights would justify the benefits, taking into
consideration our financial condition, corporate strategy and long-term plan; (ii) the potential synergy between our existing operations and the new business opportunities; (iii) the
geographical proximity of the new business opportunities to our existing operations; and (iv) whether the new business opportunities would enhance our overall competitiveness and sustainability
of our existing and future businesses.
Copper
Feishang Enterprise, through its subsidiary, Anhui Xinke New Materials Co., Ltd., is engaged in copper-related
businesses, including copper exploration, importation of copper, copper processing and trading of copper.
Forestry
Feishang Enterprise owns slash pine plantations in Jiangxi. Through its subsidiary, Jiangxi Feishang Forestry Co., Ltd.,
Feishang Enterprise engages in the production, sales and research and development of rosin and the processing of abietic resin and turpentine. Through its subsidiary, Taihe Feishang
Forestry Co., Ltd., Feishang Enterprise engages in the production of tackifying resin, resin coating and polyamide resin.
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Other businesses
Feishang Enterprise, through its indirect subsidiary, Wuhu Port Company Limited, provides port services. Wuhu Port Company Limited, in
turn, through its 25.86% interest in Wuhu Port Storage and Transportation Company Limited, a company whose shares are listed on the Shanghai Stock Exchange, provides modern logistics services
comprising loading, storage, transportation and trading.
DEED OF NON-COMPETITION
The Controlling Shareholders, Feishang Energy and Feishang Enterprise have executed the Deed of Non-Competition in the favor our
Company on December 24, 2013, pursuant to which each of them has undertaken to:
- •
- not, and procure that their respective subsidiaries or parties controlled by them either solely or jointly with another
Controlling Shareholder or any other party ("Affiliates") will not, either on their own account or in conjunction with or on behalf of any person, firm or company, directly or indirectly, be
interested or engaged in or acquire or hold any right or interest (in each case whether as a shareholder, partner, agent or otherwise) in any business which directly or indirectly competes or
may so compete with the Core Businesses;
- •
- notify our Company of any business opportunity which directly or indirectly competes or may so compete with the Core
Businesses ("New Business Opportunity"), if any of them becomes aware of such business opportunity; and
- •
- use its best endeavours to procure that the New Business Opportunity is first offered to our Company on terms and
conditions that are fair and reasonable.
For
the purpose of the Deed of Non-Competition, "Core Businesses" shall include the acquisition and exploitation of coal mining rights (including the exploration, construction,
development and operation of coal mines) located in Guizhou province in the PRC.
Each
of the Controlling Shareholders, Feishang Energy and Feishang Enterprise also unconditionally and irrevocably undertakes to grant to our Company the following options and
pre-emptive rights:
Options to purchase
- (a)
- Under
the Deed of Non-Competition, our Company has been granted the following options to purchase:
- (i)
- any
existing coal mines in Guizhou province which are held by any Controlling Shareholder, Feishang Energy or Feishang Enterprise (for example, the
Sanjiazhai Mine) or any other coal mines in Guizhou province `which we choose not to exercise our rights to acquire (please see paragraph (b) below) but which have been acquired by Feishang
Energy in fulfilling its obligations as a coal mine consolidator;
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- (ii)
- any
interest in the relevant Controlling Shareholder's, Feishang Energy's or Feishang Enterprise's business, including any business of their respective
Affiliates, which directly or indirectly competes or is likely to compete with the Core Businesses; and
- (iii)
- any
interest in any business of a Controlling Shareholder, Feishang Energy, Feishang Enterprise or their respective Affiliates resulting from a New
Business Opportunity which has been offered to us, but has not been purchased by us, and has been retained by a Controlling Shareholder, Feishang Energy, Feishang Enterprise or their respective
Affiliates,
in
each of the cases above, for consideration to be determined based on the valuation appraised by an independent qualified valuer to be jointly appointed by the relevant Controlling Shareholder,
Feishang Energy or Feishang Enterprise on the one hand, and us on the other hand. The above options may be exercised at any time subject to any relevant laws, regulations and applicable Listing Rules
and existing third party pre-emptive rights and the relevant Controlling Shareholder, Feishang Energy or Feishang Enterprise shall, following the exercise of such options by us, as soon as practicable
and subject to any relevant laws, regulations and applicable Listing Rules and existing third party pre-emptive rights, do all acts and execute all documents necessary to effect such acquisition.
Rights of first refusal and first offer
(b) Our
Company has also been granted the following rights:
- (i)
- in
the case that any Controlling Shareholder, Feishang Energy or Feishang Enterprise (or any of their respective Affiliates) wishes to sell any existing
business or develop any new business that directly or indirectly competes, or may so compete with the Core Businesses, the relevant Controlling Shareholder, Feishang Energy or Feishang Enterprise
shall, and shall procure that their respective Affiliates shall, give us the first opportunity to acquire such businesses on terms and conditions that are fair and reasonable and that are not less
favorable than the terms they would offer to other third party purchasers;
- (ii)
- in
the case that there is a New Business Opportunity offered to any of the Controlling Shareholders, Feishang Energy, Feishang Enterprise or any of their
respective Affiliates (including any coal mine in Guizhou province which Feishang Energy is requested by the relevant regulatory authorities to acquire or consolidate in fulfilling its obligations as
a coal mine consolidator), they shall notify us of such New Business Opportunity and use their best efforts to ensure that the offeror first offers such New Business Opportunity to us on terms and
conditions that are fair and reasonable and that are not less favorable than the terms that such offeror would offer to the relevant Controlling Shareholder, Feishang Energy, Feishang Enterprise or
any of their respective Affiliates,
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relevant
Controlling Shareholder, Feishang Energy or Feishang Enterprise shall, following the exercise of such rights by us, as soon as practicable and subject to any relevant laws, regulations and
applicable listing rules and existing third party pre-emptive rights, do all acts and execute all documents necessary to enable our rights to take effect.
The
Deed of Non-Competition does not restrict each of the Controlling Shareholders, Feishang Energy, Feishang Enterprise and their respective
Affiliates to:
- •
- hold, directly or indirectly securities of any company listed on the Stock Exchange or other recognized stock exchange
which is primarily engaged in any Core Business provided that the interests of the relevant Controlling Shareholder, its Affiliates. Feishang Energy and its Affiliate, and Feishang Enterprise and its
Affiliates, in each case, in such company represents in aggregate not more than 5% of the total issued share capital of such company and that the relevant Controlling Shareholder and its Affiliates,
Feishang Energy and its Affiliates, or Feishang Enterprise and its Affiliates, in each case, individually or together, are not in control of the board of directors of such company;
- •
- hold shares and other securities in us and our subsidiaries or Feishang Energy, or Feishang Enterprise and its
Affiliates; and/or
- •
- hold shares and other securities of any company listed on the Stock Exchange or other stock exchange whose primary
business is not the Core Businesses.
Furthermore,
each of the Controlling Shareholders, Feishang Energy, and Feishang Enterprise and its Affiliates undertakes to us to provide an annual confirmation to us and our
independent non-executive Directors regarding their compliance and the compliance of their Affiliates (as relevant) with the Deed of Non-Competition.
We
will disclose the review by our independent non-executive Directors of the compliance, and enforcement of, the Deed of Non-Competition in our annual report or by way of announcement
to the public in compliance with the requirements of the Listing Rules. In the event any New Business Opportunities presented by or otherwise arising in connection with any of the Controlling
Shareholders, Feishang Energy, or Feishang Enterprise and its Affiliates are turned down by us according to the Deed of Non-Competition, we will disclose the decision, as well as the basis for such
decision in our annual report or interim report.
The
Deed of Non-Competition will take effect on the Listing Date and will remain in full force and be terminated:
- •
- in respect of the Controlling Shareholders, upon the earlier of:
- i.
- the
date on which the relevant Controlling Shareholders and/or their Affiliates cease to be a controlling shareholder of us within the meaning of the
Listing Rules;
- ii.
- the
date on which our Shares cease to be listed on the Stock Exchange; and
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- iii.
- the
date on which our Company ceases to engage in the Core Businesses; and
- •
- in respect of Feishang Energy only, on the later of the date on which (a) it ceases to be qualified as a coal mine
consolidator in Guizhou province and (b) it ceases to be an Affiliate of the Affiliate Shareholders.
- •
- in respect of Feishang Enterprise only, on the later of the date on which (a) it ceases to be an affiliate of the
Controlling Shareholders and (b) it ceases to control the Sanjiazhai Coal Mine.
For
the avoidance of doubt, CHNR, together with its subsidiaries and the parties controlled by it, will become an Affiliate of Mr. Li Feilie upon the completion of the Spin-off
and be subject to the relevant undertakings set forth above.
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Our Directors confirm that, for the reasons set forth below, we will be able to conduct our business independently of our Controlling
Shareholders and their respective associates following the Listing and completion of the Spin-off.
Management independence
Feishang Enterprise, Feishang, Laitan Investments, CHNR and their subsidiaries, on the one hand, and our Company, on the other hand,
have boards of directors or equivalent decision making bodies that function independently of each other. While Mr. Li Feilie overlaps as a director between the respective boards of directors of
Feishang Enterprise, CHNR and our Company, he will spend the necessary time and attention required as an executive Director of our Company to formulate an overall business strategy and oversee the
corporate development of our Company. There will not be any other Directors who also serve on the board of directors of CHNR upon completion of the Spin-off.
CHNR
will cease to be our Controlling Shareholder upon completion of the Spin-off. Although Mr. Li Feilie, Mr. Tam Cheuk Ho and Mr. Wong Wai On Edward are
shareholders of CHNR, this will not affect the management independence of the Company since, except for Mr. Li who will continue to be a director of CHNR: (i) their interests in CHNR are
only in the capacity of shareholders; and (ii) they have no management role in CHNR upon completion of the Spin-off. Although Mr. Li serves as a director in both CHNR and our Company,
for the reasons disclosed in this section (including the fact that CHNR and the Company have boards of directors or equivalent decision making bodies that function independently of each other and the
fiduciary duties owed to each of the companies as a director), management independence is preserved.
Each
of our Directors is aware of his or her fiduciary duties as a Director which require, among other things, that he or she acts for the benefit and in the best interests of our
Company and does not allow any conflict between his or her duties as a Director and his or her personal interest. In the event there is a potential conflict of interest arising out of any transaction
to be entered into between our Company and our Directors or their respective associates, the interested Director(s) will, if his or her
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or
any of his or her associates' interest in such contract or arrangement is material, declare the nature of his or her interest in accordance with the Articles of Association and will not vote on or
be counted in the quorum for any resolution of the Board in respect of such contract or arrangement unless so authorized by the Articles of Association.
The
Directors have confirmed that they do not have any interests in any business which directly or indirectly competes or is likely to compete, directly or indirectly, in any material
respect with the Core Businesses as of the date of this listing document.
Business operations
We are engaged mainly, among other things, in the production and sale of anthracite coal. We have full rights to make decisions on and
to carry out our own business and operations independently. The principal supplies and equipment we use are generally widely available and we are not dependent on the Controlling Shareholders for such
supplies and equipment. We also have direct and close contact with our customers without dependence on the Controlling Shareholders for market access. Moreover, we have sufficient capital, equipment
and employees to operate our business independently.
Operational independence
Our operational decisions are made by our Directors and senior management. We have established our own set of organizational structure
made up of individual departments, each with specific areas of responsibilities. We have also established a set of internal controls to facilitate the effective operation of our business.
Financial independence
We have established an independent finance department responsible for discharging the treasury, accounting, reporting, group credit and
internal control functions independent from the Controlling Shareholders and their subsidiaries (excluding our Company). In addition, we have established our bank accounts independent of our
Controlling Shareholders. We also make tax registrations independently of our Controlling Shareholders and pay taxes independently of our Controlling Shareholders pursuant to applicable laws. We have
employed a sufficient number of dedicated financial accounting personnel responsible for financial auditing of our accounts.
During
the Track Record Period and thereafter, our Controlling Shareholders and their subsidiaries have provided certain financial assistance to our Company in the form of shareholders'
loans and guarantees.
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The following table sets forth the details of the financial assistance provided by our Controlling Shareholders and their subsidiaries (excluding our Company) to
our Company as of the Latest Practicable Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrower
|
|
Lender |
|
Date of loan
agreement |
|
Loan amount
(RMB) |
|
Current
interest rate |
|
Purpose |
|
Term |
|
Outstanding
loan amount
as of Latest
Practicable
Date
(RMB) |
|
Largest
amount
during the
term of loan
(RMB) |
|
Connected
person
providing
guarantee |
|
Security
provided
by our
Company in
respect of the
financial
assistance |
The Entrusted Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guizhou Puxin |
|
Feishang Management through China Minsheng Bank, Chongqing Branch |
|
|
March 19, 2013 |
|
|
131,000,000 |
|
|
None |
|
Replacing the inter-company loan |
|
March 19, 2013 - March 19, 2016 |
|
|
131,000,000 |
|
|
131,000,000 |
|
Nil |
|
Nil |
|
|
|
|
|
TOTAL |
|
|
131,000,000 |
|
|
|
|
|
|
TOTAL |
|
|
131,000,000 |
|
|
|
|
|
|
|
Bank and other borrowings guaranteed by our Controlling Shareholders or their subsidiaries (excluding our Group) ("Connected
Guarantees") that are expected to be released after the Listing and completion of the Spin-off |
Guizhou Puxin |
|
China Merchants Bank, Guiyang Branch |
|
|
January 29, 2013 |
|
|
20,000,000 |
|
|
7.80%
(fixed) |
|
General working capital and financing the inter-company purchase of coal |
|
January 29, 2013 - January 28, 2014 |
|
|
20,000,000 |
|
|
20,000,000 |
|
WFID |
|
Nil |
Guizhou Puxin |
|
China Merchants Bank, Guiyang Branch |
|
|
February 27, 2013 |
|
|
30,000,000 |
|
|
7.80%
(fixed) |
|
Financing the inter-company purchase of coal |
|
February 27, 2013 - February 26, 2014 |
|
|
30,000,000 |
|
|
30,000,000 |
|
WFID |
|
Nil |
Guizhou Dayun |
|
China Merchants Bank, Guiyang Branch |
|
|
December 19, 2011 |
|
|
300,000,000 |
|
|
8.52%
(floating) |
|
Financing the construction of Dayun Coal Mine |
|
December 20, 2011 - December 19, 2017 |
|
|
180,000,000 |
|
|
180,000,000 |
|
Mr. Li Feilie and Feishang Enterprise |
|
Nil |
Xinsong Coal |
|
China Minsheng Bank, Chongqing Branch |
|
|
May 5, 2011 |
|
|
50,000,000 |
|
|
8.00%
(floating) |
|
Financing the improvement project of Liujiaba Coal Mine |
|
May 5, 2011 - May 5, 2014 |
|
|
45,000,000 |
|
|
50,000,000 |
|
WFID |
|
Nil |
Dayuan Coal |
|
Bank of Communications, Guizhou Branch |
|
|
June 26, 2012 |
|
|
100,000,000 |
|
|
8.00%
(floating) |
|
Ramp-up of Dayuan Coal Mine |
|
June 26, 2012 - June 26, 2015 |
|
|
94,700,000 |
|
|
96,900,000 |
|
WFID and Mr. Li Feilie |
|
Nil |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrower
|
|
Lender |
|
Date of loan
agreement |
|
Loan amount
(RMB) |
|
Current
interest rate |
|
Purpose |
|
Term |
|
Outstanding
loan amount
as of Latest
Practicable
Date
(RMB) |
|
Largest
amount
during the
term of loan
(RMB) |
|
Connected
person
providing
guarantee |
|
Security
provided
by our
Company in
respect of the
financial
assistance |
Guizhou Dayun |
|
Industrial and Commercial Bank of China, Jinsha Branch |
|
|
December 17, 2012 |
|
|
150,000,000 |
|
|
7.21%
(floating) |
|
Financing the construction of Dayun Coal Mine |
|
December 26, 2012 - December 25, 2018 |
|
|
10,000,000 |
|
|
10,000,000 |
|
Feishang Enterprise |
|
Nil |
Guizhou Puxin |
|
China Everbright Bank, Guiyang Branch |
|
|
February 4, 2013 |
|
|
20,000,000 |
|
|
6.30%
(fixed) |
|
Financing the inter-company purchase of coal |
|
February 4, 2013 - February 3, 2014 |
|
|
20,000,000 |
|
|
20,000,000 |
|
Mr. Li Feilie and Feishang Enterprise |
|
Nil |
Linjiaao Coal |
|
Bank of Chongqing, Guiyang Branch |
|
|
August 23, 2011 |
|
|
90,000,000 |
|
|
6.40%
(floating) |
|
Financing the improvement project of Linjiaao Coal Mine |
|
August 24, 2011 - August 23, 2015 |
|
|
82,000,000 |
|
|
90,000,000 |
|
Mr. Li Feilie and WFID |
|
Nil |
Guizhou Puxin |
|
Bank of Chongqing, Guiyang Branch |
|
|
March 29, 2013 |
|
|
50,000,000 |
|
|
8.40%
(fixed) |
|
General working capital and financing the inter-company purchase of coal |
|
March 29, 2013 - March 28, 2014 |
|
|
50,000,000 |
|
|
50,000,000 |
|
Feishang Enterprise |
|
Nil |
Guizhou Puxin |
|
Huachuang Securities through Guizhou Bank, Guiyang Branch |
|
|
May 13, 2013 |
|
|
300,000,000 |
|
|
8.00%
(fixed) |
|
General working capital, financing the acquisitions of mines and the settlement of debts |
|
May 14, 2013 - May 13, 2015 |
|
|
300,000,000 |
|
|
300,000,000 |
|
Mr. Li Feilie, Feishang Enterprise and Feishang Energy |
|
Nil |
Guizhou Puxin |
|
China Minsheng Bank, Chongqing Branch |
|
|
August 14, 2013 |
|
|
100,000,000 |
|
|
6.60%
(floating) |
|
Financing the inter-company purchase of coal |
|
August 15, 2013 - August 15, 2014 |
|
|
100,000,000 |
|
|
100,000,000 |
|
WFID |
|
Nil |
Guizhou Puxin |
|
China Minsheng Bank, Chongqing Branch |
|
|
October 17, 2013 |
|
|
150,000,000 |
|
|
6.00%
(floating) |
|
General working capital |
|
October 17, 2013 - October 17, 2014 |
|
|
150,000,000 |
|
|
150,000,000 |
|
WFID |
|
Nil |
Guizhou Puxin |
|
China Everbright Bank, Guiyang Branch |
|
|
October 20, 2013 |
|
|
30,000,000 |
|
|
6.72% (fixed) |
|
Financing the purchase of coal |
|
October 22, 2013 - April 21, 2013 |
|
|
30,000,000 |
|
|
30,000,000 |
|
Feishang Enterprise |
|
Nil |
|
|
|
|
|
TOTAL |
|
|
1,390,000,000 |
|
|
|
|
|
|
TOTAL |
|
|
1,111,700,000 |
|
|
|
|
|
|
|
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The Entrusted Loan was made available by Feishang Management as the entrusting party, through the Chongqing branch of China Minsheng
Bank as the lender, to Guizhou Puxin as the borrower. The amount of RMB131.0 million represents 7.4% of the total bank and other borrowings of our Company as of June 30, 2013. We intend
to repay the Entrusted Loan as soon as
possible, in any event no later than six months after the Listing using a combination of working capital and/or securing new bank loans. Proceeds from the Entrusted Loan were applied to replace
certain inter-company loans granted by our subsidiaries to each other which were not compliant with the relevant PRC regulations on intercompany lending. Accordingly, but for the PRC legal restriction
on inter-company lending, we were able to finance the funding needs of our subsidiaries and the continuation of the Entrusted Loan was not a result of our subsidiaries' financial inability to repay
the loans they owed to each other. The Company has already incurred RMB7.6 million in commission fees for the six months ended June 30, 2013 in relation to the Entrusted Loan.
Furthermore, the Entrusted Loan commands nil interest rate compared to banks loans of similar terms which commands interest rates of around 6.30 to 9.00 per cent per annum. As a result, the Company
does not consider it commercially justifiable to incur further interest and administrative costs by taking out another new bank loan to replace the Entrusted Loan.
The
Entrusted Loan is an exempt continuing connected transaction. See "Connected Transactions — Exempt Continuing Connected
Transactions — Entrusted Loan".
As
at October 31, 2013, the total amount of outstanding loans subject to the Connected Guarantees was approximately RMB1,111.7 million, representing approximately 56.5% of
the total outstanding borrowings of our Company.
For
the reasons set forth below, our Directors and the Joint Sponsors are of the view that we are able to operate financially independently of our Controlling Shareholders.
We have obtained in-principle consents from each of China Minsheng Bank, China Merchants Bank, Bank of Communications, Industrial and
Commercial Bank of China, China Everbright Bank, Bank of Chongqing and Huachuang Securities to release all of the Connected Guarantees, to be effective upon Listing and the completion of certain
administrative procedures of the lenders, which is expected to be completed approximately three months after the Listing.
Accordingly,
all Connected Guarantees given by Mr. Li Feilie, Feishang Enterprise, Wuhu Port, WFID and Feishang Energy in respect of our loans will be replaced by guarantees to be
provided by our Company in favor of the respective lending banks on similar terms within three months after the Listing. The additional timing to release such Connected Guarantees post-Listing is
required to (1) complete certain administrative procedures of the banks and (2) enter into new loan agreements and guarantee contracts by our Company in connection with the replacement
of such guarantees following the Listing. The Company, after enquiry with the relevant banks, understands that the administrative
procedures may involve, among other things, the relevant paperwork being vetted by the banks' internal departments and having banks' signatories authorized at the time to execute such documents.
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We
believe that the in-principle consents for the replacement of all of our Connected Guarantees by guarantees to be given by our Company demonstrate that we are able to obtain new
financing and extend existing financing from commercial banks on market terms without guarantee or security from our Controlling Shareholders or their subsidiaries (excluding our Company) following
the Listing.
In July 2013, we obtained a legally binding commitment letter from China Minsheng Bank to provide a term loan with an aggregate
principal amount of up to RMB1.6 billion that may be drawn down on or before January 29, 2015, subject to certain conditions. These conditions include the absence of any material adverse
changes to our Company's financial position, which in turn requires, among others, that the revenue of our Company for the year in which the loan is drawn down must not decrease by more than 50% as
compared to the immediately preceding year, that our Company's total interest-bearing debt to asset ratio shall not exceed 90%, and that we do not have a poor credit record. According to a letter we
received from China Minsheng Bank in September 2013 explaining the July 2013 commitment letter, China Minsheng Bank will carry out internal financial assessment procedures on our Company
prior to the drawdown of the commitment, which will be conducted based on the internal credit rating system of China Minsheng Bank. In the event that our Company's credit rating is assessed by China
Minsheng Bank to be "BBB-" or below, China Minsheng Bank will not approve the drawdown. The credit rating of our Company is currently assessed by China Minsheng Bank to be "A," which is
three ratings higher than "BBB-". The interest rate of the loan will be determined based on the prevailing market conditions at the time of drawdown. The interest rates generally charged
by China Minsheng Bank are the PBOC's official benchmark interest rates plus a premium of 20% to 30%. The loan is expected to be provided without the assistance of our Controlling Shareholders or
their subsidiaries (excluding our Group). In addition, in October 2013, we obtained a legally binding commitment letter from China Merchants Bank to provide a term loan with an aggregate
principal amount of up to RMB350 million that may be drawn down on or before March 10, 2015, subject to certain conditions, including a repayment term of not less than one year for each
draw down. There are no other material financial covenants and conditions to drawdown set out in this commitment letter.
RELATED PARTY TRANSACTIONS
Related party advances
We have obtained advances from related parties from time to time during the Track Record Period. These loans are non-interest bearing,
unsecured and payable on demand. See "Financial Information — Indebtedness — Loans From Related Companies" and
note 32 to our consolidated financial statements as included in Appendix I — "Accountants' Report of the Company". Set forth below is a
summary of our related party loans since January 1, 2010 to the date of the listing document.
Wuhu Feishang is an indirect wholly owned subsidiary of CHNR. As of December 31, 2010, 2011 and 2012, the outstanding balance of
advances from Wuhu Feishang was RMB25.0 million, RMB118.0 million and RMB118.0 million, respectively. We have repaid all of the advances in April 2013. From
January 1, 2010 to April 2013, the largest daily outstanding balance of advances from Wuhu Feishang was RMB143.0 million.
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Yangpu Lianzhong is an indirect wholly owned subsidiary of CHNR. As of December 31, 2011, the outstanding balance of advances
from Yangpu Lianzhong was RMB105.0 million. We have repaid all of the advances in October 2012. From January 1, 2010 to October 2012, the largest daily outstanding balance
of advances from Yangpu Lianzhong was RMB146.0 million.
Feishang Management is an indirect wholly owned subsidiary of CHNR. As of December 31, 2010, 2011 and 2012 and the six months
ended June 30, 2013, the outstanding balance of advances from Feishang Management was RMB263.4 million, RMB178.8 million, RMB540.0 million and RMB131.0 million,
respectively. From January 1, 2010 to October 31, 2013, the largest daily outstanding balance of advances from Feishang Management was RMB620.3 million. We intend to repay the
outstanding loan of RMB131.0 million owed to Feishang Management as soon as possible, and in any event no later than six months after the Listing using a combination of working capital and/or
proceeds from new bank loans. See "— Independence from our Controlling Shareholders — Financial
Independence — The Entrusted Loan and the Connected Guarantees".
Yunnan Feishang is an indirect wholly owned subsidiary of CHNR. As of December 31, 2011, the outstanding balance of advances
from Yunnan Feishang was RMB35.2 million. We have repaid all of the advances in December 2012. From January 1, 2010 to December 2012, the largest daily outstanding balance
of advances from Yunnan Feishang was RMB35.2 million.
Yangpu Shuanghu is a wholly owned subsidiary of CHNR. As of December 31, 2010, the outstanding balance of advances from Yangpu
Shuanghu was RMB15.0 million.
We have repaid all of the advances in November 2011. From January 1, 2010 to November 2011, the largest daily outstanding balance of advances from Yangpu Shuanghu was
RMB15.0 million.
As of December 31, 2010, 2011 and 2012 and the six months ended June 30, 2013, the outstanding balance of advances from
CHNR was RMB9.7 million, RMB9.3 million, RMB9.5 million and RMB9.6 million, respectively. From January 1, 2010 to October 31, 2013, the largest daily
outstanding balance of advances from CHNR was RMB33.4 million. In December 2013, the Company repaid all of the outstanding loans of RMB33.4 million due to CHNR, and as a result,
we have repaid all outstanding loans owed to CHNR as of the Latest Practicable Date.
Fiishang Enterprise is 100% controlled by Mr. Li Feilie and his associates. As of December 31, 2010, 2011 and 2012, the
outstanding balance of advances from Feishang Enterprise was RMB1.1 million, RMB5.1 million and RMB4.9 million, respectively. We have repaid all of the advances in
May 2013. From January 1, 2010 to May 2013, the largest daily outstanding balance of advances from Feishang Enterprise was RMB240.2 million.
213
Table of Contents
Discontinued Guarantees from Related Parties
Certain of our bank and other borrowings are guaranteed by Mr. Li Feilie and/or companies controlled by him. See
"— Independence From Our Controlling Shareholders — Financial Independence" for the guarantees provided by Mr. Li and companies
controlled by him relating to our continuing bank and other borrowings and "Financial
Information — Indebtedness — Interest-Bearing Loans". The following table
sets forth the details of bank and other borrowings guaranteed by Mr. Li and companies controlled by him during the Track Record Period which have expired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrower
|
|
Lender |
|
Date of
loan
agreement |
|
Loan
amount
(RMB) |
|
Term |
|
Outstanding
loan amount
as of Latest
Practicable
Date
(RMB) |
|
Related party
providing
guarantee |
Guizhou Puxin |
|
SPDB |
|
|
June 10, 2010 |
|
|
10,000,000 |
|
June 10, 2010 -
June 8, 2011 |
|
|
0 |
|
Wuhu Port |
Guizhou Puxin |
|
SPDB |
|
|
June 18, 2010 |
|
|
20,000,000 |
|
June 18, 2010 -
June 15, 2011 |
|
|
0 |
|
Wuhu Port |
Guizhou Puxin |
|
China Minsheng Bank |
|
|
December 14, 2010 |
|
|
70,000,000 |
|
December 14, 2010 -
December 13, 2011 |
|
|
0 |
|
Wuhu Port and WFID |
Guizhou Puxin |
|
China Merchants Bank |
|
|
February 1, 2011 |
|
|
20,000,000 |
|
February 1, 2011 -
January 30, 2012 |
|
|
0 |
|
WFID |
Guizhou Puxin |
|
China Merchants Bank |
|
|
February 25, 2011 |
|
|
30,000,000 |
|
February 25, 2011 -
February 24, 2012 |
|
|
0 |
|
WFID |
Guizhou Puxin |
|
Bank of Chongqing |
|
|
April 12, 2011 |
|
|
70,000,000 |
|
April 12, 2011 -
October 12, 2011 |
|
|
0 |
|
WFID |
Guizhou Puxin |
|
SPDB |
|
|
June 30, 2011 |
|
|
50,000,000 |
|
June 30, 2011 -
July 1, 2012 |
|
|
0 |
|
Wuhu Port |
Guizhou Puxin |
|
Bank of Chongqing |
|
|
October 18, 2011 |
|
|
60,000,000 |
|
October 18, 2011 -
March 30, 2012 |
|
|
0 |
|
WFID |
Guizhou Puxin |
|
Bank of Chongqing |
|
|
October 26, 2011 |
|
|
10,000,000 |
|
October 26, 2011 -
March 30, 2012 |
|
|
0 |
|
WFID |
Guizhou Puxin |
|
China Merchants Bank |
|
|
January 31, 2012 |
|
|
20,000,000 |
|
January 31, 2012 -
January 28, 2013 |
|
|
0 |
|
WFID |
Guizhou Puxin |
|
China Merchants Bank |
|
|
February 27, 2012 |
|
|
30,000,000 |
|
February 27, 2012 -
February 26, 2013 |
|
|
0 |
|
WFID |
Guizhou Puxin |
|
China Minsheng Bank |
|
|
April 20, 2012 |
|
|
100,000,000 |
|
April 20, 2012 -
April 20, 2013 |
|
|
0 |
|
WFID |
Guizhou Puxin |
|
CITIC |
|
|
July 20, 2012 |
|
|
60,000,000 |
|
July 20, 2012 -
July 19, 2013 |
|
|
0 |
|
Wuhu Port |
214
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrower
|
|
Lender |
|
Date of
loan
agreement |
|
Loan
amount
(RMB) |
|
Term |
|
Outstanding
loan amount
as of Latest
Practicable
Date
(RMB) |
|
Related party
providing
guarantee |
Guizhou Puxin |
|
China Minsheng Bank, Chongqing Branch |
|
|
August 24, 2010 |
|
|
150,000,000 |
|
August 11, 2010 -
August 11, 2013 |
|
|
0 |
|
Mr. Li Feilie and Wuhu Port |
Guizhou Puxin |
|
Industrial and Commercial Bank of China, Guiyang Branch |
|
|
September 27, 2012 |
|
|
25,000,000 |
|
October 8, 2012 -
October 7, 2013 |
|
|
0 |
|
Mr. Li Feilie and Feishang Enterprise |
Guizhou Puxin |
|
China Everbright Bank, Chongqing Branch |
|
|
November 2, 2012 |
|
|
30,000,000 |
|
November 2, 2012 -
November 2, 2013 |
|
|
0 |
|
Feishang Enterprise |
Other Related Party Transactions
As part of our Corporate Transactions, in September 2010 and July 2011, we acquired Guizhou Yongfu and Guizhou Dayun from
Yangpu Shuanghu and Feishang Dayun, respectively. See "History and Development — Corporate Transactions".
CORPORATE GOVERNANCE
Our Board will consist of not less than three independent non-executive Directors to ensure that our Board is able to effectively
exercise independent judgment in its decision-making process and provide independent advice to our Shareholders. We will ensure that our independent non-executive Directors are of sufficient caliber,
knowledge and experience, have no connections or relationship with us or our connected persons and will carry weight in our decision-making process.
We
have adopted the following decision-making procedures for matters or transactions with potential conflicts of interest between us, on the one hand, and our Controlling Shareholders
and their subsidiaries, on the other hand:
- •
- The Articles of Association require the Directors to declare material
interests. The Articles of Association provide that if a Director is in any way interested in a contract, transaction or arrangement
with the Company (including one that is proposed), the Director shall declare the nature of such interest at the earliest opportunity at which it is practicable for him or her to do so.
215
Table of Contents
- •
- The Articles of Association require that the Directors with material interests shall not vote nor be counted in
quorum. Subject to certain exceptions, the Articles of Association provide that a Director shall not vote (nor shall he or she be
counted in the quorum) on any resolution of our Board approving any contract, arrangement or proposal in which he or she, or any of his or her associates, is, to his or her knowledge, materially
interested. If he or she votes, his or her vote will not be counted (nor will he or she be counted in the quorum for that resolution). The Articles of Association require a Director to excuse
himself or herself from voting in the event the Director has any conflicts of interest.
- •
- Audit, nomination and remuneration committees. We have
established an audit committee, a nomination committee and a remuneration committee to assess and control, and ensure our Board is appropriately advised as to, matters relating to (among other things)
our relationship with our external auditors and our internal audit function, the remuneration of the Directors and our senior management, and the composition of the Board. Our audit committee
comprises non-executive Directors and each of our nomination committee and remuneration committee comprises a majority of independent non-executive Directors. Moreover, the chairman of each of our
audit, nomination and remuneration committees is an independent non-executive Director. For the composition of, and other details relating to, these committees, see "Directors and Senior Management".
- •
- Appointment of compliance adviser. We expect to enter into
an agreement with a compliance adviser, CASH Financial Services Group Limited, to provide us with professional advice and guidance in respect of compliance with the Listing Rules and relevant
applicable laws.
In
addition, the following measures will be adopted by us in respect of the enforceability of the Deed of Non-Competition:
- •
- Compliance with Deed of Non-Competition. The independent
non-executive Directors will review, on an annual basis, the Controlling Shareholders' and Feishang Energy's compliance with the Deed of Non-Competition and we will disclose the results of such review
and the enforcement of (if any) the Deed of Non-Competition in our annual report or by way of announcement to the public in compliance with the requirements of the Listing Rules. Our
Controlling Shareholders and Feishang Energy have undertaken to us that they will provide all information necessary for the annual review by our independent non-executive Directors and the enforcement
of the Deed of Non-Competition. Our Controlling Shareholders and Feishang Energy have further undertaken to us that each of them will make an annual confirmation as to compliance with the Deed of
Non-Competition in our annual report.
- •
- New business opportunities. Any New Business
Opportunities under the Deed of Non-Competition (including to exercise or not to exercise any option under the Deed of Non-Competition) and all other matters determined by our Board as having a
potential conflict of interest with the Controlling Shareholders or Feishang Energy will be referred to our independent non-executive Directors for discussion and decision. When necessary, these
Directors will engage an independent financial advisor to advise them on these
216
Table of Contents
matters.
In the event any New Business Opportunities presented by or otherwise arising in connection with any of the Controlling Shareholders or Feishang Energy are turned down by us according
to the Deed of Non-Competition, we will disclose the decision, as well as the basis for such decision in our annual report or interim report.
- •
- Disclosure of new opportunities. Our annual report will
include the views and decisions, with bases, of our independent non-executive Directors on whether to take up any new opportunities under the Deed of Non-Competition (including to exercise or not to
exercise any option under the Deed of Non-Competition) or other matters having a potential conflict of interest with the Controlling Shareholders or Feishang Energy that have been referred to the
independent non-executive Directors.
Moreover,
any transaction that is proposed between us and any of our Controlling Shareholders will be required to comply with the then requirements of the Listing Rules, including, where
applicable, the announcement, reporting and independent shareholders' approval requirements.
Based
on the above, our Board is satisfied that there are sufficient and effective preventive measures to manage conflicts of interest and our Board is able to operate independently of
the Controlling Shareholders.
217
Table of Contents
CONNECTED TRANSACTIONS
RELEVANT CONNECTED PERSONS
The table below sets forth the connected persons of our Company who conduct or will continue to conduct connected transactions with our
Company upon the Listing and the nature of their connection with our Company:
|
|
|
Name
|
|
Connected Relationship |
| Mr. Li Feilie |
|
As of the Latest Practicable Date, Mr. Li Feilie indirectly held 100% of the issued share capital of Feishang, which in turn held approximately 58.13% of the issued share capital of CHNR. Mr. Li
also directly held approximately 1.2% of the issued share capital of CHNR. Upon Listing and completion of the Distribution, Mr. Li will, through Feishang and his direct shareholding, become our ultimate Controlling Shareholder holding
approximately 59.33% of the issued share capital of our Company and will become our connected person pursuant to Rule 14A.11(1) of the Listing Rules. |
Feishang Enterprise |
|
Feishang Enterprise is owned as to approximately 60.74% by Mr. Li Feilie, our Controlling Shareholder. As such, Feishang Enterprise is an associate of Mr. Li and our connected person
pursuant to Rule 14A.11(4) of the Listing Rules. |
Feishang Energy |
|
Feishang Energy is an indirect wholly-owned subsidiary of Feishang Enterprise, which is in turn owned as to approximately 60.74% by Mr. Li Feilie. As such, Feishang Energy is an associate of
Mr. Li and our connected person pursuant to Rule 14A.11(4) of the Listing Rules. |
WFID |
|
WFID is a non-wholly-owned subsidiary of Feishang Enterprise, which is in turn owned as to approximately 60.74% by Mr. Li Feilie. As such, WFID is an associate of Mr. Li and our connected
person pursuant to Rule 14A.11(4) of the Listing Rules. |
Wuhu Port |
|
Wuhu Port is a non-wholly-owned subsidiary of Feishang Enterprise, which is in turn owned as to approximately 60.74% by Mr. Li Feilie. As such, Wuhu Port is an associate of Mr. Li and our
connected person pursuant to Rule 14A.11(4) of the Listing Rules. |
Feishang Management |
|
Feishang Management is a wholly-owned subsidiary of CHNR, which is in turn owned as to approximately 58.13% by Feishang and approximately 1.2% by Mr. Li Feilie. As such, Feishang Management is an
associate of Mr. Li and our connected person under Rule 14A.11(4) of the Listing Rules. |
218
Table of Contents
|
|
|
Name
|
|
Connected Relationship |
Anka Consultants Limited
("Anka") |
|
Anka is owned as to 50% by Mr. Tam Cheuk Ho and as to 50% by Mr. Wong Wah On, Edward, both of whom are
our Directors. As such, Anka is an associate of each of Mr. Tam and Mr. Wong and our connected person pursuant to Rule 14A.11(4) of the Listing Rules. |
EXEMPT CONTINUING CONNECTED TRANSACTIONS
We have entered into agreements or transactions with certain of our connected persons and such agreements or transactions will
constitute continuing connected transactions of our Company under Chapter 14A of the Listing Rules. All of such transactions are exempt from the reporting, announcement and independent
shareholders' approval requirements under Chapter 14A of the Listing Rules and are classified into the following categories.
|
|
|
|
|
|
|
Nature of Transaction
|
|
Applicable Listing Rule |
|
| (1) |
|
A loan provided to our Company by Feishang Management through China Minsheng Bank |
|
|
Rule 14A.65(4) |
|
(2) |
|
Guarantees provided by our connected persons to secure loan facilities granted to our Company by third parties |
|
|
Rule 14A.65(4) |
|
(3) |
|
A licence agreement entered into between our Company and Anka to set forth certain office sharing arrangements |
|
|
Rule 14A.33(3) |
|
Entrusted Loan
Pursuant to an arrangement among Feishang Management, China Minsheng Bank and Guizhou Puxin, dated March 19, 2013, Feishang
Management deposited with China Minsheng Bank an amount equal to RMB131.0 million, which in turn was lent to Guizhou Puxin as an interest-free, unsecured loan for the purpose of replacing the
inter-company loan (the "Entrusted Loan"). The term of the loan is three years. The outstanding amount of the Entrusted Loan as of October 31, 2013 was RMB131.0 million,
representing approximately 6.70% of the total outstanding borrowings of our Company.
The
Directors are of the view that the provision of the Entrusted Loan by Feishang Management, being a form of financial assistance (as defined in the Listing Rules), for our
benefit, is fair and reasonable, on normal commercial terms and in our and our Shareholders' interest. No security over our assets is granted to Feishang Management in respect of its provision of the
Entrusted Loan. Accordingly, the provision of the Entrusted Loan is exempt from compliance with the reporting, announcement and independent shareholders' approval requirements pursuant to
Rule 14A.65(4) of the Listing Rules.
See
"Relationship with our Controlling Shareholders — Independence from our Controlling
Shareholders — Financial Independence" in respect of the arrangements to repay the Entrusted Loan upon the Listing.
219
Table of Contents
Connected Guarantees
Our connected persons have guaranteed certain of our external borrowings from banks which are Independent Third Parties
(the "Connected Guarantees"). The Connected Guarantees have enabled us to obtain more favorable financing terms from such lending banks. Details of the Connected Guarantees are set forth in the
section headed "Relationship with our Controlling Shareholders — Independence from our Controlling Shareholders — Financial
Independence".
The
Connected Guarantees will, upon the Listing, constitute financial assistance provided by our connected persons. Our Directors are of the view that the Connected Guarantees, being a
form of financial assistance (as defined in the Listing Rules) for our benefit, are fair and reasonable, on normal commercial terms and in our and our Shareholders' interest. No security over
our Company's assets is granted to our connected persons in respect of the financial assistance. Accordingly, the provision of the Connected Guarantees is exempt from compliance with the reporting,
announcement and independent shareholders' approval requirements under Rule 14A.65(4) of the Listing Rules.
See
"Relationship with our Controlling Shareholders — Independence from our Controlling
Shareholders — Financial Independence" in respect of the arrangements to release all of the Connected Guarantees within a period of three months after
the Listing.
Licence Agreement
We have entered into a licence agreement dated September 1, 2013 (the "Licence
Agreement") with Anka, our connected person. Anka currently shares, and under the terms of the Licence Agreement will continue to share, part of its rented office space with
us. The rent payable by us to Anka for the use of such office space is approximately HK$700,000 per annum.
Based
on the total assets and estimated market capitalization of our Company, in respect of the Licence Agreement above, each of the applicable percentage ratios on an annual basis falls
below 0.1%. Therefore, such transactions will be exempted from the reporting, annual review, announcement and independent shareholders' approval requirements applicable to continuing connected
transactions under Chapter 14A of the Listing Rules as they fall within the de minimis threshold under Rule 14A.33(3) of the Listing Rules.
220
Table of Contents
DIRECTORS AND SENIOR MANAGEMENT
DIRECTORS
Our Board consists of eight Directors, of which five are executive Directors and three are independent non-executive Directors. The
Directors are elected at the general meetings of the Shareholders. At every annual general meeting of Shareholders, one-third of the Directors must retire from office by rotation and every Director is
required to be subject to retirement
by rotation at least once every three years. The retiring directors will be eligible for re-election. The functions and duties of our Board include convening general meetings of the Shareholders,
implementing the resolutions passed at the Shareholders' meetings, determining our business plans and strategies, formulating our annual budget and final accounts, formulating our proposals for profit
distributions as well as exercising other powers, functions and duties as conferred by our Articles of Association. We plan to enter into service contracts with all of our executive Directors and
independent non-executive Directors which provide for a term of directorship up to three years within reasonable time prior to the Listing.
The
following table sets forth certain information concerning our Directors as of the date of this listing document:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age |
|
Position |
|
Roles and
Responsibilities |
|
Term of
Directorship |
Mr. LI Feilie (
) |
|
|
47 |
|
Chairman, executive Director and chief executive officer |
|
Corporate strategy, planning and business development |
|
Elected on January 15, 2010, subject to retirement by rotation |
Mr. HAN Weibing (
) |
|
|
42 |
|
Executive Director and chief operating officer |
|
Daily corporate management and supervision |
|
Elected on December 23, 2013, subject to retirement by rotation |
Mr. WAN Huojin (
)
|
|
|
68 |
|
Executive Director and chief technical officer |
|
Coal mine construction and coal production |
|
Elected on December 23, 2013, subject to retirement by rotation |
Mr. TAM Cheuk Ho (
) |
|
|
51 |
|
Executive Director |
|
Corporate and business development |
|
Elected on February 1, 2013, subject to retirement by rotation |
Mr. WONG Wah On Edward (
) |
|
|
50 |
|
Executive Director |
|
Corporate and business development |
|
Elected on February 1, 2013, subject to retirement by rotation |
Mr. LO Kin Cheung (
) |
|
|
49 |
|
Independent non-executive Director |
|
Independent supervision and management |
|
Elected on December 23, 2013, subject to retirement by rotation |
221
Table of Contents
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age |
|
Position |
|
Roles and
Responsibilities |
|
Term of
Directorship |
Mr. HUANG Zuye (
) |
|
|
69 |
|
Independent non-executive Director |
|
Independent supervision and management |
|
Elected on December 23, 2013, subject to retirement by rotation |
Mr. GU Jianshe (
)
|
|
|
60 |
|
Independent non-executive Director |
|
Independent supervision and management |
|
Elected on December 23, 2013, subject to retirement by rotation |
Chairman
Mr. LI Feilie (
), aged 47, has been our executive Director since January 15, 2010 and was appointed as the chairman of our Board and the chief executive officer on December 23,
2013. He is primarily responsible for the overall corporate strategy, planning and business development of our Company. He also plays an integral role in supervising the Company's operational
management, and has more than five years of experience in corporate management in the coal mining industry. Mr. Li was extensively involved in the
financing of our anthracite coal mines and their development towards commercial production. Mr. Li has served as a director and the chairman of CHNR since February 2006. He has also been
a director of Smartact, a subsidiary of the Company, since April 2010. In addition, Mr. Li has served as a director of a number of companies, including Yangpu Lianzhong since
March 2008, Feishang Mining since September 2004 and Wuhu Port since October 2002. He was a director of Wuhu Feishang from December 2001 to July 2011. He has also
served as a director of Feishang Enterprise since June 2000. Mr. Li was a director and the vice president of a private agricultural resources company in Hainan from May 1994 to
June 2001. Mr. Li graduated from Peking University (
) with a bachelor's degree and a master's degree in economics in
July 1988 and January 1991, respectively. Except as disclosed above, Mr. Li has not held
any directorship in any other publicly-listed companies in the three years preceding the Latest Practicable Date.
Executive Directors
Mr. HAN Weibing (
), aged 42, has been our executive Director and chief operating officer since December 23, 2013. He is primarily responsible for overseeing the day-to-day management and
operations of our Company. Mr. Han has served as the vice president of the coal division of CHNR, a director and the chairman of the board of directors of Guizhou Puxin and the chairman of the
board of directors of Guizhou Yongfu since January 2012, taking charge of the development and management of their coal mining related business. He has also served as a director
222
Table of Contents
of Jinsha Juli since November 2012. Mr. Han was the general manager and the vice president of the human resources department of Feishang Enterprise from
March 2009 to March 2012, and he also served as the assistant president of Feishang Enterprise from February 2010 to February 2011, during which he gained extensive
industry knowledge and management experience for coal companies. From August 1995 to March 2007, Mr. Han served as the deputy manager of the human resources department of China
International Marine Containers (Group) Co., Ltd., a multinational logistics equipment manufacturing company listed on the Shenzhen Stock Exchange. He graduated from Sun Yat-Sen
University (
) with an executive master of business administration degree in June 2007 and from Wright State University in the
United States with a master of business
administration degree in November 2008. Except as disclosed above, Mr. Han has not held any directorship in any other publicly-listed companies in the three years preceding the Latest
Practicable Date.
Mr. WAN Huojin (
), aged 68, was appointed as our executive Director and chief technical officer on December 23, 2013. He is primarily responsible for overseeing the coal mine
construction and coal production of our Company. Mr. Wan has approximately 45 years of experience in the mining industry, particularly on coal production. He was the deputy general
manager of Guizhou Puxin from March 2010 to June 2010, and has been its general manager since June 2010. His responsibilities include determining and overseeing Guizhou Puxin's
overall business strategies and plans, including the plans for coal mine operation and development. Under his leadership, Guizhou Puxin accomplished certain improvement and expansion plans of its coal
mines, including but not limited to Baiping Coal Mine, Gouchang Coal Mine and Linjiaao Coal Mine. He has served as a director of Jinsha Juli since November 2012. He also served as the deputy
general manager of Guizhou Yongfu from September 2008 to March 2010, during which he assisted the general manager with the implementation of operational plans and the achievement of
operational targets including the technological upgrades of Baiping Coal Mine and certain coal mining-related technologies. During the period between January 2001 and December 2007,
Mr. Wan acted as the head of Fengcheng Mining Bureau of Jiangxi Province (
). In November 2003, a gas explosion incident occurred
at one of the coal mines under the administration of Fengcheng Mining Bureau of Jiangxi Province. Solely by virtue
of Mr. Wan's position as the head of the bureau, he was decommissioned from his position in June 2004 as a consequence of the incident but was nevertheless retained as the deputy head of
the bureau in view of his significant rescue efforts. Thereafter, in recognition of his contributions to the promotion of safety standards at the bureau and its outstanding overall performance under
his leadership, Mr. Wan was reinstated as the head of the bureau in March 2005 and held such office until his retirement in 2007. Prior to that, he had served as the deputy head, the
deputy chief engineer of Fengcheng Mining Bureau of Jiangxi Province (
) from January 1997 to December 2000 and the head of its
safety supervisory bureau from January 1995 to January 1997. Mr. Wan was responsible
for establishing and implementing the local coal mining safety-related regulations and policies. Under his leadership, a series of technological issues, including issues relating to ventilation and
excavation mechanization, were successfully resolved. During the period from January 1994 to December 1994, Mr. Wan worked as a mine manager at Pinghu coal mine (
) owned by Fengcheng Mining Bureau of Jiangxi Province (
). From August 1968 to
December 1993, Mr. Wan spent over 25 years at Shangzhuang coal mine (
) owned by Fengcheng Mining Bureau of Jiangxi Province
(
), where he worked as a technician, a department head and was promoted to mine manager in 1982. Mr. Wan has obtained comprehensive, practical coal mining exploration and
extraction experience during his employment with Pinghu coal mine and Shangzhuang coal mine. He was involved in the technological
223
Table of Contents
upgrade
of the coal mine ventilation system, the enhancement of coal mine production capacity and the improvement of the mine hoist. In addition, during his tenure from 1968 to 2007 at Fengcheng
Mining Bureau of Jiangxi Province (
), Mr. Wan was also involved in the operation and management of five coal beneficiation plants
affiliated to Fengcheng Mining Bureau of Jiangxi Province (
). Mr. Wan graduated from Jiangxi Polytechnic College (
) with a secondary vocational school's diploma in coal mining in August 1968. He was accredited as a senior engineer by the Jiangxi Branch of China
Universal Allocation
Coal Mining Company (
) in September 1992.
Over
the past 10 years, Mr. Wan has obtained several awards for advocating improvements to certain coal mining techniques. He also published several dissertations,
including one with respect to the
resolution of the excessive gas content issue which was recognized as a National Excellent Dissertation (
) and awarded the first place of
the Representative Dissertation of China Modern Exploration New Dissertation Bank (
) in March 2005, and one with respect to the
generation of electricity by coal mine gas which was awarded a special prize in a science conference by Fengcheng Mining
Bureau (
) in October 2010. In addition, Mr. Wan has received a number of awards in recognition of his contribution to the coal
mining industry, including the award of
Mining Mechanization Contribution (
) given by Jiangxi Coal Industry Bureau (
) in January 1991, the award for high achievers given by the Coal Industry Bureau of the PRC (
) in May 1994 to persons who have made tremendous contributions to the coal mining industry, the award of Excellent Enterprise Operational Manager (
) given by the People's Government of Yichun (
) in February 2003, and the award of Outstanding Contribution
to Provincial Coal and Electricity Operation for the Year 2004 (2004
) given by Economics and Trading Committee of Jiangxi Province (
) in May 2005. Mr. Wan was also named the Excellent General Manager of Jiangxi Province for the Year 2005 (2005
) by Economics and Trading Committee of Jiangxi Province (
), Enterprises Union of Jiangxi Province (
) and Entrepreneurs Association of Jiangxi Province (
) in July 2006.
Except
as disclosed above, Mr. Wan has not held any directorship in any other publicly-listed companies in the three years preceding the Latest Practicable Date.
Mr. TAM Cheuk Ho (
), aged 51, was appointed as our executive Director on February 1, 2013. Mr. Tam had been with the CHNR Group for more than 15 years and has gained more
than five years of experience in corporate and business development in the coal mining industry. He has extensive knowledge and experience of the Company's operations. Mr. Tam served as a
director of a member of the predecessor group of CHNR from December 1993 to January 1994 and then from December 1997, and continued such directorship upon the redomicile of such
group into CHNR. He will resign from his directorship at CHNR upon the completion of the Spin-off. Mr. Tam was also the chief financial officer of CHNR from December 2004 to
January 2008 and has served as CHNR's executive vice president since January 2008, and will resign from such position upon the completion of the Spin-off. Mr. Tam also served as
the chief financial officer and a director of China Resources Development, Inc., a member of the predecessor group of CHNR, from December 1994 to December
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2004. During the period from May 2002 to April 2003, Mr. Tam was an executive director and the deputy chairman of ITC Properties Group Limited (formerly
known as Cheung Tai Hong Holdings Limited), a company listed on the Stock Exchange and engaged in property development and securities investment operations. He has been a partner of a certified public
accountant firm in Hong Kong since July 1995, and was the finance director of a private investment company from October 1992 to December 1994. He was the company secretary of
China Nuclear Industry 23 International Corporation Limited (formerly known as Tack Hsin Holdings Limited), a company listed on the Stock Exchange operating Chinese restaurants chain and
engaging in property investments from February 1993 to December 2012, and was its financial controller from February to September 1992. From July 1984 to
December 1991, Mr. Tam worked at an international certified public accountant firm and his last position at such firm was as an audit manager. Mr. Tam graduated from the Chinese
University of Hong Kong with a bachelor's degree in business administration in December 1984. He was accredited as a certified public accountant (practicing) by the Hong Kong Institute of
Certified Public Accountants in July 1992, and was admitted as a fellow in November 1999. He was also admitted as a fellow of the Association of Chartered Certified Accountants in
October 1992. Except as disclosed above, Mr. Tam has not held any directorship in any other publicly-listed companies in the three years preceding the Latest Practicable Date.
Mr. WONG Wah On Edward (
), aged 50, was appointed as our executive Director on February 1, 2013. Mr. Wong has been with the CHNR Group for more than 15 years and has gained more
than five years of experience in corporate and business development in the coal mining industry. He has served as a director of Smartact, a subsidiary of the Company, since January 2010. In
addition, he has served as a director of a member of the predecessor group of CHNR since January 1999 and its company secretary since February 1999, and continued to serve such positions
upon the redomicile of such group into CHNR. He will resign from his positions at CHNR upon the completion of the Spin-off. Mr. Wong also served as CHNR's financial controller from
December 2004 to January 2008 and its chief financial officer from January 2008, and will resign from such position upon the completion of the Spin-off. Mr. Wong also
served as the company secretary and a director of China Resources Development, Inc., the predecessor of CHNR, from December 1997 to December 2004, and its financial controller
from December 1994 to December 2004. From December 2000 to December 2006, Mr. Wong was an independent non-executive director of China Pipe Group Limited (formerly
known as World Trade Bun Kee Ltd.), a company listed on the Stock Exchange engaged in the trading of construction materials. He has also served as a partner of a certified public accountant
firm in Hong Kong since July 1995. From October 1992 to December 1994, Mr. Wong was the deputy finance director of a private investment company. From July 1988 to
October 1992, Mr. Wong worked at the audit department of an international certified public accountant firm, providing professional auditing services to clients in a variety of business
sectors, and he left the firm as a senior auditor. Mr. Wong graduated from the Hong Kong Polytechnic University with a professional diploma in company secretaryship and administration in
November 1988. He was accredited as a certified public accountant (practicing) by the Hong Kong Institute of Certified Public Accountants in September 1993, and was admitted as a fellow
in November 1999. He was also admitted as a fellow of the Association of Chartered Certified Accountants in October 1996 and an associate of the Hong Kong Institute of Chartered
Secretaries in August 1994. Except as disclosed above, Mr. Wong has not held any directorship in any other publicly-listed companies in the three years preceding the Latest
Practicable Date.
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Table of Contents
Independent non-executive Directors
Mr. LO Kin Cheung (
), aged 49, was appointed as our independent non-executive Director on December 23, 2013. He acted as an independent non-executive director of CHNR from
December 2004 to June 2006 and an independent non-executive director of China Resources Development, Inc., a member of the predecessor group of CHNR, from May 2000 to
December 2004. He also served as an independent non-executive director of China Nuclear Industry 23 International Corporation Limited (formerly known as Tack Hsin Holdings Limited), a
company listed on the Stock Exchange operating Chinese restaurant chains and engaged in property investments during the period from August 2004 to August 2011. Mr. Lo
has been the chief financial officer of a private company engaging in the printing business since September 2001. From March 1998 to July 2001, Mr. Lo was an executive
director of Wiltec Holdings Limited, a company listed on the Stock Exchange then involved in the baby care product industry and the multimedia industry. From July 1986, Mr. Lo spent
nearly 12 years with an international certified public accountant firm and his last position at such firm was as a principal. Over these years, Mr. Lo has gained extensive experience in
finance and accounting. He graduated from the University of Hong Kong with a bachelor's degree in science in 1986 and completed the advanced management program at Harvard Business School in
May 2004. Mr. Lo was admitted as a fellow of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants in March 2000 and
July 1994, respectively. He was also admitted as an associate of the Institute of Chartered Accountants in England and Wales and as a member and certified general accountant of the Certified
General Accountants Association of Canada in August 2005 and September 1990, respectively. Except as disclosed above, Mr. Lo has not held any directorship in any other
publicly-listed companies in the three years preceding the Latest Practicable Date.
Mr. HUANG Zuye (
), aged 69, was appointed as our independent non-executive Director on December 23, 2013. Mr. Huang has over 35 years of experience in the coal mining
industry. He retired from the Coal Mining Engineering Institute of Guizhou Province (
) in April 2005. Prior to that, he had worked at
the institute for 30 years since May 1975, serving as its CPC secretary from December 1997 to
March 2005, its head of institute from June 1994 to March 2003, its deputy head of institute from February 1988 to May 1994 and taking positions of assistant
engineer and engineer from May 1975 to February 1988. During such period, Mr. Huang's responsibilities ranged from engineering design, coal mine design, research and development
to the overall management of the institute. He worked as a technician at Laoying mine of Shuicheng Mining Bureau (
) from August 1967 to
April 1975 and was primarily responsible for handling the general technological issues relating to coal mine extraction. Mr. Huang graduated from
Guizhou Institute of Technology (
) with a diploma in underground coal mining extraction in August 1967. He obtained his master's degree
in project management from University of Quebec at Chicoutimi in
Canada in March 2006.
Mr. Huang was accredited a number of professional qualifications, such as a senior engineer by the Department of Personnel of Guizhou Province (
) in August 1992, a consultant engineer and a cost engineer jointly by the Ministry of Personnel of the PRC (
) and the Ministry of Construction of the PRC (
) in March 1997 and October 2001, respectively, and a registered consulting engineer
jointly by the Ministry of Personnel of the PRC (
) and the State Development Planning Commission of the PRC (
) in March 2003. Except as disclosed above, Mr. Huang has not held any directorship in any other publicly-listed companies in the three years preceding the Latest
Practicable Date.
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Table of Contents
Mr. GU Jianshe (
), aged 60, was appointed as our independent non-executive Director on December 23, 2013. Mr. Gu has approximately 40 years of experience in the mining
industry. He was a member of the CPC committee and also the head of the discipline and inspection group of Guizhou Energy Bureau (
) from
May 2009 to May 2013. He took a number of positions including the member of the CPC committee, a professional discipline and inspection supervisor, the
head of the discipline and inspection group as well as the head of office and the deputy secretary of the CPC committee during his stay with Guizhou Coal Management Bureau (
) from November 2002 to May 2009. He was a senior economist and the head of the development and planning department of Shuicheng Mining (Group) Corporation (
) from September 2001 to November 2002. Prior to that, he worked at Shuicheng Mining Bureau (
) from July 1985 to September 2001, during which he served as a senior economist and the head of its
office from June 1997 to September 2001, the deputy secretary of the CPC committee and the secretary of the discipline committee of its mechatronical general factory from
June 1995 to June 1997, the secretary and deputy manager of its office from July 1985 to June 1995. Between September 1983 and July 1985, Mr. Gu stayed
at Yunnan Normal University (
) as a student of the politics and education faculty. He worked at Wangjiazhai Coal Selection Plant (
) of Shuicheng Mining Bureau (
) from
September 1971 to September 1983 during which he also served as the deputy head of the publicity division of Shuicheng Mining Bureau (
)'s mechatronical general factory. Mr. Gu obtained a junior college's diploma in politics and education from Yunan Normal University (
) in July 1985. He also obtained his bachelor's degree in economics and management as a correspondence student (
) from CPC Guizhou Committee Party School (
) in July 1997. Mr. Gu was accredited as a senior economist by the Department
of Personnel of Guizhou Province (
) in December 1999. Except as disclosed above, Mr. Gu has not held any directorship in any
other publicly-listed companies in the three years preceding the Latest
Practicable Date.
Except
as disclosed above, there is no other information in respect of our Directors that is discloseable pursuant to Rules 13.51(2)(a) to (v) of the Listing Rules and
there is no other matter that needs to be brought to the attention of the Shareholders.
- *
- Correspondence education means a distance learning course that aims to deliver education to students who are not
physically "on site" in a traditional classroom or campus. The correspondence student may take courses online or by correspondence with teachers. The correspondence education offered by institutions
shall be accredited by the Ministry of Eductaion of PRC.
227
Table of Contents
SENIOR MANAGEMENT
Our executive Directors and senior management are responsible for the day-to-day management of our business. The following table sets
out certain information concerning our senior management:
|
|
|
|
|
|
Name
|
|
Age |
|
Position |
Mr. LI Feilie (
) |
|
|
47 |
|
Chairman, executive Director and chief executive officer |
Mr. HAN Weibing (
) |
|
|
42 |
|
Executive Director and chief operating officer |
Mr. WAN Huojin (
) |
|
|
68 |
|
Executive Director and chief technical officer |
Mr. YUE Ming Wai Bonaventure (
) |
|
|
46 |
|
Chief financial officer and company secretary |
Mr. HU Lubao (
)
|
|
|
51 |
|
Deputy chief engineer |
Mr. LIAO Diansheng (
) |
|
|
49 |
|
Head of mechanical and electrical department |
Mr. CAI Zhenghui (
) |
|
|
44 |
|
Deputy chief engineer and head of ventilation and safety department |
Mr. TENG Biao (
) |
|
|
48 |
|
Deputy chief engineer |
Mr. LAN Xiaosheng (
) |
|
|
44 |
|
Head of infrastructure department |
Mr. WU Ziping (
) |
|
|
55 |
|
Head of safety and inspection department |
Mr. CHENG Wenkun (
) |
|
|
40 |
|
Deputy head of ventilation and safety department |
Mr. JIA Zhigang (
) |
|
|
50 |
|
Deputy general manager |
Mr. LIN Quanlong (
) |
|
|
33 |
|
Head of licenses and permits department |
Mr. WU Quanyi (
)
|
|
|
38 |
|
Head of supply and sales department |
Mr. LI Feilie (
), aged 47, is an executive Director, the chairman of our Board and our chief
executive officer. See
"— Directors — Chairman".
Mr. HAN Weibing (
), aged 42, is our executive Director and chief operating officer. See
"— Directors — Executive Directors".
Mr. WAN Huojin (
), aged 68, is our executive Director and chief technical officer. See
"— Directors — Executive Directors".
Mr. YUE Ming Wai Bonaventure (
)), aged 46, was appointed as our chief financial officer and company secretary on December 23, 2013. Mr. Yue has more than five years of experience in the
financial management of coal mining companies. He has been an executive director and the legal representative of Shenzhen Chixin since July 2012, and has been the financial controller of CHNR
since April 2008 and will resign from such position upon the completion of the Spin-off. Over the years, Mr. Yue has gained expertise in the field of finance and accounting.
Mr. Yue served as the
228
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financial controller of Enerchina Holdings Limited, a company listed on the Stock Exchange operating power plants during the period from September 2007 to
April 2008. He was an independent non-executive director of K.P.I. Company Limited, a retail company listed on the Stock Exchange from June 2006 to May 2007. From
April 2003 to October 2007, Mr. Yue also acted as the chief financial officer and the company secretary of a public manufacturing company. Mr. Yue has served as a director
of a private company engaging in the provision of corporate services since March 2003. Since November 1998, Mr. Yue spent more than four years with a private investment advisory
company as an associate director until April 2003. From April to October 1998, he was the senior accounting manager of Best Wide Group Limited, a manufacturing company then listed on the
Stock Exchange. Prior to that, from August 1996 to April 1998, Mr. Yue had served as an accounting manager of Leading Spirit (Holdings) Company Ltd., another manufacturing
company then listed on the Stock Exchange. During the period from January 1995 to August 1996, Mr. Yue was the assistant financial controller and the company secretary of Nam Hing
Holdings Limited, another manufacturing company listed on the Stock Exchange. He worked as an accountant in Sun Hung Kai & Co. Limited, a company listed on the Stock Exchange engaging in
securities and investment business from December 1992 to August 1993. From July 1990 to December 1992, he worked in the audit department of an international certified
public accountant firm. Mr. Yue graduated from the Hong Kong Baptist University with a bachelor's degree in business administration in November 1990 and was awarded a master of science
degree in accounting and finance with The University of Manchester in December 1994. He was admitted as a fellow member of the Hong Kong Institute of Certified Public Accountants and the Hong
Kong Institute of Chartered Secretaries in February 2002 and November 2005, respectively. He was also admitted as an associate of
the Institute of Chartered Accountants in England & Wales in January 2005 and a member of the Institute of Chartered Accountants in Australia in January 2008. Except as disclosed
above, Mr. Yue has not held any directorship in any other publicly-listed companies in the three years preceding the Latest Practicable Date.
Mr. HU Lubao (
), aged 51, was appointed as the deputy chief engineer of Guizhou Puxin in June 2012. Mr. Hu has more than 30 years of experience in the coal mining
industry. Prior to joining our Company, Mr. Hu worked as the head of the production technology department and a senior engineer at Anyuan Coal Industry Group Co., Ltd. ("Anyuan
Coal") (
) (formerly known as Anyuan Industrial Co., Ltd. (
)) from March 2010 to May 2012. He was primarily responsible for the review, supervision and implementation of the technology-related plans as well as the
standardization of safety and quality requirements. He served as the general manager and a senior engineer of Anyuan Qujiang Coal Development Co., Ltd. (
), a subsidiary of Anyuan Coal, from December 2008 to March 2010. During this period, he was in charge of the overall management of the coal mine, including
aspects related to safety, production, operation and public relations. He was the deputy general manager and a senior engineer of Qujiang Coal Development Co., Ltd. of Fengcheng Mining
Bureau (
) from May 2003 to December 2008, during which he mainly focused on coal production, coal extraction and coal mine
maintenance. In particular, under his
leadership, the comprehensive mechanical coal mining working face was successfully put into operation, and the capacity of the coal beneficiation plant was significantly enhanced upon the
implementation of the relevant modifications and expansions. He was the deputy division chief, manager engineer and an engineer of the production and technology division of Fengcheng Mining Bureau (
) from November 1999 to May 2003, focusing on production technology-related affairs. He also held a number of positions at the Industry Corporation of Fengcheng
Mining Bureau
229
Table of Contents
(
) from July 1986 to October 1999, with his last position as the deputy chief engineer and deputy general manager. During this
period, he was primarily responsible
for the production, technology, project quality and safety supervision management. In particular, he successfully established small coal beneficiation plants after conducting the relevant research and
design work. He was a teacher at Fengcheng Mining Bureau Technician School (
) from September 1985 to July 1986. He worked as an
technician at Jianxin coal mine (
) of Fengcheng Mining Bureau (
) from August 1982 to August 1985 and was responsible for establishing the internal coal mining-related operational policies and involved in the design and
construction of a coal beneficiation plant. Mr. Hu graduated, as a correspondence student (
*), from Huainan Mining College (
) with a bachelor's degree in engineering in May 1989 and obtained, also as a correspondence student (
*), a diploma in mining engineering in November 1988. He was accredited as a senior engineer by the Professional Titles Reform Work Leading Group of Jiangxi
Province (
) in November 2000. Mr. Hu has not held any directorship in any publicly-listed companies in the three years preceding
the Latest Practicable Date.
Mr. LIAO Diansheng (
), aged 49, was appointed as the head of electrical and mechanical department of Guizhou Puxin in March 2011. Mr. Liao has approximately 30 years of
experience in the coal mining industry. He served as the head of Yongsheng Coal Mine from March 2010 to March 2011 and was responsible for the overall management of the coal mine and had
achieved a series of operational targets, including the modification of the coal mine design plan and the implementation of safe production measures and other upgrades of the coal mining-related
technologies. Prior to joining our Company, Mr. Liao served
as a senior engineer and the chief engineer of the Gas Research Institute of the Jiangxi Coal Group Corporation (
) from January 2007
to February 2010. During his employment, Mr. Liao had a number of achievements relating to gas research including the establishment of
a gas laboratory engaged in the analysis of gas-related index. He also served as deputy chief electromechanical engineer of Longnan County Hengtai Enterprise Co., Ltd. (
), a conglomerate which is engaged in coal mining, from March 2005 to November 2006, during which he was mainly involved in the electromechanical aspects of the
relevant coal mines as well as the administration of their safe production. He was also involved in the construction of new coal mines and the implementation of production plans and onsite safety
inspection. After graduation, Mr. Liao held a number of positions at Fengcheng Mining Bureau (
) from August 1983 to
February 2005. He served as the head of the electromechanics division, chief engineer and senior engineer at Fengcheng Mining Bureau's (
) electromechanics department for the period between January 2003 and February 2005, and focused on matters relating to electromechanics and was involved in the
acceptance inspection of Qujiang coal mine (
) and other technological upgrades. From August 1983 to December 2002, Mr. Liao
spent nearly 20 years at Pinghu Coal Mine (
) of Fengcheng Mining Bureau (
) where he held various positions and gained extensive engineering experience. His responsibilities ranged from resolving the technical malfunctions and participating in the
design and installation work of coal mining-related projects, overseeing coal mine operations, establishing and enhancing the relevant internal regulations and policies, to upgrading the
mining-related technologies. Mr. Liao obtained his secondary vocational school's diploma in electromechanics from Jiangxi Coal Industry
- *
- Correspondence
education means a distance learning course that aims to deliver education to students who are not physically "on site" in a traditional
classroom or campus. The student may take courses online or by correspondence with teachers. The correspondence education offered by institutions are accredited by the Ministry of Education
of PRC.
230
Table of Contents
School (
) in July 1983. Mr. Liao graduated, as a correspondence student (
), from Huainan Mining College (
) with a junior college's
diploma in mining electromechanics in December 1993. He was accredited as a senior engineer by the Title Affairs Office of Jiangxi Province (
) in February 2005. Mr. Liao, together with three other fellows, was awarded the first prize at a science conference in August 2003 by Fengcheng Mining
Bureau (
) in recognition of his advocating improvements to certain coal mining techniques. Mr. Liao has not held any directorship in
any publicly-listed companies in the three
years preceding the Latest Practicable Date.
Mr. CAI Zhenghui (
), aged 44, was appointed as the deputy chief engineer and the head of the ventilation and safety department of Guizhou Puxin in March 2012. Mr. Cai has
more than 20 years of experience in coal production. He has been the head of the safety production technology department of Guizhou Puxin since March 2010. He served as the head of the
safety production technology department of Guizhou Yongfu from September 2008 to March 2010. Mr. Cai's roles in Guizhou Puxin and Guizhou Yongfu are similar and both relate to
mining operations and technology. He is responsible for reviewing and supervising the implementation of the annual coal production plans, and maintaining coal mine quality standards. He was also the
head of the safety and technology department of Jiang Coal Guizhou Mining Group Co., Ltd. (
) between the period of
February 2008 and September 2008, and was in charge of the safety management affairs, the coordination of periodic safety inspections and
the handling of mine accidents. From July 2006 to February 2008, Mr. Cai was the chief engineer of Sanjia coal mine (
) in
Zhijin county, Guizhou province. He was also in charge of mining technology affairs, the implementation of the annual production plans and safety technologies and
measures, as well as onsite management, inspection and supervision. Prior to that, Mr. Cai had worked at Jianxin coal mine (
) owned by
Fengcheng Mining Bureau of Jiangxi Province (
) from July 1992 to July 2006, serving as a technician, engineer and managing
engineer from July 1992 to August 2005 and as the head of the
production technology division from August 2005 to July 2006. During such period, he undertook a series of responsibilities relating to the geology of the coal mine, including carrying
out geological exploration and tackling mining-related geological hazards. Mr. Cai graduated from Jiaozuo Mining College (
) in Henan
province with a bachelor's degree in engineering in July 1992, and was accredited as an engineer by the Professional Titles Reform Work Leading Group of
Jiangxi Province (
) in June 1998. Mr. Cai has not held any directorship in any publicly-listed companies in the three years
preceding the Latest Practicable Date.
Mr. TENG Biao (
), aged 48, was appointed as the deputy chief engineer of Guizhou Puxin in February 2012. Mr. Teng has
more than 25 years of experience in the coal mining industry. Mr. Teng worked in Guizhou Xiangneng Industry Co., Ltd (
)
("Xiangneng Industry"), a conglomerate dedicated in coal mining related business, from April 2007 to February 2012. He was appointed as a senior engineer of
Guizhou Xiangneng Mining Group (
) ("Xiangneng Mining"), a subsidiary of Xiangneng Industry, in June 2011. He was appointed as the
deputy chief
- *
- Correspondence
education means a distance learning course that aims to deliver education to students who are not physically "on site" in a traditional
classroom or campus. The student may take courses online or by correspondence with teachers. The correspondence education offered by institutions are accredited by the Ministry of Education
of PRC.
231
Table of Contents
engineer of Guizhou Xiangneng Industry Co., Ltd. (
) ("Xiangneng Industry"), in August 2010 and its head of
the quality supervision department in February 2009 as well as its head of the audit department in
March 2008. During his employment with Xiangneng Mining and Xiangneng Industry, Mr. Teng's responsibilities varied from auditing of projects, project quality supervision, project
acceptance inspection and the operation of electromechanical transportation technology. From July 1985 to February 2007, Mr. Teng worked at Hunan Baisha
Industry Co., Ltd. (
), a coal mining conglomerate, taking a number of positions, including a technician, the head of the
machinery and electricity team, the deputy head of the production division,
a deputy mining manager and a department head. During such period, Mr. Teng was assigned various responsibilities, including electromechanical transportation safety supervision as well as the
design of certain electricity projects.
In particular, Mr. Teng accomplished the modification of the safety system and the standardization of the safety quality requirements for the mines. Mr. Teng graduated from Hunan Coal
Industry School (
) with a secondary vocational school's diploma in electromechanical mining in July 1985, and obtained a bachelor's
degree in business management as a part-time student
from Hunan Economic Management Cadre College (
) in June 2004. He was also accredited as a senior engineer by the Department of
Personnel of Hunan Province (
) in December 2001. Mr. Teng was named the Excellent Personnel of Safe Production for the Year 1986
(1986
) by the Coal Industry Bureau of Hunan Province (
) and Coal Trade Union of Hunan Province (
) in February 1987. Mr. Teng has not held any directorship in any publicly-listed companies in the three years preceding the Latest
Practicable Date.
Mr. LAN Xiaosheng (
), aged 44, was appointed as the head of the infrastructure department of Guizhou Puxin in September 2012. Mr. Lan has more than 20 years of
experience in the coal mining industry. He has been the deputy head of Dayun Coal Mine since September 2012 and is mainly responsible for project construction management and project investment
management. He was the deputy head of the infrastructure department of Guizhou Puxin from August 2011 to September 2012. He served as an engineer of the infrastructure department of
Guizhou Puxin from March 2010 to August 2011. He also served as an engineer in the infrastructure department of Guizhou Yongfu from April 2009 to January 2010. During his
employment with Guizhou Puxin and Guizhou Yongfu, Mr. Lan's responsibilities included investment budget estimation and review, construction management and project acceptance inspections. He was
an auditor of Yinggangling Mining Bureau (
) from October 2004 to February 2009 and the person in charge of the project department
of an affiliated unit of Yinggangling Mining Bureau from April 2003
to October 2004. During the period between January 1995 and March 2003, Mr. Lan worked at Taihua Corporation of Yinggangling Mining Bureau (
), a coal mine contractor, serving as the head of the infrastructure construction team from January 1998 to March 2003, and a construction worker, an estimator
from January 1995 to December 1997. During
this period, Mr. Lan's responsibilities varied from project construction management to project budgeting. Prior to that, he had worked as a technician at Fenglin coal mine (
) of Yinggangling Mining Bureau (
) from August 1990 to April 1994 and was responsible for
mining ventilation and gas-related mining technologies. He obtained a secondary vocational school's
diploma in mine ventilation and safety in July 1990 from Jiangxi Coal Industry College (
). He studied at Xiangtan Mining College
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(
) from April 1994 to February 1995, and was granted a junior college's diploma in industrial and civil
construction in March 1995. Mr. Lan was accredited as an engineer by the Professional Technology Committee of Yinggangling Mining Bureau (
) in December 1998. Mr. Lan obtained the National Certification of Construction Cost Estimation Qualification (
) from the Construction Bureau of Jiangxi Province (
) in May 2007. He was also accredited as a state certified supervision engineer by the Ministry of Housing and Urban-Rural Development of the PRC (
) in January 2009, and a state certified constructor by the Ministry of Construction of the PRC (
) in December 2009. Mr. Lan has not held any directorship in any publicly-listed companies in the three years preceding the Latest Practicable Date.
Mr. WU Ziping (
), aged 55, was appointed as the head of the safety and inspection department of Guizhou Puxin in May 2012. Mr. Wu has more than 35 years of
experience in the coal mining industry. He has been the deputy head of the production and technology department of Guizhou Puxin from March 2012 to May 2012. He worked as the deputy
general commander and the chief engineer of Yongsheng Coal Mine from May 2009 to December 2011 and focused on technology management during coal mine construction. He was the deputy head
of the construction general command of Dayun Coal Mine from October 2008 to May 2009 in charge of safe production and technology management. From April to October 2008,
Mr. Wu was an engineer in the production and technology department of Jiangxi Coal Group (Guizhou) Mining Co., Ltd. (
), a
coal mining company. His responsibilities included providing assistance in the geological and surveying work. Prior to that, from April 2006 to April 2008,
he was the coal mine manager and chief engineer of Yingjiao coal mine (
) in Zhijin county, Guizhou province and was mainly responsible for
safe production and mining technology upgrades. Mr. Wu worked at Pinghu coal mine (
) of Fengcheng Mining Bureau of Jiangxi Province (
) from December 1976 to March 2006, during which his working scope covered mine extraction, mine
production and mine measurement, and his last position was the head of the production section. Mr. Wu graduated from China University of Mining and Technology (
) with a junior college's degree in surveying in July 1990. In addition, Mr. Wu was accredited as an engineer by Jiangxi Coal Industry Bureau (
) in September 2000. Mr. Wu has received a number of awards for his collaborative research and achievements in coal mining related technologies, including
research conducted jointly with two other fellows in relation to coal mining sinking which was awarded the third prize in a science conference held in 2003 by Fengcheng Mining Bureau (
) and achievements with other fellows relating to coal mining under certain geological conditions which were awarded the premium prizes of scientific advance achievements by
Jiangxi Coal Group Co., Ltd. (
) and Fengcheng Mining Bureau (
) in June 2005 and December 2005, respectively. Mr. Wu has not held any directorship in any publicly-listed companies in the three years preceding the
Latest Practicable Date.
Mr. CHENG Wenkun (
), aged 40, was appointed as the deputy head of the ventilation and safety department and the head of gas research center of Guizhou Puxin in March 2012.
Mr. Cheng has more than 20 years of experience in the coal mining industry. He served as an engineer of the ventilation and safety department of Guizhou Puxin from June 2010 to
February 2012, during which he supervised the preliminary construction of the gas sampling system and standard reaching system for certain coal mines of Guizhou Puxin. Before joining our
Company, Mr. Cheng occupied various positions in a number of coal mining companies. He served as the deputy head of the ventilation and
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Table of Contents
safety department of Hidili Industry (China) Group Co., Ltd., a subsidiary of Hidili Industry International Development Ltd., a Hong Kong-listed coal
mining company, from August 2008 to May 2010. During such period, he provided technology support to ensure the safe production of the relevant coal mines. He worked at Jianxin coal mine
(
) of Fengcheng Mining Bureau of Jiangxi Province (
) from July 1993 to August 2008, serving as the deputy section head from May 2006 to August 2008, the chief technician from
October 2002 to April 2006 and a technician from July 1993 to October 2002, respectively. During such period, Mr. Cheng was assigned various responsibilities
including the prevention of coal and gas outburst. Mr. Cheng graduated from Jiangxi Coal Industry School (
) with a secondary
vocational school's diploma in ventilation and safety in July 1993. He was accredited
as a ventilation engineer by the Professional Titles Reform Work Leading Group of Jiangxi Coal Group Corporation (
) in November 2009.
He was also accredited as a state certified safety engineer by the State Administration of Work Safety (
) in October 2007.
Mr. Cheng has not held any directorship in any publicly-listed companies in the three years preceding the Latest Practicable Date.
Mr. JIA Zhigang (
), aged 50, was appointed as the deputy general manager of Guizhou Puxin in January 2013 and is responsible for overseeing the licenses and permits department and
the supply and sales department of Guizhou Puxin. Mr. Jia has more than five years of experience in the coal mining industry. He served as the head of the department of public relations of
Guizhou Puxin from March 2011 to December 2012 and he also took the role as the assistant general manager of Guizhou Puxin from March 2010 to January 2013. He was the
assistant general manager of Guizhou Yongfu from September 2008 to March 2010. He has been a director of certain subsidiaries of the Company, namely Bijie Feishang since
September 2010, Yangpu Dashi since August 2010, Baiping Mining since March 2009 and Guizhou Yongfu since July 2008. From November 2006 to July 2008, he worked
as a manager of the president's office of Feishang Enterprise. During the period from May 1985 to November 2006, Mr. Jia served as an engineer in Luoyang Nonferrous Metals
Processing and Design Research Institute (
). Mr. Jia graduated from the Junior College affiliated to such institute with a junior
college's diploma in metallurgical machinery in January 1985. He obtained
the qualifications for standardization personnel from the State Bureau of Technical Supervision (
) in December 1994. Mr. Jia has
not held any directorship in any listed public companies in the three years preceding the Latest Practicable Date.
Mr. LIN Quanlong (
), aged 33, was appointed as the head of the licenses and permits department of Guizhou Puxin in March 2013. Mr. Lin has more than 10 years of
experience in the coal mining industry. Mr. Lin served as the deputy head of public relations department of Guizhou Puxin from March 2012 to December 2012. Mr. Lin served
as the deputy managing engineer of the public relations department of Guizhou Puxin from March 2010 to February 2012. He has been a director of Xinsong Coal and Linjiaao Coal since
February 2011 and January 2011, respectively. From November 2008 to March 2010, he served as the deputy managing engineer of Guizhou Dayun. He worked as a geology engineer
in the project management department of Guizhou Zhongshui Construction Management Co., Ltd. (
), a water conservancy and
hydropower project management company, being responsible for the management of coal mining projects, from March 2006 to October 2008.
From July 2003 to March 2006,
he served as a geology engineer in the production and technology department of the Qinghai Coal Geological Investigation Institute (
), a
governmental body engaging in coal exploration, responsible for the
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Table of Contents
geological
exploration work. Mr. Lin graduated from Jilin University (
) with a bachelor's degree in geological mining inspection in
July 2003. He was accredited as an engineer by Guizhou Provincial Personnel Exchange Service Center (
) in November 2008 and also as a certified safety engineer by the Ministry of Human and Social Security of the PRC Resources (
) together with the State Administration of Work Safety (
) in February 2009. Mr. Lin has not held any directorship in any publicly-listed companies in the three years preceding the Latest Practicable Date.
Mr. WU Quanyi (
), aged 38, was appointed as the head of the supply and sales department of Guizhou Puxin in March 2010. Mr. Wu has more than five years of experience in
the coal mining related industry. He served as the head of Guizhou Yongfu's supply and sales department from September 2008 to March 2010. Mr. Wu was the manager in the sales
department of Hubei Yongfu Investment Co., Ltd. (
), a coal trading company, from May 2005 to September 2008. During
the period from July 1999 to April 2005, Mr. Wu served as a manager of the
sales departments in three private companies as well as a
salesperson in a coal trading company. Mr. Wu obtained his bachelor's degree in International Economics and Trade from Fudan University (
) in July 2007 by attending its online courses. He was awarded a junior college's diploma in enterprise public relation and sales by Wuhan University (
) in June 2000. Mr. Wu has not held any directorship in any publicly-listed companies in the three years preceding the Latest Practicable Date.
COMPANY SECRETARY
Our company secretary is Mr. Yue Ming Wai Bonaventure, who is also our chief financial officer. See
"— Senior Management".
BOARD COMMITTEES
We have established the following four committees in our Board: an audit committee, a remuneration committee, a nomination committee
and a corporate social responsibility committee. The committees operate in accordance with the terms of reference established by our Board.
Audit committee
We have established an audit committee with written terms of reference in compliance with Rule 3.21 of the Listing Rules and
paragraph C3 of the Corporate Governance Code as set forth in Appendix 14 of the Listing Rules. The primary duties of the audit committee are to assist our Board to provide an
independent review of the effectiveness of the financial reporting process, internal control and risk management.
Our
audit committee consists of three independent non-executive Directors, Mr. Huang Zuye, Mr. Lo Kin Cheung and Mr. Gu Jianshe. Mr. Lo Kin Cheung, who has
professional qualifications in accountancy, is the chairman of the audit committee.
The
responsibilities of our audit committee include, among others: appointing and overseeing the work of our independent auditors and pre-approving all non-audit services to be provided
by our
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Table of Contents
independent
auditors; reviewing our annual and interim financial statements, earnings releases, critical accounting policies and practices used to prepare financial statements, alternative treatments
of financial information, the effectiveness of our disclosure controls and procedures and important trends and developments in financial reporting practices and requirements; reviewing the planning
and staffing of internal audits, the organization, responsibilities, plans, results, budget and staffing of our internal audit team and the quality and effectiveness of our internal controls;
reviewing our risk assessment and management policies; and establishing procedures for the treatment of complaints received by us regarding accounting, internal accounting controls, auditing matters,
potential violations of law and questionable accounting or auditing matters.
Remuneration committee
We have established a remuneration committee with written terms of reference in compliance with Rule 3.25 of the Listing Rules
and paragraph B1 of the Corporate Governance Code as set forth in Appendix 14 to the Listing Rules. The primary duties of the remuneration committee are to consider and recommend to the
Board the emoluments and other benefits paid by us to our Directors and to assess the appropriateness of the nature and amount of emoluments of such senior management on a periodic basis by reference
to relevant employment market conditions with the overall objective of ensuring maximum Shareholder benefit from the retention of talented individuals.
Our
remuneration committee consists of three independent non-executive Directors, Mr. Lo Kin Cheung, Mr. Huang Zuye and Mr. Gu Jianshe, and two executive Directors,
Mr. Li Feilie and Mr. Han Weibing. Mr. Gu Jianshe is the chairman of the remuneration committee.
The responsibilities of our remuneration committee include, among others: approving and overseeing the total compensation package for
our executive officers, evaluating the performance of and determining and approving the compensation to be paid to our senior management; reviewing and making recommendations to our Board with respect
to Directors' compensation, including equity-based compensation; administering and periodically reviewing and making recommendations to our Board regarding the long-term incentive compensation or
equity plans made available to our Directors, employees and consultants; and reviewing and making recommendations to our Board regarding executive compensation philosophy, strategy and principles and
preparing annual reports on the compensation of our senior management.
Nomination committee
We have established a nomination committee with written terms of reference in compliance with paragraph A5.2 of the Corporate
Governance Code as set forth in Appendix 14 to the Listing Rules. The primary duties of the nomination committee are to formulate the nomination procedures and standards for candidates
for Directors and senior management, conduct preliminary review of the qualifications and other credentials of the candidates for Directors and senior management, and recommend suitable candidates for
Directors and senior management to the Board.
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Table of Contents
Our
nomination committee consists of three independent non-executive Directors, Mr. Lo Kin Cheung, Mr. Huang Zuye and Mr. Gu Jianshe, and two executive Directors,
Mr. Li Feilie and Mr. Tam Cheuk Ho. Mr. Huang Zuye is the chairman of the nomination committee.
The
responsibilities of our nomination committee include, among others: reviewing the structure, size and composition of the Board and making recommendations on any proposed changes to
the Board to complement the Company's corporate strategy; identifying individuals suitably qualified to become Board members and making recommendations to the Board on the selection of individuals
nominated for directorships; assessing the independence of independent non-executive Directors; and making
recommendations to the Board on the appointment or re-appointment of Directors and succession planning for Directors.
Corporate social responsibility committee
We have established a corporate social responsibility committee with written terms of reference. The primary purpose of such committee
is to assist the Board in reviewing the policies and overseeing the issues with respect to corporate social responsibility, including workplace quality, occupational health and safety, environmental
protection, operating practices and community involvement.
Our
corporate social responsibility committee consists of two executive Directors, Mr. Wan Huojin and Mr. Han Weibing, and one independent non-executive Director,
Mr. Gu Jianshe. Mr. Gu Jianshe is the chairman of the committee.
The
responsibilities of our corporate social responsibility committee include, among others: considering and formulating the Company's value and strategy as regards corporate social
responsibility; developing and reviewing the Company's corporate social responsibility policies and occupational health and safety standards; identifying corporate social responsibility issues, and
related risks and opportunities that are relevant to the Company's operations; monitoring and overseeing the implementation of the Company's corporate social responsibility policies and practices; and
evaluating and enhancing the Company's corporate social responsibility performance and making recommendation to the Board for improvement.
COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT
Our Directors receive compensation in the form of fees, salaries, allowances, bonuses and other benefits-in-kind, including our
Company's contribution to a pension plan on their behalf.
After
the Listing, our Directors and senior management may receive share options pursuant to our Company's Share Option Scheme. See
Appendix V — "Statutory and General Information — (b) Share Option Scheme".
Total
benefits granted to our Directors and charged to the consolidated income statements in 2010, 2011 and 2012 were approximately RMB17.0 million, nil and nil, respectively.
During the Track Record Period, no remuneration was paid by our Company to our Directors or the five highest paid employees as an inducement to join, or upon joining, our Company. No compensation was
paid to, or
237
Table of Contents
receivable
by, our Directors or past Directors or the five highest paid employees for the Track Record Period for the loss of office as director of any member of our Company or of any other office in
connection with the management of the affairs of any member of our Company. None of our Directors waived any emoluments for 2010, 2011 and 2012.
As
required by PRC regulations, we participate in various defined pension schemes for our employees, including those organized by regional or municipal governments. The employees covered
by such schemes include our Directors and management personnel. The total amounts set aside or accrued by our Company to provide pension, retirement or similar benefits were approximately
RMB0.7 million in 2012.
The
five highest paid employees in 2010, 2011 and 2012 include 1, nil and nil Director, respectively. The aggregate amount of compensation paid by our Company to the five highest paid
employees who are not Directors during the same periods were approximately RMB0.8 million, RMB0.8 million and RMB 1.3 million, respectively. Under the arrangements currently in
force, there was no remuneration payable to, or benefits-in-kind receivable by, the Directors (including three independent non-executive Directors) in respect of the six months ending
June 30, 2013.
In
2012, none of our Directors had any service contracts with the Company that provided for benefits upon termination of employment.
SHARE OPTION SCHEME
We have conditionally approved the Share Option Scheme pursuant to which eligible participants may be granted Options to subscribe for
Shares as incentives to contribute to our Company and to enable our Company to recruit high caliber employees and attract or retain
human resources that are valuable to our Group. A summary of the principal terms of the Share Option Scheme is set out in Appendix V — "Statutory
and General Information — (b) Share Option Scheme".
COMPLIANCE ADVISER
Our Company has agreed to appoint CASH Financial Services Group Limited to be the compliance adviser upon listing in compliance with
Rule 3A.19 of the Listing Rules. Our Company has entered into a compliance adviser's agreement with the compliance adviser, the material terms of which are
as follows:
- (a)
- our
Company will appoint CASH Financial Services Group Limited as the compliance adviser for the purposes of Rule 3A.19 of the Listing Rules for a
period commencing from the Listing Date and ending on the date on which our Company distributes its annual report incorporating financial results for the first full financial year commencing after the
Listing Date in compliance with Rule 13.46 of the Listing Rules;
- (b)
- the
compliance adviser will provide our Company with certain services, including providing our Company with proper guidance and advice as to compliance with
the requirements under the Listing Rules and applicable laws, rules, codes and guidelines;
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Table of Contents
- (c)
- the
compliance adviser will assess the understanding of all new appointees to the Board regarding the nature of their responsibilities and fiduciary duties
as a Director, and to the extent that the compliance adviser forms an opinion that the new appointees' understanding is inadequate, it will discuss the inadequacies with the Board and make
recommendations to the Board regarding appropriate remedial steps such as training;
- (d)
- the
Company will indemnify the compliance adviser, its directors, officers, employees and/or agents from and against any and all costs, expenses, losses,
claims, damages or liabilities incurred by the compliance adviser or its affiliates, directors, officers, employees and/or agents relating to, or arising out of, or in connection with any matter
contemplated in the compliance advisers' agreement, provided that the Company shall not be liable to the extent that any such costs, expenses, losses, claims, damages or liabilities result from the
willful default of the compliance adviser or its affiliates or of any of its directors, officers, employees or agents; and
- (e)
- the
compliance adviser may terminate the compliance advisers' agreement and resign as the compliance adviser if there arises any circumstances, including
regulatory requirements, which in its sole opinion make it inadvisable to continue as the compliance adviser.
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Table of Contents
SUBSTANTIAL SHAREHOLDERS
The following table sets forth information with respect to the ownership of our Shares (i) immediately prior to completion of
the Spin-off and (ii) immediately following completion of the Spin-off, by:
- •
- each Shareholder who directly or indirectly controlled, or is entitled to exercise, or control the exercise of, 5% or more
of our Shares;
- •
- each executive officer;
- •
- each of our Directors; and
- •
- all of our executive officers and Directors as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immediately prior to
completion of the Spin-off |
|
Immediately following
completion of the Spin-off |
|
| Name |
|
Number of
Shares Directly
or Indirectly
Held |
|
Approximate
Percentage of
Share Capital
(%) |
|
Number of
Shares Directly
or Indirectly
Held |
|
Approximate
Percentage of
Share Capital
(%) |
|
CHNR |
|
|
124,554,580 |
(1) |
|
100 |
|
— |
|
|
— |
|
Feishang |
|
|
124,554,580 |
(2) |
|
100 |
|
72,402,965 |
(6) |
|
58.1 |
|
Laitan Investments |
|
|
124,554,580 |
(3) |
|
100 |
|
72,402,965 |
(7) |
|
58.1 |
|
Mr. Li Feilie |
|
|
124,554,580 |
(4) |
|
100 |
|
73,902,965 |
(8) |
|
59.3 |
|
Rosetta Stone Capital Limited(5) |
|
|
— |
|
|
— |
|
11,250,000 |
(9) |
|
9.03 |
|
Mr. Han Weibing |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Wan Huojin |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Tam Cheuk Ho |
|
|
— |
|
|
— |
|
1,409,630 |
(10) |
|
1.13 |
|
Mr. Wong Wah On Edward |
|
|
— |
|
|
— |
|
2,000,000 |
(11) |
|
1.61 |
|
Mr. Lo Kin Cheung |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Huang Zuye |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Gu Jianshe |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Yue Ming Wai Bonaventure |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Hu Lubao |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Liao Diansheng |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Cai Zhenghui |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Teng Biao |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Lan Xiaosheng |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Wu Ziping |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Cheng Wenkun |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Jia Zhigang |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Lin Quanlong |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
Mr. Wu Quanyi |
|
|
— |
|
|
— |
|
* |
|
|
* |
|
All executive officers and Directors as a group (20 persons) |
|
|
— |
|
|
— |
|
77,312,595 |
|
|
62.07 |
|
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Table of Contents
- *
- Shares held in all cases constituted less than 1% of the issued share capital of the Company.
- (1)
- These
Shares are held directly by CHNR.
- (2)
- Feishang
held 58.1% of the equity interests in CHNR. Accordingly, under the SFO, Feishang was deemed to be interested in the 124,554,580 Shares held
by CHNR.
- (3)
- Laitan
Investments held 100% of the equity interests in Feishang. Accordingly, under the SFO, Laitan Investments was deemed to be interested in the
124,554,580 Shares held by CHNR.
- (4)
- Mr. Li
Feilie held 100% of the equity interests in Laitan Investments. Accordingly, under the SFO, Mr. Li was deemed to be interested in the
124,554,580 Shares held by CHNR. Mr. Li also directly held 300,000 CHNR Shares or approximately 1.2% of the equity interests in CHNR.
- (5)
- Based
solely upon its filings with the SEC, we understand that Rosetta Stone Capital Limited was owned 32.5% by Mr. Guozhong Xie, 29.17% by Keen View
Investments Limited, 29.17% by Sun Fortune Investments Limited, 5.83% by Smartmind Investments Limited and 3.33% by Mr. Yuen Kin Lo. Mr. Xie was the sole director of Rosetta Stone
Capital Limited, Ms. Pan Pan Hui was the sole shareholder and director of Keen View Investments Limited, Ms. Yi Mei Liu was a controlling shareholder and director of Sun Fortune
Investments Limited and Ms. Yunxiao Zhao was the sole shareholder and director of Smartmind Investments Limited. We also understand that Rosetta Stone Capital Limited maintained an office at
10th Floor, Center Point, 181 Gloucester Road, Hong Kong.
- (6)
- Feishang
held 14,480,593 CHNR Shares. Based on the distribution of five Shares for every CHNR Share outstanding, Feishang held 72,402,965 Shares
following completion of the Spin-off.
- (7)
- Laitan
Investments held 100% of the equity interests in Feishang. Accordingly, under the SFO, Laitan Investments was deemed to be interested in the
72,402,965 Shares held by Feishang.
- (8)
- Mr. Li
Feilie held 100% of the equity interests in Laitan Investments. Accordingly, under the SFO, Mr. Li was deemed to be interested in the
72,402,965 Shares held by Feishang. Since Mr. Li also directly held 300,000 CHNR Shares immediately prior to completion of the Spin-off, based on the distribution of five Shares
for every CHNR Share outstanding, Mr. Li will directly hold 1,500,000 Shares following completion of the Spin-off.
- (9)
- Rosetta
Stone Capital Limited held 2,250,000 CHNR Shares. Based on the distribution of five Shares for every CHNR Share outstanding, Rosetta Stone
Capital Limited will hold 11,250,000 Shares following completion of the Spin-off.
- (10)
- Mr. Tam
Cheuk Ho held 281,926 CHNR Shares. Based on the distribution of five Shares for every CHNR Share outstanding, Mr. Tam will
hold 1,409,630 Shares following completion of the Spin-off.
- (11)
- Mr. Wong
Wah On Edward held 400,000 CHNR Shares. Based on the distribution of five Shares for every CHNR Share outstanding, Mr. Wong
will hold 2,000,000 Shares following completion of the Spin-off.
Following completion of the Spin-off, we will have an aggregate of 124,554,580 Shares outstanding, based on 24,910,916 CHNR Shares
outstanding on April 24 , 2013. The mailing address for each of the Directors and executive officers is c/o Feishang Anthracite Resources Limited, Room 2205, Shun Tak Centre,
200 Connaught Road Central, Sheung Wan, Hong Kong.
Based
on CHNR's shareholder records as June 25, 2013 (assuming that there are no changes in shareholdings between June 25, 2013 and the Distribution Record Date),
immediately following completion of the Spin-off, our Shares would be held on record by a total of 181 registered shareholders (with more than 300 beneficial shareholders), 146 of whom,
representing approximately 29.15% of the outstanding Shares, were located in the United States. Shares registered in the name(s) of intermediaries were assumed to be held by residents of the
same country where the intermediary was located.
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Table of Contents
Except
as disclosed herein, the Directors are not aware of any person who will, immediately following completion of the Spin-off, have an interest or short position in Shares or
underlying Shares which would be required to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be
interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at our general meetings. Except as otherwise disclosed in this listing
document, as of the Latest Practicable Date, we were not aware of any arrangement which may at a subsequent date result in a change of control of our Company.
242
Table of Contents
SHARE CAPITAL
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
Value (HK$) |
|
Authorized share capital |
|
|
1,000,000,000 |
|
|
10,000,000 |
|
Issued share capital immediately before completion of the Spin-off |
|
|
124,554,580 |
|
|
1,245,545.8 |
|
Issued share capital immediately following completion of the Spin-off |
|
|
124,554,580 |
|
|
1,245,545.8 |
|
ASSUMPTIONS
The above table assumes that the Distribution becomes unconditional and it takes no account of any Shares which may be allotted and
issued pursuant to the general mandate to issue new Shares, or which we may repurchase pursuant to the share repurchase mandate.
RANKING
The Shares are ordinary shares in the share capital of the Company and will rank equally in all respects with each other, and will
qualify for all dividends, income and other distributions declared, made or paid and any other rights and benefits attaching or accruing to the Shares following the completion of the Spin-off.
GENERAL MANDATE TO ISSUE SHARES
The Directors have been granted a mandate to allot, issue and deal with additional Shares and to make or grant offers, agreements and
options which will or might require the exercise of such powers, provided that the aggregate nominal amount of Shares allotted or agreed conditionally or unconditionally to be allotted (whether
pursuant to an option or otherwise) by the Directors other than pursuant to:
- •
- a rights issue; or
- •
- any scrip dividend or similar arrangement providing for the allotment of Shares in lieu of the whole or part of a dividend
on Shares
shall
not exceed the aggregate of:
- •
- 20% of the aggregate nominal amount of the Shares in issue as at the date on which dealings in the Shares commence on the
Stock Exchange; and
- •
- the aggregate nominal amount of the share capital of the Company repurchased by the Company under the share repurchase
mandate (up to a maximum equivalent to 10% of the aggregate nominal amount of Shares in issue as at the date on which dealings in the Shares commence on the Stock Exchange).
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Table of Contents
This
mandate will expire at the earliest of:
- •
- the conclusion of the next annual general meeting of the Company;
- •
- the expiration of the period within which the next annual general meeting of the Company is required by law to be
held; and
- •
- the revocation or variation of the authority given by an ordinary resolution of the Shareholders.
For
further details of this mandate, see the section headed "Further Information About Our Company — Repurchase of our shares" in
Appendix V — "Statutory and General Information" to this listing document.
GENERAL MANDATE TO REPURCHASE SHARES
The Directors have been granted a repurchase mandate to exercise all the powers of the Company to make repurchase of Shares on the
Stock Exchange or on any other stock exchange on which the securities of the Company may be listed and which is recognized by the SFC and the Stock Exchange for this purpose, with a total nominal
value of not more than 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date on which dealings in the Shares commence on the Stock Exchange.
This
repurchase mandate only relates to on-market share repurchases (within the meaning of the Hong Kong Code on Share Repurchases) and will expire at the
earliest of:
- •
- the conclusion of the Company's next annual general meeting;
- •
- the expiration of the period within which the next annual general meeting of the Company is required by law to be
held; and
- •
- the revocation or variation of the authority given by an ordinary resolution of the Shareholders.
For
further details of this repurchase mandate, see the section headed "Further Information About Our Company — Repurchase of our Shares" in
Appendix V — "Statutory and General Information" to this listing document.
UNDERTAKINGS BY THE COMPANY
Pursuant to Rule 10.08 of the Listing Rules, the Company has undertaken to the Stock Exchange that the Company will not issue
any further Shares or securities convertible into equity securities of the Company (whether or not of a class already listed) or enter into any agreement to such issue within
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six
months from the date on which the Company's securities first commence dealing on the Stock Exchange (whether or not such issues of Shares or securities will be completed within six months from the
commencement of dealing), except in the circumstances provided under Rule 10.08 of the Listing Rules.
UNDERTAKINGS BY THE CONTROLLING SHAREHOLDERS
Pursuant to Rule 10.07 of the Listing Rules, each of the Controlling Shareholders has undertaken to the Stock Exchange and to
the Company that except pursuant to the Distribution, it will not and will procure that the relevant registered holder(s) will not:
- (a)
- in
the period commencing on the date by reference to which disclosure of its shareholding is made in this listing document and ending on the date which is
six months from the date on which dealings in the Shares commence on the Stock Exchange, dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or
encumbrances in respect of, any of the Shares in respect of which it is shown by this listing document to be the beneficial owner; and
- (b)
- in
the period of six months commencing on the date on which the period referred to in paragraph (a) above expires, dispose of, or enter into any
agreement to dispose of or otherwise create any options, rights interests or encumbrances in respect of, any of the Shares if, immediately following such disposal or upon the exercise or enforcement
of such options, rights, interests or encumbrances, it would cease to be the controlling shareholder of the Company.
Pursuant
to Note 3 to Rule 10.07(2) of the Listing Rules, each of the Controlling Shareholders has undertaken to the Stock Exchange and to the Company that within the
period commencing on the date by reference to which disclosure of its shareholding in the Company is made in this listing document and ending on the date which is 12 months from the date on
which dealings in the Shares commence on the Stock Exchange, it will:
- (i)
- when
it pledges or charges any Shares beneficially owned by it in favour of an authorized institution (as defined in the Banking Ordinance
(Chapter 155 of the Laws of Hong Kong)) pursuant to Note 2 to Rule 10.07(2) of the Listing Rules, immediately inform the Company of such pledge or charge together with the number
of Shares so pledged or charged; and
- (ii)
- when
it receives indications, either verbal or written, from the pledgee or chargee of any Shares that any of the pledged or charged Shares will be
disposed of, immediately inform the Company of such indications.
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APPENDIX I
ACCOUNTANTS' REPORT OF THE COMPANY
[INTENTIONALLY
OMITTED. SEE "ABOUT THIS INFORMATION STATEMENT" ON PAGE IS-1]
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APPENDIX II
ACCOUNTANTS' REPORT OF GUIZHOU PUXIN
[INTENTIONALLY
OMITTED. SEE "ABOUT THIS INFORMATION STATEMENT" ON PAGE IS-1]
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APPENDIX III
COMPETENT PERSON'S REPORT
[INTENTIONALLY
OMITTED. SEE "ABOUT THIS INFORMATION STATEMENT" ON PAGE IS-1]
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APPENDIX IV
SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND
BRITISH VIRGIN ISLANDS COMPANIES LAW
Set out below is a summary of certain provisions of the Memorandum of Association and Articles of Association of our
Company and of certain aspects of BVI company law.
A. SUMMARY OF THE CONSTITUTION OF THE COMPANY
1. Memorandum of Association
The Memorandum of Association was adopted on December 23, 2013 and states, inter alia, that the liability of members of the Company is limited, that
the objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Act or any other law of
the BVI.
1.1 Classes of Shares
The Company is authorised to issue ordinary shares. Pursuant to the Memorandum of Association, the maximum number of shares that the Company is authorised to
issue is 1,000,000,000 shares with a par value of HK$0.01.
The
Memorandum of Association is available for inspection at the address specified in Appendix VI — "Documents Available for Inspection".
2. Articles of Association
The Articles of Association were adopted on December 23, 2013 and include provisions to the following effect:
2.1 Directors
(a) Power to allot and issue Shares
Subject to the provisions of the Companies Act and the Memorandum of Association and Articles of Association, the unissued shares in the Company (whether forming
part of its original or any increased number of shares the Company is authorised to issue) shall be at the disposal of the Directors, who may offer, allot, grant options over or otherwise dispose of
them to such persons, at such times and for such consideration, and upon such terms, as the Directors shall determine.
Subject
to the provisions of the Articles of Association and to any direction that may be given by the Company in general meeting and without prejudice to any special rights conferred on
the holders of any existing shares or attaching to any class of shares, any share may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or
restrictions, whether in regard to dividend, voting, return applicable to shares or otherwise, and to such persons at such time and for such consideration as the Directors may determine. Subject to
the Companies Act and to any special rights conferred on any members or attaching to any class of shares, any share may, with the sanction of a special resolution of members, be issued on terms that
it is, or at the option of the Company or the holder thereof, liable to be redeemed.
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(b) Power to dispose of the assets of the Company or any subsidiary
The management of the business of the Company shall be vested in the Directors who, in addition to the powers and authorities by the Articles of Association
expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done or approved by the Company and are not by the Articles of Association or the
Business Companies Act expressly directed or required to be exercised or done by the Company in general meeting.
(c) Compensation or payment for loss of office
Payment to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from
office (not being a payment to which the Director is contractually entitled) must first be approved by the Company in general meeting.
(d) Loans to Directors
There are provisions in the Articles of Association prohibiting the making of loans to Directors and associates which are equivalent to the restrictions imposed
by the Companies Ordinance.
(e) Financial assistance to purchase Shares
Subject to all applicable laws, the Company may give financial assistance to Directors and employees of the Company, its subsidiaries or any holding company or
any subsidiary of such holding company in order that they may buy shares in the Company or any such subsidiary or holding company. Further, subject to all applicable laws, the Company may give
financial assistance to a trustee for the acquisition of shares in the Company or shares in any such subsidiary or holding company to be held for the benefit of employees of the Company, its
subsidiaries, any holding company of the Company or any subsidiary of any such holding company (including salaried Directors).
(f) Disclosure of interest in contracts with the Company or any of its subsidiaries
No Director or proposed Director shall be disqualified by his office from contracting with the Company either as vendor, purchaser or otherwise nor shall any such
contract or any contract or arrangement entered into by or on behalf of the Company with any person, company or partnership of or in which any Director shall be a member or otherwise interested be
capable on that account of being avoided, nor shall any Director so contracting or being any member or so interested be liable to account to the Company for any profit so realised by any such contract
or arrangement by reason only of such Director holding that office or the fiduciary relationship thereby established, provided that such Director shall, if his interest in such contract or arrangement
is material, declare the nature of his interest at the earliest meeting of the board of Directors at which it is practicable for him to do so, either specifically or by way of a general notice stating
that, by reason of the facts specified in the notice, he is to be regarded as interested in any contracts of a specified description which may be made by the Company.
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A
Director shall not be entitled to vote on (nor shall he be counted in the quorum in relation to) any resolution of the Directors in respect of any contract or arrangement or any
other proposal in which the Director or any of his associates has any material interest, and if he shall do so his vote shall not be counted (nor is he to be counted in the quorum for the
resolution), but this prohibition shall not apply to any of the following matters, namely:
- (i)
- the
giving to such Director or any of his associates of any security or indemnity in respect of money lent or obligations incurred by him or any of them at
the request of or for the benefit of the Company or any of its subsidiaries;
- (ii)
- the
giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the
Director or any of his associates has himself/themselves assumed responsibility in whole or in part and whether alone or jointly under a guarantee or indemnity or by the giving of security;
- (iii)
- any
proposal concerning an offer of shares, debentures or other securities of or by the Company or any other company which the Company may promote or be
interested in for subscription or purchase where the Director or any of his associates is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;
- (iv)
- any
proposal or arrangement concerning the benefit of employees of the Company or any of its subsidiaries including:
- (A)
- the
adoption, modification or operation of any employees' share scheme or any share incentive scheme or share option scheme under which the Director or any
of his associates may benefit;
- (B)
- the
adoption, modification or operation of a pension or provident fund or retirement, death or disability benefits scheme which relates both to Directors,
their associates and employees of the Company or any of its subsidiaries and does not provide in respect of any Director or any of his associates as such any privilege or advantage not generally
accorded to the class of persons to which such scheme or fund relates; and
- (v)
- any
contract or arrangement in which the Director or any of his associates is/are interested in the same manner as other holders of shares or debentures or
other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company.
(g) Remuneration
The Directors shall be entitled to receive by way of remuneration for their services such sum as shall from time to time be determined by the Directors, or the
Company in general meeting or by the Directors, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided amongst the Directors in such
proportions and in such manner as they may agree, or failing agreement, equally, except that in such event any Director holding office for less than
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the
whole of the relevant period in respect of which the remuneration is paid shall only rank in such division in proportion to the time during such period for which he has held office. Such
remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment
or office.
The
Directors shall also be entitled to be paid all expenses, including travel expenses, reasonably incurred by them in or in connection with the performance of their duties as Directors
including their expenses of travelling to and from board meetings, committee meetings or general meetings or otherwise incurred whilst engaged on the business of the Company or in the discharge of
their duties as Directors.
The
Directors may grant special remuneration to any Director, who shall perform any special or extra services at the request of the Company. Such special remuneration may be made payable
to such Director in addition to or in substitution for his ordinary remuneration as a Director, and may be made payable by way of salary, commission or participation in profits or otherwise as may
be agreed.
The
remuneration of an executive Director or a Director appointed to any other office in the management of the Company shall from time to time be fixed by the Directors and may be by way
of
salary, commission, or participation in profits or otherwise or by all or any of those modes and with such other benefits (including share option and/or pension and/or gratuity and/or other benefits
on retirement) and allowances as the Directors may from time to time decide. Such remuneration shall be in addition to such remuneration as the recipient may be entitled to receive as
a Director.
(h) Retirement, appointment and removal
The Directors shall have power from time to time and at any time to appoint any person to be a Director either to fill a casual vacancy or as an addition to the
existing Directors. Any Director so appointed shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election at that meeting.
The
Company may by resolution of members remove any Director (including a Managing Director or other executive Director) before the expiration of his period of office notwithstanding
anything in the Articles of Association or in any agreement between the Company and such Director (but without prejudice to any claim for compensation or damages payable to him in respect of
the termination of his appointment as Director or of any other appointment or office as a result of the termination of his appointment as Director). The Company may by resolution of members appoint
another person in his place. Any Director so appointed shall hold office during such time only as the Director in whose place he is appointed would have held the same if he had not been removed. The
Company may also by resolution of members elect any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office
only until the next following annual general meeting of the Company and shall then be eligible for re-election. No person shall, unless recommended by the Directors, be eligible for election to the
office of Director at any general meeting unless, during the period, which shall be at least seven days, commencing no earlier than the day after the despatch of the notice of the meeting appointed
for such election and ending no later than seven days prior to the date of such meeting, there has been given
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to
the Secretary of the Company notice in writing by a member of the Company (not being the person to be proposed) entitled to attend and vote at the meeting for which such notice is given of
his intention to propose such person for election and also notice in writing signed by the person to be proposed of his willingness to be elected.
There
is no shareholding qualification for Directors nor is there any specified age limit for Directors.
The
office of a Director shall be vacated:
- (i)
- if
he resigns his office by notice in writing to the Company at its registered office or its principal office in Hong Kong;
- (ii)
- if
an order is made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of
managing his affairs and the Directors resolve that his office be vacated;
- (iii)
- if,
without leave, he is absent from meetings of the Directors (unless an alternate Director appointed by him attends) for 12 consecutive months,
and the Directors resolve that his office be vacated;
- (iv)
- if
he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally;
- (v)
- if
he ceases to be or is prohibited from being a Director by law or by virtue of any provision in the Articles of Association;
- (vi)
- if
he is removed from office by notice in writing served upon him signed by not less than three-fourths in number (or, if that is not a round number, the
nearest lower round number) of the Directors (including himself) for the time being then in office; or
- (vii)
- if
he shall be removed from office by a resolution of members of the Company under the Articles of Association.
At
every annual general meeting of the Company one-third of the Directors for the time being, or, if their number is not three or a multiple of three, then the number nearest to, but not
less than, one-third, shall retire from office by rotation provided that every Director (including those appointed for a specific term) shall be subject to retirement by rotation at least once every
three years. A retiring Director shall retain office until the close of the meeting at which he retires and shall be eligible for re-election thereat. The Company at any annual general meeting at
which any Directors retire may fill the vacated office by electing a like number of persons to be Directors.
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(i) Borrowing powers
The Directors may from time to time at their discretion exercise all the powers of the Company to raise or borrow or to secure the payment of any sum or sums of
money for the purposes of the Company and to mortgage or charge its undertaking, property and assets (present and future) and uncalled amounts owing on the shares in the Company or any
part thereof.
The
rights of the Directors to exercise these powers may only be varied by a special resolution of members of the Company.
(j) Proceedings of the Board
The Directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings and proceedings as they think fit in any part of the
world. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote.
2.2 Alteration to constitutional documents
No alteration or amendment to the Memorandum of Association or Articles of Association may be made except by special resolution of members of the Company.
2.3 Variation of rights of existing shares or classes of shares
If at any time the authorised shares of the Company is divided into different classes of shares, all or any of the rights attached to any class of shares for the
time being issued (unless otherwise provided for in the terms of issue of the shares of that class) may, subject to the provisions of the Companies Act be varied or abrogated either with the consent
in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution of members of the Company passed at a separate
meeting of the holders of the shares of that class. To every such separate meeting all the provisions of the Articles of Association relating to general meetings shall mutatis
mutandis apply, but so that the quorum for the purposes of any such separate meeting and of any adjournment thereof shall be a person or persons together holding
(or representing by proxy or duly authorised representative) at the date of the relevant meeting not less than one-third in nominal value of the issued shares of that class.
The
special rights conferred upon the holders of shares of any class shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be
deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
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2.4 Alteration to the number of shares the Company is authorised to issue
The members of the Company may from time to time by resolution of members increase the maximum number of shares that the Company is authorised to issue.
The
Company may from time to time by resolution of members:
- (a)
- consolidate
and divide all or any of its shares into shares of larger amount than its existing shares. On any consolidation of fully paid shares and
division into shares of larger amount, the Directors may settle any difficulty which may arise as they think expedient and in particular (but without prejudice to the generality of the
foregoing) may as between the holders of shares to be consolidated determine which particular shares are to be consolidated into each consolidated share, and if it shall happen that any person shall
become entitled to fractions of a consolidated share or shares, such fractions may be sold by some person appointed by the Directors for that purpose and the person so appointed may transfer the
shares so sold to the purchaser thereof and the validity of such transfer shall not be questioned, and so that the net proceeds of such sale (after deduction of the expenses of such sale) may either
be distributed among the persons who would otherwise be entitled to a fraction or fractions of a consolidated share or shares rateably in accordance with their rights and interests or may be paid to
the Company for the Company's benefit;
- (b)
- cancel
any shares which at the date of the passing of the resolution of members of the Company have not been taken or agreed to be taken by any person, and
diminish the maximum number of shares the Company is authorised to issue by the number of the shares so cancelled subject to the provisions of the Companies Act; and
- (c)
- sub-divide
its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association, subject nevertheless to the provisions of
the Companies Act, and so that the resolution of members whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the
shares may have any such preferred or other special rights, over, or may have such deferred rights or be subject to any such restrictions as compared with the others as the company has power to attach
to unissued or new shares,
provided
that where shares are consolidated or sub-divided, the aggregate par value of the new shares must be equal to the aggregate par value of the original shares.
2.5 Special resolution — majority required
A "special resolution of members" is defined in the Articles of Association to mean a resolution passed by a majority of not less than three-fourths of the votes
of such members of the Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a
general meeting of which not less than 21 days' notice specifying the intention to propose the resolution as a special resolution has been duly
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given
and includes a special resolution approved in writing by all of the members of the Company entitled to vote at a general meeting of the Company in one or more instruments each signed by one or
more of such members, and the effective date of the special resolution so adopted shall be the date on which the instrument or the last of such instruments (if more than one)
is executed.
In
contrast, a "resolution of members" is defined in the Articles of Association to mean a resolution passed by a simple majority of the votes of such members of the Company as, being
entitled to do so, vote in person or, in the case of corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting held in accordance with the
Articles of Association and includes a resolution approved in writing by all the members of the Company aforesaid.
2.6 Voting rights
Subject to any special rights, privileges or restrictions as to voting for the time being attached to any class or classes of shares, at any general meeting where
a show of hands is allowed, every member present in person (or, in the case of a member being a corporation, by its duly authorised representative) shall have one vote, and on a poll every member
present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy shall have one vote for each share registered in his name in the register of
members of the Company. All members of the Company has a right to attend and speak at any general meeting of the Company.
Where
any member of the Company is, under the Listing Rules, required to abstain from voting on any particular resolution or is restricted to voting only for or only against any
particular resolution, any votes cast by or on behalf of such member in contravention of such requirement or restriction shall not be counted.
In
the case of joint registered holders of any share, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he were solely
entitled thereto; but if more than one of such joint holders be present at any meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more
senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders
stand on the register in respect of the relevant joint holding.
A
member of the Company in respect of whom an order has been made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise
incapable of managing his affairs may vote by any person authorised in such circumstances to do so and such person may vote by proxy.
Save
as expressly provided in the Articles of Association or as otherwise determined by the Directors, no person other than a member of the Company duly registered and who shall have
paid all sums for the time being due from him payable to the Company in respect of his shares shall be entitled to be present or to vote (save as proxy for another member of the Company), or to be
counted in a quorum, either personally or by proxy at any general meeting.
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At
any general meeting a resolution put to the vote of the meeting is to be decided by way of a poll save that the Chairman may, in good faith, allow a resolution which relates purely to
a procedural or administrative matter as prescribed under the Listing Rules to be voted on by a show of hands.
If
a recognised clearing house (or its nominee) is a member of the Company it may authorise such person or persons as it thinks fit to act as its proxy(ies) or representative(s)
at any general meeting of the Company or at any general meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the
number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be entitled to exercise the same rights and powers on behalf of
the recognised clearing house (or its nominee) which he represents as that recognised clearing house (or its nominee) could exercise as if such person were an individual member of the
Company holding the number and class of shares specified in such authorisation.
2.7 Annual general meetings
The Company shall in each year hold a general meeting as its annual general meeting in addition to any other general meeting in that year and shall specify the
meeting as such in the notice calling it; and not more than 15 months (or such longer period as the Stock Exchange may authorise) shall elapse between the date of one annual general
meeting of the Company and that of the next.
2.8 Accounts and audit
The Directors shall cause to be kept such books of account as are necessary to give a true and fair view of the state of the Company's affairs and to show and
explain its transactions and otherwise in accordance with the Companies Act.
The
Directors shall from time to time determine whether, and to what extent, and at what times and places and under what conditions, the accounts and books of the Company, or any of
them, shall be open to the inspection of members of the Company (other than a Director) and no such member (not being a Director) shall have any right to inspect any accounts or books or
documents of the Company except as conferred by the Companies Act or as authorised by a resolution of the Directors.
The
Directors shall, commencing with the first annual general meeting, cause to be prepared and to be laid before the members of the Company at every annual general meeting a profit and
loss account for the period, in the case of the first account, since the incorporation of the Company and, in any other case, since the preceding account, together with a balance sheet as at the date
at which the profit and loss account is made up and a Director's report with respect to the profit or loss of the Company for the period covered by the profit and loss account and the state of the
Company's affairs as at the end of such period, an auditor's report on such accounts and such other reports and accounts as may be required by law. Copies of those documents to be laid before the
members of the Company at an annual general meeting shall not less than 21 days before the date of the meeting, be sent in the
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manner
in which notices may be served by the Company as provided in the Articles of Association to every member of the Company and every holder of debentures of the Company provided that the Company
shall not be required to send copies of those documents to any person of whose address the Company is not aware or to more than one of the joint holders of any shares or debentures.
The
Company shall at any annual general meeting appoint an auditor or auditors of the Company who shall hold office until the next annual general meeting. The removal of an auditor
before the expiration of his period of office shall require the approval of an ordinary resolution of the members in general meeting. The remuneration of the auditors shall be fixed by the Company at
the annual general meeting at which they are appointed provided that in respect of any particular year the Company in general meeting may delegate the fixing of such remuneration to
the Directors.
2.9 Notice of meetings and business to be conducted thereat
An annual general meeting and any extraordinary general meeting called for the passing of a special resolution of members shall be called by notice of not less
than 21 days and any other extraordinary general meeting shall be called by not less than 14 days. The notice shall be inclusive of the day on which it is served or deemed to be served
and of the day for which it is given, and shall specify the time, place and agenda of the meeting, particulars of the resolutions to be considered at the meeting and, in the case of special business,
the general nature of that business. The notice convening an annual general meeting shall specify the meeting as such, and the notice convening a meeting to pass a special resolution of members shall
specify the intention to propose the resolution as a special resolution of members. Notice of every general meeting shall be given to the auditors and all members of the Company (other than those who,
under the provisions of the Articles of Association or the terms of issue of the shares they hold, are not entitled to receive such notice from the Company).
Notwithstanding
that a meeting of the Company is called by shorter notice than that mentioned above, it shall be deemed to have been duly called if it is
so agreed:
- (a)
- in
the case of a meeting called as an annual general meeting, by all members of the Company entitled to attend and vote thereat or their proxies; and
- (b)
- in
the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding
not less than 95 per cent. in nominal value of the shares giving that right.
All
business shall be deemed special that is transacted at an extraordinary general meeting and also all business shall be deemed special that is transacted at an annual general meeting
with the exception of the following, which shall be deemed ordinary business:
- (a)
- the
declaration and sanctioning of dividends;
- (b)
- the
consideration and adoption of the accounts and balance sheets and the reports of the Directors and the auditors and other documents required to be
annexed to the balance sheet;
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- (c)
- the
election of Directors in place of those retiring;
- (d)
- the
appointment of auditors;
- (e)
- the
fixing of, or the determining of the method of fixing of, the remuneration of the Directors and of the auditors;
- (f)
- the
granting of any mandate or authority to the Directors to offer, allot, grant options over or otherwise dispose of the unissued shares of the Company
representing not more than 20 per cent. (or such other percentage as may from time to time be specified in the Listing Rules) in nominal value of its then existing shares and the
number of any securities repurchased pursuant to sub-paragraph (g) below; and
- (g)
- the
granting of any mandate or authority to the Directors to repurchase securities of the Company.
2.10 Transfer of Shares
Transfers of shares may be effected by an instrument of transfer in the usual common form or in such other form as the Directors may approve which is consistent
with the standard form of transfer as prescribed by the Stock Exchange.
The
instrument of transfer shall be executed by or on behalf of the transferor and, unless the Directors otherwise determine, the transferee, and the transferor shall be deemed to remain
the holder of the share until the name of the transferee is entered in the register of members of the Company in respect thereof. All instruments of transfer shall be retained by the Company.
The
Directors may refuse to register any transfer of any share which is not fully paid up or on which the Company has a lien. The Directors may also decline to register any transfer of
any shares unless:
- (a)
- the
instrument of transfer is lodged with the Company accompanied by the certificate for the shares to which it relates (which shall upon the registration
of the transfer be cancelled) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer;
- (b)
- the
instrument of transfer is in respect of only one class of shares;
- (c)
- the
instrument of transfer is properly stamped (in circumstances where stamping is required);
- (d)
- in
the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four;
- (e)
- the
shares concerned are free of any lien in favour of the Company; and
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- (f)
- a
fee of such maximum as the Stock Exchange may from time to time determine to be payable (or such lesser sum as the Directors may from time to time
require) is paid to the Company in respect thereof.
If
the Directors refuse to register a transfer of any share they shall, within two months after the date on which the instrument of transfer was lodged with the Company, send to each of
the transferor and the transferee notice of such refusal.
The
registration of transfers may, on 14 days' notice (or on 6 business days' notice in the case of a rights issue) being given by advertisement published on the
Stock Exchange's website or, subject to the Listing Rules, by electronic communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles of
Association or by advertisement published in the newspapers, be suspended and the register of members of the Company closed at such times for such periods as the Directors may from time to time
determine, provided always that the registration of transfers shall not be suspended or the register closed for more than 30 days in any year (or such longer period as the members of the
Company may by resolution of members determine provided that such period shall not be extended beyond 60 days in any year). In the event that there is an alteration of book closure dates, the
Company shall give at least 5 business days' notice before the announced closure, or the new closure, whichever is earlier. If, however, there are exceptional circumstances (e.g. during
a Number 8 or higher typhoon signal and black rainstorm warning) that render the giving of such publication of advertisement impossible, the Company shall comply with these requirements
as soon as practicable.
2.11 Power of the Company to purchase its own Shares
The Company is empowered by the Companies Act and the Articles of Association to purchase its own shares subject to certain restrictions and the Directors may
only exercise this power on behalf of the Company subject to the authority of its members in general meeting as to the manner in which they do so and to any applicable requirements imposed from time
to time by the Stock Exchange and the SFC of Hong Kong.
The
Directors shall not, unless permitted pursuant to the Companies Act, purchase any of the shares in the Company unless immediately after such purchase the value of the Company's
assets exceeds its liabilities and the Company is able to pay its debts as they fall due.
2.12 Power of any subsidiary of the Company to own Shares
There are no provisions in the Articles of Association relating to the ownership of shares by a subsidiary.
2.13 Dividends and other methods of distributions
Subject to the Companies Act and Articles of Association, the Directors may, by resolution of directors, declare a dividend in any currency if they are satisfied,
on reasonable grounds that, immediately after the payment of the dividend, the value of the Company's assets exceeds its liabilities and the Company is able to pay its debts as they fall due.
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Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends shall (as regards any shares
not fully paid throughout the period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of
the period in respect of which the dividend is paid. For these purposes no amount paid up on a share in advance of calls shall be treated as paid up on the share.
The
Directors may from time to time pay to the members of the Company such interim dividends as appear to the Directors to be justified by the profits of the Company. The Directors may
also pay half-yearly or at other intervals to be selected by them at a fixed rate if they are of the opinion that the profits available for distribution justify the payment.
The
Directors may retain any dividends or other moneys payable on or in respect of a share upon which the Company has a lien, and may apply the same in or towards satisfaction of the
debts, liabilities or engagements in respect of which the lien exists. The Directors may also deduct from any
dividend or other monies payable to any member of the Company all sums of money (if any) presently payable by him to the Company on account of calls, instalments or otherwise.
No
dividend shall carry interest against the Company.
Whenever
the Directors or the Company in general meeting have resolved that a dividend be paid or declared on the shares in the Company, the Directors may further resolve:
(a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up on the basis that the shares so allotted are to be of the same class as the
class already held by the allottee, provided that the members of the Company entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such
allotment; or (b) that the members of the Company entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such
part of the dividend as the Directors may think fit on the basis that the shares so allotted are to be of the same class as the class already held by the allottee. The Company may upon the
recommendation of the Directors by resolution of members resolve in respect of any one particular dividend of the Company that notwithstanding the foregoing a dividend may be satisfied wholly in the
form of an allotment of shares credited as fully paid without offering any right to members of the Company to elect to receive such dividend in cash in lieu of such allotment.
Unless
otherwise directed by the Directors, any dividend, interest or other sum payable in cash to a holder of shares may be paid by cheque or warrant sent through the post addressed to
the registered address of the member of the Company entitled, or in the case of joint holders, to the registered address of the person whose name stands first in the register of members of the Company
in respect of the joint holding or to such person and to such address as the holder or joint holders may in writing direct. Every cheque or warrant so sent shall be made payable to the order of the
holder or, in the case of joint holders, to the order of the holder whose name stands first on the register of members of the Company in respect of such shares, and shall be sent at his or their risk
and the payment of any such cheque or warrant by the bank on which it is drawn shall operate as a good discharge to the Company in respect of the dividend and/or bonus represented thereby,
notwithstanding that it may subsequently appear that the same has been stolen or that any endorsement
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thereon
has been forged. The Company may cease sending such cheques for dividend entitlements or dividend warrants by post if such cheques or warrants have been left uncashed on two consecutive
occasions. However, the Company may exercise its power to cease sending cheques for dividend entitlements or dividend warrants after the first occasion on which such a cheque or warrant is returned
undelivered. Any one of two or more joint holders may give effectual receipts for any
dividends or other moneys payable or property distributable in respect of the shares held by such joint holders.
Any
dividend unclaimed for six years from the date of declaration of such dividend may be forfeited by the Directors and shall revert to the Company.
The
Directors may, with the sanction of the resolution of members of the Company, direct that any dividend be satisfied wholly or in part by the distribution of specific assets of any
kind, and in particular of paid up shares, debentures or warrants to subscribe securities of any other company, and where any difficulty arises in regard to such distribution the Directors may settle
it as they think expedient, and in particular may disregard fractional entitlements, round the same up or down or provide that the same shall accrue to the benefit of the Company, and may fix the
value for distribution of such specific assets and may determine that cash payments shall be made to any members of the Company upon the footing of the value so fixed in order to adjust the rights of
all parties, and may vest any such specific assets in trustees as may seem expedient to the Directors.
2.14 Proxies
Any member of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person who must be an individual as his
proxy to attend and vote instead of him and a proxy so appointed shall have the same right as the member to speak at the meeting. A proxy need not be a member of the Company.
Instruments
of proxy shall be in common form or in such other form that complies with the Listing Rules as the Directors may from time to time approve provided that it shall enable a
member of the Company to instruct his proxy to vote in favour of or against (or in default of instructions or in the event of conflicting instructions, to exercise his discretion in respect of)
each resolution to be proposed at the meeting to which the form of proxy relates. The instrument of proxy shall be deemed to confer authority to vote on any amendment of a resolution put to the
meeting for which it is given as the proxy thinks fit. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to
which it relates provided that the meeting was originally held within 12 months from such date.
The
instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney authorised in writing, or if the appointor is a corporation either under its seal or
under the hand of an officer, attorney or other person authorised to sign the same.
The
instrument appointing a proxy and (if required by the Directors) the power of attorney or other authority (if any) under which it is signed, or a notarially certified
copy of such power or authority, shall be delivered at the registered office of the Company (or at such other place as may be
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specified
in the notice convening the meeting or in any notice of any adjournment or, in either case, in any document sent therewith) not less than 48 hours before the time appointed for
holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not
less than 48 hours before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid
after the expiration of 12 months from the date named in it as the date of its execution. Delivery of any instrument appointing a proxy shall not preclude a member of the Company from attending
and voting in person at the meeting or poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
2.15 Calls on Shares and forfeiture of Shares
The Directors may from time to time make calls upon the members of the Company in respect of any moneys unpaid on their shares (whether on account of the nominal
amount of the shares or by way of premium or otherwise) and not by the conditions of allotment thereof made payable at fixed times and each member of the Company shall (subject to the Company serving
upon him at least 14 days' notice specifying the time and place of payment and to whom such payment shall be made) pay to the person at the time and place so specified the amount called on his
shares. A call may be revoked or postponed as the Directors may determine. A person upon whom a call is made shall remain liable on such call notwithstanding the subsequent transfer of the shares in
respect of which the call was made.
A
call may be made payable either in one sum or by instalments and shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed. The
joint holders of a share shall be jointly and severally liable to pay all calls and instalments due in respect of such share or other moneys due in respect thereof.
If
a sum called in respect of a share shall not be paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day
appointed for payment thereof to the time of actual payment at such rate, not exceeding 15 per cent. per annum, as
the Directors may determine, but the Directors shall be at liberty to waive payment of such interest wholly or in part.
If
any call or instalment of a call remains unpaid on any share after the day appointed for payment thereof, the Directors may at any time during such time as any part thereof remains
unpaid serve a notice on the holder of such shares requiring payment of so much of the call or instalment as is unpaid together with any interest which may be accrued and which may still accrue up to
the date of actual payment.
The
notice shall name a further day (not earlier than the expiration of 14 days from the date of service of the notice) on or before which, and the place where, the payment
required by the notice is to be made, and shall state that in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call was made or instalment
is unpaid will be liable to be forfeited.
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If
the requirements of such notice are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments
and interest due in respect thereof has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends and bonuses declared in respect of the
forfeited shares and not actually paid before the forfeiture. A forfeited share shall be deemed to be the property of the Company and may be sold, re-allotted or otherwise disposed of.
A
person whose shares have been forfeited shall cease to be a member of the Company in respect of the forfeited shares but shall, notwithstanding the forfeiture, remain liable to pay to
the Company all moneys which at the date of forfeiture were payable by him to the Company in respect of the shares, together with (if the Directors shall in their discretion so require)
interest thereon at such rate not exceeding 15 per cent. per annum as the Directors may prescribe from the date of forfeiture until payment, and the Directors may enforce payment thereof
without being under any obligation to make any allowance for the value of the shares forfeited, at the date of forfeiture.
2.16 Inspection of register of members
The register of members of the Company shall be kept in such manner as to show at all times the members of the Company for the time being and the shares
respectively held by them. The register may, on 14 days' notice being given by advertisement published on the Stock Exchange's website, or subject to the Listing Rules, by electronic
communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles of Association or by advertisement published in the newspapers be closed at
such times and for such periods as the Directors may from time to time determine either generally or in respect of any class of shares, provided that the register shall not be closed for more than
30 days in any year (or such longer period as the members of the Company may by resolution of members determine provided that such period shall not be extended beyond 60 days in
any year).
Any
register of members held in Hong Kong shall during normal business hours (subject to such reasonable restrictions as the Directors may impose) be open to inspection by any member of
the Company without charge and by any other person on payment of such fee not exceeding HK$2.50 (or such higher amount as may from time to time be permitted under the Listing Rules) as the
Directors may determine for each inspection.
2.17 Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not
preclude the appointment, choice or election of a chairman which shall not be treated as part of the business of the meeting.
Two
members of the Company present in person or by proxy shall be a quorum provided always that if the Company has only one member of record the quorum shall be that one member present
in person or by proxy.
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A
corporation being a member of the Company shall be deemed for the purpose of the Articles of Association to be present in person if represented by its duly authorised representative
being the person appointed by resolution of the directors or other governing body of such corporation or by power of attorney, authorise such person as it thinks fit to act as its representative at
the relevant general meeting of the Company or at any relevant general meeting of any class of members of the Company.
The
quorum for a separate general meeting of the holders of a separate class of shares of the Company is described in sub-paragraph 2.3 above.
2.18 Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles of Association concerning the rights of minority shareholders in relation to fraud or oppression.
2.19 Procedure on liquidation
If the Company shall be wound up, and the assets available for distribution amongst the members of the Company as such shall be insufficient to repay the whole of
the amounts paid up on the shares in the Company, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members of the Company in proportion to the nominal
value of such shares, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. And if in a winding up the assets available for distribution
amongst the members of the Company shall be more than sufficient to repay the whole of the amounts paid up on the issued shares in the Company at the commencement of the winding up, the excess shall
be distributed amongst the members of the Company in proportion to the nominal value of such shares at the commencement of the winding up on the shares held by them respectively. The foregoing is
without prejudice to the rights of the holders of shares issued upon special terms and conditions.
If
the Company shall be wound up, the liquidator may, with the authority of a special resolution of members of the Company and any other sanction required by the Companies Act, divide
amongst the members of the Company in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such
purpose, set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members of
the Company. The liquidator may, with the like authority or sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the members of the Company as the
liquidator, with the like authority or sanction and subject to the Companies Act, shall think fit, but so that no member of the Company shall be compelled to accept any assets, shares or other
securities in respect of which there is a liability.
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2.20 Untraceable members
The Company shall be entitled to sell any shares of a member of the Company or the shares to which a person is entitled by virtue of transmission on death or
bankruptcy or operation of law if: (i) all cheques or warrants, not being less than three in number, for any sums payable in cash to the holder of such shares have remained uncashed for a
period of 12 years; (ii) the Company has not during that time or before the expiry of the three month period referred to in (iv) below received any indication of the whereabouts
or existence of the member or person entitled to such shares by death, bankruptcy or operation of law; (iii) during the 12 year period, at least three dividends in respect of the shares
in question have become payable and no dividend during that period has been claimed by the member; and (iv) upon expiry of the 12 year period, the Company has caused an advertisement to
be published in the newspapers or subject to the Listing Rules, by electronic communication in the manner in which notices may be served by the Company by electronic means as provided in the Articles
of Association, giving notice of its intention to sell such shares and a period of three months has elapsed since such advertisement and the Stock Exchange has been notified of such intention. The net
proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds it shall become indebted to the former member for an amount equal to such
net proceeds.
B. SUMMARY OF BVI COMPANY LAW AND TAXATION
1 Introduction
The Companies Act is derived, to a large extent, from English corporate legislation, although there are significant differences between
the Companies Act and English corporate legislation. Set out below is a summary of certain provisions of the Companies Act, although this summary does not purport to be a complete review of all
matters of corporate law and taxation which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar.
2 Incorporation
The Company was incorporated in the BVI as BVI Business Company on January 6, 2010 under the Companies Act. The Company is
required to pay an annual fee to the Registrar of Corporate Affairs in the BVI which is based on the number of shares the company is authorised to issue.
3 Shares
One of the major features of the Companies Act is that the concept of share capital has been abolished.
Instead,
a company limited by, or otherwise authorised to issue shares, can now simply state in its memorandum of association the maximum number and classes of shares that the company is
authorised to issue. Companies may also divide their shares (including those shares already in issue) into a larger number of shares or combine them into a smaller number of shares in the same class
or series, provided that the maximum number of shares the company is permitted to issue is not exceeded. On any such division or combination of shares the aggregate par value (if any) of the
new shares must be equal to the aggregate par value of the original shares.
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The
directors of a company can, at their discretion, issue shares in registered or bearer form (although in order to issue bearer shares there must be an express authorisation in the
memorandum of association and such bearer shares must be held by an approved custodian) for such consideration and on such terms as they may determine.
Shares
can be issued for consideration in any form, provided such consideration is not less than par value where the share is a par value share.
If
so authorised by its memorandum of association, a company can issue more than one class of shares and, if so, the memorandum of association must also specify the rights, privileges,
restrictions and conditions which attach to each class.
The
Companies Act provides that companies may issue redeemable shares, shares with no rights, limited rights or preferential rights to share in distributions, or shares with no or
special or limited or conditional voting rights. They may also, subject to their memorandum of association and articles of association, issue bonus shares, partly or nil paid shares, and fractional
shares.
The
Companies Act provides that a company may purchase, redeem or otherwise acquire its own shares, either in accordance with the procedure set out in the Companies Act, or any other
procedure as provided for in the memorandum of association and articles of association of the company.
Under
the provisions in the Companies Act, the directors may make an offer for the company to purchase, redeem or otherwise acquire shares in the company provided that the offer is
either (a) to all shareholders and would, if successful, leave the relative voting and distribution rights unaffected, or (b) to one or more shareholders and consented to in writing by
all shareholders, or is otherwise permitted by the memorandum of association or articles of association. Where the offer is to one or more shareholders, the directors must pass a resolution to the
effect that in their opinion the purchase, redemption or other acquisition would benefit the remaining shareholders, and the proposed offer is fair and reasonable to the company and the remaining
shareholders.
Where
an acquisition by a company of its own shares would be treated as a distribution, the conditions imposed on distributions (detailed in paragraph 5 below) must be met. The
purchase, redemption or other acquisition by a company of its own shares is not deemed to be a distribution where it is effected pursuant to, inter alia, a right of a shareholder to have his
shares redeemed or exchanged for money or other property of the company or where the share is redeemable at the option of the company.
4 Financial Assistance
There is no statutory restriction in the BVI on the provision of financial assistance by a company for the purchase of, or subscription
for, its own or its holding company's shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of due care, skill and
diligence that they are acting in good faith, for a proper purpose and in the interests of the company, that such assistance can be given.
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5 Dividends and distributions
The directors of a company may only declare a distribution by the company if they are satisfied, on reasonable grounds, that the
company will, immediately after the distribution, satisfy the solvency test set out in section 57(1) of the Companies Act. A company satisfies the solvency test if the value of its assets
exceeds its liabilities and it is able to pay its debts as they fall due.
6 Shareholders' Remedies
The Companies Act has introduced a series of remedies available to shareholders. Where a company engages in activity which breaches the
Companies Act or the company's memorandum of association and articles of association, the court can issue a restraining or compliance order. Shareholders can also bring derivative, personal and
representative actions under certain circumstances. The traditional English basis for shareholders' remedies has also been incorporated into the Companies
Act — where a shareholder of a company considers that the affairs of the company have been, are being or are likely to be conducted in a manner likely to be
oppressive, unfairly discriminating or unfairly prejudicial to him, he may apply to the court for an order on such conduct.
7 Mergers and Consolidations
Under the Companies Act two or more companies, each a "constituent company", may merge or consolidate.
A
merger involves merging two or more companies into one of the constituent companies that will remain as the surviving company and a consolidation involves two or more companies
consolidating into a new company. Subject to the memorandum of association and articles of the company a merger
or consolidation must be authorised by a resolution of shareholders of every class of shares entitled to vote on the merger.
There
are differing procedures depending on the type of merger that is taking place. Under the Companies Act a merger may occur between any of
the following:
- (a)
- Two
or more companies incorporated under the Companies Act;
- (b)
- One
or more companies incorporated under the Companies Act and one or more companies incorporated under the laws of a jurisdiction outside the BVI where the
BVI company is the surviving entity;
- (c)
- One
or more companies incorporated under the Companies Act and one or more companies incorporated under the laws of a jurisdiction outside the BVI where the
foreign company is the surviving entity;
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- (d)
- A
parent company and one or more of its subsidiaries where the companies are incorporated under the Companies Act;
- (e)
- A
parent company and one or more of its subsidiaries where one or more of the companies are incorporated under the Companies Act, one or more are
incorporated under the laws of a jurisdiction outside the BVI and where the BVI company is the surviving company; or
- (f)
- A
parent company and one or more if its subsidiaries where one or more of the companies are incorporated under the Companies Act, one or more are
incorporated under the laws of a jurisdiction outside the BVI and where the foreign company is the surviving entity.
Under
the Companies Act, a shareholder of a company is entitled to payment of the fair value of his shares upon dissenting from:
- (a)
- A
merger, if the company is a constituent company, unless the company is the surviving company and the shareholder continues to hold the same or
similar shares;
- (b)
- A
consolidation, if the company is a constituent company.
The
Companies Act sets out the procedure that must be followed in effecting dissenters' rights. Ultimately, if the company and the dissenter fail to agree on the price to be paid for the
shares owned by the dissenter, then the statutory procedure provides that the fair value of the shares owned by the dissenter is fixed by three appraisers.
8 Redemption of minority shares
Under the Companies Act and subject to the memorandum of association or articles of association of a company, shareholders of a company
holding 90 per cent of the votes of the outstanding shares entitled to vote; and shareholders of a company holding 90 per cent of the votes of the outstanding shares of
each class of shares entitled to vote as a class, may give a written instruction to the company directing it to redeem the shares held by the remaining shareholders. Upon receiving this direction, the
company must redeem the shares it has been directed to redeem and must give written notice to each shareholder stating the redemption price and the manner by which the redemption will
be effected.
The
shareholders having their shares compulsorily redeemed are entitled to receive fair value for their shares and may dissent from the compulsory redemption. The Companies Act sets out
the procedure that must be followed in effecting dissenters' rights. Ultimately, if the company and the dissenter fail to agree on the price to be paid for the shares owned by the dissenter, then the
statutory procedure provides that the fair value of the shares owned by the dissenter is fixed by three appraisers.
9 Disposal of assets
Under the Companies Act and subject to the memorandum of association or articles of association of a company, any sale, transfer,
lease, exchange or other disposition, other than a mortgage, charge or other encumbrance or the enforcement thereof, of more than 50 per cent in value of the assets of the company, if
not made in the usual or regular course of the business carried on by the company, requires the approval of the shareholders.
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The
Companies Act sets out the procedure that must be followed in relation to effecting such a disposal.
10 Accounting and auditing requirements
The Companies Act requires that a company shall cause to be kept proper books of account that (a) are sufficient to show and
explain the company's transactions; and (b) will, at any time, enable the financial position of the company to be determined with reasonable accuracy.
11 Register of shareholders
A BVI Business Company may, subject to the provisions of its articles of association, maintain its principal register of members and
any branch registers at such locations, whether within or outside of the BVI, as its directors may, from time to time, think fit. However either the register of members or a copy of the register of
members of the BVI Business Company has to be kept at the office of its registered agent in the BVI.
There
is no mandatory requirement under the Companies Act for a company to make any filings of shareholder information to the Registrar of Corporate Affairs in the BVI. The names and
addresses of the shareholders are, accordingly, not a matter of public record and are not available for public inspection.
12 Inspection of books and records
Subject to the Companies Act, a shareholder of a company will have general right under the Companies Act to inspect or obtain copies of
the register of members, the register of directors and minutes of meetings and resolutions of members and of those classes of members of which he is a member. However, subject to the company's
memorandum of association and articles of association, the directors may, if they are satisfied that it would be contrary to the company's interests to allow a shareholder to inspect any document
(or part of a document) refuse to permit the shareholder to inspect the document or limit the inspection of the document, including limiting the making of copies or the taking of extracts from
the records.
13 Special resolutions
The Companies Act does not define "special resolution". However a company's memorandum of association and articles of association may
make provisions for varying threshold levels of votes required to pass a resolution and require that certain matters may only be approved if passed by a certain percentage of votes.
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14 Subsidiary owning shares in parent
The Companies Act does not prohibit a BVI company acquiring and holding shares in its parent company. The directors of any subsidiary
making such acquisition must discharge their duties of care and to act honestly and in good faith and in what the director believes to be in the best interests of the company.
Under
the Companies Act:
- (a)
- a
director of a company that is a wholly-owned subsidiary may, when exercising powers or performing duties as a director, if expressly permitted to do so by
the memorandum of association and articles of association of the company, act in a manner which he believes is in the best interests of that company's holding company even though it may not be in the
best interests of the company.
- (b)
- a
director of a company that is a subsidiary, but not a wholly-owned subsidiary, may, when exercising powers or performing duties as a director, if
expressly permitted to do so by the memorandum of association or articles of association of the company and with the prior agreement of the shareholders, other than its holding company, act in a
manner which he believes is in the best interests of that company's holding company even though it may not be in the best interests of the company.
- (c)
- a
director of a company that is carrying out a joint venture between the shareholders may, when exercising powers or performing duties as a director in
connection with the carrying out of the joint venture, if expressly permitted to do so by the memorandum of association or articles of association of the company, act in a manner which he believes is
in the best interests of a shareholder or shareholders, even though it may not be in the best interests of the company.
15 Indemnification
BVI law in general does not limit the extent to which a company's articles of association may provide for indemnification of officers
and directors, subject to the conditions set
out in the Companies Act (e.g. the officer or director has acted honestly and in good faith and in what he believed to be in the best interests of the company and, in the case of criminal
proceedings, that officer or director had no reasonable cause to believe that his conduct was unlawful).
16 Liquidation
A company is placed in liquidation either by an order of the court or by a resolution of directors or shareholders. A liquidator is
appointed whose duties are to collect the assets of the company (including the amount (if any) due from the contributories (shareholders)), settle the list of creditors and discharge the
company's liability to them, rateably if insufficient assets exist to discharge the liabilities in full, and to settle the list of contributories and divide the surplus assets (if any) amongst
them in accordance with the rights attaching to the shares.
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17 Stamp duty on transfers
No stamp duty is payable in the BVI on transfers of shares of BVI companies.
18 Taxation
Companies incorporated or registered under the Companies Act are currently exempt from income and corporate tax. In addition, the BVI
currently does not levy capital gains tax on companies incorporated or registered under the Companies Act.
19 Exchange control
There are no exchange control regulations or currency restrictions in the BVI.
20 General
Maples and Calder, our Company's legal advisers on BVI law, have sent to our Company a letter of advice summarising aspects of BVI
company law. This letter, together with a copy of the Companies Act, is available for inspection as referred to in Appendix VI — "Documents Available for
Inspection". Any person wishing to have a detailed summary of BVI company law or advice on the differences between it and the laws of any jurisdiction with which he/she is more familiar is recommended
to seek independent legal advice.
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APPENDIX V
STATUTORY AND GENERAL INFORMATION
(a) FURTHER INFORMATION ABOUT OUR COMPANY
(A) Incorporation
Our Company was established under the laws of the BVI as a limited liability company on January 6, 2010. Our Company was registered as a non-Hong Kong
company under Part XI of the Companies Ordinance since December 20, 2013 and our place of business in Hong Kong is at Room 2205, Shun Tak Centre, 200 Connaught Road
Central, Sheung Wan, Hong Kong. Mr. Wong Wah On Edward and Mr. Yue Ming Wai Bonaventure have been appointed as the authorized representatives of our Company for the acceptance of service
of process and notices in Hong Kong.
As
our company was incorporated in the BVI, our corporate structure and Articles of Association are subject to the relevant laws and regulations of the BVI. A summary of the relevant
provisions of our Articles of Association and a summary of certain relevant aspects of the laws and regulations of the BVI is set out in
Appendix IV — "Summary of the Constitution of Our Company and British Virgin Islands Companies Law".
(B) Changes in the Share Capital of our Company
Pursuant to the resolutions in writing passed by the Directors on December 6, 2013:
- (a)
- the
authorized share capital of our Company was changed from US$50,000 divided into 50,000 ordinary shares of US$1.00 each to HK$10,000,000 divided
into 1,000,000,000 Shares of HK$0.01 each;
- (b)
- all
issued shares of US$1.00 each were repurchased from CHNR at par and cancelled; and
- (c)
- a
total of 124,554,580 Shares of HK$0.01 each were issued to CHNR for HK$98,380,000.
These
transactions were completed on December 12, 2013.
In
addition, as the date of its incorporation on April 14, 2004, the registered share capital of Guizhou Dayun was RMB1 million. On July 27, 2011, the registered
share capital of Guizhou Dayun was increased to RMB150 million.
Save
as disclosed herein, there has been no alteration in the share capital of any member of our Group during the three-year period immediately preceding the date of this listing
document.
(C) Written Resolutions of the Sole Shareholder Dated December 23, 2013
Pursuant to the resolutions in writing passed by the then sole Shareholder on December 23, 2013:
- (a)
- our
Company approved and adopted our Articles of Association;
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listed
and which is recognized by the SFC and the Stock Exchange for this purpose, was approved, provided that the aggregate nominal amount of the Company's Shares which may be repurchased pursuant to
such approval shall not exceed 10 per cent. of the aggregate nominal amount of the Shares in issue as at the date on which dealings in the Shares commence on the Stock
Exchange; and
for
the purpose of this paragraph:
- (i)
- "relevant
period" means the period from the passing of the resolution until the earliest of:
- a.
- the
conclusion of the next annual general meeting of the Company;
- b.
- the
expiration of the period within which the next annual general meeting of the Company is required by law to be held; and
- c.
- the
revocation or variation of the authority given by ordinary resolution of the Shareholders in general meeting; and
- (ii)
- references
to "Shares" include securities which carry a right to subscribe for or purchase shares.
- (D)
- Repurchase of our Shares
This
section sets out information required by the Hong Kong Stock Exchange to be included in this listing document concerning the repurchase by us of our own securities.
- 1.
- Provisions of the Listing Rules
The
Listing Rules permit companies with a primary listing on the Hong Kong Stock Exchange to repurchase their own securities on the Hong Kong Stock Exchange subject to certain restrictions, the
more important ones of which are summarized below:
- (a)
- Shareholders'
approval
All
proposed repurchase of securities (which, under the Listing Rules and the Companies Ordinance, must be fully paid up in the case of shares) by a company with a primary listing on the Hong Kong
Stock Exchange must be approved in advance by an ordinary resolution of the shareholders, either by way of general mandate or by specific approval of a particular transaction.
- (b)
- Source
of funds
Repurchases
must be funded out of funds legally available for the purpose in accordance with the Memorandum of Association, the Articles of Association and the applicable laws of the British
Virgin Islands. A listed company may not repurchase its own securities on the Hong Kong
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Stock
Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Hong Kong Stock Exchange. Subject to the foregoing, any repurchases by
us may be made out of our funds which would otherwise be available for dividend or distribution or out of the proceeds of a new issue of Shares made for the purpose of the repurchase. Any amount of
premium payable on the purchase over the par value of the Shares to be repurchased must be out of the funds which would otherwise be available for dividend or distribution or from sums standing to the
credit of our share premium account.
- (c)
- Trading
restrictions
The
total number of shares which a listed company may repurchase on the Hong Kong Stock Exchange is the number of shares representing up to a maximum of 10% of the aggregate number of shares in issue.
A company may not issue or announce a proposed issue of new securities for a period of 30 days immediately following a repurchase (other than an issue of securities pursuant to an exercise of
warrants, share options or similar instruments requiring the company to issue securities which were outstanding prior to such repurchase) without the prior approval of the Hong Kong Stock Exchange. In
addition, a listed company is prohibited from repurchasing its shares on the Hong Kong Stock Exchange if the purchase price is 5% or more than the average closing market price for the five preceding
trading days on which its shares were traded on the Hong Kong Stock Exchange. The Listing Rules also prohibit a listed company from repurchasing its securities which are in the hands of the public
falling below the relevant prescribed minimum percentage as required by the Hong Kong Stock Exchange. A company is required to procure that the broker appointed by it to effect a repurchase of
securities discloses to the Hong Kong Stock Exchange such information with respect to the repurchase as the Hong Kong Stock Exchange may require.
- (d)
- Status
of repurchased shares
All
repurchased securities (whether effected on the Hong Kong Stock Exchange or otherwise) will be automatically delisted and the certificates for those securities must be cancelled
and destroyed.
- (e)
- Suspension
of repurchase
A
listed company may not make any repurchase of securities after inside information has come to its knowledge until the information has been made publicly available. In particular, during the period
of one month immediately preceding the earlier of: (i) the date of the board meeting (as such date is first notified to the Hong Kong Stock Exchange in accordance with the Listing Rules)
for the approval of a listed company's results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and (ii) the deadline for
publication of an announcement of a listed company's results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing
Rules) and ending on the date of the results announcement, the listed company may not repurchase its shares on the Hong Kong Stock Exchange other than in exceptional circumstances. In addition, the
Hong Kong Stock Exchange may prohibit a repurchase of securities on the Hong Kong Stock Exchange if a listed company has breached the Listing Rules.
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- (f)
- Reporting
requirements
Certain
information relating to repurchases of securities on the Hong Kong Stock Exchange or otherwise must be reported to the Hong Kong Stock Exchange not later than 30 minutes before the
earlier of the commencement of the morning trading session or any pre-opening session on the following business day. In addition, a listed company's annual report is required to disclose details
regarding repurchases of securities made during the year, including a monthly analysis of the number of securities repurchased, the purchase price per share or the highest and lowest price paid for
all such purchases, where relevant, and the aggregate prices paid.
- (g)
- Connected
persons
A
listed company is prohibited from knowingly repurchasing securities on the Hong Kong Stock Exchange from a "connected person", that is, a director, chief executive or substantial shareholder
of the company or any of its subsidiaries or their associates and a connected person is prohibited from knowingly selling his or her securities to the company.
- 2.
- Reasons for repurchase
The
Directors believe that it is in the best interest of our Company and our Shareholders for the Directors to have general authority from the Shareholders to enable us to repurchase Shares in the
market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only be
made where the Directors believe that such repurchases will benefit our Company and our Shareholders.
- 3.
- Funding of repurchases
In
repurchasing securities, we may only apply funds legally available for such purpose in accordance with the Articles of Association, the Listing Rules and the applicable laws of the British Virgin
Islands. On the basis of our current financial position as disclosed in this listing document and taking into account our current working capital position, the Directors consider that, if the
repurchase mandate were to be exercised in full, it might have a material adverse effect on our working capital and/or our gearing position as compared with the position disclosed in this listing
document. However, the Directors do not propose to exercise the repurchase mandate to such an extent as would, in the circumstances, have a material adverse effect on our working capital requirements
or the gearing levels which in the opinion of the Directors are from time to time appropriate for us.
- 4.
- General
Exercise
in full of the repurchase mandate, on the basis of 124,554,580 Shares in issue after completion of the Spin-off, could accordingly result in up to 12,455,458 Shares being
repurchased by us during the period prior to the earliest of:
- (a)
- the
conclusion of our next annual general meeting;
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- (b)
- the
expiration of the period within which our next annual general meeting is required by the Articles of Association or the Companies Act or any
other applicable laws of the British Virgin Islands to be held; or
- (c)
- the
revocation or variation of the repurchase mandate by an ordinary resolution of the Shareholders in general meeting.
None
of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates currently intends to sell any Shares to us or our subsidiaries. The Directors
have undertaken to the Hong Kong Stock Exchange that, so far as the same may be applicable, they will exercise the repurchase mandate in accordance with the Listing Rules, the Memorandum of
Association, the Articles of Association, the Companies Act and any other applicable laws of the British Virgin Islands.
If,
as a result of a repurchase of Shares, a Shareholder's proportionate interest in the voting rights of us is increased, such increase will be treated as an acquisition for the purpose of the Hong
Kong Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert could obtain or consolidate control of us and become obliged to make a mandatory offer in accordance with
Rule 26 of the Hong Kong Takeovers Code. Save as aforesaid, the Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases
pursuant to the repurchase mandate.
No
connected person has notified us that he or she has a present intention to sell Shares to us, or has undertaken not to do so, if the repurchase mandate is exercised.
(b) SHARE OPTION SCHEME
The following is a summary of principal terms of the Share Option Scheme of our Company conditionally approved by a resolution of the then sole Shareholder passed
on December 23, 2013 (the "Adoption Date"). The terms of the Share Option Scheme are in compliance with the provisions of Chapter 17 of the Listing Rules.
Purpose
The purposes of the Share Option Scheme are to provide incentives to participants to contribute to our Company through the grant of
option(s) to subscribe for Shares ("Options") and to enable our Company to recruit high caliber employees and attract or retain human resources that are valuable to our Group.
Eligibility of participants
Eligible participant ("Eligible Participant") means (a) any employee, director or consultant of the Company or any subsidiary;
or (b) any other person who has contributed to the success of the Listing, in each case, as determined by the Board. The eligibility of an Eligible Participant will be determined by the Board
with reference to his or her past and expected commitment and contribution to the Company and/or the subsidiaries of the Company.
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Conditions of the Share Option Scheme
The Share Option Scheme of our Company shall come into effect on the date on which the following conditions
are fulfilled:
- (a)
- the
passing of the resolution by our sole Shareholder to adopt and approve the Share Option Scheme and to authorise the Board to grant Options pursuant to
the Share Option Scheme and to allot and issue Shares pursuant to the exercise of any Options; and
- (b)
- the
approval of the Listing Committee of the Stock Exchange for the listing of and permission to deal in our Shares to be allotted and issued pursuant to
the exercise of Options in accordance with the terms of the Share Option Scheme; and
- (c)
- the
commencement of the dealing in the Shares on the Stock Exchange.
Maximum number of Shares
The maximum number of Shares in respect of which Options may be granted under the Share Option Scheme is 12,455,458, which is equal to
10% of the issued share capital of our Company as at the Adoption Date, provided, however, that:
- (a)
- the
maximum number of Shares may be "refreshed" with the approval of our Shareholders in a general meeting up to a maximum of 10% of the issued share
capital of our Company at the date of such Shareholders' approval; and
- (b)
- the
total maximum number of Shares which may be issued upon exercise of all outstanding Options granted and yet to be exercised under the Share Option
Scheme and any other share option scheme shall not exceed 30% of the issued share capital of our Company from time to time.
Maximum entitlement of each participant
Unless approved by our Shareholders in a general meeting (with the relevant participant and his associates abstaining from voting), no
participant shall be granted an Option if the total number of Shares issued and to be issued upon exercise of the Options granted to such participant in any 12-month period up to the date of the
latest grant would exceed 1% of the issued share capital of our Company at the time the Option is granted.
The
maximum number of Shares referred to above will be adjusted, in such manner as the auditors for the time being of our Company or an independent financial adviser shall confirm in
writing to the Board in accordance with the provisions relating to adjustment, in the event of any alteration in the capital structure of our Company whether by way of capitalization of profits or
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reserves,
rights issue, consolidation, subdivision or reduction of the share capital of our Company provided that no such adjustment shall be made in the event of an issue of Shares as consideration
in respect of a transaction to which our Company or any of our subsidiaries is a party or an issue of shares pursuant to, or in connection with, any share option scheme, share appreciation rights
scheme or any arrangement for remunerating or incentivizing any employee, consultant or adviser to the Company or any of our subsidiaries.
Offer and grant of Options and option period
On and subject to the terms of the Share Option Scheme, the Board shall be entitled from time to time on any day within 10 years
after the Adoption Date to offer to grant to any participant as the Board may in its absolute discretion select and subject to such conditions (including but not limited to imposition of any
performance target(s) and/or vesting scale) as the Board may think fit an Option to subscribe for such number of Shares (being a board lot or an integral multiple thereof) as the Board may determine
at the subscription price.
An
offer of the grant of an Option shall be made to a participant by letter in such form as the Board may from time to time determine specifying the number of Shares, the subscription
price, any condition (including but not limited to imposition of any performance target(s) and/or vesting scale), the option period in respect of which the offer is made, the date by which the Option
must be accepted being a date not more than 30 days after the offer date and further requiring the participant to undertake to hold the Option on the terms on which it is to be granted and to
be bound by the provisions of the Share Option Scheme. Such offer shall be personal to the participant concerned and shall not be transferable.
The
option period, which is the period during which a grantee may exercise an Option, shall commence on the date on which the offer is accepted and in any event shall end not later than
10 years from the offer date but subject to the early termination provisions of the Share Option Scheme.
Granting Options to connected persons
An offer of the grant of an Option to a Director, chief executive or substantial Shareholder of our Company or any of their respective
associates must be approved by our independent non-executive Directors (excluding any independent non-executive Director who is the grantee of the Options). Where any grant of Options to a substantial
Shareholder or an independent non-executive Director, or any of their respective associates, would result in our Shares issued and to be issued upon exercise of all options already granted and to be
granted (including Options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant (a) representing in aggregate over 0.1% of our
Shares in issue from time to time; and (b) having an aggregate value, based on the closing price of our Shares at the date of each grant, in excess of HK$5.0 million, such further grant
of options must be approved by our Shareholders. All connected persons of our Company must abstain from voting in favor at such general meeting.
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Offer period and number accepted
Any offer of the grant of an Option may be accepted or deemed to have been accepted in respect of less than the number of Shares in
respect of which it is offered provided that it is accepted in respect of a board lot or an integral multiple thereof. To the extent that the offer of the grant of an Option is not accepted within
30 days from the date upon which it is made in the manner indicated in this paragraph, it will be deemed to have been irrevocably declined. An Option shall be deemed to have been granted and
accepted and to have taken effect on the relevant offer date when the duplicate letter comprising acceptance of the offer of the grant of the Option duly signed by the grantee together with a
remittance in favor of our Company of HK$1.0 by way of consideration for the grant thereof is received by our Company within the specified time period. Such remittance shall in no circumstances
be refundable.
Restriction on the time of grant of Options
The Board shall not offer the grant of any Option to any participant after a price sensitive event has occurred or a price sensitive
matter has been the subject of a decision, or after any inside information has come to the knowledge of the Company, until such price sensitive or inside information has been published or disclosed in
accordance with the applicable laws, rules and regulations. In particular, no Option may be offered during the period commencing one month immediately preceding the
earlier of:
- (a)
- the
date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of our
Company's results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and
- (b)
- the
deadline for our Company to publish an announcement of our results for any year or half-year under the Listing Rules, or quarterly or any other interim
period (whether or not required under the Listing Rules),
and
ending on the date of the results announcement.
Minimum holding period, vesting and performance target
On and subject to the terms of the Share Option Scheme, the Board may in its absolute discretion grant an Option to any participant
subject to such conditions (including but not limited to imposition of any vesting and performance target(s) and/or minimum holding period) as the Board may think fit.
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Subscription price
The subscription price in respect of any Option shall be a price determined by the Board and notified to a Share Option Scheme
participant (subject to any adjustments made pursuant to the terms and conditions of the Share Option Scheme) which shall be the higher of:
- (a)
- the
closing price of our Shares as stated in the Stock Exchange daily quotations sheet on the relevant offer date, which must be a business day;
- (b)
- the
average closing price of our Shares as stated in the Stock Exchange's daily quotations sheets for the five trading days immediately preceding the
relevant offer date; and
- (c)
- the
nominal value of our Shares.
Exercise of Option
An Option may be exercised in whole or in part (but if in part only, in respect of a board lot or any integral multiple thereof)
in the manner as set out in Share Option Scheme by the grantee (or his or her legal personal representative(s)) giving notice in writing to our Company stating that the Option is thereby
exercised and specifying the number of Shares to be subscribed. Each such notice must be accompanied by a remittance for the full amount of the aggregate subscription price for our Shares in respect
of which the notice is given. Within 21 days after receipt of the notice and the remittance and, where appropriate, receipt of the auditors' certificate pursuant to Share Option Scheme, our
Company shall allot and issue the relevant Shares to the grantee (or his or her legal personal representative(s)) credited as fully paid and issue to the grantee (or his or her legal
personal representative(s)) a share certificate in respect of our Shares so allotted.
Save
as provided in the Share Option Scheme, the Option may be exercised by the grantee, in accordance with the terms of the grant letter at any time or times during the option period
provided that:
- (a)
- in
the event of the grantee ceasing to be an employee, Director or consultant of our Company or any subsidiary for any reason other than his or her death or
disability or the termination of his or her employment on one or more of the grounds specified in the Share Option Scheme, the grantee may exercise the Option that has vested at the date of cessation
of his or her employment (to the extent not already exercised) within the period of one month following the date of such cessation, which date shall be the last actual working day of his
employment with our Company or the relevant subsidiary whether payment in lieu of notice is made or not (if applicable);
- (b)
- in
the event that the grantee ceases to be an employee, Director or consultant of our Company or any subsidiary by reason of death and none of the events
which would be a ground for termination of his employment under the Share Option Scheme has occurred, the legal personal representative(s) of the grantee shall be entitled within a period of one year
from the date of death (or such longer period as the Board may determine) to exercise the Option in full (to the extent not already exercised);
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- (c)
- in
the event that the grantee ceases to be an employee, Director or consultant of our Company or any subsidiary by reason of disability and none of the
events which would be a ground for termination of his employment under the Share Option Scheme has occurred, for the purposes of Option vesting only, the grantee shall be treated as if his her
employment with the Company or the relevant subsidiary continued for the lesser of: (i) three years after the date of disability; and (b) the remaining term of the Option, and during
such time the Option shall continue to vest and remain exercisable;
- (d)
- if
a general offer (whether by way of take-over offer, share repurchase offer or otherwise in like manner but other than by way of scheme of arrangement) is
made to all the holders of Shares (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or in concert with the offeror)
and such offer becomes, or is declared, unconditional, the grantee shall be entitled to exercise the Option in full (to the extent not already exercised) to its full extent by giving notice to
the Company at any time after the general offer becomes or is declared unconditional and up to the close of such offer;
- (e)
- in
the event a general offer for Shares by way of scheme of arrangement is made by any person to all the Shareholders and has been approved by the necessary
number of Shareholders at the requisite meetings, the Grantee shall be entitled to exercise the Option (to the extent not already exercised) to its full extent by giving notice to the Company
at any time after the meetings whereby the scheme is approved and up to the record date for determining entitlements under such scheme of arrangement;
- (f)
- in
the event a notice is given by the Company to the Shareholders to convene a Shareholders' meeting for the purpose of approving a resolution to
voluntarily wind-up the Company, the Company shall give notice thereof to all the grantees on the same day as it dispatches to the Shareholders the notice convening the meeting and, each grantee shall
be entitled to exercise the Option (to the extent not already exercised) to its full extent by giving notice to the Company, such notice to be given not later than three business days prior to
the date of the proposed meeting. The Company shall as soon as possible and in any event no later than two business days immediately prior to the date of the proposed meeting, allot and issue such
number of Shares to the grantee which falls to be issued on such exercise of the Option, credited as fully paid. With effect from the date two business days prior to the date of such meeting, the
rights of all grantees to exercise their respective Options shall forthwith be suspended. If, for any reason, the resolution for the voluntary winding-up of the Company is not approved by the
Shareholders, the rights of the grantees to exercise their respective Options shall be restored in full, to the extent that they had not been exercised at the date such rights were suspended, as if
such resolution for the voluntary winding-up of the Company had not been proposed by the Company; and
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- (g)
- if,
pursuant to the Companies Act, a compromise or arrangement (other than a scheme of arrangement) between our Company and our Shareholders and/or
creditors is proposed for the purposes of or in connection with a scheme for the reconstruction of our Company or our amalgamation with any other company or companies, our Company shall give notice
thereof to all grantees on the same date as we dispatch to each Shareholder and/or creditor of our Company a notice summoning the meeting to consider such a compromise or arrangement, and thereupon
each grantee shall be entitled to exercise the Option (to the extent not already exercised) to its full extent by giving notice to the Company, such notice to be given not later than three
business days prior to the date of the proposed meeting. The Company shall as soon as possible and in any event no later than two business days immediately prior to the date of the proposed meeting,
allot and issue such number of Shares to the grantee which falls to be issued on such exercise of the Option, credited as fully paid. With effect from the date that is two business days before the
date of such meeting, the rights of all grantees to exercise their respective Options shall forthwith be suspended. The Board shall endeavor to procure that the Shares issued upon the exercise of the
Options in such circumstances shall for the purposes of such compromise or arrangement form part of the issued share capital of the Company on the effective date thereof and that such Shares shall in
all respects be subject to such compromise or arrangement. If, for any reason, such compromise or arrangement is not approved by the relevant court (whether upon the terms presented to the relevant
court or upon any other terms as may be approved by such court), the rights of the grantees to exercise their respective Options shall, with effect from the date of the making of the order by the
relevant court and to the extent they had not been exercised at the date such rights were suspended, be restored in full as if such compromise or arrangement had not been proposed by
the Company.
Ranking of Shares
Voting, dividend, transfer and other rights, including but not limited to rights arising on liquidation of the Company, shall not
attach to the Options themselves. However, the Shares to be allotted upon the exercise of an Option will be subject to all the provisions of the Articles of Association for the time being in force and
will rank pari passu with the fully paid Shares in issue on the date of exercise, and accordingly will entitle the holders to participate in all dividends and other distributions paid or made
on or after the date of exercise other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefor is before the date
of exercise.
Life of Share Option Scheme
Subject to relevant terms of the Share Option Scheme, the Share Option Scheme shall be valid and effective for a period of
10 years commencing on the Adoption Date, after which period no further Options will be offered but the provisions of the Share Option Scheme shall remain in full force and effect to the extent
necessary to give effect to the exercise of any Options granted prior thereto or otherwise as may be required in accordance with the provisions of the Share Option Scheme.
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Administration
The Share Option Scheme of our Company shall be subject to the administration of the Board whose decision (save as otherwise provided)
shall be final and binding on all parties.
Lapse of Options
An Option shall lapse automatically and not be exercisable (to the extent not already exercised) on the
earliest of:
- (a)
- the
expiry of the option period;
- (b)
- the
expiry of any of the periods in relation to the exercise of the Option;
- (c)
- subject
to relevant terms in the Share Option Scheme, the date of the commencement of the winding-up of our Company;
- (d)
- the
date on which the grantee ceases to be an employee, Director or consultant of our Company or any of our subsidiaries by reason of the termination of his
or her employment or service on any one or more of the grounds that he or she has been guilty of serious misconduct, or has committed an act of bankruptcy or has become insolvent or has made any
arrangement or composition with his or her creditors generally, or has been convicted of any criminal offence involving his or her integrity or honesty or (if so determined by the Board or the
board of directors of the relevant subsidiary) on any other grounds on which an employer or principal would be entitled to terminate his or her employment or service at common law or pursuant to any
applicable laws or under the grantee's service contract with our Company or the relevant subsidiary. A resolution of the Board to the effect that the employment or service of a grantee has or has not
been terminated on one or more of the grounds specified above shall be conclusive; and
- (e)
- the
date on which the grantee commits a breach of the terms and conditions in relation to transferability.
Adjustment
In the event of any alteration in the capital structure of our Company whilst any Option remains exercisable, whether by way of
capitalization of profits or reserves, rights issue, consolidation, subdivision or reduction of the share capital of our Company in accordance with applicable laws and regulatory requirements (other
than an issue of Shares as consideration in respect of a transaction to which our Company or any of our subsidiaries is a party or an issue of shares pursuant to, or in connection with, any share
option scheme, share appreciation rights scheme or any arrangement for remunerating or incentivizing any employee, consultant or adviser to the Company or any subsidiary), such corresponding
adjustments (if any) shall be made to:
- (a)
- the
number or nominal amount of Shares, the subject matter of the Option (insofar as it is unexercised);
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- (b)
- the
maximum number of Shares in respect of which Options may be granted under the Share Option Scheme;
- (c)
- the
subscription price; and/or
- (d)
- the
method of exercise of the Option,
as
the auditors or an independent financial adviser shall confirm in writing to the Board that the adjustments satisfy the requirements set out in the note to Rule 17.03(13) of the Listing
Rules or otherwise comply with the Listing Rules or other rules, practices, directions, future guidance or
interpretation of the Listing Rules of or issued by the Stock Exchange in force from time to time. Any such adjustments shall give the Share Option Scheme participant the same proportion of the equity
capital of the Company and any adjustments to the advantage of the Share Option Scheme participant to the exercise price or to the number of Shares subject to the Options must be approved by the
Shareholders in general meeting, and no adjustment may be made to the extent that Shares would be issued at less than their nominal value. The capacity of the auditors or the independent financial
adviser is that of experts and not of arbitrators and their certification shall be final and binding on our Company and the grantees in the absence of manifest error. The costs of the auditors or the
independent financial adviser shall be borne by the Company.
Share capital
The exercise of any Option shall be subject to the Shareholders of our Company in general meeting approving any necessary increase in
the authorized share capital of our Company. Subject thereto, the Board shall make available sufficient authorized but unissued share capital of our Company to meet subsisting requirements on the
exercise of Options.
Cancellation of Options not exercised
The Board may at any time with the consent of and on such terms as may be agreed with the relevant grantee cancel Options previously
granted to but not yet exercised by the grantee. Where any Option is cancelled and new Option is intended to be granted to the same Share Option Scheme participant, the Share Option Scheme must have
available unissued Options (excluding the cancelled Option(s)) within the maximum number of Shares as aforementioned.
Termination of Share Option Scheme
Our Company by ordinary resolution in general meeting or the Board may at any time terminate the operation of the Share Option Scheme
and in such event no further Options will be offered but the provisions of the Share Option Scheme shall remain in force in all other respects. All Options granted prior to such termination shall
continue to be valid and exercisable in accordance with the terms of the Share Option Scheme.
Transferability of Options
An Option shall be personal to the grantee and shall not be assignable and no grantee shall in any way sell, transfer, charge,
mortgage, encumber or create any interest in favor of any third party over or in relation to any Option or attempt so to do, except with the prior written consent of the Board from time
to time.
V-14
Table of Contents
Amendment of Share Option Scheme
The Share Option Scheme may be altered in any respect by resolution of the Board except that the amendments shall not affect adversely
any rights which have accrued to any grantee and provided that the specific provisions in the Share Option Scheme which relate to the matters set out in Rule 17.03 of the Listing Rules shall
not be altered to the advantage of grantees or prospective grantees except with the prior sanction of a resolution of our Shareholders in a general meeting. Any alterations to the terms and conditions
of the Share Option Scheme which are of a material nature or any change to the terms of the Options granted shall be subject to the approval of our Shareholders, save where the alterations take effect
automatically under the existing terms of the Share Option Scheme. After any alteration, the amended terms of the Share Option Scheme must comply with the relevant requirements of the Listing Rules.
Any change to the authority of the Board in relation to any alteration to the terms of the Share Option Scheme shall be subject to the approval of our Shareholders in a general meeting.
(c) PARTICULARS OF SUBSIDIARIES
Our principal subsidiaries are listed in note 1 to the Accountants' Report set out in
Appendix I — "Accountants' Report of the Company" to this listing document.
(d) FURTHER INFORMATION ABOUT OUR BUSINESS
A. Summary of our material contracts (not being contracts entered into in the ordinary course of business)
We have entered into the following contracts (not being contracts entered into in the ordinary course of business) within two years preceding the date of
this listing document which are or may be material:
- (a)
- the
Deed of Non-Competition; and
- (b)
- the
compliance adviser's agreement dated December 23, 2013 entered into between our Company and CASH Financial Services Group Limited.
We
expect to enter into a sponsors agreement with the Joint Sponsors, our Controlling Shareholders and CHNR within reasonable time prior to the Listing.
V-15
Table of Contents
B. Intellectual property rights
(a) Trademarks
As at the Latest Practicable Date, our Company had applied for registration of the following trademarks:
|
|
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
Name of Applicant |
|
Class |
|
Application Date |
|
Application
Number |
|
Place of
Application |
|
|
Hong Kong Smartact Limited |
|
|
4, 16, 35, 37 |
|
July 24, 2013 |
|
302682441 |
|
Hong Kong |
|
|
Hong Kong Smartact Limited |
|
|
4, 16, 35, 37 |
|
July 24, 2013 |
|
302682423 |
|
Hong Kong |
|
|
Hong Kong Smartact Limited |
|
|
4, 16, 35, 37 |
|
July 24, 2013 |
|
302682432 |
|
Hong Kong |
V-16
Table of Contents
(b) Domain names
As of the Latest Practicable Date, we had registered the following domain names:
|
|
|
|
|
|
|
|
| |
Domain Name
|
|
Owner |
|
Registration Date |
|
Expiry Date |
| |
fsanthracite.com.hk |
|
Hong Kong Smartact Limited |
|
November 6, 2012 |
|
November 9, 2013 |
| |
fsanthracite.com |
|
Hong Kong Smartact Limited |
|
November 6, 2012 |
|
November 6, 2014 |
| |
fsanthracite.com.cn |
|
Hong Kong Smartact Limited |
|
November 6, 2012 |
|
November 6, 2014 |
Save
as disclosed herein, there are no patents, trademarks or other intellectual property rights which are material in relation to our business.
(e) DISCLOSURE OF INTERESTS
A. Substantial shareholders
Immediately following completion of the Spin-off, so far as the Directors and our chief executive are aware, the following persons will have an interest or a
short position in the Shares or underlying Shares
which would fall to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of part XV of the SFO, or will be directly or indirectly, interested in 10% or more of
the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Company:
- (a)
- Long
positions in the Shares or underlying Shares
|
|
|
|
|
|
|
|
|
| |
Name of Shareholder
|
|
Number of Shares
directly or
indirectly held |
|
Approximate
percentage of
issued share
capital (%) |
|
| |
Feishang |
|
|
72,402,965 |
|
|
58.1 |
|
| |
Laitan Investments |
|
|
72,402,965 |
(1) |
|
58.1 |
|
| |
Mr. Li Feilie |
|
|
73,902,965 |
(2) |
|
59.3 |
|
| |
Rosetta Stone Capital Limited |
|
|
11,250,000 |
|
|
9.03 |
|
- (1)
- Laitan
Investments held 100% of the equity interests in Feishang. Accordingly, under the SFO, Laitan Investments was deemed to be interested in the
72,402,965 Shares held by Feishang.
- (2)
- Mr. Li
Feilie held 100% of the equity interests in Laitan Investments. Accordingly, under the SFO, Mr. Li Feilie was deemed to be interested
in the 72,402,965 Shares held by Feishang. Mr. Li Feilie also directly held 1,500,000 Shares.
- (b)
- Short
positions in the Shares and underlying Shares — nil.
V-17
Table of Contents
- (c)
- Interests
in other members of our Company
|
|
|
|
|
|
|
|
|
|
|
| |
Name of subsidiary
|
|
Name of shareholder |
|
Amount
of registered
capital
contributed |
|
Approximate
percentage of
interest
(%) |
|
| |
Baiping Mining |
|
Yangpu Wanshun Energy Co. Ltd.(1) |
|
|
RMB17,400,000 |
|
|
30 |
|
| |
Guizhou Yongfu |
|
Yangpu Wanshun Energy Co. Ltd. |
|
|
RMB30,000,000 |
|
|
30 |
|
- (1)
- An
Independent Third Party.
Save
as disclosed herein, the Directors are not aware of any person who immediately following completion of the Spin-off will have an interest or a short position in Shares or underlying
Shares
which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of part XV of the SFO, or will be directly or indirectly, interested in 10% or
more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Company and are therefore regarded as substantial
shareholders under the Listing Rules.
B. Disclosure of our Directors' interests
Immediately following completion of the Spin-off, the interests and short positions of each Director and chief executive of our Company in the shares, underlying
shares and debentures of our Company and its associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to us and the Stock Exchange pursuant to Divisions
7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have under such provisions of SFO) or which will be required, pursuant to
section 352 of the SFO, to be recorded in the register referred to therein or which will be required to be notified to us and the Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors and Listed Issuers contained in the Listing Rules, will be as follows:
- (a)
- Interest
in the share capital of the Company (all being long positions)
|
|
|
|
|
|
|
|
|
|
|
| |
Director or Chief Executive
|
|
Type of interest |
|
Number of Shares
interested |
|
Approximate
percentage of
issued share
capital (%) |
|
| |
Mr. Li Feilie |
|
Interests of controlled corporation |
|
|
72,402,965 |
|
|
58.1 |
|
| |
Mr. Li Feilie |
|
Personal |
|
|
1,500,000 |
|
|
1.2 |
|
| |
Mr. Tam Cheuk Ho |
|
Personal |
|
|
1,409,630 |
|
|
1.1 |
|
| |
Mr. Wong Wah On Edward |
|
Personal |
|
|
2,000,000 |
|
|
1.6 |
|
V-18
Table of Contents
- (b)
- Interest
in the share capital of Feishang (being the holding company of the Company and therefore an associated corporation of the Company)
|
|
|
|
|
|
|
|
|
|
|
| |
Director or Chief Executive
|
|
Type of interest |
|
Number of shares
interested |
|
Approximate
percentage of
issued share
capital (%) |
|
| |
Mr. Li Feilie |
|
Interests of controlled corporation |
|
|
1 |
|
|
100 |
|
- (c)
- Interest
in the share capital of Laitan Investments (being the holding company of the Company and therefore an associated corporation of the Company)
|
|
|
|
|
|
|
|
|
|
|
| |
Director or Chief Executive
|
|
Type of interest |
|
Number of shares
interested |
|
Approximate
percentage of
issued share
capital (%) |
|
| |
Mr. Li Feilie |
|
Personal |
|
|
3 |
|
|
100 |
|
- (d)
- Interest
in the share capital of CHNR (being a subsidiary of the Company's holding company and therefore an associated corporation of the Company)
|
|
|
|
|
|
|
|
|
|
|
| |
Director or Chief Executive
|
|
Type of interest |
|
Number of shares
interested |
|
Approximate
percentage of
issued share
capital (%) |
|
| |
Mr. Li Feilie |
|
Interests of controlled corporation |
|
|
14,480,593 |
|
|
58.1 |
|
| |
Mr. Li Feilie |
|
Personal |
|
|
300,000 |
|
|
1.2 |
|
| |
Mr. Tam Cheuk Ho |
|
Personal |
|
|
281,926 |
|
|
1.1 |
|
| |
Mr. Wong Wah On Edward |
|
Personal |
|
|
400,000 |
|
|
1.6 |
|
C. Particulars of service contracts
Each Director has entered into a service contract with the Company for a term up to three years, subject to re-election and re-appointment.
D. Directors' remuneration
The aggregate amount of benefits in kind granted to our Directors and charged to the consolidated income statements in respect of each of 2010, 2011 and 2012 were
approximately RMB17.0 million, nil and nil, respectively.
V-19
Table of Contents
E. Personal guarantees
Mr. Li Feilie has provided personal guarantees in favor of lenders in connection with banking facilities granted to us. See "Relationship with Our
Controlling Shareholders — Independence from Our Controlling Shareholders — Financial Independence".
F. Connected transactions and related party transactions
Details of the connected transactions and related party transactions of the Company are set out in the section entitled "Connected Transactions" of this listing
document and in the Accountants' Report, the text which is set out in Appendix I — "Accountants' Report of the Company" to this listing document,
respectively.
G. Disclaimers
Save as disclosed in this listing document:
- (a)
- none
of the Directors or chief executive of our Company had any interests and short positions in the shares, underlying shares and debentures of our Company
or any associated corporation (within the meaning of Part XV of the SFO) which will have to be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which he is taken or deemed to have under such provisions of SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the
register referred to therein, or will be required, pursuant to the Model Code for Securities Transactions by Directors and Listed Companies to be notified to us and the Stock Exchange, in each case
once our Shares are listed;
- (b)
- none
of the Directors or any of the parties listed in the paragraph headed "Qualification of experts" in this Appendix is interested in our promotion, or in
any assets which have, within the two years immediately preceding the issue of this listing document, been acquired or disposed of by or leased to us, or are proposed to be acquired or disposed of by
or leased to our Company;
- (c)
- none
of the Directors or any of the parties listed in paragraph headed "Qualification of experts" in this Appendix is materially interested in any contract
or arrangement subsisting at the date of this listing document which is unusual in its nature or conditions or which is significant in relation to our business;
- (d)
- none
of the parties listed in the paragraph headed "Qualification of experts" in this Appendix:
- i.
- is
interested legally or beneficially in any shares in any member of our Group; or
- ii.
- has
any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our
Group; and
V-20
Table of Contents
- (e)
- none
of the Directors or their respective associates or any Shareholders of our Company (who to the knowledge of the Directors owns more than 5% of
our issued share capital) has any interest in our five largest suppliers or our five largest customers.
(f) OTHER INFORMATION
A. Estate duty
We have been advised that no material liability for estate duty is likely to fall on our Company or any member of our Group in the BVI, Hong Kong and the PRC,
being jurisdictions in which one or more of the companies comprising our Group were incorporated.
B. Litigation
As of the Latest Practicable Date, save as disclosed in this listing document, our Company is not involved in any material litigation, arbitration or
administrative proceedings. So far as we are aware, no such litigation, arbitration or administrative proceedings are pending or threatened.
C. Joint Sponsors
Each of the Joint Sponsors has declared its independence pursuant to Rule 3A.07 of the Listing Rules.
The
Joint Sponsors have made an application on our behalf to the Listing Committee of the Stock Exchange for listing of, and permission to deal in, our Shares in issue. All necessary
arrangements have been made enabling the Shares to be admitted into CCASS.
D. Preliminary expenses
Our estimated preliminary expenses are approximately HK$1.0 million and are payable by our Company.
E. Compliance adviser
Our Company has agreed to appoint CASH Financial Services Group Limited to be the compliance adviser upon listing in compliance with Rule 3A.19 of the
Listing Rules. Our Company has entered into a compliance advisers' agreement with the compliance advisers, the material terms of which are as follows:
- (a)
- our
Company will appoint CASH Financial Services Group Limited as the compliance adviser for the purpose of Rule 3A.19 of the Listing Rules for a
period commencing on the Listing Date and ending on the date on which our Company distributes its annual report incorporating financial results for the first full financial year commencing after the
Listing Date in compliance with Rule 13.46 of the Listing Rules;
V-21
Table of Contents
- (b)
- the
compliance adviser will provide our Company with certain services, including providing our Company with proper guidance and advice as to compliance with
the requirements under the Listing Rules and applicable laws, rules, codes and guidelines;
- (c)
- the
compliance adviser will assess the understanding of all new appointees to the Board regarding the nature of their responsibilities and fiduciary duties
as a Director, and to the extent that the compliance adviser forms an opinion that the new appointees' understanding is inadequate, it will discuss the inadequacies with the Board and make
recommendations to the Board regarding appropriate remedial steps such as training;
- (d)
- the
Company will indemnify the compliance adviser, its directors, officers, employees and/or agents from and against any and all costs, expenses, losses,
claims, damages or liabilities incurred by the compliance adviser or its affiliates, directors, officers, employees and/or agents relating to, or arising out of, or in connection with any matter
contemplated in the compliance advisers' agreement, provided that the Company shall not be liable to the extent that any such costs, expenses, losses, claims, damages or liabilities result from the
willful default of the compliance adviser or its affiliates or of any of its directors, officers, employees or agents; and
- (e)
- the
compliance adviser may terminate the compliance advisers' agreement and resign as the compliance adviser if there arises any circumstances, including
regulatory requirements, which in its sole opinion make it inadvisable to continue as the compliance adviser.
F. Qualification of experts
The qualifications of the experts who have given opinions in this listing document are as follows:
|
|
|
|
| |
Name
|
|
Qualification |
| |
[Intentionally omitted] |
|
Certified public accountants |
| |
Commerce & Finance Law Offices |
|
Legal advisers to the Company as to PRC law |
| |
Maples and Calder |
|
Legal advisers to the Company as to BVI law |
| |
Behre Dolbear Asia, Inc. |
|
Competent Person |
V-22
Table of Contents
G. No material adverse change
The Directors confirm that there has been no material adverse change in our financial or trading position since June 30, 2013 and that no material changes
have occurred since the date of the Competent Person's Report up to the date of this listing document.
H. Miscellaneous
Save as disclosed in this listing document, within the two years preceding the date of this listing document:
- (a)
- we
have not issued nor agreed to issue any share or loan capital of any member of our Group fully or partly paid either for cash or for a consideration
other than cash;
- (b)
- no
share or loan capital of any member of our Group is under option or is agreed conditionally or unconditionally to be put under option;
- (c)
- we
have not issued nor agreed to issue any founder Shares, management Shares or deferred Shares;
- (d)
- our
Company has no outstanding convertible debt securities or debentures;
- (e)
- no
commission, discount, brokerage or other special term has been granted in connection with the issue or sale of any capital of the Company; and
- (f)
- there
is no arrangement under which future dividends are waived or agreed to be waived.
I. Consents
Each of the experts as referred to in the paragraph headed "Qualification of experts" in this Appendix, has given and has not withdrawn their respective written
consents to the issue of this listing document with the inclusion of their reports and/or opinions and/or the references to their names included herein in the form and context in which they are
respectively included.
J. Sufficiency of foreign exchange
For holders of our Shares, cash dividends payments, if any, will be proposed by our Board and paid in Hong Kong dollars. Our Directors are of the view that we
will have sufficient Hong Kong dollars to pay any cash dividends payments as they become due.
V-23
Table of Contents
APPENDIX VI
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at the offices of Sullivan & Cromwell (Hong Kong) at
28th Floor, Nine Queen's Road Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this listing
document:
- (a)
- the
Memorandum of Association and the Articles of Association of our Company;
- (b)
- the
Accountants' Report of the Company prepared by Ernst & Young, the text of which is set out in
Appendix I — "Accountants' Report of the Company";
- (c)
- the
Accountants' Report of Guizhou Puxin prepared by Ernst & Young, the text of which is set out in
Appendix II — "Accountants' Report of Guizhou Puxin";
- (d)
- the
Competent Person's Report prepared by Behre Dolbear Asia, Inc. as set out in
Appendix III — "Competent Person's Report";
- (e)
- the
material contracts referred to in Appendix V — "Statutory and General
Information — Further Information About Our Business — Summary of Our Material Contracts (not being contracts entered into
in the ordinary course of business)";
- (f)
- the
written consents referred to in Appendix V — "Statutory and General
Information — Other Information — Consents";
- (g)
- the
service agreements referred to in Appendix V — "Statutory and General
Information — Disclosure of Interests — Particulars of Service Contracts";
- (h)
- the
letter of advice issued by Maples and Calder summarizing aspects of BVI company law, the text of which is set out in
Appendix IV — "Summary of the Constitution of our Company and British Virgin Islands Companies Law";
- (i)
- the
BVI Business Companies Act, 2004 (as amended);
- (j)
- the
rules of the Share Option Scheme; and
- (k)
- the
PRC legal opinions dated December 31, 2013 issued by Commerce & Finance Law Offices, the legal advisors to the Company as to PRC law in
respect of certain aspects of our Company and the property interests of our Company.
VI-1
Table of Contents
APPENDIX VII
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information was prepared and included in the listing
document in accordance with the requirements of the Stock Exchange and the Listing Rules and does not meet the requirements of Article 11 of Regulation S-X under the Exchange Act.
The information set forth in this appendix does not form part of the Accountants' Report from Ernst & Young, Certified Public
Accountants, Hong Kong, the reporting accountants of the Company, as set forth in Appendix I to this listing document, and is included herein for information only. The unaudited
pro forma financial information should be read in conjunction with the section headed "Financial Information" and the "Accountants' Report" set forth in Appendix I to this listing
document.
A. UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS
The following is an illustrative statement of unaudited pro forma adjusted consolidated net tangible assets of the Group as of
June 30, 2013 which has been prepared in accordance with paragraph 4.29 of the Listing Rules for the purpose of illustrating the effect of (i) the issuance of
124,554,580 shares with a par value of HK$0.01 each to CHNR at a total consideration of HK$98.4 million as of December 12, 2013, the repurchase of the original issued
1 share of US$1.00 at par and cancellation of the class of 50,000 ordinary shares with a par value of US$1.00 each ("Changes In Share Capital") and (ii) the occurrence of all the
outstanding listing expenses between RMB37.9 million and RMB43.6 million pursuant to the completion of the listing by introduction on the Main Board of the Stock Exchange ("Listing
Expenses").
The
following unaudited pro forma adjusted consolidated net tangible assets of the Group have been prepared to show the effect on the consolidated net tangible assets of the Group
as of June 30, 2013 as if the listing by introduction on the Main Board of the Stock Exchange had occurred on January 1, 2013, and the abovementioned transactions of Changes In Share
Capital and Listing Expenses had also occurred on January 1, 2013.
The
unaudited pro forma adjusted consolidated net tangible assets of the Group have been prepared for illustrative purposes only and, because of their nature, they may not give a
true picture of the financial position of the Group.
The
following unaudited pro forma adjusted consolidated net tangible assets of the Group have been prepared based on the audited consolidated net assets of the Group as of
June 30, 2013 as extracted from "Appendix I — Accountants' Report of The Comany," and is adjusted as described below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
tangible assets
attributable to owner
of the Company as of
June 30, 2013(1) |
|
Changes In Share
Capital(2) |
|
Listing Expenses(3) |
|
Unaudited pro forma
adjusted consolidated
net tangible assets |
|
Unaudited pro forma
adjusted consolidated
net tangible assets
per share(3)(4) |
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB'000
|
|
RMB per share
|
|
| |
196,439 |
|
|
77,538 |
|
|
(40,745 |
) |
|
233,232 |
|
|
1.87 |
|
VII-1
Table of Contents
Notes:
- (1)
- The
audited consolidated net tangible assets attributable to owners of the Company as at June 30, 2013 is arrived at after deducting non-controlling
interests of RMB93.1 million from the audited consolidated net assets of RMB289.6 million as at June 30, 2013, as shown in the Accountants' Report, the text of which is set out in
Appendix I to this listing document.
- (2)
- On
December 6, 2013, the Company increased its authorized share capital under which it may issue an aggregate of: (i) a maximum of
50,000 shares of one class with a par value of US$1.00 each; and (ii) a maximum of 1,000,000,000 ordinary shares of one class with a par value of HK$0.01 each (the "Listco
Shares"), pursuant to which CHNR completed the subscription for 124,554,580 Listco Shares of the Company with a par value of HK$0.01 each at a total consideration of HK$98.4 million as
of December 12, 2013. Subsequently on December 12, 2013, the Company repurchased the one share with a par value of US$1.00 in the Company held by CHNR at par and simultaneously, the
Company reduced its authorized but unissued share capital by the cancellation of the entire class of 50,000 ordinary shares with a par value of US$1.00 each.
- (3)
- The
amount represents estimated expenses relating to the Listing by introduction on the Main Board of the Stock Exchange expected to be incurred by the
Group subsequent to June 30, 2013 which mainly include professional fees for the Joint Sponsors, the Company's legal advisers and reporting accountants and other listing related expenses. The
amount represents the best estimate of the Directors based on the arithmetic mean of the range of expected listing expenses from RMB37.9 million to RMB43.6 million as disclosed under the
caption "Financial Information — Listing Expenses" to the Listing Document.
- (4)
- The
unaudited pro forma consolidated net tangible assets per Share is arrived at after the adjustments as described in note 2 and
note 3 above and is based on 124,554,580 shares as if the shares had been issued as of January 1, 2013.
- (5)
- No
other adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets to reflect any trading results or other
transactions of the Group entered into subsequent to June 30, 2013.
- (6)
- The
translation of HK dollars to Renminbi has been made at the rate of HK$1.2688 to RMB1.00, the People's Bank of China Rate prevailing on
December 12, 2013. No representation is made that the HK dollar amounts have been, could have been or could be converted to Renminbi, or vice versa, at that rate or at any other rates or
at all.
VII-2
Table of Contents
B. UNAUDITED PRO FORMA ADJUSTED LOSSES PER SHARE
The following unaudited pro forma adjusted losses per share of the Group for the six months ended June 30, 2013 has been
prepared in accordance with Rule 4.29 of the Listing Rules, on the basis of the notes set forth below, for the purpose of illustrating the effect of the occurrence of all the outstanding
listing expenses of RMB 40.7 million pursuant to the completion of the listing by introduction on the Main Board of the Exchange ("Listing Expenses"). It has been prepared for illustrative
purpose only and, because of its hypothetical nature, may not give a true and fair picture of the financial results of the Group.
|
|
|
|
|
|
|
RMB '000 |
|
Audited consolidated losses attributable to owner of the Company(1) |
|
|
(221,947 |
) |
Listing Expenses(2) |
|
|
(40,745 |
) |
Adjusted consolidated losses attributable to owner of the Company |
|
|
(262,692 |
) |
Unaudited pro forma adjusted losses per share(3) |
|
|
(2.11 |
) |
Notes:
- (1)
- The
consolidated net loss attributable to owner of the Company for the six months ended June 30, 2013 is extracted from the consolidated income
statements as shown in the Accountants' Report, the text of which is set out in Appendix I to this listing document.
- (2)
- The
amount represents estimated expenses relating to the Listing expected to be incurred by the Group subsequent to June 30, 2013 which mainly
include professional fees for the Joint Sponsors, the Company's legal advisers and reporting accountants and other listing related expenses. The amount represents the best estimate of the Directors
based on the arithmetic mean of the range of expected listing expenses from RMB37.9 million to RMB43.6 million as disclosed under the caption "Financial
Information — Listing Expenses" to the Listing Document.
- (3)
- The
calculation of the adjusted pro forma losses per share is based on the adjusted consolidated net loss attributable to owner of the Company for
the six months ended June 30, 2013 and on the assumptions that the Company had completed the listing by introduction on the Main Board of the Stock Exchange, pursuant to which the outstanding
listing expenses had been incurred on January 1, 2013 and the 124,554,580 shares had been issued to CHNR on January 1, 2013.
VII-3
Table of Contents
C. INDEPENDENT REPORTING ACCOUNTANT'S ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION
[INTENTIONALLY OMITTED. SEE "ABOUT THIS INFORMATION STATEMENT" ON PAGE IS-1]
VII-4
