Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities. (Incorporated in Bermuda with limited liability) (Stock Code: 8306) ISSUE OF CONVERTIBLE BONDS ISSUE OF CONVERTIBLE BONDS On 9 March 2010 after trading hours, each of the two Subscribers and the Company entered into the Subscription Agreements in respect of the issue of the Convertible Bonds in the principal aggregate amount of HK$30,000,000 due 2012 at its face value (with each Subscriber subscribing for the Convertible Bonds in the outstanding sum of HK$15,000,000 each). Completion of the Subscription is subject to the conditions as set out in the paragraph headed Conditions precedent below. Detailed terms of the Convertible Bonds are set out in the paragraph headed Principal terms of the Convertible Bonds. The net proceeds from the issue of the Convertible Bonds of approximately HK$29,500,000 will be used for general working capital of the Group and for future investment in the mining business in the PRC. As at the date hereof, each of the Subscribers, their ultimate beneficial owners and their respective associates is an Independent Third Party. - -
As at the date of this announcement, the Company has a total of 3,291,002,590 issued Shares. Assuming allotment and issue of the Conversion Shares from the full exercise of the conversion rights attaching to the Convertible Bonds, the Conversion Shares represent (i) approximately 3.20% of the existing issued share capital of the Company as at the date hereof, (ii) approximately 3.14% of the issued share capital of the Company as enlarged by the completion of the Top-up Placing (but before the issue of any of the Conversion Shares), (iii) approximately 3.10% of the issued share capital as enlarged by the issue of the Conversion Shares in full (but before the completion of the Top-up Placing), and (iv) approximately 3.05% of the issued share capital as enlarged by the issue of the Conversion Shares in full and the completion of the Top-up Placing. The issue of the Conversion Shares will be made under the current general mandate of the Company. The Company will apply to GEM Listing Committee for the listing of, and permission to deal in the Conversion Shares. No listing of the Convertible Bonds will be sought on the Stock Exchange or any other stock exchanges. On 9 March 2010 after trading hours, each of the Subscribers and the Company entered into the Subscription Agreements in respect of the issue of the Convertible Bonds in the principal aggregate amount of HK$30,000,000 due 2012 at its face value. Details of the Subscription Agreements and the terms of the Convertible Bonds are described below. SUBSCRIPTION AGREEMENT (1) Parties and Date Date: 9 March 2010 Issuer: the Company Subscribers: (1) L & W Holding Limited (2) Delta Glory Limited To the best of the knowledge, information and belief of the Directors and having made all reasonable enquiries, as at the date hereof, each of the Subscribers, their ultimate beneficial owners and their respective associates is an Independent Third Party. Both L & W and Delta Glory are principally engaged in investment holding. - 2 -
(2) Principal terms of the Convertible Bonds Aggregate principal amount: Interest rate: Maturity date: Ranking: Conversion: Conversion price: HK$30,000,000 (with each Subscriber subscribing for the Convertible Bonds in the outstanding sum of HK$15,000,000 each). The Convertible Bonds shall carry an interest of 1% per annum plus the prime lending rate per annum quoted by The Hongkong and Shanghai Banking Corporation Limited, payable quarterly. Unless previously cancelled or converted, any outstanding Convertible Bonds shall be redeemed on the date falling on the second anniversary of the date of issue of the Convertible Bonds. The Convertible Bonds constitute general and unsecured obligations of the Company and rank equally among themselves and pari passu with all other present and future unsecured and unsubordinated obligations of the Company. The holder of the Convertible Bonds will have the right to convert the whole or part of the principal amount of the Convertible Bonds into Shares at the conversion price (as provided below) at any time and from time to time, from the date of issue of the Convertible Bonds in amounts of a whole multiple of HK$1,000,000 on each conversion. The conversion price is initially HK$0.285 per Share, subject to adjustment for, among other matters, subdivision or consolidation of Shares, rights issue, extraordinary stock or cash distribution, and other dilutive events (which are the standard anti-dilution adjustment). The conversion price represents: (i) (ii) a premium of approximately 1.79% to the closing price per Share as quoted on the Stock Exchange of HK$0.280 on 9 March 2010, being the date of the Subscription Agreements; and a premium of approximately 1.42% to the average of the closing prices per Share of HK$0.281 for the last five trading days immediately prior to 9 March 2010; and (iii) a premium of approximately 2.52% to the average of the closing prices per Share of HK$0.278 for the last ten trading days immediately prior to 9 March 2010; and (iv) a premium of approximately 5.55% over the net consolidated assets value per Share of approximately HK$0.27 as at 30 June 2009 (based on the latest unaudited net consolidated assets of the Group stated in the Group s interim results for the six months ended 30 June 2009 published on the Stock Exchange s website). - 3 -
Events leading to adjustment of the conversion price: The events leading to adjustment to the conversion price include the following: (i) an alteration of the nominal amount of each Share by reason of any consolidation or subdivision; (ii) an issue (other than in lieu of a cash dividend) by the Company of Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund); (iii) a capital distribution being made by the Company, whether on a reduction or otherwise, to Shareholders (in their capacity as such) or a grant by the Company to Shareholders (in their capacity as such) or rights to acquire for cash assets of the Company or any of its subsidiaries; (iv) an offer of new Shares for subscription by way of rights, or a grant of options or warrants to subscribe new Shares being made by the Company to Shareholders (in their capacity as such) at a price which is less than 70% of the market price on the date of the announcement of the terms of the offer or grant; (v) an issue wholly for cash being made by the Company of securities convertible into or exchangeable for or carrying rights of subscription for new Shares and the total effective consideration per Share receivable for such securities is less than 70% of the market price on the date of announcement of the terms of the issue of such securities; or (vi) an issue of Shares wholly for cash at a price per Share which is less than 70% of the market price on the date of announcement of the terms of such issue. market price means the average of the closing prices of one Share quoted on the Stock Exchange for each of the last five Stock Exchange dealing days on which dealings in the Shares on the Stock Exchange took place ending on the last such dealing day preceding the day on or as of which the market price is to be ascertained. - 4 -
Voting: Transfer: Early redemption: Holders of the Convertible Bonds will not be entitled to attend or vote at any general meeting of the Company by reason only of it being the holder of the Convertible Bonds. With the prior notification of the Company, the Convertible Bonds may be transferable to any persons (other than connected persons of the Company). Unless the Company has obtained the prior consent of the Stock Exchange, the Convertible Bonds shall not be assigned or transferred to a connected person of the Company. The Company cannot redeem all or part of the outstanding Convertible Bonds before its maturity date. Based on the conversion price of HK$0.285 per Conversion Share, a maximum number of 105,263,156 Conversion Shares will be allotted and issued upon exercise of the conversion rights attached to the Convertible Bonds in full, which represent: (i) approximately 3.20% of the existing issued share capital of the Company as at the date hereof, (ii) approximately 3.14% of the issued share capital of the Company as enlarged by the completion of the Top-up Placing (but before the issue of any of the Conversion Shares), (iii) approximately 3.10% of the issued share capital as enlarged by the issue of the Conversion Shares in full (but before the completion of the Top-up Placing), and (iv) approximately 3.05% of the issued share capital as enlarged by the issue of the Conversion Shares in full and the completion of the Top-up Placing. The Conversion Shares will rank pari passu in all respects with the Shares in issue as at the date of allotment and issue of the Conversion Shares. There will not be any restrictions for the subsequent sale of the Conversion Shares by the Subscribers. No application will be made for listing of, or permission to deal in, the Convertible Bonds on the Stock Exchange or any other stock exchange. Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares. - 5 -
(3) Conditions precedent Completion of each of the Subscription Agreements is conditional upon the fulfillment of the following conditions precedent: (a) (b) (c) the GEM Listing Committee of the Stock Exchange having granted (either unconditionally or subject only to conditions to which the Company and the relevant Subscriber have no reasonable objection) listing of and permission to deal in the Conversion Shares; the warranties provided by the Company under the relevant Subscription Agreement remaining true, accurate and complete in all material respects; and all necessary consents and approvals required to be obtained on the part of the Company and the relevant Subscriber in respect of the relevant Subscription Agreement and the transactions contemplated thereby having been obtained. If any of the above conditions are not fulfilled on or before the 60th day from the date of the relevant Subscription Agreement (or such other date as may be agreed by the Company and the relevant Subscriber in writing), the relevant Subscription Agreement will lapse and become null and void and the parties thereto shall be released from all obligations hereunder, save the liabilities for any antecedent breaches thereof. (4) Completion Completion shall take place within three business days following the date on which the above conditions are fulfilled (or such other date as the parties hereto may agree). REASON FOR THE ISSUE OF CONVERTIBLE BONDS AND USE OF PROCEEDS The Group is principally engaged in the mining and processing industry of zinc and lead as at the date of this announcement. The Directors consider raising funds by issuing Convertible Bonds is justifiable considering the recent market conditions which represent an opportunity for the Company to enhance its working capital and strengthen its capital base and financial position for the possible future investments of the Group. The Directors consider that the issue of the Convertible Bonds is an appropriate means of raising additional capital for the Company since it will not have an immediate dilution effect on the shareholding of the existing Shareholders. The conversions price of HK$0.285 was agreed upon based on the recent closing prices of the Shares as quoted on the Stock Exchange. The Directors consider that the terms of the Subscription Agreements and the Convertible Bonds, which were arrived at after arm s length negotiations between the Company and the Subscribers, are fair and reasonable and are in the interests of the Company and the Shareholders - 6 -
as a whole. The gross proceeds from the issue of the Convertible Bonds is HK$30,000,000. The net proceeds from the issue of the Convertible Bonds of approximately HK$29,500,000 will be used for general working capital of the Group and for future investment in the mining business in the PRC. After deducting the expenses relating to the Subscription, the net conversion price for each Conversion Share is approximately HK$0.28. The Company is still at liberty to issue other securities to raise funds when the Board considers appropriate to do so. The terms of the Convertible Bonds do not place any restrictions in this regard on the Company, save for the adjustment of the conversion price (if necessary) of the Convertible Bonds. SHAREHOLDING STRUCTURE The shareholding structure of the Company (i) as at the date of this announcement, (ii) immediately after the completion of the Top-up Placing (but before the issue of any of the Conversion Shares), (iii) immediately after the issue of the Conversion Shares in full (but before completion of the Top-up Placing), and (iv) immediately after completion of the Top-up Placing and the issue of the Conversion Shares in full is as follows: Immediately after the completion Immediately after the Immediately of the Top-up issue of the Conversion after completion Placing (but before Shares in full (but of the Top-up Placing At the date of the issue of any of the before completion of the and the issue of the Shareholder this announcement Conversion Shares) Top-up Placing) Conversion Shares in full No. of Shares Approx. % No. of Shares Approx. % No. of Shares Approx. % No. of Shares Approx. % Substantial shareholder: Callaway Group Limited 758,144,014 23.04 758,144,014 22.63 758,144,014 22.32 758,144,014 21.94 Ruffy Investments Limited 435,367,532 13.23 435,367,532 12.99 435,367,532 12.82 435,367,532 12.60 Mei Wei 56,050,000 1.70 56,050,000 1.67 56,050,000 1.65 56,050,000 1.62 Public: Placees 0 0 59,880,000 1.79 0 0 59,880,000 1.73 L & W 0 0 0 0 52,631,578 1.55 52,631,578 1.52 Delta Glory 0 0 0 0 52,631,578 1.55 52,631,578 1.52 Other public: Shareholders 2,041,441,044 62.03 2,041,441,044 60.92 2,041,441,044 60.11 2,041,441,044 59.07 Total 3,291,002,590 100.00 3,350,882,590 100.00 3,396,265,746 100.00 3,456,145,746 100.00-7 -
Notes: Note 1: Callaway Group Limited is beneficially owned as to 100% by Mr. Zhuo Ze Fan, an executive Director. Note 2: Ruffy Investments Limited is beneficially owned as to 100% by Mr. Mei Wei. Under the Securities and Futures Ordinance, Mr. Mei Wei is deemed to be interested in all the Shares held by Ruffy Investments Limited FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS Save as disclosed below, the Company has not conducted any equity fund raising activities in the previous 12 months immediately preceding the date of this announcement. Date of announcement Event Net proceeds Intended use of proceeds Actual use of proceeds 25 August 2009 Subscription of 57,687,500 new Shares at the subscription price of HK$0.26 each Approximately HK$14,900,000 General working capital of the Group HK$1,900,000 out of HK$14,900,000 has been used as general working capital of the Group, while the remaining HK$13,000,000 is not utilized yet but will be used as general working capital of the Group 9 September 2009 Subscription of 59,620,000 new Shares at the subscription price of HK$0.26 each Approximately HK$15,000,000 General working capital of the Group None of the HK$15,000,000 have not been used as general working capital of the Group yet 6 January 2010 Top-up placing of 229,556,000 Shares at the placing and subscription price of HK$0.2465 each Approximately HK$56,000,000 General working capital of the Group All of the HK$56,000,000 has been used as general working capital of the Group. 4 March 2010 Top-up placing of 59,880,000 Shares at the placing and subscription price of HK$0.257 Approximately HK$15,140,000 General working capital and for future investment in the mining business in the PRC None of the HK$15,140,000 have not been used as general working capital of the Group yet - 8 -
Mandate to issue the Subscription Shares The Conversion Shares are to be issued under the general mandate to allot, issue and deal with Shares granted to the Directors at the annual general meeting of the Company held on 8 May 2009. Under the said general mandate, 526,750,000 Shares (which should be 105,350,000 shares of HK$0.002 each before the share subdivision taking effect from 20 August 2009) can be issued. Before the date of this announcement, the Company has allotted and issued an aggregate of 346,863,500 Shares by utilizing the general mandate, and an aggregate of 59,880,000 Shares will be allotted and issued by utilizing the general mandate at the completion of the Top-up Placing (which is expected to take place on or before 18 March 2010). Hence, the remaining number of Shares which could be allotted and issued under the general mandate is 120,006,500 as at the date hereof. As such, the current general mandate is sufficient for the issue and allotment of the Conversion Shares. No separate Shareholders approval is required for the issue of the Convertible Bonds pursuant to the Subscription Agreements. DEFINITIONS Unless the context requires otherwise, the following terms have the following meanings in this announcement: associates Board Company Completion connected persons Conversion Shares Convertible Bonds Delta Glory has the meaning ascribed thereto in the Listing Rules board of the Directors China Nonferrous Metals Company Limited, a company incorporated in Bermuda with limited liability and the issued Shares of which are listed on the GEM completion of the Subscription Agreements has the meaning ascribed thereto in the GEM Listing Rules the Shares which may fall to be allotted and issued upon exercise of the conversion rights attaching to the Convertible Bonds the convertible bonds in the aggregate principal amount of HK$30 million due 2012 bearing an interest of 1% p.a. plus the best lending rate quoted by The Hongkong and Shanghai Banking Corporation Limited, to be issued by the Company to the Subscribers pursuant to the Subscription Agreements Delta Glory Limited, a company incorporated in the British Virgin Islands with limited liability, who and whose ultimate beneficial owners are Independent Third Parties - 9 -
Directors GEM GEM Listing Rules Group Hong Kong Independent Third Party(ies) directors of the Company The Growth Enterprise Market of the Stock Exchange the Rules Governing the Listing of Securities on the GEM the Company and its subsidiaries Hong Kong Special Administrative Region of the People s Republic of China person(s) which is/are third party(ies) independent of the Company and its connected person(s) as defined under the GEM Listing Rules L & W L & W Holding Limited, a company incorporated in Macau Special Administrative Region with limited liability, who and whose ultimate beneficial owners are Independent Third Parties Share(s) Shareholder(s) Stock Exchange Subscribers Subscription Subscription Agreements Top-up Placing ordinary share(s) of HK$0.0004 each in the share capital of the Company holder(s) of the Share(s) The Stock Exchange of Hong Kong Limited collectively, L & W and Delta Glory, and each a Subscriber the subscription of the Convertible Bonds by the Subscribers pursuant to the terms of the Subscription Agreements collectively, (i) the subscription agreement dated 9 March 2010 and entered into between the Company and Delta Glory in relation to the subscription and issue of HK$15,000,000 of the Convertible Bonds at its face value and (ii) the subscription agreement dated 9 March 2010 and entered into between the Company and L & W in relation to the subscription and issue of HK$15,000,000 of the Convertible Bonds at its face value, and each a Subscription Agreement the placing of a maximum of 59,880,000 existing Shares held by Ruffy Investments Limited at the placing price of HK$0.257 each and the top-up subscription of such number of new Shares equivalent to the number of Shares placed by Ruffy Investments Limited at the price of HK$0.257, details of which are announced by the Company on 4 March 2010-10 -
HK$ Hong Kong dollars, the lawful currency of Hong Kong % per cent. By order of the board of directors of China Nonferrous Metals Company Limited Zhuo Ze Fan Chairman Hong Kong, 9 March 2010 As at the date of this announcement, the executive directors of the Company are Mr. Zhuo Ze Fan, Ms. Xie Yi Ping, Dr. Yu Heng Xiang, Mr. Ng Tang, Mr. Xu Bing, Mr. Kang Hongbo and Ms. Han Qiong and the independent non-executive directors of the Company are Mr. Zhao Shou Guo, Mr. Chau Kam Wing Donald and Mr. Chen Mingxian. This announcement, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (1) the information contained in this announcement is accurate and complete in all material respects and not misleading; (2) there are no other matters the omission of which would make any statement in this announcement misleading; and (3) all opinions expressed in this announcement have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable. This announcement will be published on the GEM website on the Latest Company Announcement page for at least 7 days from the date of publication and on the Company s website www.cnm.com.hk. * For identification purpose only - 11 -