Metallurgical of China : ANNOUNCEMENT - CONNECTED TRANSACTION - ACQUISITION OF 10% EQUITY INTEREST IN MINMETALS CAOFEIDIAN

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ANNOUNCEMENT

CONNECTED TRANSACTION

ACQUISITION OF 10% EQUITY INTEREST IN

MINMETALS CAOFEIDIAN

The Board announces that 22MCC, a wholly-owned subsidiary of the Company, proposes to enter into the Equity Transfer Agreement with Zongheng Iron & Steel, pursuant to which 22MCC will acquire 10% equity interest in Minmetals Caofeidian from Zongheng Iron & Steel at nil consideration (subject to the adjustment that may be made based on the appraisal by the independent valuer on the equity interest to be transferred, but the adjusted consideration shall not be higher than the appraised value). Upon completion of the Equity Transfer, 22MCC shall make capital contribution of RMB79,389,000 to Minmetals Caofeidian. On the same date of the execution of the Equity Transfer Agreement, 22MCC will enter into the Shareholders Agreement with the remaining shareholders of Minmetals Caofeidian (including, among others, Minmetals Corporation and CISDI) to regulate the rights and obligations of the shareholders of Minmetals Caofeidian upon completion of the Transaction.

China Minmetals, the indirect controlling shareholder of the Company, indirectly holding approximately 55.53% of the total issued shares of the Company, is a connected person of the Company. As Minmetals Caofeidian is held as to 74.36% by Minmetals Corporation, and Minmetals Corporation is a non-wholly owned subsidiary of China Minmetals, each of Minmetals Corporation and Minmetals Caofeidian is a connected person of the Company. Accordingly, the Transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As the applicable percentage ratios of the Transaction exceed 0.1% but less than 5%, the Transaction is subject to the reporting and announcement requirements, but exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

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BACKGROUND

The Board announces that 22MCC, a wholly-owned subsidiary of the Company, proposes to enter into the Equity Transfer Agreement with Zongheng Iron & Steel, pursuant to which 22MCC will acquire 10% equity interest in Minmetals Caofeidian from Zongheng Iron & Steel at nil consideration (subject to the adjustment that may be made based on the appraisal by the independent valuer on the equity interest to be transferred, but the adjusted consideration shall not be higher than the appraised value). Upon completion of the Equity Transfer, 22MCC shall make capital contribution of RMB79,389,000 to Minmetals Caofeidian. On the same date of the execution of the Equity Transfer Agreement, 22MCC will enter into the Shareholders Agreement with the remaining shareholders of Minmetals Caofeidian (including, among others, Minmetals Corporation and CISDI) to regulate the rights and obligations of the shareholders of Minmetals Caofeidian upon completion of the Transaction.

EQUITY TRANSFER AGREEMENT

Parties

• Seller: Zongheng Iron & Steel
• Buyer: 22MCC

Equity interest to be acquired

Pursuant to the Equity Transfer Agreement, 22MCC will acquire 10% equity interest in Minmetals Caofeidian from Zongheng Iron & Steel. Upon completion of the Transaction, the Company (through its subsidiaries 22MCC and CISDI) will indirectly hold an aggregate of 20% equity interest in Minmetals Caofeidian.

Consideration

The parties will engage an independent valuer to appraise the value of the equity interest to be transferred. Given that Zongheng Iron & Steel has yet to perform its payment obligation in respect of its subscribed capital contribution to Minmetals Caofeidian, the parties agree that the consideration for the Equity Transfer shall be nil (subject to the adjustment that may be made based on the appraisal by the independent valuer on the equity interest to be transferred, but the adjusted consideration shall not be higher than the appraised value).

Completion

Completion of the Equity Transfer shall take place when the parties complete the relevant procedures for the change of industrial and commercial registration.

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SHAREHOLDERS AGREEMENT

Parties

• Minmetals Corporation
• CISDI
• 22MCC
• HBIS Group

Subscribed capital contribution

The registered capital of Minmetals Caofeidian is RMB793,890,000, and the capital contribution subscribed by each of the shareholders is as set out below:

	Subscribed capital	Percentage to
Shareholder	contribution	registered capital
Minmetals Corporation	RMB590,337,000	74.36%
CISDI	RMB79,389,000	10%
22MCC	RMB79,389,000	10%
HBIS Group	RMB44,775,000	5.64%

Pursuant to the Shareholders Agreement, 22MCC shall pay its subscribed capital contribution to Minmetals Caofeidian in a lump sum within 10 working days upon completion of the change of industrial and commercial registration for the Equity Transfer. The capital contribution by 22MCC shall be funded by the Group with its internal resources.

Corporate governance

The board of directors of Minmetals Caofeidian shall comprise nine directors, among which Minmetals Corporation is entitled to nominate five directors, and each of CISDI, 22MCC and HBIS Group is entitled to nominate one director, all of whom shall be elected at the general meeting. The remaining director is an employee representative director who shall be elected at the employee representative meeting.

The supervisory committee of Minmetals Caofeidian shall comprise three supervisors, among which Minmetals Corporation is entitled to nominate one supervisor, and each of 22MCC and HBIS Group is entitled to nominate one supervisor in turns, all of whom shall be elected at the general meeting. The remaining supervisor is an employee representative supervisor who shall be elected at the employee representative meeting.

Minmetals Caofeidian shall have one general manager and one chief financial officer, both of whom shall be nominated by Minmetals Corporation, and shall be appointed or removed by the board of directors of Minmetals Caofeidian.

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INFORMATION ON MINMETALS CAOFEIDIAN

Minmetals Caofeidian was established on 5 December 2018. As at the date of this announcement, Minmetals Caofeidian is held as to 74.36%, 10%, 10% and 5.64% by Minmetals Corporation, CISDI, Zongheng Iron & Steel and HBIS Group, respectively. Minmetals Corporation, CISDI and HBIS Group have paid their respective subscribed capital contribution, while Zongheng Iron & Steel has yet to perform its payment obligation in respect of its subscribed capital contribution. Upon completion of the Transaction, Minmetals Caofeidian will be held as to 74.36%, 10%, 10% and 5.64% by Minmetals Corporation, CISDI, 22MCC and HBIS Group, respectively.

Minmetals Caofeidian is a project company established for facilitating the International Ore Exchange Centre Project. The development strategies of the Project is to build a green, environmental-friendly, intelligent, multi-functional international ore exchange centre, and create the most competitive iron and steel industry ecochain. The Project will provide one-stop services, covering ore proportioning, warehousing, spot trading, bonding, warehouse receipt transactions, futures delivery warehouse, technical services and other functions. Principally targeting at the market in Tangshan area, Hebei Province, the PRC at present, the Project is expected to spread to Northwest China through Mengji Railway and other East Asian countries through maritime transport.

Based on the financial statements prepared by Minmetals Caofeidian in accordance with the China Accounting Standards for Business Enterprises, the audited net assets of Minmetals Caofeidian as at 31 December 2018 amounted to RMB635,123,100. The audited profit before tax and audited profit after tax of Minmetals Caofeidian for the year ended 31 December 2018 amounted to RMB11,131.45 and RMB8,348.59, respectively.

REASONS FOR AND BENEFITS OF THE TRANSACTION

Located in the Port of Caofeidian, Tangshan City, Hebei Province, the PRC, the Project has benefitted from its advantageous geographical location, good port and inland transportation conditions. Blended ores to be produced and sold under the Project have become the mainstream products in the global iron ore market. A great number of iron and steel enterprises are in great and immediate demand for high-quality and cost- effective blended ores, and Tangshan area is the most intensive area of iron and steel enterprises in the PRC. Through the Transaction, the Group can seize the development opportunities in the Port of Caofeidian, provide customers in the target market with reliable ore source, reduce production cost, and consolidate and expand the Group's market influence in intelligent, efficient, green and environmental-friendly stockyard while obtaining stable returns on investment.

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The Directors (including the independent non-executive Directors) are of the view that the Transaction is entered into on normal commercial terms in the ordinary and usual course of business of the Group, and is fair and reasonable and in the interests of the Company and its shareholders as a whole. As Mr. Guo Wenqing, Mr. Zhang Zhaoxiang and Mr. Lin Jinzhen hold positions in China Minmetals or its subsidiaries, they have abstained from voting on the resolution of the Board to approve the Transaction.

LISTING RULES IMPLICATIONS

China Minmetals, the indirect controlling shareholder of the Company, indirectly holding approximately 55.53% of the total issued shares of the Company, is a connected person of the Company. As Minmetals Caofeidian is held as to 74.36% by Minmetals Corporation, and Minmetals Corporation is a non-wholly owned subsidiary of China Minmetals, each of Minmetals Corporation and Minmetals Caofeidian is a connected person of the Company. Accordingly, the Transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As the applicable percentage ratios of the Transaction exceed 0.1% but less than 5%, the Transaction is subject to the reporting and announcement requirements, but exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

GENERAL INFORMATION

The Group has strong capabilities in metallurgical engineering. It is a large multinational conglomerate operating in various specialized fields across different industries, with engineering contracting, property development, equipment manufacturing and resources development as its principal businesses.

22MCC, a wholly-owned subsidiary of the Company, is a large-scale integrated conglomerate principally engaged in the businesses of engineering general contracting and real estate development, as well as relevant businesses such as international engineering, steel structure manufacturing, technical equipment manufacturing and equipment leasing.

CISDI, an indirect non-wholly owned subsidiary of the Company, is principally engaged in the businesses including integrated solution plans, consultation, engineering design, engineering general contracting, equipment assembly, project supervision, production and operation service for iron and steel enterprises.

Minmetals Corporation is a large-scale multinational conglomerate engaged in transnational operation, mainly covering production and operation of metals, minerals, mechanical and electrical products, as well as financial, real estate, freight, inviting for tenders, project contracting and investment business.

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HBIS Group is principally engaged in the business of iron and steel materials, and also operates in segments across mine resources, finance and securities, modern logistics, iron and steel trading and equipment manufacturing.

Zongheng Iron & Steel is a large-scale integrated iron and steel joint conglomerate integrating sintering, ironmaking, steelmaking, steel rolling, power generation by waste heat, pressure and gas from oxygen generation, and sewage treatment and utilization.

DEFINITIONS

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

"22MCC"	China 22MCC Group Co., Ltd.* ( 中 國 二 十 二 冶 集 團
	有 限 公 司), a company incorporated under the laws of the
	PRC with limited liability, and a wholly-owned subsidiary
	of the Company
"Board"	the board of Directors of the Company
"China Minmetals"	China Minmetals Corporation* ( 中 國 五 礦 集 團 有 限
	公 司), a state wholly-owned enterprise established in the
	PRC under the direct control of the State-owned Assets
	Supervision and Administration Commission of the State
	Council, and the indirect controlling shareholder of the
	Company
"CISDI"	CISDI Engineering Co., Ltd. * ( 中 冶 賽 迪 工 程 技 術 股
	份 有 限 公 司), a company incorporated under the PRC
	laws with limited liability, and an indirect non-wholly
	owned subsidiary of the Company
"Company"	Metallurgical Corporation of China Ltd.* ( 中 國 冶 金 科
	工 股 份 有 限 公 司), a joint stock limited company with
	limited liability incorporated under the laws of the PRC on
	1 December 2008
"connected person(s)"	has the meaning ascribed thereto under the Listing Rules
"controlling shareholder"	has the meaning ascribed thereto under the Listing Rules
"Director(s)"	the director(s) of the Company
"Equity Transfer"	the acquisition by 22MCC from Zongheng Iron & Steel of
	its 10% equity interest in Minmetals Caofeidian

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"Equity Transfer	the equity transfer agreement to be entered into between
Agreement"	22MCC and Zongheng Iron & Steel
"Group"	the Company and its subsidiaries
"HBIS Group"	HBIS Group Co., Ltd. * ( 河 鋼 集 團 有 限 公 司), a
	company incorporated under the PRC laws with limited
	liability, and a third party independent of the Company
	and its connected persons
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Listing Rules"	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
"Minmetals Caofeidian"	China Minmetals Group (Tangshan Caofeidian) Ore
	Holdings Co., Ltd. * ( 中 國 五 礦 集 團（唐 山 曹 妃 甸）礦
	石 控 股 有 限 公 司), a company incorporated under the
	PRC laws with limited liability, and a non-wholly owned
	subsidiary of Minmetals Corporation
"Minmetals Corporation"	China Minmetals Corporation Limited* ( 中 國 五 礦 股 份
	有 限 公 司), a company incorporated under the PRC laws
	with limited liability, and a non-wholly owned subsidiary
	of China Minmetals
"PRC"	the People's Republic of China and for the sole purpose of
	this announcement, excluding Hong Kong, Macau Special
	Administrative Region and Taiwan
"Project"	International Ore Exchange Centre Project
"RMB"	Renminbi, the lawful currency of the PRC
"Shareholders Agreement"	the shareholders agreement to be entered into among
	Minmetals Corporation, CISDI, 22MCC and HBIS Group
	on the same date of the execution of the Equity Transfer
	Agreement to regulate the rights and obligations of the
	shareholders of Minmetals Caofeidian upon completion of
	the Transaction

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"subsidiary(ies)"	has the meaning ascribed thereto under the Listing Rules
"Transaction"	the Equity Transfer and the capital contribution of
	RMB79,389,000 by 22MCC to Minmetals Caofeidian
"Zongheng Iron & Steel"	Hebei Zongheng Iron & Steel Group Co., Ltd. * ( 河 北
	縱 橫 鋼 鐵 集 團 有 限 公 司), a company incorporated
	under the PRC laws with limited liability, and a third party
	independent of the Company and its connected persons
	By order of the Board
	Metallurgical Corporation of China Ltd. *
	Zeng Gang
	Joint Company Secretary
Beijing, the PRC
30 October 2019

As at the date of this announcement, the Board of the Company comprises two executive Directors: Mr. Guo Wenqing and Mr. Zhang Zhaoxiang; four independent non-executive Directors: Mr. Zhou Jichang, Mr. Yu Hailong, Mr. Ren Xudong and Mr. Chan Ka Keung, Peter; and one non-executive Director: Mr. Lin Jinzhen.

• For identification purposes only

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