Dongjiang Environmental : CONTINUING CONNECTED TRANSACTION AGREEMENT ON PURCHASE AND SALE OF INDUSTRIAL AND MINING PRODUCTS

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CONTINUING CONNECTED TRANSACTION

AGREEMENT ON PURCHASE AND SALE OF

INDUSTRIAL AND MINING PRODUCTS

On 11 February 2020, a non wholly-owned subsidiary of the Company, Qingyuan Xinlv (as supplier) and Danxia Smelter (as purchaser) entered into the Agreement on Purchase and Sale of Industrial and Mining Products. Pursuant to the Agreement on Purchase and Sale of Industrial and Mining Products, the parties agreed that Qingyuan Xinlv shall supply copper sulphate to Danxia Smelter.

As Danxia Smelter is a branch of Zhongjin Lingnan, which is a non wholly-owned subsidiary of Guangdong Rising Assets (a substantial shareholder of the Company), Danxia Smelter is a connected person of the Company under the Listing Rules. Accordingly, the transactions contemplated under the Agreement on Purchase and Sale of Industrial and Mining Products constitute continuing connected transactions of the Company under the Listing Rules. There had not been such transactions from 1 January 2020 to 11 February 2020.

As the highest of the applicable percentage ratios (other than the profit ratio) calculated based on the Agreement on Purchase and Sale of Industrial and Mining Products are higher than 0.1% but less than 5% on an annual basis, and the annual cap exceeds HK$3,000,000, pursuant to Rule 14A.76 of the Listing Rules, the transactions contemplated under the Agreement on Purchase and Sale of Industrial and Mining Products are subject to the announcement and annual review requirements, but are exempt from the circular (including independent financial advice) and independent shareholders' approval requirements.

Agreement on Purchase and Sale of Industrial and Mining Products

The Board announces that on 11 February 2020, Qingyuan Xinlv (as supplier) and Danxia Smelter (as purchaser) entered into the Agreement on Purchase and Sale of Industrial and Mining Products. Pursuant to the Agreement on Purchase and Sale of Industrial and Mining Products, the parties agreed that Qingyuan Xinlv shall supply copper sulphate to Danxia Smelter.

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The principal terms of the Agreement on Purchase and Sale of Industrial and Mining Products are as follows:

Date

11 February 2020

Parties

1. Qingyuan Xinlv as supplier; and
2. Danxia Smelter as purchaser

Principal terms and pricing principles

Pursuant to the Agreement on Purchase and Sale of Industrial and Mining Products, Qingyuan Xinlv shall supply copper sulphate to Danxia Smelter in accordance with Danxia Smelter's quality requirements and relevant international technical standards. The consideration under the Agreement on Purchase and Sale of Industrial and Mining Products will be settled in cash.

Pricing principles

The price of copper sulphate in a respective calendar month is based on costs and linked to the average price of copper (1#cathode copper) on the website of Shanghai Metals Market (www.smm.cn) of the previous calendar month, plus a certain profit mark-up.

Such profit mark-up is determined based on the historical gross profit margin of the Group's recycled products (including copper products, nickel products and other recycled products), the historical gross profit margins were approximately 25.36% for the year ended 31 December 2018 and approximately 26.93% for the first half of 2019, respectively. Reference would also be made to other factors including but not limited to the Group's copper production capacity, inventory and weekly order volume from time to time, and are subject to the weekly review and internal approval of the Group. If the profit markup significantly deviates from the data of the immediately previous week, Qingyuan Xinlv will negotiate with Danxia Smelter to adjust such profit mark-up, based on the same pricing principles.

Such profit mark-up was determined after arm's length negotiation between the Group and Danxia Smelter, the Company confirms that the price at which Qingyuan Xinlv supplies copper sulphate to Danxia Smelter is no less favourable than the price at which it supplies copper sulphate to other entities with business relations.

Proposed annual cap

By reference to the Agreement on Purchase and Sale of Industrial and Mining Products and based on a monthly supply of approximately 20 tons of copper sulphate by Qingyuan Xinlv to Danxia Smelter, the annual cap for the year 2020 shall be not exceeding RMB4,500,000. Such annual cap was determined on an arm's length basis and based on normal commercial terms with reference to a number of factors including: (i) the unit price of copper sulphate; (ii) Danxia Smelter's

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demand for copper sulphate; (iii) the Company's estimation on the relevant market price of copper; and (4) the historical transaction amount for the supply of copper sulphate by the Group to Danxia Smelter for the year ended 31 December 2019.

Historical transaction amount and annual cap

The historical transaction amount for the supply of copper sulphate by the Group to Danxia Smelter for the year ended 31 December 2019 are approximately RMB2,633,998.

Qingyuan Xinlv (as supplier), a non wholly-owned subsidiary of the Company and Danxia Smelter (as purchaser) have entered into an agreement on purchase and sale of industrial and mining products on 22 February 2019, the annual cap for the transactions contemplated thereunder for the year 2019 was RMB10,000,000.

Internal control measures

In accordance with the Listing Rules, the Group will at all times comply with Rule 14A.34 and Rule 14A.51 to 14A.59 of the Listing Rules.

In addition, in order to safeguard the overall interests of the Company and its shareholders, the Company has adopted the following guidelines and principles in regulating the Group's transactions with Danxia Smelter:

1 .	The Group will report to the independent non-executive Directors, if necessary, on the
	transactions under Agreement on Purchase and Sale of Industrial and Mining Products
	during each audit committee meeting;
2 .	Transactions under the Agreement on Purchase and Sale of Industrial and Mining Products
	will be reviewed annually by the auditors of the Group and independent non-executive
	Directors, and reported in the annual report of the Company; to ensure that transactions
	carried out under Agreement on Purchase and Sale of Industrial and Mining Products are
	in accordance with the Agreement on Purchase and Sale of Industrial and Mining Products,
	on normal commercial terms (or terms no less favourable than those offered to independent
	third parties), and in accordance with the pricing principles stipulated under the Listing
	Rules; and
3 .	The Group will regularly review transactions with Danxia Smelter to identify any
	transactions that may be at risk of exceeding the proposed cap and any measures to be
	introduced in response to such transactions. The Group has formulated a series of internal

measures and policies to ensure that the transaction will be carried out in accordance with the terms of the Agreement on Purchase and Sale of Industrial and Mining Products and the above pricing principles.

Reasons for and benefits of the continuing connected transactions

The continuing connected transactions contemplated under the Agreement on Purchase and Sale of Industrial and Mining Products are to satisfy the Company's normal production and operation needs. Such transactions are consistent with the Company's business development needs, and

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would bring reasonable income and benefits to the Company.

The Directors (including the independent non-executive Directors) consider that the Agreement on Purchase and Sale of Industrial and Mining Products was entered into on normal commercial terms in the ordinary course of business of the Company; the terms of and transactions contemplated thereunder are fair and reasonable, and in the interests of the Company and its shareholders as a whole.

Information of the parties of the transaction

The Company is a joint stock limited company established in the PRC. The Company is primarily engaged in (i) disposal and treatment of waste; (ii) production and sales of recycled products and renewable energy; (iii) construction and provision of environmental systems and services; (iv) renewable energy utilization; and (v) trading of chemical products and others.

Qingyuan Xinlv is a company established in the PRC with limited liability and mainly engaged in waste recycling comprehensive utilization, environmental protection engineering, sewage treatment; and the sale of chemical products.

Zhongjin Lingnan is a joint stock limited company established in the PRC with limited liability, it is mainly engaged in (i) non-ferrous metal mineral products, smelting products, processing products, comprehensive utilization products (including sulfuric acid, oxygen, sulfur, gallium, antimony, electric furnace zinc powder production), packaging materials and containers; and (ii) building materials, mechanical equipment and pipeline installation and maintenance.

Danxia Smelter is a branch of joint-stock company established in the PRC with limited liability, it is mainly engaged in the production, processing and sales of non-ferrous metal mineral products, smelting products, processing products, comprehensive utilization products (including sulfuric acid, oxygen, sulfur, gallium, antimony, electric furnace zinc powder production), packaging materials and containers.

Listing Rules Implications

As Danxia Smelter is a branch of Zhongjin Lingnan, which is a non wholly-owned subsidiary of Guangdong Rising Assets (a substantial shareholder of the Company), Danxia Smelter is a connected person of the Company under the Listing Rules. Accordingly, the transactions contemplated under the Agreement on Purchase and Sale of Industrial and Mining Products constitute continuing connected transactions of the Company under the Listing Rules. There had not been such transactions from 1 January 2020 to 11 February 2020.

As the highest of the applicable percentage ratios (other than the profit ratio) calculated based on the Agreement on Purchase and Sale of Industrial and Mining Products are higher than 0.1% but less than 5% on an annual basis, and the annual cap exceeds HK$3,000,000, pursuant to Rule 14A.76 of the Listing Rules, the transactions contemplated under the Agreement on Purchase and Sale of Industrial and Mining Products are subject to the announcement and annual review requirements, but are exempt from the circular (including independent financial advice) and independent shareholders' approval requirements.

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As (1) Mr. Tan Kan (executive Director) was nominated by Guangdong Rising Assets and elected at a general meeting of the Company and was appointed by the Party Committee of Guangdong Rising Assets as the Secretary of Party of the Company; (2) Mr. Yao Shu (executive Director) was nominated by Guangdong Rising Assets and elected at a general meeting of the Company and was appointed by the Party Committee of Guangdong Rising Assets as the Deputy Secretary of Party of the Company; and (3) Mr. Liu Boren and Mr. Huang Yiming (both non-executive Directors) have positions in Guangdong Rising Assets and its subsidiaries, they are deemed to be materially interested in the transactions contemplated under the Agreement on Purchase and Sale of Industrial and Mining Products and the annual cap and have therefore abstained from voting on the relevant Board resolutions approving the transactions contemplated under the Agreement on Purchase and Sale of Industrial and Mining Products and the annual cap in the Board meeting. Save as disclosed above, none of the Directors have material interests in the Agreement on Purchase and Sale of Industrial and Mining Products and is required to abstain from voting in the Board meeting approving the relevant Board resolutions.

DEFINITIONS

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

"Board"	:	the board of Directors
"Company"	:	東 江 環 保 股 份 有 限 公 司 (Dongjiang Environmental
		Company Limited*), a joint stock limited company
		established in the PRC, whose H Shares and A Shares are
		listed on the Stock Exchange and on the Shenzhen Stock
		Exchange, respectively
"Director(s)"	:	the director(s) of the Company
"Group"	:	the Company and its subsidiaries
"connected person(s)"	:	has the meaning ascribed to it under the Listing Rules
"Danxia Smelter"	:	Danxia Smelter of Shenzhen Zhongjin Lingnan
		Nonfemet Co. Limited* (深圳市中金嶺南有色金屬股
		份有限公司丹霞冶煉廠 ) a branch of Zhongjin Lingnan,
		a company established in the PRC with limited liability
"Guangdong Rising Assets"	:	Guangdong Rising Assets Management Co., Ltd.* (廣東
		省廣晟資產經營有限公司), a company established in
		the PRC with limited liability and a substantial
		shareholder of the Company as at the date of this
		announcement
"Hong Kong"	:	the Hong Kong Special Administrative Region of the
		PRC

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"HK$":

"Listing Rules"

:

"PRC":

"RMB":

"Agreement on Purchase : and Sale of Industrial and Mining Products"

"Stock Exchange"	:
"Zhongjin Lingnan"	:

"%":

Shenzhen, the PRC

11 February 2020

Hong Kong dollars, the lawful currency of Hong Kong

the Rules Governing the Listing of Securities on the Stock Exchange

the People's Republic of China, which for the purpose of this announcement only, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

RMB, the legal currency of the PRC

the agreement dated 11 February 2020 entered into between the Qingyuan Xinlv (as supplier) and Danxia Smelter (as purchaser) in relation to the supply of copper sulphate, with a term from 11 February 2020 to 31 December 2020

The Stock Exchange of Hong Kong Limited

Shenzhen Zhongjin Lingnan Nonfemet Co. Limited* (深

圳 市 中 金 嶺 南 有 色 金 屬 股 份 有 限 公 司 ), company

established in the PRC with limited liability, and a non- wholly owned subsidiary of Guangdong Rising Assets, the substantial shareholders of the Company

per cent

By order of the Board

Dongjiang Environmental Company Limited*

Tan Kan

Chairman

As at the date of this announcement, the Board of Directors of the Company comprises two executive Directors, being Mr. Tan Kan, Mr. Yao Shu; four non-executive Directors, being Mr. Liu Boren, Mr. Huang Yiming, Mr. Lu Bei and Mr. Jin Yongfu and three independent nonexecutive Directors, being Mr. Zhu Zhengfu, Mr. Qu Jiu Hui and Mr. Wong Hin Wing. .

* For identification purpose only

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