CHINA KINGSTONE MINING HOLDINGS LIMITED 中 國 金 石 礦 業 控 股 有 限 公 司 (Incorporated in the Cayman Islands with Limited Liability) (Stock Code: 1380)
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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. CHINA KINGSTONE MINING HOLDINGS LIMITED 中 國 金 石 礦 業 控 股 有 限 公 司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 1380) ANNOUNCEMENT (1) DISCLOSEABLE TRANSACTION IN RELATION TO PROCUREMENT AGREEMENT AND (2) ADVANCE TO ENTITIES AND PRICE SENSITIVE INFORMATION IN RELATION TO STRATEGIC COOPERATION WITH FOUR OTHER COMPANIES ENGAGED IN STONE MATERIAL INDUSTRY (1) DISCLOSEABLE TRANSACTION IN RELATION TO PROCUREMENT AGREEMENT The Board is pleased to announce that on 1 March 2012, Kingstone Guangzhou, a wholly owned subsidiary of the Company and Guangzhou Zhongling, an Independent Third Party, have entered into an agreement (‘‘Procurement Agreement’’) whereby Guangzhou Zhongling was engaged to procure various production, transportation and other related equipments for Kingstone Guangzhou. Under the Procurement Agreement, Kingstone Guangzhou is required to pay an amount of RMB94,726,238 (equals approximately HK$116,172,258.28) through Shenzhen Yuyoufa Trading Co., Ltd, an Independent Third Party, to Guangzhou Zhongling as prepayments in relation to procurement of equipment. The Directors (including the independent non-executive Directors) are of the view that the terms of the Procurement Agreement are fair and reasonable and are on normal commercial terms as well as in the interest of the Group and the Shareholders as a whole. – 1 – As one or more of the applicable percentage ratios is 5% or more but is less than 25%, the prepayment contemplated under the Procurement Agreement constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. Accordingly, the Procurement Agreement is subject to notification and announcement requirements under the Listing Rules. (2) ADVANCE TO ENTITIES AND PRICE SENSITIVE INFORMATION IN RELATION TO STRATEGIC COOPERATION In March 2012, Kingstone Guangzhou, a wholly owned subsidiary of the Company, formed strategic cooperation partnership with the Strategic Partners to jointly develop and expand stone material processing capacity in Yunfu, Guangdong Province and to develop national distribution network for stone products based on the following Letter of Intent and the Agreements: 1. Letter of Intent entered into between Kingstone Guangzhou and the Strategic Partners on 6 March 2012 setting out the basic framework of the cooperation between the relevant parties: (i) Yunfu Huihua and Yunfu Chengjiu will jointly establish stone material processing base in Yunfu, Guangdong Province and develop national distribution network for stone products, and Kingstone Guangzhou will provide an advance in the amount of RMB240 million (equals approximately HK$294,336,000) to Yunfu Huihua and Yunfu Chengjiu for the above-mentioned purpose. (ii) Yunfu Kailong and Yunfu Zhijing will jointly establish stone material processing base in Yunfu, Guangdong Province and develop national distribution network for stone products, and Kingstone Guangzhou will provide an advance in the amount of RMB70 million (equals approximately HK$85,848,000) to Yunfu Kailong and Yunfu Zhijing for the above-mentioned purpose. (iii) After signing of the Letter of Intent, the Strategic Partners will introduce other companies engaged in stone material industry to join the strategic cooperation partnership. 2. Strategic Cooperation Agreement A entered into by Kingstone Guangzhou, Yunfu Huihua and Yunfu Chengjiu on 13 March 2012, together with a supplemental agreement entered into between the same parties on the same date, setting out details of the cooperation between the relevant parties; and 3. Strategic Cooperation Agreement B entered into by Kingstone Guangzhou, Yunfu Kailong and Yunfu Zhijing on 12 March 2012, together with a supplemental agreement entered into between the same parties on 13 March 2012, setting out details of the cooperation between the relevant parties. – 2 – The Board is currently in the process of reviewing and assessing the prospects, risks and return of the strategic cooperation given the latest market development. Further announcement will be made by the Company in compliance with the Listing Rules where necessary in due course. As the advancement made by Kingstone Guangzhou to Yunfu Huihua and Yunfu Chengjiu under the Strategic Cooperation Agreement A exceeds 8% of the total assets of the Company as defined under Rule 14.07(1) of the Listing Rules, the payment made under the Strategic Cooperation Agreement A constitutes an advance to an entity pursuant to Rule 13.13 of the Listing Rules and therefore is subject to the disclosure requirements under the same rule. This announcement is also made pursuant to Rule 13.09(1) of the Listing Rules. Shareholders and investors are advised to exercise caution when dealing in the shares of the Company. (1) DISCLOSEABLE TRANSACTION IN RELATION TO PROCUREMENT AGREEMENT Major Terms of the Procurement Agreement Date : 1 March 2012 Parties : Kingstone Guangzhou Guangzhou Zhongling Subject : The Procurement Agreement is a one year co-operation agreement between Kingstone Guangzhou and Guangzhou Zhongling whereby Guangzhou Zhongling will procure (i) mining equipments; (ii) equipments for cutting slabs; and (iii) heavy duty cranes and transportation equipment based on the needs of Kingstone Guangzhou from time to time during the term of the agreement. Term : 2 March 2012 to 1 March 2013 Price : Factory price of the equipments plus a reasonable service fee to be agreed between Kingstone Guangzhou and Guangzhou Zhongling. The service fee includes bank charges warehouse rental charges transportation fees, toll fees and handling charges. – 3 – Services to be provided by : (i) responsible for transportation of the equipment from the Guangzhou Zhongling factory to a mining site specified by Kingstone Guangzhou and assist to deal with all claims which may arise in connection therewith; (ii) report to Kingstone Guangzhou on the progress in relation to supply of the equipment and work with Kingstone Guangzhou to take any corresponding actions in a timely manner; (iii) arrange negotiations to resolve all potential disputes and other administrative work; (iv) assist with the administrative procedures regarding any exchange of equipments, repairs and refunds during the period when claims are being made; and (v) bear all loss suffered by Kingstone Guangzhou in relation to any breach of contract with suppliers. Prepayment terms : Kingstone Guangzhou is required to pay an amount of RMB94,726,238 (equals approximately HK$116,172,258.28), which was arrived at based on arm’s length negotiation between Kingstone Guangzhou and Guangzhou Zhongling, within 15 days of signing of the Procurement Agreement to Guangzhou Zhongling as prepayments in relation to procurement of equipment. As at the date of this announcement, the prepayment of RMB94,726,238 (equals approximately HK$116,172,258.28) has been fully paid to Guangzhou Zhongling through Shenzhen Yuyoufa, an Independent Third Party and an alliance company of Guangzhou Zhongling, at the request of Guangzhou Zhongling in accordance with the terms of the Procurement Agreement. The actual consideration under each procurement order will be deducted from the prepayment amount. The balance of any prepayment amount will be refunded to Kingstone Guangzhou at the completion of the Procurement Agreement. – 4 – Reasons for and Benefits of the Procurement Agreement Through the Procurement Agreement, the Group will be able to acquire marble slabs processing equipment, which will enable the Group to expand its production facility. The Directors (including the independent non-executive Directors) are of the view that the terms of the Procurement Agreement are fair and reasonable and are on normal commercial terms as well as in the interest of the Group and the Shareholders as a whole. General Information on the Parties The Group is principally engaged in marble mining and currently own and operates two marble mines, the Zhangjiaba Mine and the Tujisi Mine. Guangzhou Zhongling is principally engaged in waterway dredging, port constructions, earthwork, investment by self-owned funds, investment consultancy, and wholesale and retail trade. Shenzhen Yuyoufa, an alliance company of Guangzhou Zhongling, is principally engaged in channel dredging (excluding sand mining), port constructions, earthwork (excluding extraction). To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Guangzhou Zhongling and Shenzhen Yuyoufa and each of their respective ultimate beneficial owner is an Independent Third Party. Implications under the Listing Rules As one or more of the applicable percentage ratios is 5% or more but is less than 25%, the prepayment contemplated under the Procurement Agreement constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. Accordingly, the Procurement Agreement is subject to notification and announcement requirements under the Listing Rules. (2) ADVANCE TO ENTITIES AND PRICE SENSITIVE INFORMATION IN RELATION TO PROPOSED TERMINATION OF STRATEGIC COOPERATION Kingstone Guangzhou, a wholly owned subsidiary of the Company, has formed strategic cooperation partnership with the Strategic