History and Development
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HISTORY AND DEVELOPMENT OVERVIEW We were the largest among gold producers listed in the PRC and/or Hong Kong that operate in the PRC in terms of 2017 gold mine production volume in the PRC. We are engaged in gold exploration, mining, processing, smelting and sales. With our base in Shandong province, the largest gold producing province in China in terms of 2017 gold mine production volume, we have achieved rapid development through organic growth as well as domestic and overseas acquisitions. As of March 31, 2018, we controlled and operated a total of 12 PRC Mines located in Shandong province, Inner Mongolia autonomous region, Fujian province and Gansu province and operated the Veladero Mine in Argentina jointly with Barrick Gold, a leading global gold company, through our 50% indirect interest in MAG. According to the F&S Report, Veladero Mine was the largest gold mine in operation in South America in terms of 2017 gold mine production volume. OUR HISTORY Our key promoter, SDG Group Co., is a large-scale state-owned enterprise with more than 40 years of experience in the gold business. It was established in July 1996 by conversion from its predecessor, Shandong Province Gold Industry Company (山東省黃金工業總公司), which was incorporated in 1975. Our Company was established in January 2000, and our A Shares have been listed on the Shanghai Stock Exchange since August 28, 2003. As of the Latest Practicable Date, our registered capital was RMB1,857,118,809, comprising 1,857,118,809 Shares. For details of the previous changes in our share capital after the establishment of our Company, please see “Appendix VIII — Statutory and General Information” in this Prospectus. Milestones Major milestones in our history of establishment and development are summarized as follows: January 2000 Our Company was established by our key promoter, SDG Group Co., and four other promoters. February 2001 “Research on Mining Methods of Deposits under the Complex Conditions of Xincheng Gold Mine” (新城金礦複雜條件礦床 採礦方法研究) led by Xincheng Gold Mine won the Second Prize of the National Science and Technology Progress Awards (國家科學技術進步獎二等獎) granted by the Ministry of Science and Technology of the PRC. December 2001 We became an accredited gold supplier of the Shanghai Gold Exchange (in establishment). August 2003 We were listed on the Shanghai Stock Exchange. — 136 — HISTORY AND DEVELOPMENT January 2008 We acquired (i) exploration and mining permits of Linglong Gold Mine, Sanshandao Gold Mine, Yinan Gold Mine and Qingdao Gold Mine-Xinhui mine area, and (ii) mining permits of Sizhuang mine area and Wangershan mine area of Jiaojia Gold Mine, which laid the foundation for our strategic layout of gold mines in Shandong. December 2008 We acquired approximately 73.52% interest in Chifengchai Gold Mine, which was our first mine outside Shandong province and realized our strategic layout of gold mines in Inner Mongolia autonomous region. March 2011 Our Xincheng Gold Mine, Sanshandao Gold Mine and Guilaizhuang Gold Mine were selected by the MLR as the first batch of “National Level Pilot Green Mines” (國家級綠色礦山試點單位) in the PRC. March 2012 We acquired 70% interest in Xihe Zhongbao Gold Mine and realized our strategic layout of gold mines in Gansu province. October 2012 We acquired 80% interest in Fujian Yuanxin Gold Mine and realized our strategic layout of gold mines in Fujian province. October 2016 We acquired (i) exploration and mining permits of Linglong Gold Mine-Dongfeng mine area, (ii) exploration permit of Sanshandao Gold Mine-Xinli mine area, (iii) entire interest in Penglai Gold Mine, and (iv) 70.65% interest in Guilaizhuang Gold Mine, which further boosted our mining resources in Shandong. December 2016 We were admitted as a constituent stock of SSE 50 Index of the Shanghai Stock Exchange. June 2017 We acquired 50% interest in the Veladero Mine located in San Juan Province of Argentina, being our first overseas mine, and realized our strategic layout of gold mines in Argentina of South America. September 2017 We were admitted as a constituent stock of the Hang Seng China A Industry Top Index. November 2017 According to F&S Report, our Jiaojia Gold Mine and Linglong Gold Mine were among the few gold mines in China that have reached a cumulative gold mine production volume of 100 tonnes, (equivalent to approximately 3,215.1 koz). — 137 — HISTORY AND DEVELOPMENT Promoting for Establishment In July 1996, with approval from the People’s Government of Shandong Province (山東省人民 政府), the former Shandong Province Gold Industry Company (山東省黃金工業總公司) and the Linglong Gold Mine, Xincheng Gold Mine, Jiaojia Gold Mine, Sanshandao Gold Mine and Yinan Gold Mine of Shandong province were converted into a wholly state-owned enterprise and formed SDG Group Co. Our Company was established on January 31, 2000 with approval from Shandong Province Economic System Reform Commission (山東省經濟體制改革委員會) and the People’s Government of Shandong Province. Our largest shareholder, SDG Group Co., acted as the key promoter to establish our Company together with four other promoters, namely Shandong Zhaojin Group Co., Ltd. (山東招金集團有限公司), Shandong Laizhou Gold (Group) Co., Ltd. (山東萊州黃金(集團)有限公司), Jinan Yuquan Development Centre (濟南玉泉發展中心) (subsequently renamed as Jinan Yuquan Development Co., Ltd. (濟南玉泉發展有限公司)) and Rushan Gold Mine (乳山市金礦) (subsequently renamed as Shandong Jinzhou Mining Group Co., Ltd. (山東金洲礦業集團有限公司)). Most of our promoters were state-owned enterprises in Shandong province. At the time of our establishment, SDG Group Co., Shandong Zhaojin Group Co., Ltd., Shandong Laizhou Gold (Group) Co., Ltd., Jinan Yuquan Development Centre and Rushan Gold Mine held as to 97%, 1%, 1%, 0.6% and 0.4% of our shareholders’ equity, respectively. Listing of A Shares In August 2003, we completed the initial public offering of our A shares and listing on the Shanghai Stock Exchange (stock code: 600547). Immediately after the listing of A Shares, our shareholding structure was as follows: Approximate shareholding percentage SDG Group Co. ................................................ 60.625% Shandong Zhaojin Group Co., Ltd.................................... 0.625% Shandong Laizhou Gold (Group) Co., Ltd. ............................. 0.625% Jinan Yuquan Development Centre ................................... 0.375% Rushan Gold Mine ............................................... 0.250% Public shareholders .............................................. 37.500% Total ......................................................... 100% Since the listing of our A Shares on the Shanghai Stock Exchange and up to the Latest Practicable Date, we had not received any notification from the Shanghai Stock Exchange indicating that we were involved in any non-compliance issues. Our Directors considered that our operation was in compliance with the relevant listing rules of the Shanghai Stock Exchange in all material aspects since the listing date of our A Shares on the Shanghai Stock Exchange. — 138 — HISTORY AND DEVELOPMENT Major Shareholding Changes Equity Division Reform In March 2006, after obtaining approval from the Shandong SASAC, the Company completed the equity division reform. The shareholders of non-tradable shares of the Company, namely, SDG Group Co., Shandong Zhaojin Group Co., Ltd., Shandong Laizhou Gold (Group) Co., Ltd., Jinan Yuquan Development Centre and Rushan Gold Mine advanced Shares to all the then shareholders of tradable shares on a basis of 2.5 Shares for every 10 existing Shares at nil consideration, in order to convert all non-tradable shares into restricted tradable shares. Upon completion of the equity division reform, all our Shares became tradable shares. Private Placement in 2008 In January 2008, we completed the private placement of 17,884,051 Shares. Such private placement was divided into two parts, being asset subscription and cash subscription. In respect of the asset subscription, SDG Group Co. and SDG Group Pingdu Gold Co., Ltd. (山東黃金集團平度黃金有 限公司)(“Pingdu Gold”, a subsidiary of SDG Group Co. and subsequently renamed as Qingdao Gold) subscribed for an aggregate of 8,944,051 Shares at a total consideration of RMB992,163,693.20 settled by way of (i) a combination of assets in Linglong Gold Mine, Sanshandao Gold Mine and Yinan Gold Mine, and 2% equity interest in SDG Jincang Mining Co., Ltd. (山東黃金集團金倉礦業有限公 司) held by SDG Group Co., and (ii) assets of Xinhui Gold Mine held by Pingdu Gold. The value of the above assets was appraised by an independent asset valuation institution. In respect of the cash subscription, China Life Asset Management Company Limited (中國人壽資產管理有限公司)(“China Life Asset Management”), China International Fund Management Co, Ltd. (上投摩根基金管理有限 公司)(“CIFM”), China Southern Asset Management Co., Ltd. (南方基金管理有限公司)(“CSAM”), Beijing Kaiyuan Jiusheng Investment Co., Ltd. (北京開元久盛投資有限公司)(“Kaiyuan Jiusheng”) and Rongtong Fund Management Co. (融通基金管理公司)(“Rongtong Fund”) contributed a total of RMB991,714,200 in cash to subscribe for 8,940,000 Shares. The final issue price for the private placement was RMB110.93 per Share, which was determined on the basis of the average closing price of A Shares of the Company for 20 trading days preceding the announcement date of the Board resolution and having duly considered the interests of the shareholders with tradable shares. In January 2008, the change of registration at the Shanghai branch of China Securities Depository and Clearing Corporation Limited (中國證券登記結算有限公司上海分 公司) was completed in respect of the above Shares. At the time of the private placement,