江西銅業股份有限公司 JIANGXI COPPER COMPANY LIMITED · A letter from the Board is set out...
Transcript of 江西銅業股份有限公司 JIANGXI COPPER COMPANY LIMITED · A letter from the Board is set out...
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult yourlicensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Jiangxi Copper Company Limited, you should at once handthis circular and the accompanying forms of proxy and reply slips to the purchaser or the transferee or to the bankor stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaseror transferee.
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes norepresentations as to its accuracy or completeness and expressly disclaims any liability whatsoever for any losshowsoever arising from or in reliance upon the whole or any part of the contents of this circular.
江西銅業股份有限公司JIANGXI COPPER COMPANY LIMITED
(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China)
(Stock Code: 0358)
PROPOSED ISSUE OF NEW A SHARES
AND
DISCLOSEABLE AND CONNECTED TRANSACTION
Independent financial adviser to the independent board committee ofJiangxi Copper Company Limited
Goldbond Capital (Asia) Limited
A letter from the Board is set out on pages 1 to 18 of this circular. A letter from the Independent BoardCommittee is set out on page 19 of this circular.
A letter from Goldbond Capital (Asia) Limited, the independent financial adviser, containing its advice to the IndependentBoard Committee and the Independent Shareholders is set out on pages 20 to 35 of this circular.
Notices convening the extraordinary general meeting and the class meetings of the Company to be held at theConference Room of the Company, 15 Yejin Avenue, Guixi City, Jiangxi, the People’s Republic of China onThursday, 17 May 2007 is set out on pages 132 to 144 of this circular.
If you intend to attend the extraordinary general meeting and the class meetings of the Company, please completeand return the accompanying reply slips in accordance with the instructions printed thereon as soon as possibleand in any event by not later than 27 April 2007.
Whether or not you are able to attend the meetings, you are requested to complete and return the enclosed formsof proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than24 hours before the time appointed for holding of the meeting or any adjournment thereof. Completion and returnof the forms of proxy will not preclude you from attending and voting in person at the meetings or any adjournmentthereof should you so wish.
2 April 2007
TABLE OF CONTENTS
— i —
Pages
Definitions ..................................................................................................................................................... iii
Letter from the Board .................................................................................................................................. 1
I. Introduction ............................................................................................................................. 1
II. Proposed Issue of New A Shares ......................................................................................... 2
III. The Acquisition Agreement .................................................................................................. 8
IV. Reason for and benefits of the Acquisition Agreement .................................................... 10
V. Information on the Targets .................................................................................................... 11
VI. Information on the Group ..................................................................................................... 15
VII. General .................................................................................................................................... 16
VIII. The Independent Board Committee ..................................................................................... 16
IX. The EGM and the Class Meetings ....................................................................................... 16
X. Poll Procedure ........................................................................................................................ 17
XI. Recommendation .................................................................................................................... 18
XII. Further information ................................................................................................................ 18
Letter from the Independent Board Committee ........................................................................................ 19
TABLE OF CONTENTS
— ii —
Pages
Letter from Goldbond Capital ..................................................................................................................... 20
Appendix I – Valuation Report on properties ........................................................................................... 36
Appendix II – Valuation Report on Plant and
Machinery of Chengmenshan Copper Mine .......................................................................................... 46
Appendix III – Valuation Report on Plant and
Machinery of Xiangsi Railway ............................................................................................................... 52
Appendix IV – Valuation Report on Plant and
Machinery of Copper Alloy Company ................................................................................................... 58
Appendix V – Valuation Report on Plant and
Machinery of Copper Product Company ............................................................................................... 64
Appendix VI – Valuation Report on Plant and
Machinery of JCC Dexing Transportation Company ........................................................................... 70
Appendix VII – Valuation Report on Plant and
Machinery of JCC Chemical Company .................................................................................................. 76
Appendix VIII – Valuation Report on the Mining Right
of Chengmenshan Copper Mine .............................................................................................................. 82
Appendix IX– General information ............................................................................................................ 125
Notice of Extraordinary General Meeting ................................................................................................. 132
Notice of A Share Class Meeting ............................................................................................................... 138
Notice of H Share Class Meeting ............................................................................................................... 141
DEFINITIONS
— iii —
In this circular, the following expressions have the following meanings unless the context otherwise requires:
“A Shares” Renminbi-denominated domestic shares in the ordinary share capital
of the Company, with a nominal value of RMB1.00 each, which are
listed on the Shanghai Stock Exchange
“A Share Issue” the issue of Consideration Shares by the Company to JCC and the
issue of Placing Shares to other institutional investors
“Acquisition” the acquisition of the Targets as contemplated under the Acquisition
Agreement
“Acquisition Agreement” the conditional sale and purchase agreement dated 16 March 2007
entered into between the Company and JCC in respect of the
Acquisition
“Announcement” the announcement of the Company dated 19 March 2007 in respect
of the A Share Issue and the Acquisition Agreement
“Appraisal Date” 30 June 2006, the date on which the appraised values of the relevant
net asset values of the Targets were determined
“Articles of Association” the articles of association of the Company
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Beijing Jingwei” 北京經緯資產評估有限責任公司 (for identification purposes, in
English, Beijing Jingwei Assets Appraisal Co., Ltd.)
“Beijing Zhongzheng” 北京中証評估有限責任公司 (for identification purposes, in English,
Beijing Zhongzheng Appraisal Co., Ltd,), a PRC independent qualified
valuer
“Blister Copper” copper which has been cast after passing through a converter. Blister
copper is approximately 98.5% copper and take its name from
“blisters” that form on the surface
“Board” the board of Directors
“Class Meetings” the class meetings for holders of (i) A Shares (including the holders
of A Shares and A Shares with trading moratorium) and (ii) H Shares
respectively
DEFINITIONS
— iv —
“Chengmenshan Copper Mine” Chengmenshan Mine of Jiangxi Copper Company (城門山銅礦),
wholly owned by JCC
“Company” Jiangxi Copper Company Limited, a Sino-foreign joint venture joint
stock limited company incorporated in the PRC
“Completion Date” the date on which the sale and purchase of the Targets in accordance
with the Acquisition Agreement is completed
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“Consideration Share(s)” not less than 44.63% of the total number of A Shares to be issued
under the A Share Issue as the consideration for the Acquisition
payable by the Company under the Acquisition Agreement
“Copper Alloy Company” Jiangxi Copper Alloy Company Limited (江西銅業合金材料有限
公司), a company established in the PRC and the registered capital
of which is owned as to 60% and 40% by the Company and JCC
respectively
“Copper Cathode” copper sheet which is 99.9% and above pure produced by either an
electrolytic refining process or by electrowinning
“Copper Concentrate” a product of the concentrator usually containing 20% to 30% copper.
It is a raw material for smelting
“Copper Product Company” Jiangxi Copper Products Company Limited (江西銅業銅材有限公
司), a company established in the PRC and the registered capital of
which is owned as to 60% and 40% by the Company and JCC
respectively
“CSRC” China Securities and Regulatory Commission
“Directors” director(s) of the Company
“EGM” an extraordinary general meeting of the Company to be convened to
consider, if thought fit, to approve the A Share Issue and the
Acquisition Agreement
“Goldbond Capital” Goldbond Capital (Asia) Limited, an independent financial adviser
to the Independent Board Committee and the Independent
Shareholders
DEFINITIONS
— v —
“Grant Sherman” Grant Sherman Appraisal Limited
“Group” the Company and its subsidiaries
“H Shares” overseas listed foreign invested shares of RMB1.00 each in the
capital of the Company, which are subscribed for and traded in HK$
and which are listed on the Stock Exchange and London Stock
Exchange Limited
“Independent Board Committee” an independent committee of the Board established for the purpose
of reviewing the transactions contemplated under the Acquisition
Agreement
“Independent Shareholders” the Shareholders other than JCC and its associates
“Independent Third Party(ies)” party(ies) who is/are independent of the Company and connected
persons of the Company
“JCC” Jiangxi Copper Corporation, a substantial shareholder of he Company,
holding approximately 42.31% of the total issued share capital of the
Company
“JCC Chemical Company” Jiangxi Copper Group Chemical Company Limited (江西銅業集團
化工有限公司), a company established in the PRC and the registered
capital of which is owned as to 100% by JCC
“JCC Dexing Transportation Jiangxi Copper Group (Dexing) Transportation Company Limited,
Company” (江西銅業集團(德興)運輸有限公司), a company established in
the PRC and the registered capital of which is owned as to 100% by
JCC
“JCC Group” JCC and its subsidiaries (other than the Group)
“Latest Practicable Date” 29 March 2007, being the latest practicable date prior to the printing
of this circular for ascertaining certain information referred to in this
circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Long Stop Date” being the date falling one day before the six month period following
the A Share Issue having been approved by the CSRC
DEFINITIONS
— vi —
“Percentage Ratios” the percentage ratios under Rule 14.07 of the Listing Rules, other
than the equity capital ratio and profits ratio
“Placing” the proposed placing of new A Shares to institutional investors
“Placing Shares” the new A Shares to be issued and placed to investors under the
Placing
“PRC” the People’s Republic of China
“Scrap Copper” the waste produced in the copper industry and/or industrial waste
abandoned after being used with copper content
“Shanghai Listing Rules” the rules governing the listing of securities on the Shanghai Stock
Exchange
“Shareholder(s)” the holder(s) of the shares of the Company
“Share Reform Plan” the share reform plan pursuant to which the non-tradable A Shares
were converted into tradable A Shares with reference made to the
announcements of the Company dated 24 February 2006, 3 March
2006, 14 March 2006, 28 March 2006, 3 April 2006, 12 April 2006
and 13 April 2006
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Targets” the mining rights and the related operating assets and liabilities of
the Chengmenshan Copper Mine, operating assets and related
liabilities of the Xiangsi Railway, 40% equity interest of the Copper
Alloy Company, 40% equity interest of Copper Product Company,
100% equity interest of JCC Chemical Company and 100% equity
interest of the JCC Dexing Transportation Company
“Xiangsi Railway” the Xiangsi Railway especial line (香泗鐵路專用線) located in
Dexing, Jiangxi Province, running from Xiangtuan to Sizhou, owned
by JCC
“HK$ Hong Kong dollars, the lawful currency of Hong Kong
“RMB” Renminbi, the lawful currency of the PRC
Translation of Renminbi into Hong Kong dollars is based on the exchange rate of HK$1.00 = RMB1.00.
LETTER FROM THE BOARD
— 1 —
江西銅業股份有限公司JIANGXI COPPER COMPANY LIMITED
(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China)
(Stock Code: 0358)
Board of Directors Legal address:
Executive Directors: 15 Yejin Avenue
Mr. Li Yihuang (Chairman) Guixi City
Ms. Qi Huaiying Jiangxi
Mr. He Changming People’s Republic of China
Mr. Wu Jinxing
Mr. Wang Chiwei Place of business in Hong Kong:
Mr. Gao Jianmin
Mr. Liang Qing Suite 4901, 49th Floor
Office Tower
Independent non-executive Directors: Convention Plaza
Mr. Kang Yi 1 Harbour Road
Mr. Tu Shutian Wanchai
Ms. Zhang Rui Hong Kong
Mr. Yin Hongshan
2 April 2007
To the Shareholders
Dear Sir or Madam,
PROPOSED ISSUE OF NEW A SHARES
AND
DISCLOSEABLE AND CONNECTED TRANSACTION
I. INTRODUCTION
On 19 March, 2007, the Board announced that the Company intends to apply to the CSRC and other
relevant PRC authorities for the approval of the issue of not more than 290,000,000 A Shares (including
the Consideration Shares and the Placing Shares) in the PRC and the listing of such A Shares on the
Shanghai Stock Exchange. The proposed A Share Issue will be conditional on, amongst other things,
(i) the approval of the Independent Shareholders by way of special resolution at the EGM and the Class
Meetings in accordance with the Articles of Association and the relevant requirements of the Listing
Rules; and (ii) the approvals for the issue of the A Shares from the relevant governmental authorities,
including but not limited to CSRC.
LETTER FROM THE BOARD
— 2 —
The Board also announced that on 16 March 2007, the Company entered into the Acquisition Agreement
with JCC, pursuant to which, the Company agreed to acquire the Targets from JCC for an aggregate
consideration of RMB1,785.3 million (subject to adjustment) which will be satisfied by the issue of
the Consideration Shares.
JCC is a substantial shareholder holding approximately 42.31% of the total issued share capital of the
Company, and therefore JCC is a connected person of the Company under the Listing Rules. The
entering into of the Acquisition Agreement constituted a discloseable and connected transaction of the
Company and is therefore subject to the requirements under Chapter 14 and 14A of the Listing Rules.
As the Percentage Ratios in connection with the Acquisition Agreement exceeded 2.5%, the Acquisition
Agreement is subject to the reporting, announcement and Independent Shareholders’ approval requirement
pursuant to Chapter 14A of the Listing Rules.
II. PROPOSED ISSUE OF NEW A SHARES
The Board announced that the Company intends to apply to the CSRC and other relevant PRC
authorities for the approval of the issue of not more than 290,000,000 A Shares, representing
approximately 19.23% of the total A Shares in issue, approximately 10.02% of the existing issued share
capital of the Company and approximately 9.11% of the issued share capital of the Company as
enlarged by the A Share Issue, in the PRC and the listing of such A Shares on the Shanghai Stock
Exchange. The A Shares shall comprise the Consideration Shares to be issued to JCC in consideration
of the Acquisition and the issue and Placing Shares to not more than nine institutional investors who
and their respective ultimate beneficial owners shall be Independent Third Parties under the Placing
in the PRC. As at the Latest Practicable Date, the Company conducted negotiations with various
potential investors, however, no agreement has been made between the Company and such potential
investors in respect of the Placing. Following completion of the A Share Issue, it is expected that there
will not be any new substantial shareholder (as defined under the Listing Rules) introduced as a result
of subscription of the Placing Shares. The proposed A Share Issue will be conditional on, amongst
other things, (i) the approval of the Independent Shareholders by way of special resolution at the EGM
and the Class Meetings in accordance with the Articles of Association and the relevant requirements
of the Listing Rules; and (ii) the approvals for the issue of the A Shares from the relevant governmental
authorities, including but not limited to CSRC. The Company intends to issue the Placing Shares and
the Consideration Shares on the same day. The approvals from Independent Shareholders on the A
Share Issue will be valid for one year after the date of the EGM and the Class Meetings, if the A Share
Issue cannot be completed within the prescribed period, the approval from Independent Shareholders
will lapse.
The Directors expect the number of the Consideration Shares to be issued to JCC will not be less than
44.63% of the total number of A Shares to be issued under the A Share Issue, and such Consideration
Shares to be issued to JCC will be utilised to satisfy the consideration of the Acquisition Agreement.
JCC will undertake not to transfer the Consideration Shares within 36 months from the completion
date of the Placing. In addition, the Company will require the placees not to dispose of the Placing
Shares for a period of 12 months from the date of completion of the Placing.
LETTER FROM THE BOARD
— 3 —
Assuming that (a) there is no further issue of Shares from the date hereof up to the date of completion
of the A Share Issue and (b) there are 290,000,000 A Shares issued under the A Share Issue, and (c)
129,427,000 Consideration Shares, being approximately 44.63% of the total number of A Shares are
issued to JCC as consideration, the shareholding structure of the Company before and after completion
of the A Share Issue will be as follows :-
Before completion of the A Share Issue After completion of the A Share Issue
Approximate Approximate
percentage of percentage of
Class of Shares / Number of issued share Class of Shares/ Number of issued share
Shareholders shares capital Shareholders shares capital
1 Total number of A Shares 1,507,556,200 52.07% 1. Total number of A Shares 1,797,556,200 56.44%
JCC 1,225,035,414 42.31% JCC 1,354,462,414 42.53%
Holders of A Shares with Holders of A Shares with
trading moratorium 1,920,786 0.07% trading moratorium 1,920,786 0.06%
Holders of A Shares 280,600,000 9.69% Holder of A Shares 441,173,000 13.85%
2 Total number of H Shares 1,387,482,000 47.93% 2. Total number of H Shares 1,387,482,000 43.56%
3. Total number of shares 2,895,038,200 100% 3. Total number of shares 3,185,038,200 100%
Following completion of the A Share Issue, there will not be a change of control of the Company.
Public float requirements under the Listing Rules will be maintained before and after completion of
the A Share Issue.
Resolutions to authorise the Board in determining, inter alia, the issue price, the actual number of A
Shares to be issued will be considered at the EGM and the Class Meetings. It is intended that the issue
price of the A Shares will not be less than 90% of the average trading price of the A Shares on the
Shanghai Stock Exchange for 20 trading days immediately before the date of the Announcement, i.e.
from 30 January 2007 to 5 March 2007, for reference purpose, 90% of average closing price of the
A Share during such period is approximatley RMB13.78 per A Share. In addition, the issue price will
be determined with reference to the following factors : (i) the issue price will not be lower than the
net asset value per Share as reported in the latest audited accounts of the Company, for reference
purpose, the audit net asset value per Share as at 31 December 2005 was RMB2.88 which is calculated
based on the existing 2,895,038,200 shares in issue; (ii) the funding requirements and arrangements
of the proposed projects of the Company; (iii) the trading price of A Shares in the secondary market,
price-to-earning ratio and the growth trend; and (iv) the result of negotiations with other relevant
parties. Therefore, the total amount of the proceeds of the A Share Issue is not able to be determined
at the moment, however, it is estimated that the proceeds from the A Share Issue will amount to
approximately RMB4,000,000,000 (including the value for issue of the Consideration Shares) and the
cash proceeds from the Placing is intended to be used to finance:
LETTER FROM THE BOARD
— 4 —
(i) the expansion of phase II of Chengmenshan Copper Mine;
(ii) the renovation of technology for mining method of Yongping Copper Mine;
(iii) the technology renovation of the Fujiawu Copper Mine;
(iv) the expansion of the processing capacity of Wushan Copper Mine to 5,000 tonnes per day;
(v) the expansion of copper recovering from slag;
(vi) the expansion of anode mud treatment and comprehensive utilization; and
(vii) the utilization of the heat recovered from smelting process.
Further announcement will be made after the number of A Shares under the A Share Issue and the
issue price of the A Shares are fixed. It is expected that the number of A Shares and the issue price
will be fixed after the obtaining of the approvals from the relevant governmental authorities. There
were no fund raising activities of the Company within 12 months immediately preceding the date of
the Announcement.
Summary of the material information relating to the projects to be funded by the proceeds from the
Placing are set out below. Please refer to the announcement of the Company published on the website
of the Shanghai Stock Exchange at http://www.sse.com.cn for further details of following projects.
Expansion of phase II of Chengmenshan Copper Mine
The Company intends to invest approximately RMB498.0 million to finance the expansion of phase
II of Chengmenshan Copper Mine with a view to increasing the handling capacity to 7,000 tonnes per
day.
After completion of the expansion, the annual production capacity of Chengmenshan Copper Mine will
reach 14,816.93 tonnes of Copper Concentrate, 25,814.42 tonnes of sulfur, 232 kg of gold and 15,142
kg of silver and 607,150 tonnes of sulfur concentrate (standard sulfur concentrate of 703,541.55
tonnes). The Company will invest 126.32 million for construction of environmental protection facilities.
It is expected that the expansion will commence in December 2007 and complete in December 2009.
Renovation of technology for mining method of Yongping Copper Mine
The Company intends to invest approximately RMB387.52 million to finance the renovation of
technology for mining method of Yongping Copper Mine to convert such mines from open pit mine
to mines comprising open pit mine and underground mine.
LETTER FROM THE BOARD
— 5 —
The proven total copper reserve of Yongping Copper Mine is 1,310,000 tonnes, with 14,950,000 tonnes
of pyrite ores. The average grade of copper and sulphur is 0.73% and 12.83% respectively. The ores
also contain associated gold and silver. Currently, the mine owns a large mining and ore-dressing
capacity of 10,000 tonnes per day. The open-pit mining method has been employed for over 20 years.
Following the pit expansion project in 2002, there still remains approximately 8 years in the steady
output cycle. The pit is estimated to be closed in 2015. The proven underground ore reserve of
Yongping Copper Mine is 65,800,000 tonnes at an average copper grade of 0.59%, representing
390,000 tonnes of copper metal. In order to fully utilize the geological resources outside the open pit,
maximise the output cycle and secure its capacity of 10,000 tonnes per day as well as take full play
of the existing scale merit and asset profitability, it is necessary to commence the project of shifting
from open-pit to mines comprising open pit and underground mine for Yongping Copper Mine as soon
as possible.
Upon completion of the project, a large-scale modern mine with a steady output cycle of 15 years,
a service period of 19 years and a capacity of 5,000 tonnes per day will be developed. Moreover, the
existing steady output cycle at 10,000 tonnes per day will be extended by 7 years (i.e., to 14 years
from 2006), taking full use of its existing assets for better scale merit and asset profitability. The project
is expected to bring desirable returns on an overall basis.
Technology renovation of the Fujiawu Copper Mine
The Company intends to invest approximately RMB300.56 million to finance the technology renovation
of Fujiawu Copper Mine so as to extend the mining period of Dexing Copper Mine of the Company
from 24 years to 40 years.
Upon acceptance and completion, the project will own a mining capacity of 150,000 tonnes of ores
per day. It can provide copper concentrates containing 22,265 tonnes of copper, 80 kilograms of gold,
1,988 kilograms of silver, 23,855 tonnes of sulphur as well as molybdenum concentrates containing
710 tonnes of molybdenum and 1,000 tonnes of electro-deposit copper per annum on the average. All
produced copper concentrates will be used as materials for production of Guixi Smelter of the
Company. The produced electro-deposit copper will be sold through the Company’s established
distributing network, with an estimated output-to-sales ratio of 100%.
Expansion of the processing capacity of Wushan Copper Mine to 5,000 tonnes per day
The Company intends to invest approximately RMB120.24 million to finance the expansion of the
processing capacity of Wushan Copper Mine by 5,000 tonnes per day.
Upon completion, the project in Wushan Copper Mine will increase the mining/ore-dressing capacity
by 2,000 tonnes to 5,000 tonnes per day. It can provide copper concentrates containing 12,814 tonnes
of copper, 218 kilograms of gold, 7,512 kilograms of silver, 171,000 tonnes of sulphur as well as
sulphur concentrates of 331,900 tonnes (containing 132,700 tonnes of sulphur). All the products will
be provided to Guixi Smelter of the Company, thus stabilising the Company’s self-supplying of copper
materials.
LETTER FROM THE BOARD
— 6 —
Expansion of copper recovering from slag
The Company intends to invest approximately RMB189.53 million to finance the expansion of the
copper recovering operation of the Group, which will increase the production capacity and the recovery
ratio of recovering copper from slag.
Currently, Guixi Smelting Plant owns a workshop for copper recovery from electric furnace slag with
a smelting capability of 3,100 tonnes per day. Upon commencement of operation of the 300,000-tonne-
per-annum copper smelting project in 2007, furnace slag will be increased by 1,555 tonnes per day
in total, including 1,185 tonnes of flash furnace slag per day with 2% copper content, and 370 tonnes
of converter slag with 5% copper content. Hence, it is necessary to expand the existing copper recovery
workshop for the purposes of treatment of the increased slag, integration of production management
as well as saving investment and operation cost.
For treatment of the flash furnace slag, the Company’s 300,000-tonne-per-annum copper smelting
project abandons slag-cleaning furnace with low metal recovery rate and poor environment protection
while adopting the copper milling treatment. This will increase the rate of copper recovery in smelting
process by nearly 1% and each year, another 2000 tonnes of copper can be recovered from slag.
Meanwhile, the slag residue can be further used to recover iron concentrate and for cement additive,
thereby maximising the utilisation of invaluable national resources.
Upon achievement of the target output of the project, output of slag concentrate will be increased by
47,944.36 tonnes (with 24% copper content) each year. All such slag concentrate is to be used for flash
furnace smelting with a 100% sales-to-production ratio.
Expansion of anode mud treatment and comprehensive utilisation
The Company intends to invest approximately RMB194.27 million to finance the expansion of the
capacity of the anode mud treatment operation of the Group so as to cope with the expected expansion
of the annual production capacity of the Group.
Anode mud is a mixture of various rare precious metals deposited on the bottom of the smelting tank
in the copper smelting process. Guixi Smelting Plant has an anode mud treatment system in place.
Since 1987 when it was put into production, the system has been upgraded for several times with a
current daily smelting capability of 4,450 tonnes of dry mud. In 2006, Guixi Smelting Plant produced
13 tonnes of gold bullion and 350 tonnes of silver bullion. As the phase I project of the 300,000-tonne
copper smelting project of the Company is about to be completed and put into operation, the output
of anode mud is expected to increase by 1,200 tonnes per annum (dry mud) from the current level.
When the phase II project is completed and put into operation, the output of anode mud is expected
to increase by 1,200 tonnes per annum (dry mud) from the current level. However, the current smelting
capability of Guixi Smelting Plant can no longer meet such needs. To cope with the 700,000-tonne-
per-annum copper smelting capability, it is necessary to optimise the existing anode mud treatment
facilitates and implement expansion projects so as to enhance the anode mud treatment ability in
addressing the needs from production of gold and silver and comprehensive utilization of resources.
LETTER FROM THE BOARD
— 7 —
Upon implementation of the phase I project, major products will include 8 tonnes of gold bullion (Au
99.99%) and 70 tonnes of silver bullion (Ag 99.99%) while following the implementation of the phase
I project, major products will include 15 tonnes of gold bullion (Au 99.99%) and 100 tonnes of silver
bullion (Ag 99.99%). As gold and silver products can be sold in both futures and spot markets, the
sales-to-production ratio of gold and silver products may reach 100%.
Utilization of the heat recovered from smelting process
The Company intends to invest approximately RMB272.61 million to finance the installation of the
off-gas recovery system to recover the waste comprising heat and steam pressure generated from the
smelting process of the Group.
Upon operation of the project, the heat recovered from smoke will be equivalent to 85,800 tonnes of
standard coal per annum while 1,053 tonnes of standard coal will be saved per annum from the
recovered steam pressure. The heat and steam generated from such process will be utilized by Guixi
Smelting Plant with a 100% sales-to-production ratio. The preliminary work concerning this project
is in progress.
The balance of the fund required for the above projects will be financed by bank borrowings and other
means. If there is any balance of the net proceeds from the Placing, such balance will be used as
additional working capital of the Company for its production operations.
Please refer to the announcement of the Company published on the website of the Shanghai Stock
Exchange at http://www.sse.com.cn for further details of the A Share Issue.
LETTER FROM THE BOARD
— 8 —
III. THE ACQUISITON AGREEMENT
On 16 March 2007, the Company entered into the Acquisition Agreement with JCC, pursuant to which,
the Company agreed to acquire certain assets and equity interests in certain group companies of the
JCC Group from JCC.
Particulars of the Acquisition Agreement
Date
16 March 2007
Parties
Purchaser : the Company
Vendor : JCC
Targets of the Acquisition
Pursuant to the Acquisition Agreement, the Company agreed to acquire and JCC agreed to sell the Targets
comprising the following assets and equity interests in certain group companies of the JCC Group:
1. the mining rights and the related operating assets and liabilities of the Chengmenshan Copper
Mine;
2. the operating assets and the related liabilities of the Xiangsi Railway;
3. 40% equity interest of the Copper Alloy Company;
4. 40% equity interest of the Copper Product Company;
5. 100% equity interest of the JCC Dexing Transportation Company; and
6. 100% equity interest of the JCC Chemical Company.
For details of the Targets, please refer to the paragraph headed “Information on the Targets” below.
LETTER FROM THE BOARD
— 9 —
Consideration
The aggregate consideration under the Acquisition Agreement amounted to approximately RMB1,785.3
million (subject to adjustments) (the “Consideration”) which was arrived at after arm’s length negotiations
between the Company and JCC with reference to the appraised values of the Targets prepared by
Beijing Zhongzheng, a PRC independent qualified valuer. The Directors confirmed that Beijing
Zhongzheng is a qualified valuer endorsed by the relevant PRC government regulatory bodies. In order
to comply with the relevant regulatory requirements of the PRC, the Company has appointed Beijing
Zhongzheng to conduct appraisals on the Targets and in order to comply with the Listing Rules, the
Company has appointed Grant Sherman to conduct valuation on the properties, plant and machinery
of the Targets. In addition, the Company has appointed Beijing Jingwei to prepare the valuation report
on the mining rights of the Chengmenshan Copper Mine. Valuation reports in respect of the properties,
plant and machinery of the Targets and the mining right of the Chengmenshan Copper Mine have been
included in this circular as appendices I to VIII. The Consideration composed of:
1. as to approximately RMB1,442.4 million for the acquisition of the mining rights and the related
operating assets and liabilities of the Chengmenshan Copper Mine;
2. as to approximately RMB86.2 million for the acquisition of the operating assets and the related
liabilities of the Xiangsi Railway;
3. as to approximately RMB83.6 million for the acquisition of 40% equity interest of the Copper
Alloy Company;
4. as to approximately RMB111.4 million for the acquisition of 40% equity interest of the Copper
Product Company;
5. as to approximately RMB17.3 million for the acquisition of 100% equity interest of the JCC
Dexing Transportation Company; and
6. as to approximately RMB44.5 million for the acquisition of 100% equity interest of the JCC
Chemical Company.
As mentioned above, the Consideration is subject to adjustments. The consideration for the acquisition
of each of the Targets will be adjusted with reference to the appraised values of such assets as confirmed
by the relevant governmental authorities. Further announcement will be made if there is substantial
adjustment to the Consideration.
The Consideration will be satisfied by the issue and allotment of the Consideration Shares to JCC.
Based on the existing plan of the A Share Issue, the issue of Consideration Shares shall be sufficient
to satisfy the Consideration. Should there be a shortfall in satisfying the Consideration, the Group will
pay such shortfall by internal resources of the Group, including but not limited to cash held by the
Company and/or bank borrowings.
LETTER FROM THE BOARD
— 10 —
The land of Changmenshan Copper Mine has not been included in the subject of the Acquisition.
Pursuant to the Acquisition Agreement, JCC undertook to the Company that, following completion
of the Acquisition, JCC shall lease the land of Chengmenshan Copper Mine to the Company at a rental
to be determined with reference to the valuation prepared by an independent valuer, subject to a
maximum amount of RMB13,258,500 per annum.
Conditions precedent to the Acquisition Agreement
Completion of the Acquisition Agreement is conditional upon, among others, the fulfilment of the
following conditions on or before the Long Stop Date or such later date as the parties to the Acquisition
Agreement may agree in writing:
(a) the obtaining of all necessary approvals from the supervision authorities of JCC in respect of
the Acquisition Agreement;
(b) the obtaining of all necessary approval(s) from the relevant PRC regulatory authorities in respect
of the transfer of the assets to the Company under the Acquisition Agreement;
(c) the obtaining of all necessary approvals from the Board and the approval of the Independent
Shareholders (i) at the EGM in respect of the Acquisition Agreement at which JCC and its
associates will abstain from voting and (ii) at the EGM and Class Meetings in respect of the
A Share Issue at which JCC and its associates will abstain from voting; and
(d) the obtaining of all necessary approval(s) from the relevant PRC regulatory authorities (including
but not limited to CSRC) in respect of the A Share Issue.
Neither the Company nor JCC has the right to waive any of the conditions mentioned above. As at
the Latest Practicable Date, none of the conditions mentioned above has been satisfied.
If the conditions to the Acquisition Agreement are not fulfilled on or before the Long Stop Date or
such other date as the parties may agree in writing, the Acquisition Agreement will lapse and all the
obligations and liabilities of the parties to the Acquisition Agreement will cease and terminate save
for any antecedent breach.
IV. REASONS FOR AND BENEFITS OF THE ACQUISITION AGREEMENT
According to the Share Reform Plan, JCC undertook that it will, within one year from the date of
completion of the Share Reform Plan, propose to the Company for the transfer or injection of certain
JCC’s assets which are relevant to the copper industry and are in line with the Company’s development
strategies to the Company to enhance the operational results of the Company and to minimize the
amount of connected transactions and competition between the Company and JCC. Pursuant to the
Share Reform Plan, JCC has proposed to the Company for the transfer or injection (where relevant)
of the Targets to the Company.
LETTER FROM THE BOARD
— 11 —
The executive Directors believe that the transfer or injection (where relevant) of the Targets to the
Company would (i) enhance the operational independency of the Group by reducing its reliance on
JCC for the provision of certain raw materials and complementary services required for the Group’s
production; and (ii) increase the competitiveness and enhance the economies of scale of the Group;
and (iii) minimize the continuing connected transactions of the Company. As such, the Directors
believe that the entering into of the Acquisition Agreement is beneficial to the Group. Although the
performance of the JCC Chemical Company in 2004 is better than that in 2005, the Directors believe
that the acquisition of JCC Chemical Company is also beneficial to the Company based on the fact
that the price of sulfuric acid is now in upward trend and such acquisition can minimize the continuing
connected transactions of the Company. Taking into account the Consideration was determined with
reference to the appraised values of the Targets, the executive Directors consider the terms of the
Acquisition Agreement are fair and reasonable and the entering into of the Acquisition Agreement is
in the interests of the Company and the Shareholders as a whole.
Upon completion of the Placing, the cash and bank balance of the Group will increase by the amount
equals to the net proceeds (after deducting all relevant costs and expenses) to be raised from the
Placing. In addition, the issue of the Consideration Shares will also increase the asset value of the
Group. Accordingly, the total assets and net assets of the Group will be enhanced as a result of the
increase in fixed assets and cash received from the Placing. However, since the issue price of the
Placing has not been determined yet, the impact on the Group’s net asset value per Share cannot be
ascertained at the moment.
As the Consideration is determined with reference to the appraised values of the Targets, no loss or
gain will arise from the Acquisition, and therefore, the Acquisition is expected to have no material
immediate effect on the profit and loss account of the Group.
V. INFORMATION ON THE TARGETS
The Chengmenshan Copper Mine
The Chengmenshan Copper Mine is a mine located near the Jiujiang City, Jiangxi Province, the PRC
and includes an operating open pit mine and a concentrator. Construction of the milling facilities of
1,200 tonnes per day was completed in July 2000 and the formal production of Chengmenshan Copper
Mine commenced in January 2002. The mining rights of Chengmenshan Copper Mine have a duration
of 10 years, commenced in 2004, and are renewable upon application to the relevant regulatory
authority. JCC had been granted the mining rights of Chengmenshan Mine at the consideration of
RMB202,885,100. Assets of Chengmenshan Mine were purchased over a period of time, accordingly,
there is no one-off original purchase cost available for such assets.
LETTER FROM THE BOARD
— 12 —
According to the document “江西省國土資源廳贛採字[2004]0818號《江西省國土資源廳採礦登記通
知書》”, the ore reserves of the area of the Chengmenshan Copper Mine under acquisition containing
1,531,164 tonnes of copper, 61.896 tonnes of gold and 2,426 tonnues of silver and 32,131,109 tonnes of
sulfur. In the year 2006, Chengmenshan Copper Mine produced 6,188 tonnes of copper concentrate, 30
kg of gold and 2,065 kg of silver and 95,332 tonnes of standard sulfur concentrate.
According to the valuation report prepared by Beijing Zhongzheng, the appraised net asset value of
the operating assets of Chengmenshan Copper Mine as at 30 June 2006 amounted to approximately
RMB1,442,410,400. The net asset value of the operating assets of Chengmenshan Copper Mine as at
30 June 2006 amounted to approximately RMB250 million and the following table sets out the net
profits attributable to the operating assets of Chengmenshan Copper Mine :
For the period
Financial year ended from 1 January
31 December to 30 June
2004 2005 2006
RMB’000 RMB’000 RMB’000
Net profits before taxation and extraordinary items 53,010 83,348 96,708
Net profits after taxation and extraordinary items 53,010 83,348 96,708
According to the valuation report prepared by Beijing Jingwei, text of which is set out in Appendix
VIII to this circular, the assessed value of mining right of the Chengmenshan Copper Mine as at 30
June 2006, being the base date for valuation, amounted to RMB1,359,602,700. According to the
valuation reports prepared by Grant Sherman, the value of (i) the properties and (ii) the plant and
machinery of Chengmenshan Copper Mine as at 28 February 2007 amounted to (i) RMB228,835,589
and (ii) RMB37,324,084 respectively.
The Xiangsi Railway
The Xiangsi Railway has been utilised by JCC to provide railway transportation services to the Group
from Xiangtun to Sizhou for materials such as products of the Group. The assets of the Xiangsi Railway
comprised mainly of property and equipment.
According to the valuation report prepared by Beijing Zhongzheng, the appraised net asset value of
the operating assets of the Xiangsi Railway as at 30 June 2006 amounted to approximately
RMB86,203,400. The net asset value of the operating assets of Xiangsi Railway as at 30 June 2006
amounted to approximately RMB51,594,900. Assets of Xiangsi Railway were purchased over a period
of time, accordingly, there is no one-off original purchase cost available for such assets.
According to the valuation reports prepared by Grant Sherman, the value of (i) the properties and (ii)
the plant and machinery of Xiangsi Railway as at 28 February 2007 amounted to (i) RMB70,100,164
and (ii) RMB11,460,259 respectively.
LETTER FROM THE BOARD
— 13 —
The Copper Alloy Company
The Copper Alloy Company is principally engaged in the manufacturing and processing of copper and
copper alloy rods and wires; providing after-sale service for its products. Copper alloy rods and wires
which are required materials for the manufacturing of cable and wire, enameled wires, Internet-used
wires, sliding-contact wires, and fine wires is an required material for the manufacturing of electronic
equipment and tele-communication products. Following completion of the Acquisition, the Copper
Alloy Company will become a wholly owned subsidiary of the Company. The Copper Alloy Company
was established in February 2005 and commenced operation in April 2006, accordingly, there is no
operation data available for Copper Alloy Company for the two years ended 31 December 2005. As
the Copper Alloy Company was established by the Company and JCC, accordingly, there is no orginial
purchase cost availabe for 40% equity interest of the Copper Alloy Company.
According to the valuation report prepared by Beijing Zhongzheng, the appraised net value of the
Copper Alloy Company as at 30 June 2006 amounted to approximately RMB208,928,600. The net asset
value of the Copper Alloy Company as at 30 June 2006 amounted to approximately RMB199,500,000.
According to the valuation reports prepared by Grant Sherman, the value of (i) the properties and (ii)
the plant and machinery of the Copper Alloy Company as at 28 February 2007 amounted to (i)
RMB20,010,658 and (ii) RMB121,021,619 respectively.
The Copper Product Company
The Copper Product Company is principally engaged in the manufacturing and processing of copper
rod and wire and providing after-sale service for its products and other related services and businesses.
Following completion of the Acquisition, the Copper Product Company will become a wholly owned
subsidiary of the Company. As the Copper Product Company was established by the Company and
JCC, accordingly, there is no orginial puchase cost available for 40% equity interest of the Copper
Product Company.
The following table sets out the financial results of the Copper Product Company for the two financial
years ended 31 December 2005 and for the period from 1 January 2006 to 30 June 2006 :
For the period
Financial year from 1 January
ended 31 December to 30 June
2004 2005 2006
RMB’000 RMB’000 RMB’000
Net profits before taxation and extraordinary items 33,178 19,217 18,114
Net profits after taxation and extraordinary items 33,178 19,217 15,396
LETTER FROM THE BOARD
— 14 —
According to the valuation report prepared by Beijing Zhongzheng, the appraised value of the Copper
Product Company as at 30 June 2006 amounted to approximately RMB278,934,900. The net asset value
of the Copper Product Company as at 30 June 2006 amounted to approximately RMB266,249,000.
According to the valuation reports prepared by Grant Sherman, the value of (i) the properties and (ii)
the plant and machinery of the Copper Product Company as at 28 February 2007 amounted to (i)
RMB21,993,027 and (ii) RMB134,727,210 respectively.
The JCC Dexing Transportation Company
The JCC Dexing Transportation Company is principally engaged in the business of (i) railway and
vehicle transportation services; (ii) vehicle production services; (iii) vehicle repair services; (iv)
machinery manufacturing; (v) loading and unloading services; and (vi) pressurized-fluid soft tube
processing and repair services, and has been providing services such as (i) railway and vehicle
transportation services; (ii) machinery and electrical equipment repair and maintenance services; and
(iii) vehicle repair services to the Group. The assets of the JCC Dexing Transportation Company are
mainly comprised current assets, property and equipment. Following completion of the Acquisition,
JCC Dexing Transportation Company will become a wholly owned subsidiary of the Company. As the
JCC Dexing Transportation Company was established by JCC, accordingly, there is no original
purchase cost available for the 100% equity interest of the JCC Dexing Transportation Company.
The following table sets out the financial results of the JCC Dexing Transportation Company for the
two financial years ended 31 December 2005 and for the period from 1 January 2006 to 30 June 2006:
For the period
Financial year from 1 January
ended 31 December to 30 June
2004 2005 2006
RMB’000 RMB’000 RMB’000
Net profits before taxation and extraordinary items 793.6 450 (699.2)
Net profits after taxation and extraordinary items 252.5 166 (1,305.4)
According to the valuation report prepared by Beijing Zhongzheng, the appraised value of the JCC
Dexing Transportation Company as at 30 June 2006 amounted to approximately RMB17,256,700. The
net asset value of the JCC Dexing Transportation Company as at 30 June 2006 amounted to approximately
RMB15,357,900.
According to the valuation reports prepared by Grant Sherman, the value of (i) the properties and (ii)
the plant and machinery of the JCC Dexing Transportation Company as at 28 February 2007 amounted
to (i) RMB6,966,035 and (ii) RMB11,724,522 respectively.
LETTER FROM THE BOARD
— 15 —
The JCC Chemical Company
The JCC Chemical Company is principally engaged in the production and sale of sulphur related
products and processing of mineral concentrates, and was responsible for the processing of by-products
such as sulphuric acid and raw copper sulphate and other waste products and materials generated from
the Group’s production such as white dust, raw selenium and black cement copper supplied by the
Group. The principal product of the JCC Chemical Company is sulphuric acid. The assets of the JCC
Chemical Company comprised mainly equipment and property. Following completion of the Acquisition,
JCC Chemical Company will become a wholly owned subsidiary of the Company. As the JCC Chemical
Company was established by JCC, accordingly, there is no original purchase cost available for the
100% equity interest of the JCC Chemical Company.
As the JCC Chemical Company was registered in October 2004 and commenced its business in late
2005, there was no financial result for the financial year ended 31 December 2004. The following table
sets out the financial results of the JCC Chemical Company for the financial year ended 31 December
2005 and for the period from 1 January 2006 to 30 June 2006:
For the period
Financial year from 1 January
ended 31 December to 30 June
2005 2006
RMB’000 RMB’000
Net profits before taxation and extraordinary items 1,013 (457.56)
Net profits after taxation and extraordinary items 90 (457.56)
According to the valuation report prepared by Beijing Zhongzheng, the appraised value of the JCC
Chemical Company as at 30 June 2006 amounted to approximately RMB44,535,700. The net asset
value of the JCC Chemical Company as at 30 June 2006 amounted to approximately RMB41,161,800.
According to the valuation reports prepared by Grant Sherman, the value of (i) the properties and (ii)
the plant and machinery of the JCC Chemical Company as at 28 February 2007 amounted to (i)
RMB12,719,157 and (ii) RMB55,909,169 respectively.
VI. INFORMATION ON THE GROUP
The Company is a Sino-foreign joint stock limited company incorporated in the PRC on 24 January
1997. The Company’s main scope of operations include: non-ferrous metal mines, rare and precious
metals, nonmetal mines; smelting, rolling processing and further processing of non-ferrous metals and
related by-products; sale and after sale services for self produced products, future business outside the
PRC together with related consulting services and business. The principal product of the Company
is Copper Cathode.
LETTER FROM THE BOARD
— 16 —
VII. GENERAL
JCC is an integrated enterprise in non-ferrous metals industry in the PRC. The principal business of
JCC covers copper mining, milling, smelting and processing operations. It is the largest copper
production base and the important sulfur, gold and sliver producer in the PRC. JCC also engages in
the business of supply of copper raw materials, including Scrap Copper, Blister Copper and Copper
Concentrate, which are the principal raw materials for the production of Copper Cathode.
JCC is a substantial shareholder holding approximately 42.31% of the total issued share capital of the
Company, and therefore JCC is a connected person of the Company under the Listing Rules. The
entering into of Acquisition Agreement constituted a discloseable and connected transaction of the
Company and is therefore subject to the requirements under Chapters 14 and 14A of the Listing Rules.
As the Percentage Ratios in connection with the Acquisition Agreement exceeded 2.5%, the Acquisition
Agreement is subject to the reporting, announcement and Independent Shareholders’ approval requirement
pursuant to Chapter 14A of the Listing Rules.
As the A Shares of the Company are listed on the Shanghai Stock Exchange, the Company is required,
in addition to the Listing Rules, to comply with the Shanghai Listing Rules. Under the Shanghai Listing
Rules, the Acquisition Agreement is subject to approval by the Independent Shareholders.
VIII. THE INDEPENDENT BOARD COMMITTEE
The Independent Board Committee comprising the independent non-executive Directors has been
formed for advising the Independent Shareholders on the A Share Issue and the terms and conditions
of the Acquisition Agreements.
Goldbond Capital has been appointed as independent financial adviser to the Independent Board
Committee and the Independent Shareholders on the same. The letter is set out in the section headed
“Letter from Goldbond Capital” of this circular.
IX. THE EGM AND CLASS MEETINGS
The EGM and the Class Meetings will be convened to consider and approve the resolutions in respect
of, among other things, the A Share Issue in accordance with the Articles of Association and the
relevant requirements of the Listing Rule, at such meetings, JCC and its associates will abstain from
voting. Ordinary resolution will be proposed to approve, among other things, the Acquisition Agreement
and the transactions contemplated thereunder at the EGM, at which JCC and its associates will abstain
from voting.
Notices convening the EGM and the Class Meetings to be held at the Conference Room of the
Company, 15 Yejin Avenue, Guixi City, Jiangxi, the PRC, on Thursday, 17 May 2007 is set out on
pages 132 to 144 of this circular.
LETTER FROM THE BOARD
— 17 —
Shareholders of the Company whose name appeared on the register of members of the
Company on 17 April 2007 are entitled to attend and vote at the EGM and the Class Meetings.
The register of members of the Company will be closed from 17 April 2007 to 17 May 2007,
both days inclusive, during such period no share transfer will be registered.
If you intend to attend the EGM and/or the Class Meetings, please complete and return the accompanying
reply slips in accordance with the instructions printed thereon as soon as possible and in any event
by not later than 27 April 2007.
Whether or not you are able to attend the meetings, you are requested to complete and return the
accompanying forms of proxy in accordance with the instructions printed thereon as soon as possible
and in any event not less than 24 hours before the time appointed for holding of the meetings or any
adjournment thereof. Completion and return of the forms of proxy will not preclude you from attending
and voting in person at the meetings or any adjournment thereof should you so wish.
X. POLL PROCEDURE
As at the Latest Practicable Date, JCC was interested in 42.31% of the total issued share capital of
the Company and a connected person of the Company. In view of the interest of JCC in the transactions
contemplated under the A Share Issue and the Acquisition Agreement, JCC and its associates will
abstain from voting at the EGM and the Class Meetings on the resolutions in respect of the A Share
Issue and the Acqusition Agreement. The votes to be taken at the EGM and the Class Meetings will
be taken by poll, the results of which will be announced after the EGM and the Class Meetings.
Under the Company’s Articles of Association, a poll can be demanded by:
(a) the chairman of the meeting;
(b) at least two shareholders present in person or by proxy for the time being entitled to vote at
the meeting;
(c) by any shareholder or shareholders (including proxy) holding individually or holding an aggregate
of 10 per cent or more of the shares carrying the right to vote at the meeting.
The Chairman will demand a poll at the EGM and the Class Meetings.
LETTER FROM THE BOARD
— 18 —
XI. RECOMMENDATION
Your attention is drawn to the letter from the Independent Board Committee set out on page 19 which
contains its recommendation to the Independent Shareholders on the A Share Issue and the terms of
the Acquisition Agreement, and the letter of advice from Goldbond Capital, the text of which is set
out on pages 20 to 35 of this circular containing its advice to the Independent Board Committee and
the Independent Shareholders. The Independent Shareholders are advised to read the aforesaid letters
before deciding as to how to vote on the resolutions approving the A Share Issue and Acquisition
Agreement.
XII. FURTHER INFORMATION
Your attention is drawn to the further information set out in the appendices to this circular.
Yours faithfully,
By Order of the Board
Li Yihuang
Chairman
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
— 19 —
江西銅業股份有限公司JIANGXI COPPER COMPANY LIMITED
(a sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China)
(Stock Code: 0358)
Legal address:15 Yejin AvenueGuixi CityJiangxiPeople’s Republic of China
2 April 2007
To the Independent Shareholders
Dear Sir or Madam,
PROPOSED ISSUE OF NEW A SHAREAND
DISCLOSEABLE AND CONNECTED TRANSACTION
We have been appointed as members of the Independent Board Committee to advise the Independent
Shareholders in respect of the terms of the A Share Issue and the Acquisition Agreement, details of which
are set out in the letter from the Board in the circular dated 2 April 2007 (the “Circular”) to the Shareholders,
of which this letter forms part. Terms defined in the Circular shall have the same meanings when used in
this letter unless the context otherwise requires.
Having taken into accounts the terms of the A Share Issue and the Acquisition Agreement and the advice
and recommendation of Goldbond Capital, we consider that the terms of the A Share Issue and the Acquisition
Agreement are fair and reasonable so far as the interests of the Independent Shareholders are concerned and
the A Share Issue and the Acquisition Agreement are conducted in the interests of the Company and the
Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the
resolutions which will be proposed to approve the A Share Issue at the EGM and the Class Meetings and
the Acquisition Agreement at the EGM.
Yours faithfully,
Mr. Kang Yi Mr. Tu Shutian
Ms. Zhang Rui Mr. Yin Hongshan
Independent Board Committee
LETTER FROM GOLDBOND CAPITAL
— 20 —
The following is the letter of advice from Goldbond Capital (Asia) Limited to the Independent Board
Committee and the Independent Shareholders prepared for the purpose of inclusion in this circular:
Goldbond Capital (Asia) Limited
3902B, 39th Floor, Tower 1
Lippo Centre
89 Queensway
Hong Kong
2 April 2007
The Independent Board Committee and the Independent Shareholders
Dear Sirs,
PROPOSED ISSUE OF NEW A SHARES AND
DISCLOSEABLE AND CONNECTED TRANSACTION
INTRODUCTION
We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders
in respect of the terms of the A Share Issue and the Acquisition Agreement, details of the terms of the A
Share Issue and the Acquisition Agreement are set out in the circular dated 2 April 2007 issued by the
Company (the “Circular”) to the Shareholders, of which this letter forms part. This letter contains our advice
to the Independent Board Committee and the Independent Shareholders as to whether the terms of the A Share
Issue and the Acquisition Agreement are fair and reasonable and in the interests of the Company and the
Shareholders as a whole. Unless the context requires otherwise, capitalized terms used in this letter shall have
the same meanings as those defined in the Circular.
In formulating our opinions and recommendations, we have relied on the statements, information, opinions,
and representations contained or referred to in the Circular, which have been provided to us by the Directors.
We have assumed that all statements, information, opinions and representations contained or referred to in
the Circular were true, complete and accurate in all aspects at the time they were made and given and continue
to be true in all respects as at the despatch date of the Circular. We have also assumed that all statements
of belief, opinion, assumptions and intention made by the Directors in the Circular were reasonably made
after due and careful enquiry and were based on honestly-held opinions. We have no reason to doubt the truth,
accuracy and completeness of the information and representations provided to us by the Directors and we
have been advised by the Directors that no material facts have been omitted from the information and
representations provided and referred to in the Circular.
LETTER FROM GOLDBOND CAPITAL
— 21 —
We consider that we have been provided with sufficient information to enable us to reach an independent
view to justify our reliance on the accuracy of the information and representations contained in the Circular
and to provide a reasonable basis for our recommendations. We have no reason to suspect that any relevant
information has been withheld, nor are we aware of any facts or circumstances which would render the
information provided and the representations made to us to be untrue, inaccurate, or misleading. In addition,
we have taken all reasonable steps as required under Rule 13.80 of the Listing Rules to satisfy ourselves that
there is a reasonable basis for our advice as stated herein. We have not, however, carried out any independent
verification of the information provided to us by the Directors, nor have we conducted any independent
investigation into any related transactions referred to in the Circular, or into the businesses, affairs and
prospects of the Group.
We are a licensed securities dealer and corporate finance adviser under the Securities and Futures Ordinance
(Chapter 571 of the Laws of Hong Kong) and together with our affiliates provide a full range of financial
advisory and broking services, which, in the course of normal trading activities, we and our affiliates may
from time to time effect transactions and hold securities, including derivative securities, of the Company for
our own account or the accounts of our customers.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In arriving at our opinion regarding the terms of the A Share Issue and the Acquisition Agreement, we have
considered the following principal factors and reasons:
A. BACKGROUND OF THE A SHARE ISSUE AND THE ACQUISITION
1. The A Share Issue
As stated in the Letter, the Company intendeds to apply to the CSRC and other relevant PRC
authorities for the approval of the issue of not more than 290,000,000 A Shares, representing
about 19.23% of the total A Shares in issue, about 10.02% of the existing issued share capital
of the Company and about 9.11% of the issued share capital of the Company as enlarged by
the A Share Issue, in the PRC and the listing of such A Shares on the Shanghai Stock Exchange.
The A Shares will be comprised the Consideration Shares to be issued to JCC as consideration
of the Acquisition and the Placing Shares to be issued to not more than nine institutional
investors who are Independent Third Parties under the Placing in the PRC. The Company intends
to issue the Placing Shares and the Consideration Shares on the same day.
LETTER FROM GOLDBOND CAPITAL
— 22 —
The Directors expect the number of the Consideration Shares to be issued to JCC will not be
less than 44.63% of the total number of A Shares to be issued under the A Share Issue, and
such Consideration Shares to be issued to JCC will be utilised to satisfy the consideration of
the Acquisition.
It is intended that the issue price of the A Shares will not be less than 90% of the average trading
price of the A Shares on the Shanghai Stock Exchange for 20 trading days immediately before
the date of the Announcement, i.e. from 30 January 2007 to 5 March 2007. In addition, the issue
price will be determined with reference to the following factors:
(i) the issue price will not be lower than the net asset value per Share as reported in the
latest audited accounts of the Company;
(ii) the funding requirements and arrangements of the proposed projects of the Company;
(iii) the trading price of the A Shares in the secondary market, price-to-earning ratio and the
growth trend; and
(iv) the result of negotiations with other relevant parties.
The total amount of proceeds of the A Share Issue is yet to be determined, however, it is
estimated that the proceeds from the A Share Issue will amount to about RMB4,000,000,000
(including the value of the Consideration Shares) and the cash proceeds from the Placing is
intended to be applied to finance:
(i) the expansion of phase II of the Chengmenshan Copper Mine;
(ii) the renovation of technology for mining method of the Yongping Copper Mine;
(iii) the technology renovation of the Fujiawu Copper Mine;
(iv) the expansion of the processing capacity of the Wushan Copper Mine by 5,000 tonnes
per day;
(v) the expansion of copper recovering from slag;
(vi) the expansion of anode mud treatment and comprehensive utilization; and
(vii) the utilization of the heat recovered from smelting process.
LETTER FROM GOLDBOND CAPITAL
— 23 —
It is expected that the number of A Shares and the issue price will be fixed after the approvals
from the relevant governmental authorities has been obtained. Please refer to the letter from
the Board (the “Letter”) for further details regarding the abovementioned intended application
of the proceeds from the Placing.
2. The Acquisition
On 16 March 2007, the Company entered into the Acquisition Agreement with JCC, pursuant
to which, the Company agreed to acquire the Targets from JCC for an aggregate Consideration
of RMB1,785.3 million (subject to adjustment) which will be satisfied by the issue of the
Consideration Shares. The Targets comprise assets and equity interests in certain group companies
of the JCC Group which include the followings:
1. the mining rights and the related operating assets and liabilities of the Chengmenshan
Copper Mine;
2. the operating assets and the related liabilities of the Xiangsi Railway;
3. 40% equity interest of the Copper Alloy Company;
4. 40% equity interest of the Copper Product Company;
5. 100% equity interest of the JCC Dexing Transportation Company; and
6. 100% equity interest of the JCC Chemical Company.
The aggregate consideration under the Acquisition Agreement was arrived at after arm’s length
negotiations between the Company and JCC with reference to the appraised values of the Targets
prepared by Beijing Zhongzheng, a PRC independent qualified valuer. The Consideration will
be satisfied by the issue and allotment of the Consideration Shares to JCC. Should there be a
shortfall in satisfying the Consideration, the Group will pay such shortfall in cash by internal
resources of the Group and/or bank borrowings. Please refer to the Letter for further details
regarding the Targets.
LETTER FROM GOLDBOND CAPITAL
— 24 —
JCC is a substantial shareholder holding about 42.31% of the total issued share capital of the
Company, and therefore JCC is a connected person of the Company under the Listing Rules.
The entering into of the Acquisition Agreement constituted a discloseable and connected
transaction of the Company and is therefore subject to the requirements under Chapter 14 and
chapter 14A of the Listing Rules. As the Percentage Ratios in connection with the Acquisition
Agreement exceeded 2.5%, the Acquisition Agreement is subject to the reporting, announcement
and Independent Shareholders’ approval requirements pursuant to Chapter 14A of the Listing
Rules.
The Company will convene the EGM and the Class Meeting for the purpose of approving, among
others, the A Share Issue and the Acquisition Agreement and the transactions contemplated
thereunder by the Independent Shareholders. The Independent Board Committee has been
established to consider the terms of the A Share Issue and the Acquisition Agreement and to
advise the Independent Shareholders on how to vote. In this regard, we have been appointed
by the Company to advise the Independent Board Committee and the Independent Shareholders
as to whether the terms of the A Share Issue and the Acquisition Agreement are fair and
reasonable and in the interests of the Company and the Shareholders as a whole.
B. THE A SHARE ISSUE AND THE ACQUISITION AGREEMENT
1. Reasons for the A Share Issue
As state in the Letter, the Group has various expansion plans, including the Acquisitions to,
among others, increase the production capacity and improve the production process of the
Group. The funding required for such expansion plans amounts to about RMB3,748.0 million.
On the other hand, as stated in the 2006 interim report of the Company, as at 30 June 2006,
the Company had bank balances and cash of about RMB1,796.4 million and a gearing ratio of
about 36.03%, which is calculated by dividing total liabilities of the Company of about
RMB5,817.1 million by total assets of the Company of about RMB16,145.6 million as at 30
June 2006. As advised by the Directors, taking into account (i) the funding required for the
expansion plans; (ii) working capital available to the Group; (iii) current gearing ratio of the
Group; (iv) other means to raise funds and the effects of such means; (v) the A Share price is
currently at a relatively high point for the past few years; and (vi) the price of A Shares and
H Shares, the Directors consider the A Share Issue to be in the interests of the Shareholders
and the Company as a whole. In view of the above, we consider it is in the interests of the
Company and the Shareholders as a whole to issue the Consideration Shares and the Placing
Shares to satisfy all or part of the Consideration and to raise additional funds for the expansion
plans of the Company respectively.
LETTER FROM GOLDBOND CAPITAL
— 25 —
As the A Share Issue only represents about 10.02% and 9.11% of the existing issued share capital
and issued share capital of the Company as enlarged by the A Share Issue, we consider that
the A Share Issue will not have significant dilution effect on the existing Shareholders. In view
of the benefits to be brought by the expansion plans on the Group as stated in the letter and
as advised by the Directors that such benefits is expected to improve the operational performance
of the Group in the long run, we consider the A Share Issue to be in the interests of the Company
and the Shareholders as a whole.
2. Reasons for the transactions under the Acquisition Agreement
The Company is a sino-foreign joint stock limited company incorporated in the PRC on 24
January 1997. The Company’s main scope of operations include (i) the operation of non-ferrous
metal mines, rare metals and non-metal mines; (ii) smelting, rolling processing and further
processing of non-ferrous metals and related by-products; (iii) sale and after sale services for
self-produced products; (iv) other business outside the PRC; and (v) related consulting services
and business. The principal product of the Company is Copper Cathode.
JCC is an integrated enterprise conducts business in the non-ferrous metals industry in the PRC.
The principal business of JCC includes copper mining, milling, smelting and processing operations.
It is the largest copper production base and a significant sulfur, gold and sliver producer in the
PRC. JCC also engages in the business of production of copper raw materials, including Scrap
Copper, Blister Copper and Copper Concentrate, which are the principal raw materials for the
production of Copper Cathode.
According to the Share Reform Plan, JCC undertook that it would, within one year from the
date of completion of the Share Reform Plan, propose to the Company for the transfer or
injection of certain JCC’s assets which are relevant to the copper industry and are in line with
the Company’s development strategies. Pursuant to the Share Reform Plan, JCC has proposed
to the Company for the transfer or injection (where relevant) of the Targets, which are all copper
industry related assets, to the Company.
As stated in the annual report of the Company for the year ended 31 December 2005 (the “2005
Annual Report”), “the Company is fully aware of its increasing dependency on external
resources along with its expansion” and “will adopt active measures to address the challenge
prudently. The Company will put more investment in resource development and utilisation” and
“expects to expand resource reserve and achieve a shift in growth mode.” In addition, “the
Company will follow up tightly with JCC for its undertaking to propose to the general meeting
of the Company to approve the assets injection or transfer from JCC in line with corporate
strategic targets, as undertaken by JCC within the year after completion of the Company’s share
reform plan.” Accordingly, the Directors are of the view that the acquisition of the Chengmenshan
Copper Mine is in line with the development strategy of the Company as stated in the 2005
Annual Report.
LETTER FROM GOLDBOND CAPITAL
— 26 —
The Company has entered into certain agreements with JCC, the Copper Alloy Company and
the Copper Product Company in respect of the continuous supply of industrial services, materials,
processing and agency services and other miscellaneous and complementary services etc, which
constituted continuing connected transactions for the Company. Upon completion of the
Acquisition, the Targets will be wholly owned by the Company, and certain transactions between
the Company and JCC, the Copper Alloy Company and the Copper Product Company will no
longer constitute continuing connected transactions of the Company. Accordingly, the Group
could operate more independently from the JCC Group. In addition, the Group would also be
able to minimise the costs and expenses in association with such transactions as the Targets
would become wholly owned by the Company upon completion of the Acquisition. In view of
the above, the executive Directors believe that the Acquisition will strengthen the governance
and improve the financial results of the Company.
The Directors advised that in acquiring the Targets from JCC, the Company can also (i) enhance
its control over the Copper Alloy Company and the Copper Product Company; (ii) achieve
economies of scale; and (iii) enjoy the benefits of cost efficiency through further vertical
integration of production by owning facilities which are required to provide certain complementary
services required by the Group. Upon completion of the Acquisition, the Directors believe that
the Group can strengthen its position from acquiring raw materials for processing of final
products as well as obtaining the relevant required complementary services and consider that
the Acquisition will enhance the operational results of the Company.
As stated in the Letter, the Directors consider that the terms of the Acquisition Agreement are
fair and reasonable and the entering into of the Acquisition Agreement is in the interests of the
Company and the Shareholders as a whole. In view of the reasons above, we are of the view
that the entering into of the Acquisition Agreement with JCC is fair and reasonable and in the
interests of the Company and the Shareholders as a whole.
LETTER FROM GOLDBOND CAPITAL
— 27 —
3. Basis of Consideration
Pursuant to the Acquisition Agreement, the aggregate consideration amounted to about
RMB1,785.3 million (subject to adjustments), which was determined with reference to the
appraised values of the Targets as at 30 June 2006 extracted from the valuation reports prepared
by Beijing Zhongzheng (the “PRC Valuation Reports”), a PRC independent qualified valuer,
prepared for the purpose of serving as a basis to determine the Consideration. The Consideration
will also be adjusted with reference to the appraised values of such assets to be confirmed by
the relevant governmental authorities. Set out below are the approximate considerations and
appraised values for each of the Targets.
Asset and company Consideration Appraised value
(RMB’ million) (RMB’ million)
Mining right
1. mining right of the Chengmenshan Copper Mine 1,359.6 1,359.6
Operating assets
2. related operating assets and liabilities of
the Chengmenshan Copper Mine 82.8 82.8
3. operating assets and the related liabilities of
the Xiangsi Railway 86.2 86.2
Equity interests
4. 40% equity interest of the Copper Alloy Company 83.5 83.5
(Note 1)
5. 40% equity interest of the Copper Product Company 111.4 111.4
(Note 2)
6. 100% equity interest of the JCC Dexing
Transportation Company 17.3 17.3
7. 100% equity interest of the JCC Chemical Company 44.5 44.5
Total 1,785.3 1,785.3
Notes:
1. The apprised value of the entire equity interest of the Copper Alloy Company amounted to about RMB208.9million.
2. The apprised value of the entire equity interest of the Copper Product Company amounted to about RMB278.4million.
LETTER FROM GOLDBOND CAPITAL
— 28 —
As advised by Beijing Zhongzheng, the PRC Valuation Reports were principally prepared based
on the cost approach, which determines the value of an asset by assuming the value of such
asset is equal to the cost of reproducing or replacing it, less depreciation from physical
deterioration and functional and economic/ external obsolescence. As stated in the PRC Valuation
Reports, the valuation of the Targets prepared by Beijing Zhongzheng was conducted in
accordance with the relevant rules and regulations regarding asset valuation in the PRC.
When preparing the valuation report for the Chengmenshan Copper Mine, Beijing Zhongzheng
based on a valuation report prepared by Beijing Jingwei, a qualified independent valuer, which
as advised by the Directors, is an authorised mining right valuer in the PRC, to assess the value
of the mining right of the Chengmenshan Copper Mine. As stated in such valuation report, the
valuation of the mining right of the Chengmenshan Copper Mine prepared by Beijing Jingwei
was based on the comparable sales approach in accordance with the relevant PRC mining right
valuation rules and regulations.
As advised by the Directors, pursuant to the Interim Measures on the Management of Transfer
of the State-owned Property Rights of Enterprises (《企業國有產權轉讓管理暫行辦法》) effective
from 1 February 2004, the consideration for the transfer of State-owned assets shall be based
on the value appraised by a qualified valuer endorsed by or filed with the relevant PRC
government regulatory bodies. In view of the above and as confirmed by the Directors that
Beijing Zhongzheng and Beijing Jingwei are qualified valuers endorsed by or filed with the
relevant PRC government regulatory bodies, we consider that the Consideration, which is based
on the appraised value, is in line with our understanding of the above PRC regulation.
LETTER FROM GOLDBOND CAPITAL
— 29 —
Grant Sherman, an independent qualified valuer in Hong Kong, has also prepared valuation
reports (the “Hong Kong Valuation Reports”) on the properties, machineries and equipment,
excluded the intangible assets such as the mining right of the Chengmenshan Copper Mine but
included the full value of the properties, machineries and equipment of the Copper Alloy
Company and the Copper Product Company, (the “Fixed Assets”) of the Targets as at 28
February 2007 based on valuation standards generally adopted in Hong Kong. Beijing Zhongzheng
is a shareholder of Grant Sherman. According to the Hong Kong Valuation Reports, the value
of such Fixed Assets, including properties with no commercial values due to the absence of
proper title proof and property transfer rights which amounted to about RMB9.1 million as stated
in the Hong Kong Valuation Reports, as at 28 February 2007 was about RMB741.9 million.
Details of the Hong Kong Valuation Reports are set out as in Appendices I to VII to the Circular.
The value of the Fixed Assets according to the PRC Valuation Reports amounted to about
RMB722.2 million, which was determined by extracting and adding the appraised values of the
Fixed Assets of each of the Targets as stated in the PRC Valuation Reports, as at 30 June 2006.
We noted that the value of the Fixed Assets according to the Hong Kong Valuation Reports
represent a premium of about 2.73% to the PRC Valuation Reports. However, Grant Sherman
and Beijing Zhongzheng confirmed that such difference was mainly due to the different valuation
dates of the PRC Valuation Reports and the Hong Kong Valuation Reports, and confirm that,
if the valuation dates of such reports were the same, the difference between the values of the
Fixed Assets according to the PRC Valuation Reports and the Hong Kong Valuation Reports
would be minimal, which we consider to be insignificant. Beijing Zhongzheng also advised that,
if adopting the same valuation standards, the difference in apprised values regarding the Targets
as at difference valuation dates will be mainly because of new investments, depreciations and
balance transfers from the construction in progress accounts to the fixed asset accounts, and
expects such difference in appraised values to be immaterial. In view of the above, we consider
it no worse off to the Shareholders for the Company to determine the Consideration base on
the PRC Valuation reports instead of the Hong Kong Valuation Reports.
We have performed searches on the information available on the Stock Exchange website and
identified connected transactions (the “Comparable Transactions”) in 2005 and 2006 involved
the acquisition of assets from connected parties by listed H share companies with market
capitalisation exceed HK$10,000 million as at 28 February 2007 and adopted the appraised
values as the basis to determine the relevant considerations. We compared the premium/ discount
of considerations to appraised values of the Comparable Transactions, and the following table
shows the approximate considerations, appraised values and the premium/ discount of
considerations to appraised values of the Comparable Transactions.
LETTER FROM GOLDBOND CAPITAL
— 30 —
Premium/
Appraised value (discount) to the
Listed company Transaction date Consideration of the target appraised value*
(RMB million) (RMB million)
China Shipping
Development Co., Ltd. November 2006 2,470.0 2,462.0 0.3%
Anhui Conch Cement
Company Limited October 2006 302.6 316.4 (4.4%)
Yanzhou Coal Mining
Company Limited September 2006 733.3 748.3 (2.0%)
China Shenhua Energy
Company Limited March 2006 1,161.6 1,161.6 —
Shanghai Electric Group
Company Limited February 2006 378.6 380.2 (0.4%)
China Power International
Development Limited June 2005 560.0 502.0 11.6%
Yanzhou Coal Mining
Company Limited June 2005 584.0 584.0 —
PetroChina Co., Ltd. June 2005 20,741.3 20,741.3 —
The Company March 2007 1,785.4 1,785.4 —
* The premiums/ (discounts) are calculated by dividing the considerations by the appraised values.
As shown above, the ratios of considerations to appraised values range from a discount of about
4.4% to a premium of about 11.6%. Taking in account the Acquisition has a ratio of Consideration
to appraised value of 1, we consider the ratio of the Consideration to the appraised value for
the Acquisition to be within the range of the Comparable Transactions mentioned above and
therefore is fair and reasonable.
As (i) the determination of the consideration of an acquisition of State-owned assets is required
to be based on the value appraised by a qualified valuer endorsed by or filed with the relevant
PRC government regulatory bodies; (ii) the Directors advised that Beijing Zhongzheng and
Beijing Jingwei are qualified valuers endorsed by or filed with the relevant PRC government
regulatory bodies; (iii) the valuation reports prepared by Beijing Zhongzheng and Beijing
Jingwei were prepared in accordance with relevant rules and regulations in the PRC; and (iv)
the ratio of the Consideration to the appraised value for the Acquisition to be in line with the
Comparable Transactions mentioned above, we are of the view that the determination of the
Consideration with reference to the appraised values is fair and reasonable.
LETTER FROM GOLDBOND CAPITAL
— 31 —
Pursuant to the Acquisition Agreement, upon Completion, JCC undertook to lease the land use
rights (the “Land Use Rights”) where the Chengmenshan Copper Mine, the Xiangsi Railway,
JCC Dexing Transportation Company and the JCC Chemical Company situated on to the
Company for a consideration not more than RMB13.3 million. As the consideration for renting
the Land Use Rights will be determined with reference to the valuation prepared by Jiangxi
Diyuan Appraising & Consulting Co., Ltd. (江西省地源評估咨詢有限責任公司), a qualified
land valuer, we consider such pricing basis regarding renting the Land Use Rights to be fair
and reasonable.
4. Issue price of the Consideration Shares and Placing Shares
The Consideration will be satisfied by the issue and allotment of the Consideration Shares,
which is expected to account for about 44.63% of the A Share Issue, to JCC. As stated in the
Letter, it is intended that the issue price of the A Share Issue will not be less than 90% of the
average trading price of the A Shares as quoted on the Shanghai Stock Exchange for the 20
trading days immediately before 20 March 2006, being the date of the publishing of the board
meeting announcement in relation to the A Share Issue and the Acquisition (the “Board Meeting
Announcement Date”), i.e. from 30 January 2007 to 5 March 2007, and for reference purpose,
90% of the average closing price of the A Share during such period is about RMB13.78 per
A Share. Trading in the A Shares was suspended from 6 March 2007 to 19 March 2007.
As advised by the Directors, pursuant to the Measures on the Management of Securities Issuings
by Listed Companies (《上市公司證券發行管理辦法》) effective from 8 May 2006, when listed
companies issue shares to not more than 10 specific parties by way of non-public offering, the
issue price of such shares to be issued shall not be less than 90% of the average trading price
for the 20 trading days immediately before the base date. As advised by the PRC legal adviser
of the Company, the base date is usually referred to as the publishing date of the board meeting
announcement regarding the approval of the non-public offering. In view of the above and taking
into account that the issue price of the A Share Issue will not be less than 90% of the average
trading price of the A Shares on the Shanghai Stock Exchange for 20 trading days immediately
before the Board Meeting Announcement Date, we consider that the issue price of the A Share
Issue is in line with our understanding of the above PRC regulation.
LETTER FROM GOLDBOND CAPITAL
— 32 —
We have performed searches on the information available on the Shanghai Stock Exchange
website and identified offerings (the “Comparable Offerings”) conducted in 2007. For the
Comparable Offerings, we noted that the proposals for the Comparable Offerings were first
approved by the respective boards and shareholders of the listed companies. Then, the listed
companies would apply for CSRC’s approval regarding the Comparable Offerings. As advised
by the Directors, because of the time required to obtain the approval from CSRC, a minimum
offer price is usually approved by the board of a listed company before applying to CSRC. The
following table shows the publishing dates of the board meeting announcements (the “Base
Date”), the dates of the relevant placing documents and the minimum issue prices approved by
the relevant boards in connection with the Comparable Offerings.
Placing Minimum issue price
Listed company Base Date document date Stock code approved by the board
Note 1 Note 2 Note 3
China Railway Erju Co., Ltd. May 2006 January 2007 600528 Not less than the average trading price
Shaanxi Broadcast & TV Network May 2006 January 2007 600831 Not less than 90% of
Intermediary Co., Ltd the average trading price
Xiamen Tungsten Corp. May 2006 February 2007 600549 Not less than the average trading price
Tianjin Tasly Pharmaceutical Co., Ltd. June 2006 January 2007 600535 Not less than the average trading price
Beijing Urban Construction
Investments & Development Co., Ltd. July 2006 February 2007 600266 Not less than the average trading price
Hubei Xingfa Chemicals Group Co., Ltd. July 2006 February 2007 600141 Not less than 90% of
the average trading price
Shanghai Jielong Group Industry July 2006 February 2007 600836 Not less than 90% of
Gorporation Limited the average trading price
Anhui Liuguo Chemical Co., Ltd. August 2006 March 2007 600470 Not less than 90% of
the average trading price
Jiangsu Changjiang Electronics August 2006 February 2007 600584 Not less than 90% of
Technology Co., Ltd. the average trading price
Shangdong Pharmaceutical Glass Co., Ltd. August 2006 March 2007 600529 Not less than 90% of
the average trading price
China Cyts Tours Holding Co., Ltd. September 2006 January 2007 600138 Not less than 90% of
the average trading price
Notes:
1) The base date refers to the dates of publications of the relevant board meeting announcements pursuant towhich, among others, the Comparable Offerings and the related minimum issue prices of the ComparableOfferings were approved.
2) The placing documents set out the details regarding the corresponding placings conducted in 2007 including,but not limited to, the number of placing shares, the issue prices, the proceeds to be raised and the numberand names of placees.
3) Average trading price is calculated based on 20 trading days immediately before the Base Date.
LETTER FROM GOLDBOND CAPITAL
— 33 —
As shown above, we noted that it is not uncommon for companies listed on the Shanghai Stock
Exchange to set minimum offer prices to be not less than 90% of the average trading price of
the 20 trading days immediately before the base date. Therefore, we are of the view that setting
the minimum offer price of the A Share Issue to be not less than 90% of the average trading
price of the A Shares as quoted on the Shanghai Stock Exchange for the 20 trading days
immediately before the Board Meeting Announcement Date is in line with the practices adopted
by the Comparable Offerings and therefore is fair and reasonable.
According to the Letter, it is intended that the Placing Shares, which is expected to account
for more than half of the Shares to be issued under the A Share Issue, assuming the number
of Consideration Shares to be issued will amount to about 44.63% of the A Share Issue, will
be issued to independent institutional investors. In addition, as stated in the Letter the issue price
of the A Share Issue will be determined with reference to, among others, (i) the trading price
of the A Shares in the secondary market; (ii) price-to-earning ratio of the Company; (iii) the
growth trend of the Company; and (iv) the result of negotiations with other relevant parties.
Assuming more than half of the Shares to be issued under the A Share Issue will be issued to
independent institutional investors, as advised by the Directors, the issue price of the A Share
Issue will be based on, among others, result of negotiations with the independent institutional
investors. On the other hand, as (i) the trading price in the secondary market; (ii) price-to-earning
ratio; and (iii) the growth trend are, among others, commonly adopted pricing basis for placings,
we consider the determination of the issue price of the A Share Issue based on such parameters
is in line with general market practice. In view of the above, we consider the pricing basis of
the A Share Issue as stated above to be fair and reasonable.
As (i) it is in the interests of the Company and the Shareholders as a whole to issue the
Consideration Shares and the Placing Shares to satisfy the Consideration and to raise additional
funding for the expansion plans of the Company; (ii) the issue price of the A Share Issue is
in line with our understanding of the relevant PRC regulation; and (iii) setting the minimum
offer price of the A Share Issue to be not less than 90% of the average trading price of the A
Shares on the Shanghai Stock Exchange for the 20 trading days immediately before the Board
Meeting Announcement Date is in line with the practices adopted by the Comparable Offerings,
we consider the issue of and the minimum issue price of the A Share Issue are fair and reasonable
and in the interests of the Company and the Shareholders as a whole.
LETTER FROM GOLDBOND CAPITAL
— 34 —
5. Financial effects of the A Share Issue and the Acquisition Agreement
Net asset value
As stated in the Letter, it is estimated that the proceeds from the A Share Issue will amount
to about RMB4,000,000,000 (including the value of the Consideration Shares). Accordingly,
upon completion of the A Share Issue and the Acquisition, the equity, bank balances and cash,
current assets and fixed assets will increase, and therefore the A Share Issue will likely to have
a positive impact on the net asset value of the Group.
As stated in the Letter, the Consideration will be satisfied by the issue and allotment of the
Consideration Shares, and should there be a shortfall in satisfying the Consideration, the Group
will pay such shortfall by internal resources of the Group, including but not limited to cash held
by the Company and/or bank borrowings. Accordingly, the equity and the fixed assets will
increase whereas (if applicable) the cash balance will decrease, and therefore the Acquisition
will likely to have a positive impact on the net asset value of the Group.
Profit and loss accounts
As advised by the Directors, given the Chengmenshan Copper Mine and the Copper Product
Company had net profits after taxations and extraordinary items of about RMB96.7 million and
RMB15.4 million and the JCC Dexing Transportation Company and the JCC Chemical Company
had net losses after taxations and extraordinary items of about RMB1.3 million and RMB0.5
million for the six months ended 30 June 2006 respectively, the A Share Issue and the Acquisition
will likely have an overall positive impact on the profitability of the Company, which in turn,
will likely have an overall positive impact on the earning per Share as well.
Working capital
As the Placing Shares will be issued to the independent institutional investors for cash, upon
completion, the A Share Issue will likely to have a positive impact on the working capital of
the Group.
As mentioned above, the Company will settle the Consideration of the Acquisition by the issue
and allotment of the Consideration Shares to JCC and if the Consideration is satisfied by the
issue and allotment of the Consideration Shares fully, the Acquisition will have no material
impact on the working capital of the Group. In the event that there is a shortfall in satisfying
the Consideration, as the Group will pay such shortfall by internal resources of the Group,
including but not limited to cash held by the Company and/or bank borrowings, the working
capital of the Group may decrease by the amount of such shortfall as mentioned above.
LETTER FROM GOLDBOND CAPITAL
— 35 —
RECOMMENDATION
Having considered:
_ the A Share Issue can generate the required funds for the expansion plans of the Company;
_ the Acquisition is in line with the development strategy of the Company as stated in the 2005 Annual
Report;
_ the Acquisition can reduce the continuing connected transactions between the Company and JCC and
strengthen the governance of the Company;
_ the transactions contemplated under the Acquisition Agreement can enhance the overall operational
results of the Group;
_ the determination of the consideration of an acquisition of State-owned assets is required to be based
on the value appraised by a qualified valuer endorsed by or filed with the relevant PRC government
regulatory bodies;
_ the appraised values of the Targets were prepared in accordance with relevant rules and regulations
in the PRC;
_ the ratio of the Consideration to the apprised value for the Acquisition is in line with the Comparable
Transactions;
_ the issue price of the A Share Issue is in line with our understanding of the relevant PRC regulation;
_ the setting of the minimum offer price of the A Share Issue to be not less than 90% of the average
trading price of the A Shares as quoted on the Shanghai Stock Exchange for the 20 trading days
immediately before the Board Meeting Announcement Date is in line with the practices adopted by
the Comparable Offerings;
_ the financial effects of the A Share lssue and the Acquisition on the Group; and
_ all of the other analyses, reasons and factors mentioned in this letter,
we consider that the transactions contemplated under the A Share Issue and the Acquisition Agreement are
fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the
Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to
recommend the Independent Shareholders to vote in favor of the resolutions to be proposed at the general
meeting of the Company to approve the A Share Issue and the Acquisition Agreement.
Yours faithfully,
For and on behalf of
Goldbond Capital (Asia) Limited
Stacey Wong
Head of Corporate Finance
APPENDIX I VALUATION REPORT ON PROPERTIES
— 36 —
2 April 2007 Room 904 on 9/F,
Harbour Centre,
25 Harbour Road,
Wan Chai,
Hong Kong
The Board of Directors
Jiangxi Copper Company Limited
15 Yejin Avenue
Guixi City
Jiangxi Province
The People’s Republic of China
Dear Sirs,
In accordance with your instructions to value the properties interests being acquired by Jiangxi Copper
Company Limited (the “Company”), held by Jiangxi Copper Corporation (“JCC”) and its subsidiaries (“JCC
Group”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections,
made relevant enquiries and searches and obtained such further information as we consider necessary for the
purpose of providing you with our opinion of the market values of the property interests as at 28 February
2007.
Due to the nature of buildings and structures of the properties, there are no market sales comparables,
therefore, we have valued these property interests on the basis of Depreciated Replacement Cost (“DRC”).
DRC is based on an estimate of the Market Value for the existing use of the land, plus the current gross
replacement (reproduction) costs of the improvements, less allowances for physical deterioration and all
relevant forms of obsolescence and optimization.
Market value is defined as the estimated amount for which a property should exchange on the date of
valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing
wherein the parties had each acted knowledgeably, prudently, and without compulsion.
In valuing the property interests, we have complied with all the requirements contained in Chapter 5 and
Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited and The HKIS Valuation Standards on Properties (1st Edition 2005) published by The Hong Kong
Institute of Surveyors.
APPENDIX I VALUATION REPORT ON PROPERTIES
— 37 —
The valuations have been made on the assumption that the owner sells the property interest on the market
without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any
similar arrangement which would serve to affect their value.
No allowance has been made in our valuation for any charges, mortgages or amounts owing on any of the
property valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise
stated, it is assumed that all the interests are free from encumbrances, restrictions and outgoings of an
onerous nature which could affect its value.
In valuing the properties, we have assumed that the owner has free and uninterrupted rights to use the
properties for the whole of the unexpired term as granted and is entitled to transfer the properties with the
residual term without payment of any further premium to the government authorities or any third parties.
We have assumed that all consents, approvals and licenses from relevant government authorities for the
properties have been granted without any onerous conditions or undue time delay which might affect their
values. It is assumed that all applicable zoning and use regulations and restrictions have been complied with
unless nonconformity has been stated, defined, and considered in the appraisal report.
No environmental impact study has been ordered or made. Full compliance with applicable national,
provincial and local environmental regulations and laws is assumed unless otherwise stated, defined, and
considered in the report. It is also assumed that all required licenses, consents, or other legislative or
administrative authority from any local, provincial, or national government or private entity or organization
either have been or can be obtained or renewed for any use which the report covers.
We have been provided with copies of extracts of title documents relating to the properties. However, we
have not inspected the original documents to verify ownership or to verify any amendments which may not
appear on the copies handed to us. Due to the nature of the land registration system in the PRC, we are
unable to search the original documents to verify the existing title of the properties or any material
encumbrances that might be attached to the properties. In the preparation of our valuation report regarding
the properties in the PRC, we have relied to the considerable extent on the legal opinion provided by the
Company’s legal adviser, Beijing X.H. Law Firm on the PRC laws regarding the titles of the properties in
the PRC.
In the course of our valuation, we have relied on a considerable extent on the information provided by the
Company on such matters as property title, statutory notices, easements, tenure, occupation, site and floor
areas, identification of the properties and all other relevant matters. We have no reason to doubt the truth and
accuracy of the information provided to us by the Company. We were also advised by the Company that no
material facts have been omitted from the information supplied. All documents have been used as reference
only. All dimensions, measurements and areas are approximations.
APPENDIX I VALUATION REPORT ON PROPERTIES
— 38 —
We have inspected the exterior of the properties and, where possible, the interior of the properties in respect
of which we have been provided with such information as we have required for the purpose of our valuation.
However, no structural survey has been carried out and it was not possible to inspect the wood work and
other parts of the structure which were covered, unexposed or inaccessible. We are therefore, unable to
report that the properties are free of rot, infestation or any structural defect. No tests have been carried out
on any of the building services.
Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB).
We enclose herewith a summary of valuations and valuation certificates.
Respectfully submitted,
For and on behalf of
GRANT SHERMAN APPRAISAL LIMITED
Peggy Y. Y. Lai
MRICS MHKIS RPS
Associate Director
Real Estate Group
Note: Ms Peggy Y.Y. Lai is a member of the Royal Institution of Chartered Surveyors, a member of the Hong Kong Institute ofSurveyors and Register Professional Surveyors in the General Practice Section, who has over 5 years experience in thevaluation of properties in Hong Kong, the PRC and the Asian Region.
APPENDIX I VALUATION REPORT ON PROPERTIES
— 39 —
SUMMARY OF VALUATION
Capital value in the
existing state as at
Property 28 February 2007
RMB
Property interests being acquired by Company and held by JCC Group in PRC
1. Various buildings and structures of JCC (“Chengmenshan”) located 228,835,589
at Lianmeng Village and Xinglian Village Jiujiang County Jiangxi Province
The People’s Republic of China
2 Various buildings and structures of Copper Alloy Company 20,010,658
located at Guixi City Jiangxi Province
The People’s Republic of China
3. Various buildings and structures of Copper Product Company 21,993,027
located at Guixi City Jiangxi Province
The People’s Republic of China
4. Various buildings and structures of JCC Chemical Company located 12,719,157
at Dexing City Jiangxi Province
The People’s Republic of China
5. Various buildings and structures of JCC Dexing Transportation Company 6,966,035
located at Dexing City Jiangxi Province
The People’s Republic of China
6. Various buildings and structures of JCC (“Xiangsi”) located 70,100,164
at Dexing City Jiangxi Province
The People’s Republic of China
Total: 360,624,630
APPENDIX I VALUATION REPORT ON PROPERTIES
— 40 —
VALUATION CERTIFICATE
Property interests being acquired by Company and held by JCC Group in PRC
Capital value inParticulars of existing state as at
Property Description and Tenure Occupancy 28 February 2007(RMB)
1. Various buildings andstructures of JCC(“Chengmenshan”)located at LianmengVillage and XinglianVillage Jiujiang CountyJiangxi ProvinceThe People’s Republicof China
The properties comprise variousbuildings and structures erected on asite with area of approximately1,528,082.13 sq. m.
The total gross floor area of thesebuildings and structures isapproximately 25,227 sq.m., mainlybuilt in various stages from 1958 to2005.
The land use rights of the propertiesbeing leased from JCC for anunspecified term.
The properties areoccupied by JCC as anoperational mine plant.
228,835,589(see note iii)
Notes:
i) The properties have 36 buildings and structures with a total floor area of approximately 25,227 sq.m. Among these, 7buildings with a total floor area of approximately 6,987 sq.m. without proper title proof.
ii) According to the PRC legal opinion, building ownership certificates were granted to the buildings with a total gross floor areaof 18,240 sq.m.
iii) We attribute “no commercial value” for those buildings without proper title proof due to the reason that the Company cannottransfer them. For reference purpose, the value of the buildings with an area of 6,987 sq.m. is RMB 5,383,349 under theassumption that the building ownership certificates has been granted.
iv) According to the PRC legal opinion, the land use rights of Chengmenshan, JCC Chemical Company, JCC DexingTransportation Company and Xiangsi being leased from JCC at the total annual rental not more than RMB13,258,500.
APPENDIX I VALUATION REPORT ON PROPERTIES
— 41 —
VALUATION CERTIFICATE
Property interests being acquired by Company and held by JCC Group in PRC
Capital value inParticulars of existing state as at
Property Description and Tenure Occupancy 28 February 2007(RMB)
2. Various buildings andstructures of CopperAlloy Company locatedat Guixi City JiangxiProvinceThe People’s Republicof China
The properties comprise variousbuildings and structures erected on asite with area of approximately12,178 sq. m.
The total gross floor area of thesebuildings and structures isapproximately 7,228 sq.m. completedin 2006.
The land use rights of the propertieshas been leased from JCC Group for3 years commencing from January 1,2007 to December 31, 2009 at ayearly rent of RMB48,712.
The properties areoccupied by JiangxiCopper Alloy CompanyLimited for manufacturingand sale of copper alloyrods and wires.
20,010,658(see note iii)
Notes:
i) The properties have 4 buildings and structures with a total floor area of approximately 7,228 sq.m. Among these, 2 buildingswith a total floor area of approximately 310 sq.m. without proper title proof.
ii) According to the PRC legal opinion, building ownership certificates were granted to the buildings with a total gross floor areaof 6,918 sq.m.
iii) We attribute “no commercial value” for those buildings without proper title proof due to the reason that the Company cannottransfer them. For reference purpose, the value of the buildings with an area of 310 sq.m. is RMB 485,443 under theassumption that the building ownership certificates has been granted.
iv) According to the PRC legal opinion, the land use rights of the properties have been leased from JCC Group to Copper AlloyCompany for 3 years commencing from January 1, 2007 to December 31, 2009 at a yearly rent of RMB4 per sq.m.
APPENDIX I VALUATION REPORT ON PROPERTIES
— 42 —
VALUATION CERTIFICATE
Property interests being acquired by Company and held by JCC Group in PRC
Capital value inParticulars of existing state as at
Property Description and Tenure Occupancy 28 February 2007(RMB)
3. Various buildings andstructures of CopperProduct Company locatedat Guixi City JiangxiProvinceThe People’s Republicof China
The properties comprise variousbuildings and structures erected on asite with area of approximately13,759 sq. m.
The total gross floor area of thesebuildings and structures isapproximately 12,824 sq.m., mainlybuilt in various stages from 2003 to2005.
The land use rights of the propertieshave been leased from JCC Group for3 years commencing from January 1,2007 to December 31, 2009 at ayearly rent of RMB55,036.
The properties areoccupied by JiangxiCopper ProductsCompany Limitedformanufacturing and saleof copper alloy rods andwires.
21,993,027(see note iii)
Notes:
i) The properties have 6 buildings and structures with a total floor area of approximately 12,824 sq.m. Among these, 3 buildingswith a total floor area of approximately 2,787 sq.m. without proper title proof.
ii) According to the PRC legal opinion, building ownership certificates were granted to the buildings with a total gross floor areaof 10,037.39 sq.m.
iii) We attribute “no commercial value” for those buildings without proper title proof due to the reason that the Company cannottransfer them. For reference purpose, the value of the buildings with an area of 2,787 sq.m. is RMB 1,748,711 under theassumption that the building ownership certificates has been granted.
iv) According to the PRC legal opinion, the land use rights of the properties has been leased from JCC Group to Copper ProductCompany for 3 years commencing from January 1, 2007 to December 31, 2009 at a yearly rent of RMB4 per sq.m.
APPENDIX I VALUATION REPORT ON PROPERTIES
— 43 —
VALUATION CERTIFICATE
Property interests being acquired by Company and held by JCC Group in PRC
Capital value inParticulars of existing state as at
Property Description and Tenure Occupancy 28 February 2007(RMB)
4. Various buildings andstructures of JCCChemical Companylocated at Dexing CityJiangxi ProvinceThe People’s Republicof China
The properties comprise variousbuildings and structures erected on asite with area of approximately103,977.2 sq. m.
The total gross floor area of thesebuildings and structures isapproximately 4,919 sq.m., mainlybuilt in 2005.
The land use rights of the propertiesbeing leased from JCC for anunspecified term
The properties areoccupied by JCCChemical Company forsales and research ofsulphur product.
12,719,157(see note iii)
Notes:
i) The properties have 15 buildings and structures with a total floor area of approximately 4,919 sq.m. Among these, 3buildings with a total floor area of approximately 222 sq.m. without proper title proof.
ii) According to the PRC legal opinion, building ownership certificates were granted to the buildings with a total gross floorarea of 4,697.81 sq.m.
iii) We attribute “no commercial value” for those buildings without proper title proof due to the reason that the Companycannot transfer them. For reference purpose, the value of the buildings with an area of 222 sq.m. is RMB 243,020 under theassumption that the building ownership certificates has been granted.
iv) According to the PRC legal opinion, the land use rights of Chengmenshan, JCC Chemical Company, JCC DexingTransportation Company and Xiangsi being leased from JCC at the total annual rental not more than RMB13,258,500.
APPENDIX I VALUATION REPORT ON PROPERTIES
— 44 —
VALUATION CERTIFICATE
Property interests being acquired by Company and held by JCC Group in PRC
Capital value inParticulars of existing state as at
Property Description and Tenure Occupancy 28 February 2007(RMB)
5. Various buildings andstructures of JCC DexingTransportation Companylocated at Dexing CityJiangxi ProvinceThe People’s Republicof China
The properties comprise variousbuildings and structures erected on asite with area of approximately47,300.24 sq. m.
The total gross floor area of thesebuildings and structures isapproximately 4,810 sq.m., mainlybuilt in various stages from 1969 to2005.
The land use rights of the propertiesbeing leased from JCC for anunspecified term
The properties areoccupied by JCC DexingTransportation Companyfor manufacturing ofautomotive parts andcement production.
6,966,035
Notes:
i) The properties have 20 buildings and structures with a total floor area of approximately 4,810 sq.m..
ii) According to the PRC legal opinion, building ownership certificates were granted to the buildings with a total gross floor areaof 4,810 sq.m..
iii) According to the PRC legal opinion, the land use rights of Chengmenshan, JCC Chemical Company, JCC DexingTransportation Company and Xiangsi being leased from JCC at the total annual rental not more than RMB13,258,500.
APPENDIX I VALUATION REPORT ON PROPERTIES
— 45 —
VALUATION CERTIFICATE
Property interests being acquired by Company and held by JCC Group in PRC
Capital value inParticulars of existing state as at
Property Description and Tenure Occupancy 28 February 2007(RMB)
6. Various buildings andstructures of JCC(“Xiangsi”) located atDexing City JiangxiProvinceThe People’s Republicof China
The properties comprise variousbuildings and structures erected on asite with area of approximately414,072.6 sq. m.
The total gross floor area of thesebuildings and structures isapproximately 4,201 sq.m., mainlybuilt in various stages from 1984 to2004.
The land use rights of the propertiesbeing leased from JCC for anunspecified term
The properties areoccupied by XiangsiRailway formanufacturing ofautomotive parts andcement production.
70,100,164(see note iii)
Notes:
i) The properties have 12 buildings and structures with a total floor area of approximately 4,201 sq.m. Among these, 2 buildingswith a total floor area of approximately 1,438 sq.m. without proper title proof.
ii) According to the PRC legal opinion, building ownership certificates were granted to the buildings with a total gross floor areaof 2,763 sq.m..
iii) We attribute “no commercial value” for those buildings without proper title proof due to the reason that the Company cannottransfer them. For reference purpose, the value of the buildings with an area of 1,438sq.m. is RMB 1,250,601 under theassumption that the building ownership certificates has been granted.
iv) According to the PRC legal opinion, the land use rights of Chengmenshan, JCC Chemical Company, JCC DexingTransportation Company and Xiangsi being leased from JCC at the total annual rental not more than RMB13,258,500.
APPENDIX II VALUATION REPORT ON PLANT AND MACHINERY OFCHENGMENSHAN COPPER MINE
— 46 —
2 April 2007 Room 904 on 9/F,
Harbour Centre,
25 Harbour Road,
Wan Chai,
Hong Kong
The Board of Directors
Jiangxi Copper Company Limited
15 Yejin Avenue
Guixi City
Jiangxi, China
Dear Sirs or Madams,
APPRAISAL SUMMARY LETTER
In accordance with your instructions, we have made an appraisal of the Machinery and Equipment (the
“Equipment”) exhibited to us as that of Chengmenshan Copper Mine 《城門山銅礦》(“Chengmenshan
Mine”), which will be acquired by Jiangxi Copper Company Limited.
This letter, which forms part of our appraisal report, identifies the Equipment, the scope and character of our
investigation, the premise of the value adopted, the valuation approaches adopted, and our conclusion of
value.
In valuing the Equipment, we have complied with the standards and ethics contained in the handbook of
Valuing Machinery and Equipment published by the American Society of Appraisers.
We confirm that we have carried out an inspection, made relevant inquiries and obtained such further
information as we consider necessary for the purpose of providing you with our opinion of the fair market
value on the premise of continued use of the Equipment as of February 28, 2007 (the “Appraisal Date”).
It is our understanding that this appraisal will be used for financing purposes.
APPENDIX II VALUATION REPORT ON PLANT AND MACHINERY OFCHENGMENSHAN COPPER MINE
— 47 —
INTRODUCTION
The mine is located in Jiujiang city, in the northern part of Jiangxi Province, the People Republic of China
(the “PRC”). Chengmenshan Mine is principally engaged in the mining of non-ferrous and non-metallic
ores, with an operating period of 20 years from June 2003. The mine contains 1.53 million tonnes of copper
and the duration of the mining right was 30 year (starting from 2004), which is extendable subject to
approval by the government.
The Equipment appraised mainly consists of grinders, feeders, transformers, elevators, electrical
installations, water pumps, air compressors, belt conveyors, ventilators, motor vehicles, and some associated
equipment including office equipment and electrical appliances.
The appraisal report comprises:
— a summary, arranged by category, showing the fair market value under the premise of continued use
of the Equipment;
— assumptions and limiting conditions; and
— a statement of general service conditions.
Excluded from this investigation were machinery and equipment held under hired purchase contract, land,
buildings and structures, building improvements, vehicles, furniture and fixture, office equipment, tools,
stocks, supplies, inventories, materials on hand, tangible assets of current nature and intangible assets that
might exist.
The Equipment is located at Chengmenshan in Jiujiang City, Jiangxi Province, the PRC.
PREMISE OF VALUE
The premise of value will be fair market value in continued use which is defined as the following:
Fair market value is defined as the estimated amount at which a property might be expected to exchange
between a willing buyer and a willing seller, neither being under compulsion, each having reasonable
knowledge of all relevant facts.
Fair market value in continued use is defined as the fair market value of a property based on continuation of
its existing use, assuming the asset could be sold in the open market for its existing use, and otherwise in
keeping with the market value definition regardless of whether or not the existing use represents the highest
and best use of the property.
APPENDIX II VALUATION REPORT ON PLANT AND MACHINERY OFCHENGMENSHAN COPPER MINE
— 48 —
Fair market value under the premise of continued use does not represent the amount that might be realized in
the event of piecemeal disposition of the property in the open market or from any alternative use to which it
may be put.
VALUATION METHODOLOGY
Before arriving at our opinion of value, we personally inspected the Equipment on 24-27 July 2006 and
studied the market conditions. To develop our opinion of value, we considered the three generally accepted
approaches to value: cost, market and income capitalization. The theory of these approaches is outlined as
follows:
The cost approach
The cost approach establishes value based on the cost of reproducing or replacing the Equipment, less
depreciation from physical deterioration, and functional and economic/external obsolescence.
Cost of Reproduction New is defined as the estimated amount required to reproduce the Equipment at one
time in like kind and materials in accordance with current market prices for materials, labor, and
manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Cost of Replacement New is defined as the estimated amount required to replace the entire property at one
time with a modern new unit using the most current technology and construction materials that will
duplicate the production capacity and utility of an existing unit at current market prices for materials, labor,
and manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Physical Deterioration is the loss in value resulting from wear and tear in operation and exposure to the
elements.
Functional Obsolescence is the loss in value caused by conditions within the Equipment such as changes in
design, materials, or process that result in inadequacy, overcapacity, lack of utility, or excess operating costs.
Economic/External Obsolescence is an incurable loss in value caused by unfavorable conditions external to
the Equipment such as the local economy, economics of the industry, availability of financing, encroachment
of objectionable enterprises, loss of material and labor sources, lack of efficient transportation, shifting of
business centers, passage of new legislation, and changes in ordinances.
The cost approach generally provides a meaningful indication of the value of land improvements, special
buildings, special structures, and special machinery and equipment associated with a viable business or
justified by economic demand.
APPENDIX II VALUATION REPORT ON PLANT AND MACHINERY OFCHENGMENSHAN COPPER MINE
— 49 —
When market transactions of comparable Equipment are not available, when data cannot be extrapolated
from larger transactions, or when transactions are non-existent, under premise of continued use, assuming
adequate earnings the cost approach is the preferred valuation procedure.
The market approach
In the market approach, the value of the appraised Equipment is estimated through analysis of recent sales
of comparable items of the Equipment. It is employed in the valuation of the Equipment for which there is a
known used market. Under the premise of continued use assuming adequate earnings, consideration is given
to the cost to acquire similar items in the used-equipment market; an allowance then is made to reflect the
costs for freight and installation.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new. The ratio is applied to similar Equipment in the classification
when the secondary market for the subject equipment is too sparse to exhibit appropriate comparables.
The income capitalization approach
In the income capitalization approach, value is developed on the basis of capitalization of the net earnings
that would be generated if a specific stream of income can be attributed to an asset or a group of assets. This
approach is most applicable to investment and general-use properties where there is an established and
identifiable rental market.
In any appraisal study, all three approaches to value must be considered, as one or more may be applicable
to the subject Equipment. In some situations, elements of two or three approaches may be combined to reach
a value conclusion. For this appraisal, since the income generated by the Equipment could hardly be
separately identified, therefore, the income capitalization approach was not applied. The cost and market
approaches were the principal methods adopted to arrive at our opinion of value.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new.
APPENDIX II VALUATION REPORT ON PLANT AND MACHINERY OFCHENGMENSHAN COPPER MINE
— 50 —
INVESTIGATION AND ASSUMPTIONS
We have conducted inspections on all items of the Equipment on 24-27 July 2006. During our inspection,
we have noted that the Equipment was in good working condition and had been well maintained. As
discussed with the management of Chengmenshan Mine (the “Management”), we recognized the functions
of the Equipment during each production stage. A detailed maintenance records for the Equipment were
provided by Chengmenshan Mine. All major equipments were strictly following a company-specific
maintenance and overhaul schedule in order to assure effective production capacity.
In the course of our investigation, we accepted property records furnished by Chengmenshan Mine as
properly describing the Equipment. We visited the locations to verify the existence of the Equipment and to
gather information relating to its condition and utility. The balance of the information provided by
Chengmenshan Mine, after adjustments based on our observation, although not subject to a detailed
verification, was accepted as reasonably representing the facts.
When developing the cost of replacement new, we have considered the extent, character and utility of the
Equipment. We have also studied the market condition and obtain current market prices from relevant
machinery dealers when applicable. We have also make allowance for freight and installation. To arrive at
the fair market value, we have made deduction for depreciation and the functional/external obsolescence
they may present, if any.
Construction-in-progress are assets not fully constructed or installed. They have been valued at their
recorded cost basis as of the appraisal date.
Any deferred maintenance, physical wear and tear, operating malfunctions, lack of utility, or other
observable conditions distinguishing the Equipment from equipment of like kind in new condition were
noted and made part of our judgment in arriving at the value.
We did not investigate any financial data pertaining to the present or prospective earning capacity of the
operation in which the assets are used. It was assumed that prospective earnings would provide a reasonable
return on the appraised value of the assets, plus the value of any assets not included in the valuation, and
adequate net working capital.
We have not carried out a mechanical survey, nor have we inspected covered or inaccessible areas of the
Equipment. Also, no investigation was conducted as to whether the operation of specific pieces of
Equipment complied with the relevant environmental standards and ordinances; we have assumed that the
Equipment are and will continue to comply with the current environmental standards and ordinances. We
have made no allowance in our valuation for costs, if any, associated with the disposal or handling of
materials required to comply with current or pending environmental legislation.
APPENDIX II VALUATION REPORT ON PLANT AND MACHINERY OFCHENGMENSHAN COPPER MINE
— 51 —
CONCLUSION OF VALUE
Based on the investigation described, it is our opinion that as of February 28, 2007, the fair market value
under the premise in continued use for the Equipment is reasonably represented by the amount of
RENMINBI DOLLAR THIRTY-SEVEN MILLION THREE HUNDRED TWENTY FOUR
THOUSAND AND EIGHTY FOUR (RMB37,324,084) ONLY, the breakdown is shown below:
Fair Market Value
(RMB)
Machinery and Equipment 24,305,701
Motor Vehicles 11,953,494
Office Equipment 1,064,889
Construction-in-Progress —
37,324,084
For the purpose of this appraisal, we have reviewed the acquisition records and asset listings made available
to us by Chengmenshan Mine. We have relied to a considerable extent on such records and listings in
arriving at our opinion of value.
We have not investigated the title to or any liabilities against the Equipment.
We hereby certify that we have neither present nor a prospective interest in the Equipment or the value
reported.
Respectfully submitted,
For and on behalf of
GRANT SHERMAN APPRAISAL LIMITED
Keith C.C. Yan, ASA
Managing Director
Note: Mr. Keith C.C. Yan is an Accredited Senior Appraiser (Business Valuation) with a membership in the American Society ofAppraisers, and he has been conducting business valuation in the Greater China region for various purposes since 1988.
APPENDIX III VALUATION REPORT ON PLANT AND MACHINERY OFXIANGSI RAILWAY
— 52 —
2 April 2007 Room 904 on 9/F,
Harbour Centre,
25 Harbour Road,
Wan Chai,
Hong Kong
The Board of Directors
Jiangxi Copper Company Limited
15 Yejin Avenue
Guixi City
Jiangxi, China
Dear Sirs or Madams,
APPRAISAL SUMMARY LETTER
In accordance with your instructions, we have made an appraisal of the Machinery and Equipment (the
“Equipment”) exhibited to us as that of Xiangsi Railway 《香泗鐵路專用線》(“Xiangsi Railway”) of
Jiangxi Copper Corporation (“JCC”).
This letter, which forms part of our appraisal report, identifies the Equipment, the scope and character of our
investigation, the premise of the value adopted, the valuation approaches adopted, and our conclusion of
value.
In valuing the Equipment, we have complied with the standards and ethics contained in the handbook of
Valuing Machinery and Equipment published by the American Society of Appraisers.
We confirm that we have carried out an inspection, made relevant inquiries and obtained such further
information as we consider necessary for the purpose of providing you with our opinion of the fair market
value on the premise of continued use of the Equipment as of February 28, 2007 (the “Appraisal Date”).
It is our understanding that this appraisal will be used for financing purposes.
APPENDIX III VALUATION REPORT ON PLANT AND MACHINERY OFXIANGSI RAILWAY
— 53 —
INTRODUCTION
Xiangsi Railway is wholly-owned by JCC. The copper mine in Dexing city (“Dexing Mine”) is the main
mine of JCC and also the largest open-pit mine in China. Currently, Xiangsi Railway is well-equipped with
the most advanced technologies for mining and ores milling processes. Major products of the Dexing Mine
include copper concentrate 《銅精礦》, sulfur concentrate 《硫精礦》 and electrode copper 《電積銅》. In
addition, Jiangxi Copper Company Limited has successfully acquired Fujiawu 《富家塢》 mine after its
bankruptcy in 2001 so as to extend the mining right in Dexing.
The Equipment appraised mainly consists of trucks, electric shovels, drills, mills, air compressors, electrical
installations, and some associated equipment including office equipment and electrical appliances.
The appraisal report comprises:
— a summary, arranged by category, showing the fair market value under the premise of continued use
of the Equipment;
— assumptions and limiting conditions; and
— a statement of general service conditions.
Excluded from this investigation were machinery and equipment held under hired purchase contract, land,
buildings and structures, building improvements, vehicles, furniture and fixture, office equipment, tools,
stocks, supplies, inventories, materials on hand, tangible assets of current nature and intangible assets that
might exist.
The Equipment is located at 《泗洲鎮》and 《香屯站》in Dexing City, Jiangxi Province, the PRC.
PREMISE OF VALUE
The premise of value will be fair market value in continued use which is defined as the following:
Fair market value is defined as the estimated amount at which a property might be expected to exchange
between a willing buyer and a willing seller, neither being under compulsion, each having reasonable
knowledge of all relevant facts.
Fair market value in continued use is defined as the fair market value of a property based on continuation of
its existing use, assuming the asset could be sold in the open market for its existing use, and otherwise in
keeping with the market value definition regardless of whether or not the existing use represents the highest
and best use of the property.
APPENDIX III VALUATION REPORT ON PLANT AND MACHINERY OFXIANGSI RAILWAY
— 54 —
Fair market value under the premise of continued use does not represent the amount that might be realized in
the event of piecemeal disposition of the property in the open market or from any alternative use to which it
may be put.
VALUATION METHODOLOGY
Before arriving at our opinion of value, we personally inspected the Equipment on 24-27 July 2006 and
studied the market conditions. To develop our opinion of value, we considered the three generally accepted
approaches to value: cost, market and income capitalization. The theory of these approaches is outlined as
follows:
The cost approach
The cost approach establishes value based on the cost of reproducing or replacing the Equipment, less
depreciation from physical deterioration, and functional and economic/external obsolescence.
Cost of Reproduction New is defined as the estimated amount required to reproduce the Equipment at one
time in like kind and materials in accordance with current market prices for materials, labor, and
manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Cost of Replacement New is defined as the estimated amount required to replace the entire property at one
time with a modern new unit using the most current technology and construction materials that will
duplicate the production capacity and utility of an existing unit at current market prices for materials, labor,
and manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Physical Deterioration is the loss in value resulting from wear and tear in operation and exposure to the
elements.
Functional Obsolescence is the loss in value caused by conditions within the Equipment such as changes in
design, materials, or process that result in inadequacy, overcapacity, lack of utility, or excess operating costs.
Economic/External Obsolescence is an incurable loss in value caused by unfavorable conditions external to
the Equipment such as the local economy, economics of the industry, availability of financing, encroachment
of objectionable enterprises, loss of material and labor sources, lack of efficient transportation, shifting of
business centers, passage of new legislation, and changes in ordinances.
The cost approach generally provides a meaningful indication of the value of land improvements, special
buildings, special structures, and special machinery and equipment associated with a viable business or
justified by economic demand.
APPENDIX III VALUATION REPORT ON PLANT AND MACHINERY OFXIANGSI RAILWAY
— 55 —
When market transactions of comparable Equipment are not available, when data cannot be extrapolated
from larger transactions, or when transactions are non-existent, under premise of continued use, assuming
adequate earnings the cost approach is the preferred valuation procedure.
The market approach
In the market approach, the value of the appraised Equipment is estimated through analysis of recent sales
of comparable items of the Equipment. It is employed in the valuation of the Equipment for which there is a
known used market. Under the premise of continued use assuming adequate earnings, consideration is given
to the cost to acquire similar items in the used-equipment market; an allowance then is made to reflect the
costs for freight and installation.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new. The ratio is applied to similar Equipment in the classification
when the secondary market for the subject equipment is too sparse to exhibit appropriate comparables.
The income capitalization approach
In the income capitalization approach, value is developed on the basis of capitalization of the net earnings
that would be generated if a specific stream of income can be attributed to an asset or a group of assets. This
approach is most applicable to investment and general-use properties where there is an established and
identifiable rental market.
In any appraisal study, all three approaches to value must be considered, as one or more may be applicable
to the subject Equipment. In some situations, elements of two or three approaches may be combined to reach
a value conclusion. For this appraisal, since the income generated by the Equipment could hardly be
separately identified, therefore, the income capitalization approach was not applied. The cost and market
approaches were the principal methods adopted to arrive at our opinion of value.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new.
APPENDIX III VALUATION REPORT ON PLANT AND MACHINERY OFXIANGSI RAILWAY
— 56 —
INVESTIGATION AND ASSUMPTIONS
We have conducted inspections on all items of the Equipment on 24-27 July 2006. During our inspection,
we have noted that the Equipment was in good working condition and had been well maintained. As
discussed with the management of Xiangsi Railway (the “Management”), we recognized the functions of the
Equipment during each production stage. A detailed maintenance records for the Equipment were provided
by Xiangsi Railway.
In the course of our investigation, we accepted property records furnished by Xiangsi Railway as properly
describing the Equipment. We visited the locations to verify the existence of the Equipment and to gather
information relating to its condition and utility. The balance of the information provided by Xiangsi
Railway, after adjustments based on our observation, although not subject to a detailed verification, was
accepted as reasonably representing the facts.
When developing the cost of replacement new, we have considered the extent, character and utility of the
Equipment. We have also studied the market condition and obtain current market prices from relevant
machinery dealers when applicable. We have also make allowance for freight and installation. To arrive at
the fair market value, we have made deduction for depreciation and the functional/external obsolescence
they may present, if any.
Construction-in-progress are assets not fully constructed or installed. They have been valued at their
recorded cost basis as of the appraisal date.
Any deferred maintenance, physical wear and tear, operating malfunctions, lack of utility, or other
observable conditions distinguishing the Equipment from equipment of like kind in new condition were
noted and made part of our judgment in arriving at the value.
We did not investigate any financial data pertaining to the present or prospective earning capacity of the
operation in which the assets are used. It was assumed that prospective earnings would provide a reasonable
return on the appraised value of the assets, plus the value of any assets not included in the valuation, and
adequate net working capital.
We have not carried out a mechanical survey, nor have we inspected covered or inaccessible areas of the
Equipment. Also, no investigation was conducted as to whether the operation of specific pieces of
Equipment complied with the relevant environmental standards and ordinances; we have assumed that the
Equipment are and will continue to comply with the current environmental standards and ordinances. We
have made no allowance in our valuation for costs, if any, associated with the disposal or handling of
materials required to comply with current or pending environmental legislation.
APPENDIX III VALUATION REPORT ON PLANT AND MACHINERY OFXIANGSI RAILWAY
— 57 —
CONCLUSION OF VALUE
Based on the investigation described, it is our opinion that as of February 28, 2007, the fair market value
under the premise in continued use for the Equipment is reasonably represented by the amount of
RENMINBI DOLLAR ELEVEN MILLION FOUR HUNDRED SIXTY THOUSAND TWO
HUNDRED FIFTY NINE (RMB11,460,259), the breakdown is shown below:
Fair Market Value
(RMB)
Machinery and Equipment 11,448,716
Motor Vehicles —
Office Equipment 11,543
Construction-in-Progress —
11,460,259
For the purpose of this appraisal, we have reviewed the acquisition records and asset listings made available
to us by Xiangsi Railway. We have relied to a considerable extent on such records and listings in arriving at
our opinion of value.
We have not investigated the title to or any liabilities against the Equipment.
We hereby certify that we have neither present nor a prospective interest in the Equipment or the value
reported.
Respectfully submitted,
For and on behalf of
GRANT SHERMAN APPRAISAL LIMITED
Keith C.C. Yan, ASA
Managing Director
Note: Mr. Keith C.C. Yan is an Accredited Senior Appraiser (Business Valuation) with a membership in the American Society ofAppraisers, and he has been conducting business valuation in the Greater China region for various purposes since 1988.
APPENDIX IV VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER ALLOY COMPANY
— 58 —
2 April 2007 Room 904 on 9/F,
Harbour Centre,
25 Harbour Road,
Wan Chai,
Hong Kong
The Board of Directors
Jiangxi Copper Company Limited
15 Yejin Avenue
Guixi City
Jiangxi, China
Dear Sirs or Madams,
APPRAISAL SUMMARY LETTER
In accordance with your instructions, we have made an appraisal of the Machinery and Equipment (the
“Equipment”) exhibited to us as that of Jiangxi Copper Alloy Company Limited 《江西銅業銅合金材料有
限公司》(“Copper Alloy Company”) of Jiangxi Copper Corporation (“JCC”).
This letter, which forms part of our appraisal report, identifies the Equipment, the scope and character of our
investigation, the premise of the value adopted, the valuation approaches adopted, and our conclusion of
value.
In valuing the Equipment, we have complied with the standards and ethics contained in the handbook of
Valuing Machinery and Equipment published by the American Society of Appraisers.
We confirm that we have carried out an inspection, made relevant inquiries and obtained such further
information as we consider necessary for the purpose of providing you with our opinion of the fair market
value on the premise of continued use of the Equipment as of February 28, 2007 (the “Appraisal Date”).
It is our understanding that this appraisal will be used for financing purposes.
APPENDIX IV VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER ALLOY COMPANY
— 59 —
INTRODUCTION
Copper Alloy Company, a joint venture company established by JCC and Jiangxi Copper Company Limited
《江西銅業股份有限公司》 (the “Company”), was found in February 2005 with a registered capital of
RMB199.5 million. The Company, whose H shares are listed on The Stock Exchange of Hong Kong Limited
(Stock code: 0358), is interested in 60 percent equity interest in Copper Alloy Company. Copper Alloy
Company is principally engaged in the manufacturing and sale of f8 - f18 copper and copper alloy rods and
wires, after-sale services, and the related technological advisory services and businesses. The production
capacity of Copper Alloy Company reached 220,000 tonnes of copper rods and wires per annum, which
played an important role in promoting JCC to become one of the largest enterprises in domestic copper rod
processing, production and sales sector.
The Equipment appraised mainly consists of machineries and equipment for the production line of copper
rods and wires.
The appraisal report comprises:
— a summary, arranged by category, showing the fair market value under the premise of continued use
of the Equipment;
— assumptions and limiting conditions; and
— a statement of general service conditions.
Excluded from this investigation were machinery and equipment held under hired purchase contract, land,
buildings and structures, building improvements, vehicles, furniture and fixture, office equipment, tools,
stocks, supplies, inventories, materials on hand, tangible assets of current nature and intangible assets that
might exist.
The Equipment is located in Guixi City, Jiangxi Province, the PRC.
PREMISE OF VALUE
The premise of value will be fair market value in continued use which is defined as the following:
Fair market value is defined as the estimated amount at which a property might be expected to exchange
between a willing buyer and a willing seller, neither being under compulsion, each having reasonable
knowledge of all relevant facts.
APPENDIX IV VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER ALLOY COMPANY
— 60 —
Fair market value in continued use is defined as the fair market value of a property based on continuation of
its existing use, assuming the asset could be sold in the open market for its existing use, and otherwise in
keeping with the market value definition regardless of whether or not the existing use represents the highest
and best use of the property.
Fair market value under the premise of continued use does not represent the amount that might be realized in
the event of piecemeal disposition of the property in the open market or from any alternative use to which it
may be put.
VALUATION METHODOLOGY
Before arriving at our opinion of value, we personally inspected the Equipment on 24-27 July 2006 and
studied the market conditions. To develop our opinion of value, we considered the three generally accepted
approaches to value: cost, market and income capitalization. The theory of these approaches is outlined as
follows:
The cost approach
The cost approach establishes value based on the cost of reproducing or replacing the Equipment, less
depreciation from physical deterioration, and functional and economic/external obsolescence.
Cost of Reproduction New is defined as the estimated amount required to reproduce the Equipment at one
time in like kind and materials in accordance with current market prices for materials, labor, and
manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Cost of Replacement New is defined as the estimated amount required to replace the entire property at one
time with a modern new unit using the most current technology and construction materials that will
duplicate the production capacity and utility of an existing unit at current market prices for materials, labor,
and manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Physical Deterioration is the loss in value resulting from wear and tear in operation and exposure to the
elements.
Functional Obsolescence is the loss in value caused by conditions within the Equipment such as changes in
design, materials, or process that result in inadequacy, overcapacity, lack of utility, or excess operating costs.
Economic/External Obsolescence is an incurable loss in value caused by unfavorable conditions external to
the Equipment such as the local economy, economics of the industry, availability of financing, encroachment
of objectionable enterprises, loss of material and labor sources, lack of efficient transportation, shifting of
business centers, passage of new legislation, and changes in ordinances.
APPENDIX IV VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER ALLOY COMPANY
— 61 —
The cost approach generally provides a meaningful indication of the value of land improvements, special
buildings, special structures, and special machinery and equipment associated with a viable business or
justified by economic demand.
When market transactions of comparable Equipment are not available, when data cannot be extrapolated
from larger transactions, or when transactions are non-existent, under premise of continued use, assuming
adequate earnings the cost approach is the preferred valuation procedure.
The market approach
In the market approach, the value of the appraised Equipment is estimated through analysis of recent sales
of comparable items of the Equipment. It is employed in the valuation of the Equipment for which there is a
known used market. Under the premise of continued use assuming adequate earnings, consideration is given
to the cost to acquire similar items in the used-equipment market; an allowance then is made to reflect the
costs for freight and installation.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new. The ratio is applied to similar Equipment in the classification
when the secondary market for the subject equipment is too sparse to exhibit appropriate comparables.
The income capitalization approach
In the income capitalization approach, value is developed on the basis of capitalization of the net earnings
that would be generated if a specific stream of income can be attributed to an asset or a group of assets. This
approach is most applicable to investment and general-use properties where there is an established and
identifiable rental market.
In any appraisal study, all three approaches to value must be considered, as one or more may be applicable
to the subject Equipment. In some situations, elements of two or three approaches may be combined to reach
a value conclusion. For this appraisal, since the income generated by the Equipment could hardly be
separately identified, therefore, the income capitalization approach was not applied. The cost and market
approaches were the principal methods adopted to arrive at our opinion of value.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new.
APPENDIX IV VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER ALLOY COMPANY
— 62 —
INVESTIGATION AND ASSUMPTIONS
We have conducted inspections on all items of the Equipment on 24-27 July 2006. During our inspection,
we have noted that the Equipment was in good working condition and had been well maintained. As
discussed with the management of Copper Alloy Company (the “Management”), we recognized the
functions of the Equipment during each production stage. A detailed maintenance records for the Equipment
were provided by Copper Alloy Company.
In the course of our investigation, we accepted property records furnished by Copper Alloy Company as
properly describing the Equipment. We visited the locations to verify the existence of the Equipment and to
gather information relating to its condition and utility. The balance of the information provided by Copper
Alloy Company, after adjustments based on our observation, although not subject to a detailed verification,
was accepted as reasonably representing the facts.
When developing the cost of replacement new, we have considered the extent, character and utility of the
Equipment. We have also studied the market condition and obtain current market prices from relevant
machinery dealers when applicable. We have also make allowance for freight and installation. To arrive at
the fair market value, we have made deduction for depreciation and the functional/external obsolescence
they may present, if any.
Construction-in-progress are assets not fully constructed or installed. They have been valued at their
recorded cost basis as of the appraisal date.
Any deferred maintenance, physical wear and tear, operating malfunctions, lack of utility, or other
observable conditions distinguishing the Equipment from equipment of like kind in new condition were
noted and made part of our judgment in arriving at the value.
We did not investigate any financial data pertaining to the present or prospective earning capacity of the
operation in which the assets are used. It was assumed that prospective earnings would provide a reasonable
return on the appraised value of the assets, plus the value of any assets not included in the valuation, and
adequate net working capital.
We have not carried out a mechanical survey, nor have we inspected covered or inaccessible areas of the
Equipment. Also, no investigation was conducted as to whether the operation of specific pieces of
Equipment complied with the relevant environmental standards and ordinances; we have assumed that the
Equipment are and will continue to comply with the current environmental standards and ordinances. We
have made no allowance in our valuation for costs, if any, associated with the disposal or handling of
materials required to comply with current or pending environmental legislation.
APPENDIX IV VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER ALLOY COMPANY
— 63 —
CONCLUSION OF VALUE
Based on the investigation described, it is our opinion that as of February 28, 2007, the fair market value
under the premise in continued use for the Equipment is reasonably represented by the amount of
RENMINBI DOLLAR ONE HUNDRED TWENTY-ONE MILLION TWENTY ONE THOUSAND
SIX HUNDRED NINETEEN (RMB121,021,619), the breakdown is shown below:
Fair Market Value
(RMB)
Machinery and Equipment 117,354,393
Motor Vehicles —
Office Equipment —
Construction-in-Progress 3,667,226
121,021,619
For the purpose of this appraisal, we have reviewed the acquisition records and asset listings made available
to us by Copper Alloy Company. We have relied to a considerable extent on such records and listings in
arriving at our opinion of value.
We have not investigated the title to or any liabilities against the Equipment.
We hereby certify that we have neither present nor a prospective interest in the Equipment or the value
reported.
Respectfully submitted,
For and on behalf of
GRANT SHERMAN APPRAISAL LIMITED
Keith C.C. Yan, ASA
Managing Director
Note: Mr. Keith C.C. Yan is an Accredited Senior Appraiser (Business Valuation) with a membership in the American Society ofAppraisers, and he has been conducting business valuation in the Greater China region for various purposes since 1988.
APPENDIX V VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER PRODUCT COMPANY
— 64 —
2 April 2007 Room 904 on 9/F,
Harbour Centre,
25 Harbour Road,
Wan Chai,
Hong Kong
The Board of Directors
Jiangxi Copper Company Limited
15 Yejin Avenue
Guixi City
Jiangxi, China
Dear Sirs or Madams,
APPRAISAL SUMMARY LETTER
In accordance with your instructions, we have made an appraisal of the Machinery and Equipment (the
“Equipment”) exhibited to us as that of Jiangxi Copper Products Company Limited 《江西銅業銅材有限
公司》(“Copper Products Company”) of Jiangxi Copper Corporation (“JCC”).
This letter, which forms part of our appraisal report, identifies the Equipment, the scope and character of our
investigation, the premise of the value adopted, the valuation approaches adopted, and our conclusion of
value.
In valuing the Equipment, we have complied with the standards and ethics contained in the handbook of
Valuing Machinery and Equipment published by the American Society of Appraisers.
We confirm that we have carried out an inspection, made relevant inquiries and obtained such further
information as we consider necessary for the purpose of providing you with our opinion of the fair market
value on the premise of continued use of the Equipment as of February 28, 2007 (the “Appraisal Date”).
It is our understanding that this appraisal will be used for financing purposes.
APPENDIX V VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER PRODUCT COMPANY
— 65 —
INTRODUCTION
Copper Products Company, a joint venture company established by JCC and Jiangxi Copper Company
Limited《江西銅業股份有限公司》 (the “Company”), was found in March 2002 with a registered capital
of RMB225 million. The Company, whose H Shares are listed on The Stock Exchange of Hong Kong
Limited (Stock code: 0358), is interested in 60 percent equity interest in Copper Product Company. Copper
Product Company is principally engaged in the manufacturing and processing of copper alloy rods and
wires, sale of domestic products, after-sale services and the related technological advisory services and
businesses. For the year of 2005, Copper Product Company sold 159,000 tonnes of copper rods and wires,
representing a growth of 9.9 percent over the amount in 2004.
The Equipment appraised mainly consists of water pumps, blowers, dryers, heat exchangers, electrical
installations, and some associated equipment including office equipment and electrical appliances.
The appraisal report comprises:
— a summary, arranged by category, showing the fair market value under the premise of continued use
of the Equipment;
— assumptions and limiting conditions; and
— a statement of general service conditions.
Excluded from this investigation were machinery and equipment held under hired purchase contract, land,
buildings and structures, building improvements, vehicles, furniture and fixture, office equipment, tools,
stocks, supplies, inventories, materials on hand, tangible assets of current nature and intangible assets that
might exist.
The Equipment is located in Guixi City, Jiangxi Province, the PRC.
PREMISE OF VALUE
The premise of value will be fair market value in continued use which is defined as the following:
Fair market value is defined as the estimated amount at which a property might be expected to exchange
between a willing buyer and a willing seller, neither being under compulsion, each having reasonable
knowledge of all relevant facts.
Fair market value in continued use is defined as the fair market value of a property based on continuation of
its existing use, assuming the asset could be sold in the open market for its existing use, and otherwise in
keeping with the market value definition regardless of whether or not the existing use represents the highest
and best use of the property.
APPENDIX V VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER PRODUCT COMPANY
— 66 —
Fair market value under the premise of continued use does not represent the amount that might be realized in
the event of piecemeal disposition of the property in the open market or from any alternative use to which it
may be put.
VALUATION METHODOLOGY
Before arriving at our opinion of value, we personally inspected the Equipment on 24-27 July 2006 and
studied the market conditions. To develop our opinion of value, we considered the three generally accepted
approaches to value: cost, market and income capitalization. The theory of these approaches is outlined as
follows:
The cost approach
The cost approach establishes value based on the cost of reproducing or replacing the Equipment, less
depreciation from physical deterioration, and functional and economic/external obsolescence.
Cost of Reproduction New is defined as the estimated amount required to reproduce the Equipment at one
time in like kind and materials in accordance with current market prices for materials, labor, and
manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Cost of Replacement New is defined as the estimated amount required to replace the entire property at one
time with a modern new unit using the most current technology and construction materials that will
duplicate the production capacity and utility of an existing unit at current market prices for materials, labor,
and manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Physical Deterioration is the loss in value resulting from wear and tear in operation and exposure to the
elements.
Functional Obsolescence is the loss in value caused by conditions within the Equipment such as changes in
design, materials, or process that result in inadequacy, overcapacity, lack of utility, or excess operating costs.
Economic/External Obsolescence is an incurable loss in value caused by unfavorable conditions external to
the Equipment such as the local economy, economics of the industry, availability of financing, encroachment
of objectionable enterprises, loss of material and labor sources, lack of efficient transportation, shifting of
business centers, passage of new legislation, and changes in ordinances.
The cost approach generally provides a meaningful indication of the value of land improvements, special
buildings, special structures, and special machinery and equipment associated with a viable business or
justified by economic demand.
APPENDIX V VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER PRODUCT COMPANY
— 67 —
When market transactions of comparable Equipment are not available, when data cannot be extrapolated
from larger transactions, or when transactions are non-existent, under premise of continued use, assuming
adequate earnings the cost approach is the preferred valuation procedure.
The market approach
In the market approach, the value of the appraised Equipment is estimated through analysis of recent sales
of comparable items of the Equipment. It is employed in the valuation of the Equipment for which there is a
known used market. Under the premise of continued use assuming adequate earnings, consideration is given
to the cost to acquire similar items in the used-equipment market; an allowance then is made to reflect the
costs for freight and installation.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new. The ratio is applied to similar Equipment in the classification
when the secondary market for the subject equipment is too sparse to exhibit appropriate comparables.
The income capitalization approach
In the income capitalization approach, value is developed on the basis of capitalization of the net earnings
that would be generated if a specific stream of income can be attributed to an asset or a group of assets. This
approach is most applicable to investment and general-use properties where there is an established and
identifiable rental market.
In any appraisal study, all three approaches to value must be considered, as one or more may be applicable
to the subject Equipment. In some situations, elements of two or three approaches may be combined to reach
a value conclusion. For this appraisal, since the income generated by the Equipment could hardly be
separately identified, therefore, the income capitalization approach was not applied. The cost and market
approaches were the principal methods adopted to arrive at our opinion of value.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new.
APPENDIX V VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER PRODUCT COMPANY
— 68 —
INVESTIGATION AND ASSUMPTIONS
We have conducted inspections on all items of the Equipment on 24-27 July 2006. During our inspection,
we have noted that the Equipment was in good working condition and had been well maintained. As
discussed with the management of Copper Product Company (the “Management”), we recognized the
functions of the Equipment during each production stage. A detailed maintenance records for the Equipment
were provided by Copper Product Company.
In the course of our investigation, we accepted property records furnished by Copper Product Company as
properly describing the Equipment. We visited the locations to verify the existence of the Equipment and to
gather information relating to its condition and utility. The balance of the information provided by Copper
Product Company, after adjustments based on our observation, although not subject to a detailed
verification, was accepted as reasonably representing the facts.
When developing the cost of replacement new, we have considered the extent, character and utility of the
Equipment. We have also studied the market condition and obtain current market prices from relevant
machinery dealers when applicable. We have also make allowance for freight and installation. To arrive at
the fair market value, we have made deduction for depreciation and the functional/external obsolescence
they may present, if any.
Construction-in-progress are assets not fully constructed or installed. They have been valued at their
recorded cost basis as of the appraisal date.
Any deferred maintenance, physical wear and tear, operating malfunctions, lack of utility, or other
observable conditions distinguishing the Equipment from equipment of like kind in new condition were
noted and made part of our judgment in arriving at the value.
We did not investigate any financial data pertaining to the present or prospective earning capacity of the
operation in which the assets are used. It was assumed that prospective earnings would provide a reasonable
return on the appraised value of the assets, plus the value of any assets not included in the valuation, and
adequate net working capital.
We have not carried out a mechanical survey, nor have we inspected covered or inaccessible areas of the
Equipment. Also, no investigation was conducted as to whether the operation of specific pieces of
Equipment complied with the relevant environmental standards and ordinances; we have assumed that the
Equipment are and will continue to comply with the current environmental standards and ordinances. We
have made no allowance in our valuation for costs, if any, associated with the disposal or handling of
materials required to comply with current or pending environmental legislation.
APPENDIX V VALUATION REPORT ON PLANT AND MACHINERY OFCOPPER PRODUCT COMPANY
— 69 —
CONCLUSION OF VALUE
Based on the investigation described, it is our opinion that as of February 28, 2007, the fair market value
under the premise in continued use for the Equipment is reasonably represented by the amount of
RENMINBI DOLLAR ONE HUNDRED THIRTY FOUR MILLION SEVEN HUNDRED TWENTY
SEVEN THOUSAND TWO HUNDRED AND TEN (RMB134,727,210), the breakdown is shown below:
Fair Market Value
(RMB)
Machinery and Equipment 131,820,024
Motor Vehicles —
Office Equipment 558,569
Construction-in-Progress 2,348,617
134,727,210
For the purpose of this appraisal, we have reviewed the acquisition records and asset listings made available
to us by Copper Product Company. We have relied to a considerable extent on such records and listings in
arriving at our opinion of value.
We have not investigated the title to or any liabilities against the Equipment.
We hereby certify that we have neither present nor a prospective interest in the Equipment or the value
reported.
Respectfully submitted,
For and on behalf of
GRANT SHERMAN APPRAISAL LIMITED
Keith C.C. Yan, ASA
Managing Director
Note: Mr. Keith C.C. Yan is an Accredited Senior Appraiser (Business Valuation) with a membership in the American Society ofAppraisers, and he has been conducting business valuation in the Greater China region for various purposes since 1988.
APPENDIX VI VALUATION REPORT ON PLANT AND MACHINERY OF JCCDEXING TRANSPORTATION COMPANY
— 70 —
2 April 2007 Room 904 on 9/F,
Harbour Centre,
25 Harbour Road,
Wan Chai,
Hong Kong
The Board of Directors
Jiangxi Copper Company Limited
15 Yejin Avenue
Guixi City
Jiangxi, China
Dear Sirs or Madams,
In accordance with your instructions, we have made an appraisal of the Machinery and Equipment (the
“Equipment”) exhibited to us as that of Jiangxi Copper Corporation (Dexing) Transportation Company
Limited 《江西銅業集團 (德興 )運輸有限公司》(“JCC Dexing Transportation Company”)of Jiangxi
Copper Corporation (“JCC”).
This letter, which forms part of our appraisal report, identifies the Equipment, the scope and character of our
investigation, the premise of the value adopted, the valuation approaches adopted, and our conclusion of
value.
In valuing the Equipment, we have complied with the standards and ethics contained in the handbook of
Valuing Machinery and Equipment published by the American Society of Appraisers.
We confirm that we have carried out an inspection, made relevant inquiries and obtained such further
information as we consider necessary for the purpose of providing you with our opinion of the fair market
value on the premise of continued use of the Equipment as of February 28, 2007 (the “Appraisal Date”).
It is our understanding that this appraisal will be used for financing purposes.
INTRODUCTION
JCC Dexing Transportation Company was established in January 1997 with a registered capital of
RMB15.86 million. JCC Dexing Transportation Company is wholly-owned by JCC and principally engaged
in the motor vehicle transportation, manufacturing of automotive parts, cement production, manufacturing or
machineries, maintenance of automobiles, transportation and repairing of motor vehicles for dangerous
goods.
APPENDIX VI VALUATION REPORT ON PLANT AND MACHINERY OF JCCDEXING TRANSPORTATION COMPANY
— 71 —
The Equipment appraised mainly consists of trucks, cranes, bulldozers, and some associated equipment
including office equipment, electrical appliances and motor vehicles.
The appraisal report comprises:
— a summary, arranged by category, showing the fair market value under the premise of continued use
of the Equipment;
— assumptions and limiting conditions; and
— a statement of general service conditions.
Excluded from this investigation were machinery and equipment held under hired purchase contract, land,
buildings and structures, building improvements, vehicles, furniture and fixture, office equipment, tools,
stocks, supplies, inventories, materials on hand, tangible assets of current nature and intangible assets that
might exist.
The Equipment is located in Dexing City, Jiangxi Province, the PRC.
PREMISE OF VALUE
The premise of value will be fair market value in continued use which is defined as the following:
Fair market value is defined as the estimated amount at which a property might be expected to exchange
between a willing buyer and a willing seller, neither being under compulsion, each having reasonable
knowledge of all relevant facts.
Fair market value in continued use is defined as the fair market value of a property based on continuation of
its existing use, assuming the asset could be sold in the open market for its existing use, and otherwise in
keeping with the market value definition regardless of whether or not the existing use represents the highest
and best use of the property.
Fair market value under the premise of continued use does not represent the amount that might be realized in
the event of piecemeal disposition of the property in the open market or from any alternative use to which it
may be put.
APPENDIX VI VALUATION REPORT ON PLANT AND MACHINERY OF JCCDEXING TRANSPORTATION COMPANY
— 72 —
VALUATION METHODOLOGY
Before arriving at our opinion of value, we personally inspected the Equipment on 24-27 July 2006 and
studied the market conditions. To develop our opinion of value, we considered the three generally accepted
approaches to value: cost, market and income capitalization. The theory of these approaches is outlined as
follows:
The cost approach
The cost approach establishes value based on the cost of reproducing or replacing the Equipment, less
depreciation from physical deterioration, and functional and economic/external obsolescence.
Cost of Reproduction New is defined as the estimated amount required to reproduce the Equipment at one
time in like kind and materials in accordance with current market prices for materials, labor, and
manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Cost of Replacement New is defined as the estimated amount required to replace the entire property at one
time with a modern new unit using the most current technology and construction materials that will
duplicate the production capacity and utility of an existing unit at current market prices for materials, labor,
and manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Physical Deterioration is the loss in value resulting from wear and tear in operation and exposure to the
elements.
Functional Obsolescence is the loss in value caused by conditions within the Equipment such as changes in
design, materials, or process that result in inadequacy, overcapacity, lack of utility, or excess operating costs.
Economic/External Obsolescence is an incurable loss in value caused by unfavorable conditions external to
the Equipment such as the local economy, economics of the industry, availability of financing, encroachment
of objectionable enterprises, loss of material and labor sources, lack of efficient transportation, shifting of
business centers, passage of new legislation, and changes in ordinances.
The cost approach generally provides a meaningful indication of the value of land improvements, special
buildings, special structures, and special machinery and equipment associated with a viable business or
justified by economic demand.
When market transactions of comparable Equipment are not available, when data cannot be extrapolated
from larger transactions, or when transactions are non-existent, under premise of continued use, assuming
adequate earnings the cost approach is the preferred valuation procedure.
APPENDIX VI VALUATION REPORT ON PLANT AND MACHINERY OF JCCDEXING TRANSPORTATION COMPANY
— 73 —
The market approach
In the market approach, the value of the appraised Equipment is estimated through analysis of recent sales
of comparable items of the Equipment. It is employed in the valuation of the Equipment for which there is a
known used market. Under the premise of continued use assuming adequate earnings, consideration is given
to the cost to acquire similar items in the used-equipment market; an allowance then is made to reflect the
costs for freight and installation.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new. The ratio is applied to similar Equipment in the classification
when the secondary market for the subject equipment is too sparse to exhibit appropriate comparables.
The income capitalization approach
In the income capitalization approach, value is developed on the basis of capitalization of the net earnings
that would be generated if a specific stream of income can be attributed to an asset or a group of assets. This
approach is most applicable to investment and general-use properties where there is an established and
identifiable rental market.
In any appraisal study, all three approaches to value must be considered, as one or more may be applicable
to the subject Equipment. In some situations, elements of two or three approaches may be combined to reach
a value conclusion. For this appraisal, since the income generated by the Equipment could hardly be
separately identified, therefore, the income capitalization approach was not applied. The cost and market
approaches were the principal methods adopted to arrive at our opinion of value.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new.
INVESTIGATION AND ASSUMPTIONS
We have conducted inspections on all items of the Equipment on 24-27 July 2006. During our inspection,
we have noted that the Equipment was in good working condition and had been well maintained. As
discussed with the management of JCC Dexing Transportation Company (the “Management”), we
recognized the functions of the Equipment during each production stage. A detailed maintenance records for
the Equipment were provided by JCC Dexing Transportation Company. All major equipments were strictly
following a company-specific maintenance and overhaul schedule in order to assure effective production
capacity.
APPENDIX VI VALUATION REPORT ON PLANT AND MACHINERY OF JCCDEXING TRANSPORTATION COMPANY
— 74 —
In the course of our investigation, we accepted property records furnished by JCC Dexing Transportation
Company as properly describing the Equipment. We visited the locations to verify the existence of the
Equipment and to gather information relating to its condition and utility. The balance of the information
provided by JCC Dexing Transportation Company, after adjustments based on our observation, although not
subject to a detailed verification, was accepted as reasonably representing the facts.
When developing the cost of replacement new, we have considered the extent, character and utility of the
Equipment. We have also studied the market condition and obtain current market prices from relevant
machinery dealers when applicable. We have also make allowance for freight and installation. To arrive at
the fair market value, we have made deduction for depreciation and the functional/external obsolescence
they may present, if any.
Construction-in-progress are assets not fully constructed or installed. They have been valued at their
recorded cost basis as of the appraisal date.
Any deferred maintenance, physical wear and tear, operating malfunctions, lack of utility, or other
observable conditions distinguishing the Equipment from equipment of like kind in new condition were
noted and made part of our judgment in arriving at the value.
We did not investigate any financial data pertaining to the present or prospective earning capacity of the
operation in which the assets are used. It was assumed that prospective earnings would provide a reasonable
return on the appraised value of the assets, plus the value of any assets not included in the valuation, and
adequate net working capital.
We have not carried out a mechanical survey, nor have we inspected covered or inaccessible areas of the
Equipment. Also, no investigation was conducted as to whether the operation of specific pieces of
Equipment complied with the relevant environmental standards and ordinances; we have assumed that the
Equipment are and will continue to comply with the current environmental standards and ordinances. We
have made no allowance in our valuation for costs, if any, associated with the disposal or handling of
materials required to comply with current or pending environmental legislation.
APPENDIX VI VALUATION REPORT ON PLANT AND MACHINERY OF JCCDEXING TRANSPORTATION COMPANY
— 75 —
CONCLUSION OF VALUE
Based on the investigation described, it is our opinion that as of February 28, 2007, the fair market value
under the premise in continued use for the Equipment is reasonably represented by the amount of
RENMINBI DOLLAR ELEVEN MILLION SEVEN HUNDRED FORTY TWO THOUSAND FIVE
HUNDRED TWENTY TWO (RMB11,742,522), the breakdown is shown below:
Fair Market Value
(RMB)
Machinery and Equipment 4,253,851
Motor Vehicles 7,297,861
Office Equipment 190,810
Construction-in-Progress —
11,742,522
For the purpose of this appraisal, we have reviewed the acquisition records and asset listings made available
to us by JCC Dexing Transportation Company. We have relied to a considerable extent on such records and
listings in arriving at our opinion of value.
We have not investigated the title to or any liabilities against the Equipment.
We hereby certify that we have neither present nor a prospective interest in the Equipment or the value
reported.
Respectfully submitted,
For and on behalf of
GRANT SHERMAN APPRAISAL LIMITED
Keith C.C. Yan, ASA
Managing Director
Note: Mr. Keith C.C. Yan is an Accredited Senior Appraiser (Business Valuation) with a membership in the American Society ofAppraisers, and he has been conducting business valuation in the Greater China region for various purposes since 1988.
APPENDIX VII VALUATION REPORT ON PLANT AND MACHINERY OFJCC CHEMICAL COMPANY
— 76 —
2 April 2007 Room 904 on 9/F,
Harbour Centre,
25 Harbour Road,
Wan Chai,
Hong Kong
The Board of Directors
Jiangxi Copper Company Limited
15 Yejin Avenue
Guixi City
Jiangxi, China
Dear Sirs or Madams,
APPRAISAL SUMMARY LETTER
In accordance with your instructions, we have made an appraisal of the Machinery and Equipment (the
“Equipment”) exhibited to us as that of Jiangxi Copper Chemical Company Limited 《江西銅業集團化工
有限公司》(“JCC Chemical Company”)of Jiangxi Copper Corporation (“JCC”).
This letter, which forms part of our appraisal report, identifies the Equipment, the scope and character of our
investigation, the premise of the value adopted, the valuation approaches adopted, and our conclusion of
value.
In valuing the Equipment, we have complied with the standards and ethics contained in the handbook of
Valuing Machinery and Equipment published by the American Society of Appraisers.
We confirm that we have carried out an inspection, made relevant inquiries and obtained such further
information as we consider necessary for the purpose of providing you with our opinion of the fair market
value on the premise of continued use of the Equipment as of February 28, 2007 (the “Appraisal Date”).
It is our understanding that this appraisal will be used for financing purposes.
APPENDIX VII VALUATION REPORT ON PLANT AND MACHINERY OFJCC CHEMICAL COMPANY
— 77 —
INTRODUCTION
JCC Chemical Company was found in October 2004 with a registered capital of RMB42.63 million. As at
the Appraisal Date, the entire equity interest of JCC Chemical Company was held by JCC. JCC Chemical
Company is principally engaged in the manufacturing and sale of sulfuric products, and the extended
treatment of mineral products. Major product of JCC Chemical Company was 98% sulfuric acid with a
design capacity of 100Kta per annum. JCC Chemical Company has successfully fulfilled the environmental
requirement for the discharge of harmful substances during the production process.
The Equipment appraised mainly consists of conveyors, heat recovery system, electrical installations, and
some associated equipment including office equipment and electrical appliances.
The appraisal report comprises:
— a summary, arranged by category, showing the fair market value under the premise of continued use
of the Equipment;
— assumptions and limiting conditions; and
— a statement of general service conditions.
Excluded from this investigation were machinery and equipment held under hired purchase contract, land,
buildings and structures, building improvements, vehicles, furniture and fixture, office equipment, tools,
stocks, supplies, inventories, materials on hand, tangible assets of current nature and intangible assets that
might exist.
The Equipment is located at《泗洲鎮》and《香屯站》in Dexing City, Jiangxi Province, the PRC.
PREMISE OF VALUE
The premise of value will be fair market value in continued use which is defined as the following:
Fair market value is defined as the estimated amount at which a property might be expected to exchange
between a willing buyer and a willing seller, neither being under compulsion, each having reasonable
knowledge of all relevant facts.
Fair market value in continued use is defined as the fair market value of a property based on continuation of
its existing use, assuming the asset could be sold in the open market for its existing use, and otherwise in
keeping with the market value definition regardless of whether or not the existing use represents the highest
and best use of the property.
APPENDIX VII VALUATION REPORT ON PLANT AND MACHINERY OFJCC CHEMICAL COMPANY
— 78 —
Fair market value under the premise of continued use does not represent the amount that might be realized in
the event of piecemeal disposition of the property in the open market or from any alternative use to which it
may be put.
VALUATION METHODOLOGY
Before arriving at our opinion of value, we personally inspected the Equipment on 24-27 July 2006 and
studied the market conditions. To develop our opinion of value, we considered the three generally accepted
approaches to value: cost, market and income capitalization. The theory of these approaches is outlined as
follows:
The cost approach
The cost approach establishes value based on the cost of reproducing or replacing the Equipment, less
depreciation from physical deterioration, and functional and economic/external obsolescence.
Cost of Reproduction New is defined as the estimated amount required to reproduce the Equipment at one
time in like kind and materials in accordance with current market prices for materials, labor, and
manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Cost of Replacement New is defined as the estimated amount required to replace the entire property at one
time with a modern new unit using the most current technology and construction materials that will
duplicate the production capacity and utility of an existing unit at current market prices for materials, labor,
and manufactured equipment, contractors’ overhead and profit, and fees, but without provision for overtime,
bonuses for labor, or premiums for materials or equipment.
Physical Deterioration is the loss in value resulting from wear and tear in operation and exposure to the
elements.
Functional Obsolescence is the loss in value caused by conditions within the Equipment such as changes in
design, materials, or process that result in inadequacy, overcapacity, lack of utility, or excess operating costs.
Economic/External Obsolescence is an incurable loss in value caused by unfavorable conditions external to
the Equipment such as the local economy, economics of the industry, availability of financing, encroachment
of objectionable enterprises, loss of material and labor sources, lack of efficient transportation, shifting of
business centers, passage of new legislation, and changes in ordinances.
The cost approach generally provides a meaningful indication of the value of land improvements, special
buildings, special structures, and special machinery and equipment associated with a viable business or
justified by economic demand.
APPENDIX VII VALUATION REPORT ON PLANT AND MACHINERY OFJCC CHEMICAL COMPANY
— 79 —
When market transactions of comparable Equipment are not available, when data cannot be extrapolated
from larger transactions, or when transactions are non-existent, under premise of continued use, assuming
adequate earnings the cost approach is the preferred valuation procedure.
The market approach
In the market approach, the value of the appraised Equipment is estimated through analysis of recent sales
of comparable items of the Equipment. It is employed in the valuation of the Equipment for which there is a
known used market. Under the premise of continued use assuming adequate earnings, consideration is given
to the cost to acquire similar items in the used-equipment market; an allowance then is made to reflect the
costs for freight and installation.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new. The ratio is applied to similar Equipment in the classification
when the secondary market for the subject equipment is too sparse to exhibit appropriate comparables.
The income capitalization approach
In the income capitalization approach, value is developed on the basis of capitalization of the net earnings
that would be generated if a specific stream of income can be attributed to an asset or a group of assets. This
approach is most applicable to investment and general-use properties where there is an established and
identifiable rental market.
In any appraisal study, all three approaches to value must be considered, as one or more may be applicable
to the subject Equipment. In some situations, elements of two or three approaches may be combined to reach
a value conclusion. For this appraisal, since the income generated by the Equipment could hardly be
separately identified, therefore, the income capitalization approach was not applied. The cost and market
approaches were the principal methods adopted to arrive at our opinion of value.
A variant of the direct market approach is the use of market relationship. Recent market prices for
Equipment in an asset classification are determined with respect to age and are compared with a benchmark
price, such as the cost of reproduction new.
APPENDIX VII VALUATION REPORT ON PLANT AND MACHINERY OFJCC CHEMICAL COMPANY
— 80 —
INVESTIGATION AND ASSUMPTIONS
We have conducted inspections on all items of the Equipment on 24-27 July 2006. During our inspection,
we have noted that the Equipment was in good working condition and had been well maintained. As
discussed with the management of JCC Chemical Company (the “Management”), we recognized the
functions of the Equipment during each production stage. A detailed maintenance records for the Equipment
were provided by JCC Chemical Company.
In the course of our investigation, we accepted property records furnished by JCC Chemical Company as
properly describing the Equipment. We visited the locations to verify the existence of the Equipment and to
gather information relating to its condition and utility. The balance of the information provided by JCC
Chemical Company, after adjustments based on our observation, although not subject to a detailed
verification, was accepted as reasonably representing the facts.
When developing the cost of replacement new, we have considered the extent, character and utility of the
Equipment. We have also studied the market condition and obtain current market prices from relevant
machinery dealers when applicable. We have also make allowance for freight and installation. To arrive at
the fair market value, we have made deduction for depreciation and the functional/external obsolescence
they may present, if any.
Construction-in-progress are assets not fully constructed or installed. They have been valued at their
recorded cost basis as of the appraisal date.
Any deferred maintenance, physical wear and tear, operating malfunctions, lack of utility, or other
observable conditions distinguishing the Equipment from equipment of like kind in new condition were
noted and made part of our judgment in arriving at the value.
We did not investigate any financial data pertaining to the present or prospective earning capacity of the
operation in which the assets are used. It was assumed that prospective earnings would provide a reasonable
return on the appraised value of the assets, plus the value of any assets not included in the valuation, and
adequate net working capital.
We have not carried out a mechanical survey, nor have we inspected covered or inaccessible areas of the
Equipment. Also, no investigation was conducted as to whether the operation of specific pieces of
Equipment complied with the relevant environmental standards and ordinances; we have assumed that the
Equipment are and will continue to comply with the current environmental standards and ordinances. We
have made no allowance in our valuation for costs, if any, associated with the disposal or handling of
materials required to comply with current or pending environmental legislation.
APPENDIX VII VALUATION REPORT ON PLANT AND MACHINERY OFJCC CHEMICAL COMPANY
— 81 —
CONCLUSION OF VALUE
Based on the investigation described, it is our opinion that as of February 28, 2007, the fair market value
under the premise in continued use for the Equipment is reasonably represented by the amount of
RENMINBI DOLLAR FIFTY FIVE MILLION NINE HUNDRED NINE THOUSAND ONE
HUNDRED SIXTY NINE (RMB55,909,169), the breakdown is shown below:
Fair Market Value
(RMB)
Machinery and Equipment 55,379,283
Motor Vehicles 133,890
Office Equipment 395,996
Construction-in-Progress —
55,909,169
For the purpose of this appraisal, we have reviewed the acquisition records and asset listings made available
to us by JCC Chemical Company. We have relied to a considerable extent on such records and listings in
arriving at our opinion of value.
We have not investigated the title to or any liabilities against the Equipment.
We hereby certify that we have neither present nor a prospective interest in the Equipment or the value
reported.
Respectfully submitted,
For and on behalf of
GRANT SHERMAN APPRAISAL LIMITED
Keith C.C. Yan, ASA
Managing Director
Note: Mr. Keith C.C. Yan is an Accredited Senior Appraiser (Business Valuation) with a membership in the American Society ofAppraisers, and he has been conducting business valuation in the Greater China region for various purposes since 1988.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 82 —
This valuation report is prepared in Chinese language and the English version is therefore a
translation only. Should there be any inconsistencies, the Chinese version shall prevail.
Mining Right Valuation Report on Chengmenshan Mine of Jiangxi Copper Corporation
Abstract
JWPBZ (2006) No. 250
Valuer: Beijing Jingwei Assets Appraisal Co., Ltd.
Valuation Principal: Jiangxi Copper Company Limited (the “Company”)
Valuation Object: Mining right of Chengmenshan Copper Mine of Jiangxi Copper Corporation (“JCC”)
Valuation Purpose: JCC plans to transfer its own mining right of Chengmenshan Copper Mine to the
Company, and the mining right shall be valued in accordance with relevant regulations of the State. In order
to achieve the above-mentioned purpose, we will make fair and rational value suggestions on
“Chengmenshan Mine Mining right of Jiangxi Copper Corporation” to the valuation principal under various
conditions and on the base day of valuation as stated in this valuation report through the valuation.
Valuation Base Date: 30 June, 2006
Valuation Period: From 10 July, 2006 to 20 August, 2006
Valuation Method: Comparable Sales
Valuation Conclusion: Based on the onsite investigation, local market analysis and appropriate valuation
methods and coefficients selected by the valuers according to principles and procedures of the mining right
valuation, we hereby determine that the valuation calculation period for “Mining right of Chengmenshan
Copper Mine of Jiangxi Copper Corporation” is 30 years, the proven ore reserves are 118,156,500 tonnes
and the valuation value is RMB1,359,602,700 (Say RMB one billion, three hundred and fifty-nine million,
six hundred and two thousand, and seven hundred yuan only). Although the existing mining right certificate
is for a period of 10 years since 2004, according to the representation of the directors of the Company, the
mining right may be extended to 30 years upon application to the relevant governmental authorities.
STATEMENTS ON THE VALUATION:
Valid period of the valuation conclusion is one year, i.e. it will be valid within one year since the base day of
valuation. The valuation conclusion will not be valid after one year unless it is revalued.
This report is only applicable for the above-mentioned valuation purpose and submission to relevant
regulatory organs by the principal. The use right of this valuation report shall belong to the principal and
shall not be provided or made public to others without the principal’s permission.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 83 —
IMPORTANT NOTES:
The above-mentioned contents are extracted from the valuation report on mining right of Chengmenshan of
JCC. For details of the valuation project, please refer to the whole text of the mining right valuation.
Legal Representative: Liu Zhongzhen, certified Mining Right Assess or registered in the Ministry of Land
and Resources of the People’s Republic of China
Project Manager: Li Xiuzhi, certified Mining Right Assess or registered in the Ministry of Land and
Resources of the People’s Republic of China
Certified Mining Right Valuer: Liu Zhongzhen, Li Xiuzhi
Beijing Jingwei Assets Appraisal Co., Ltd.
20 August 2006
Text of the Valuation Report on Copper Mine Mining right of JCC
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 84 —
Mining Right Valuation Report on Chengmenshan Mine of Jiangxi Copper Corporation
JWPBZ (2006) No. 250
At the request of the Company, Beijing Jingwei Assets Appraisal Co., Ltd. has valued the Mining right of
Chengmenshan Copper of JCC which JCC plans to transfer through the accepted mining right valuation
methods in accordance with relevant regulations on mining right valuation of the State and in the light of
objective, independent, fair and scientific principles. Valuers of this company have made market surveys and
confirmations to the mining right of Chengmenshan of JCC, and estimated the market value represented by
the entrusted mining right of Chengmenshan of JCC for valuation on 30 June, 2006 according to necessary
valuation procedures. The valuation situation of the mining right and the valuation conclusion are reported
as follows:
1. VALUER
Valuer Name: Beijing Jingwei Assets Appraisal Co., Ltd.
Registered Address: Room 1502, Tower D, Shidaizhiguang Mingyuan, 45 North Street, Xizhimen,
Haidian District, Beijing
Professional qualification cretificates: “Assets Valuation Qualification Certificate” No.: 11020001
issued by the Ministry of Finance of the PRC;
“Qualification Certificate for Mineral Exploration Rights
and Mining right Valuation” No. KQPZ [1999] No. 001
issued by the Minstry of Land and Resources of the PRC;
Corporation Business License of the People’s Republic of
China: 1100002114168.
Legal Representative: Liu Zhongzhen (Certified Mining Right Assessor of PRC, Certified Public
Valuer of PRC)
The Valuer has 15 years of experience in valuation of assets and mining right in the PRC.
2. VALUATION PRINCIPAL AND MINING RIGHT OWNER
Valuation Principal: Jiangxi Copper Company Limited (the “Company”)
Mining Right Owner: Jiangxi Copper Corporation (“JCC”)
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 85 —
3. VALUATION PURPOSE
JCC plans to transfer its own mining right of Chengmenshan Copper Mine to the Company, and the
mining right shall be valued in accordance with relevant national regulations. In order to achieve the
above-mentioned purpose, we will make fair and rational value suggestions on Chengmenshan Mine
Mining Right of JCC to the valuation principal under various conditions and on the base day of
valuation as stated in this valuation report through the valuation.
4. VALUATION OBJECT AND SCOPE
The valuation object is the mining right of Chengmenshan Copper Mine of JCC.
Mining License No.: 3600000410854, mine type: copper mine; mining method: open cutting;
production scale: 3.96 million tonnes/year; mining area: 1.45 square kilometres; valid period: ten
years, from November 2004 to November 2014. Coordinates of the inflection points in the mining
areas are as follows:
No. X Coordinate Y Coordinate
1 3285666.00 39384366.60;
2 3285638.00 39384304.00;
3 3285400.00 39383888.00;
4 3285304.00 39383207.00;
5 3285373.00 39382887.00;
6 3285517.00 39382795.00;
7 3285797.00 39382803.00;
8 3286098.00 39382800.00;
9 3286453.00 39382900.00;
10 3286800.00 39383112.00;
11 3286800.00 39383323.00;
12 3286678.00 39383622.00;
13 3286624.00 39383847.00;
14 3286622.10 39383854.10;
15 3285671.70 39383844.30.
It is determined by 15 inflection points.
Mining depth: from 140 Metre down to -600 Metre
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 86 —
5. BASE DAY OF VALUATION
According to economic actions and relevant purposes of the valuation principal, the base day
determined in the project valuation was 30 June, 2006, and both the measurement and pricing
standards for the valuation report were objective and valid price standards on 30 June, 2006.
6. VALUATION BASIS
6.1 Mineral Resources Law of the People’s Republic of China promulgated by the Standing
Committee of the National People’s Congress (NPCSS);
6.2 Procedures for Administration of Registration of Mining of Mineral Resources promulgated
by the State Council;
6.3 Measures for Administration of Transfer of Mineral Exploration Right and Mining Rights
promulgated by the State Council;
6.4 Interim Regulations Concerning the Assignment and Transfer of the Mine Property Right
promulgated by the State Council;
6.5 Interim Measures for the Administration of Valuation of Mineral Exploration Right and
Mining Rights promulgated by the State Council;
6.6 Evaluation and Determination of Measures for Mineral Resource Reserves promulgated by the
State Council;
6.7 Guide to Mining Right Valuation (2004 Revision) promulgated by the State-owned Land
Resources Bureau;
6.8 Mining License (No. 3600000410854) promulgated by Department of Land and Resources of
Jiangxi Province;
6.9 Check Report on Chengmenshan Copper Resource Reserves of Jiujiang County of Jiangxi
Province (Jiangxi Provincial Dept. of Land and Resources, December 2003)
6.10 “Certification of Mineral Resource Reserves Review Record (11 December, 2003) in relation
to the Check Report on Chengmenshan Copper Resource Reserves of Jiujiang County of
Jiangxi Province of Ministry of Land and Resources GTZCBZ [2003] No.136
6.11 Pre-Feasibility Study Report on Chengmenshan Copper Mine (12000t/d) of Jiangxi Copper
Corporation prepared by Nanchang Engineering & Research Institute of Nonferrous Metals
(“NERNI”) (October 2003);
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 87 —
6.12 “Minutes of the Review Meeting on Pre-Feasibility Study Report on Chengmenshan Copper
Mine (12000t/d) of Jiangxi Copper Corporation (25 December, 2003);
6.13 Financial statements of Chengmenshan Copper Mine of Jiangxi Copper Corporation for 2004,
2005 and 2006.
6.14 Other relevant information verified, collected and investigated by the valuers on-site.
7. VALUATION PRINCIPLES
According to the features of the mining right, besides the independent, objective and scientific work
principles, the project valuation also conforms to the following principles:
7.1 Principles for geological rules and resource economics rules;
7.2 Principles for continuing operation of mining right assets;
7.3 Principles for compliance with geological survey specifications and mining and milling design
specifications.
8. VALUATION PROCESS
The valuation period is from 10 July, 2006 to 20 August, 2006.
8.1 The entrustment was accepted and relevant matters were discussed, and the valuation scheme
was formulated, and the valuation method was determined and rational valuation coefficients
were selected, and relevant information was collected and collated by the valuers from 10 July
2006 to 12 July, 2006.
8.2 The valuer Li Xiuzhi (a certified mining right valuer) of this company surveyed the open
mining site of Chengmenshan Copper Mine with the company of Mr. Yang Xi Lin, the Vice
Manager of Production Dept. of JCC, Mr. Huang Liangjin, Deputy Director of Chengmenshan
Copper Mine Production of JCC, and Mr. Yang Guocai of Chengmenshan Copper Production
Technology Office of JCC on 13 July, 2006. Chengmenshan Copper Mine has commenced
mining.
8.3 From 14 July, 2006 to 20 August, 2006, the valuers carried out specific evaluation and
estimation according to the established valuation method, prepared and submitted an initial
report on the mining right valuation, communicated opinions with the principal and finally
submitted the formal report on the mining right valuation.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
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9. OVERVIEW OF MINING RIGHT
9.1 Location and Transportation of the Mining Area
Under the jurisdiction of Chengmen Township of Jiujiang County, Chengmenshan Copper
Mine of Jiujiang County of Jiangxi Province is directly 18 kilometres southwest from Jiujiang
City of Jiangxi Province. Geological coordinates of the mining area are E 115º 47’ 21” -115º
48’ 47” and N 29º 40’ 48” -29º 41’ 36”.
There is a paved-way (cement pavement) leading to Shahe Street, Jiujiang County. Beginning
from Shahe Street, it is 17 kilometres north from Jiujiang City via Nanchang-Jiujiang Railway
and Nanchang-Jiujiang Expressway and is 118 kilometres from Nanchang. Jiujiang-Ruichang
Highway which is 3 kilometres from the north of the mining area is 18 kilometres east from
Jiujiang, and is 18 kilometres west from Ruichang. The mining area is 20 kilometres east from
Jiujiang City via Saicheng Lake, connecting with the Changjiang River. It is allowable for over
ten tonnes of ships to sail. Shahe-Daye Railway passes through 10 kilometres south of the
mining area, with convenient transportation (Please refer to the map on page 75 of this circular
for details)
9.2 Overview of Geology and Economy of the Mining Area
The landform of Chengmenshan Copper Mine features hills and lakes, with lakes (Saihu Lake
Chengmen Lake) along its three directions, and the only continent is on the southeast of the
mine. The mining area is high in the southeast and low in the northwest. Chengmenshan-
Cuoshan mountain body stretches southeast, with the highest elevation of 147.8M. The lowest
elevation of the lake bottom is 12.0-14.0m.
The mining area is warm and wet with frequent pecipitation, dry and cold in winter and hot and wet
in summer, and the climate is subtropical with four distinctive seasons. The historical temperature
ranges from -8.0°C to 40.2°C with the annual average temperature of 17.0°C ; the annual mean
rainfall is 1400mm and the annual mean evaporation is 1655 m.
With rich resources, the industrial and agricultural industries around the mine are well
developed. The four main mining industrial systems of nonferrous metals, building materials,
chemical and metallurgy have been established all over the city and mainly concentrated in
Jiujiang City.
The mining industry is subject to large and medium mine enterprises such as Wushan Copper
Mine, Dingjiashan Copper Mine, Xingzi Granite Mine, Xingzi Shale Mine, Jiangxi Yadong
Cement Corp. Ltd., Jiujiang General Company of Mining and Metallurgy, etc.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
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Jiujiang Power Plant which is 20 kilometres from the mining area has a generating capacity of
1250MW and has been linked to the Central China Grid, meeting the demand for the mine
construction and production. Both surface water and underground water of the mining area are
very rich, and underground limestone water is excellent in quality. Various types of water for
the mining area can be supplied on the site.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
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9.3 Overview of Geological Work of the Mining Area
In 1956, Team 806, East China Survey Bureau made a preliminary general survey on
Chengmenshan Mine and submitted some different scales of geological drawings and survey
reports. At the end of 1958, North-western Geological Team of Jiangxi Geology & Mineral
Resources Development Bureau found out that copper-sulphur mine was more promising than
iron mine when they evaluated the survey on the iron mine in Chengmenshan Mine. Thus, they
focused on evaluation of copper-sulphur in 1991 and finished the evaluation task at the end of
1964. They began to explore in 1965 and submitted the Report on Final Reserves of copper,
sulphur and iron mines of Jiujiang Chengmenshan of Jiangxi in April 1964.
In 1975, North-western Geological Team of Jiangxi Geology & Mineral Resources
Development Bureau constructed a crossing profile in the rock body and discovered the ore
body of porphyry copper (molybdenum) and thus the prospect of the mining area became
brighter. They continued to explore in 1976 and submitted the Geological Report on the
Detailed Exploration of Jiujiang Chengmenshan Mine of Jiangxi Province in August 1981. The
detailed exploration report was approved by the National Mineral Reserve Committee.
To plan the mining of Chengmenshan Copper Mining Area and dispose its mining right,
Jiangxi Provincial Land Resources Administration entrusted Jiangxi Provincial Northwest
Jiangxi Geologic Formation to prepare the review report on the proposed disposal of resources
reserves within the mining right. Based on the data collection and investigation on
Chengmenshan Copper Mine in October to December 2003, the Review Report on Reserves of
Chengmenshan Copper Mine of Jiujiang County Jiangxi Province was submitted.
On 11 December 2003, the Ministry of Land and Resources issued the supporting documents
relating to review on resources reserves in the Review Report on Reserves of Chengmenshan
Copper Mine of Jiujiang County Jiangxi Province (GTZCBZ No. [2003]136 ). The reviewed
and confirmed reserves are as follows:
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 91 —
The owned resources reserves of Chengmenshan Copper Mine as at 30 September 2003 were:
Resource reserve (tonne)
Category of Grade of Cu S Mo Zn TFe
resource resource New Ore Metal Ore Metal Ore Metal Ore Metal Ore Metal
Category reserve reserve category reserve reserve reserve reserve reserve reserve reserve reserve reserve reserve
Major products In-table B 111b 7400786 85899 7791317 2570908
C 111b 97747649 704575 50912140 12731741
D 122b 74594316 535798 53643006 10897499 319794 14775
B+C+D 179742751 1326272 112346463 26200148 319794 14775
Out of table B 2S11 3563450 21049
C 2S22 23481592 105836 9604282 395706 28384680 11456.3
D 2S22 20133882 68053 6238717 341902 37852124 16328.1 157714 1668 2788305 959382
B+C+D 47178924 194938 15842999 737608 66236804 27784.4 157714 1668 2788305 959382
By-products In-table D 122b 7680390 9954 74936006 5193353
Au Ag Te Ga Cd
Ore Metal Ore Metal Ore Metal Ore Metal Ore Metal
reserve reserve reserve reserve reserve reserve reserve reserve reserve reserve
Accompanied
products Out of table D 122b 240758161 61.896 240758161 2426.26 240758161 5013.26 240758161 3572.8 240758161 6065.69
9.4 Regional geological condition
Chengmenshan Copper Mining area is located at the southeast of Jiurui Mine Field, adjoining
Changjiang River in the north, Wushi Street in the south, Fengshan Cave in the west, and
Saihu Lake in the east.
The tectonic location belongs to Yangtze Peneplatform (I) Lower Yangtze-Qiantang Platform
Syneclise (II) Jiujiang Platform Subside (III) Ruichang-Jiujiang concaved pleats and severed
bands. Deposits are an important part of Daye - Jiujiang mineralized sub-zone for the iron-
copper mineralized zone of the Lower and Middle Reaches of the Changjiang River. Featuring
the three integration of skarn-type, porphyry-type and massive-sulfide-type, as well as the
characteristics of large-scale, wide variety of minerals, and complicated categories of minerals,
copper deposits in the mine field is formed due to the deep source hypabyssal — super
hypahyssal porphyry, with the orebodies mainly existed in rock body and carbonate contact
zone and the inside and outside of the contact zone.
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9.5 Geological condition of the mining area
9.5.1 Stratigraphy
The old and new outcropped stratigraphy of the mining area from the south to the north
includes: the Middle Lojoping Formation and Upper Shamao Formation of Silurian
System, the Upper Wutong Formation of Devonian System, the Middle Huanglong
Formation of Carboniferous System, the Lower Liangshan Formation and Qixia
Formation and Maoshao Formation, and Upper Longtan Formation and Changxing
Formation of Permian System, the Lower Daye Formation and Middle Jialing River
Formation of Triassic System, as well as the fourth system spread across the lake area
and the surface of the mining area.
The Silurian System to the Triassic System of the mining area, except for the influence
of partial fracture and secondary fold, generally strikes 70°, and dips to the north-west
at angles of from 45-60°. As affected by the thrust of F1 fault at the south of F1 fault, a
part of the Wutong Formation of Devonian System and the Shamao Formation of
Silurian System are generally reversed or the stratigraphy are almost upright, with
certain part reversed on Huanglong Formation. Far away from rock body or tectonic
zone, stratigraphic succession has resumed again.
Closely related with mineralization, the Permian System and the Triassic System are
important ore-bearing wall rock and secondary ore-bearing wall rock respectively, with
metal reserves accounting for 45% and 5% of the mining area respectively.
9.5.2 Structure
Chengmenshan Copper Mining area is located at the near pitching end of the east part
of the north limb of Changshan - Chengmen Lake Anticline. The structure framework of
the mining area comprises the secondary cross folds and three Formations of NEE, NW,
and NNE fractures. Fracture structures and contact structures are also well-developed.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
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Folds: Secondary folds comprise two formations of north-east and north-west brachy-
anticline-syncline folds. The north-east brachy-anticline fold is fostered at the lower
plate of F1 fault with the Silurian System as the core and two limbs being from the
Devonian System to the Permian System. The axial surface is almost upright and the
two limbs are approximately symmetrical. Axis strikes 45°, and dips to the north-east at
an angle of 30. At the occurrence of folds, interstratified glide along Wutong Formation
and Huanglong Formation occurred, resulting in interstratified fracture zone, especially
the collapsed area generated at the top of the anticline structure, which is the favourable
area for ore fluid filling and replacement and an important component of the enriched
massive sulfide orebodies in the mining area. The north-west anticline and syncline are
mainly distributed between 15 line and 654 line, with the involved stratigraphy spread
from the Silurian System to the Triassic System at a fold angel of approximately 330.
While the north-west anticline inclines slightly, the syncline tilts and the axial surface is
almost upright. Due to the anticlinal arch, interstratified glide along Wutong Formation
and Huanglong Formation becomes more intensified, which is suitable for the intrusion
of rock body and activities of ore fluid. Therefore, the anticlinal crest and its
neighbouring orebodies become thick and the synclinal axis and its neighbouring
orebodies become weak.
Faults: The faults in the mining area are mostly developed in the NEE direction,
secondary in the NW to NWW direction and the NNE to north-east direction, totalling
15 faults. The NEE direction faults mainly include F1, F2 and F20. The NEE direction
faults are formed at the earliest, and the latter is the NW direction. The NEE faults are
formed at the latest, but make the orebodiesbasically conformable to stratigraphic
attitudes with focus on bedding faults.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
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9.5.3 Magmatite
Magmatite in the mining area represent the compound massif derived from the multi
intrusion of intermediate-acid hypergene — super hypergene during the Yanshan period.
With an outcropped area of 0.8 sq. km., it is irregular oval and dips to the northwest at
an angle of about 75. It intrudes into the clastic rock of the old Silurian System and part
of the Triassic System and the carbonate stratigraphy. For the injection along the
interstratified wall rock at the shallow, complicated arborescence contact zone is
formed. The categorizes of rock body constituting compound massif take granodiorite
porphyry and quartz porphyry as the main body. Granodiorite porphyry is mainly
disseminated at the east, south, part of the west district of the compound massif, which
is also scattered in quartz porphyry with an exposed area of 0.45 sq. km.. The exposed
shape of the surface is irregular semiring with the depth approximating to equal-axis
shape, indicating an upward trend. Semicircular boundary has intrusion contact with
clastic rock and carbonate stratigraphy, whereas the inner margin contacts with quartz
porphyry. Quartz porphyry is mainly distributed at the northwest and middle lake
district of the compound massif, with an exposed area of 0.5sq. km., representing “L”
shape of north-east and north-east-east and dipping to the west like barrel-shaped
output. Quartz porphyry contacts the Permian System - the Triassic System in the
northwest and granodiorite porphyry in the east, which is inclusive of a number of
granodiorite porphyry residuals. With the strong hidden explosion of underground after
the intrusion of quartz porphyry, various kinds of explosion-like rock bodies are formed
and mainly distributed at the northwest of the compound massif and the vicinity of the
contact zone of wall rock, with an area of approximately 0.1 sq. km.. Furthermore,
Quartz Anshan Porphyrite is distributed at Tianjingwa district, which becomes the
mineralized dikes due to nerve penetration into granodiorite porphyry and orebodies.
9.5.4 Alteration of wall rock
Alteration of wall rock is complicated, two periods of which relating to mineralization
include the active period of granodiorite porphyry (the mineralized period of skarn
copper mine, mainly including skarnization, silicification, sericitization, chloritization
and argillization) and the active period of quartz porphyry (the mineralized period of
porphyry molybdenum and copper, mainly including potash feldspathization,
biotitization, silicification and sericitization). Different categories of mineralization and
the wall rock are accompanied by different alteration and zoning. From the center of the
compound massif to the outside, it can be divided into inter and outer contact zone and
seven sub-zones of altered faces. With its center on rock body, the inter zone is
distributed like surface-shape alteration. With its center on granodiorite porphyry
contact zone, the outer zone is distributed like clitellum-shape alteration.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
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9.6 Geological characteristics of deposits
Chengmenshan Mining Area is a copper-centered composite deposit integrated with large
amount of sulphur, zinc and molybdenum. The close paragenesis of copper, sulphur and zinc
constitutes compound orebodies. According to industrial indexes, the whole mining area
delineates eight categories of minerals including copper, copper-sulphur and copper-zinc, as
well as 226 inside and outside mineralized orebodies.
9.6.1 Characteristics of mineralized zones
By the categories of minerals and the features of spatial distribution, three mineralized
zones and five sub-zones constitute compound deposits with three integrations of the
rock-body-focused, down-to-upper, and inside-to-outside characteristics. Three
mineralized zones involve inter zone of rock body, contact zone and outer contact zone.
For five sub-zones, the inter zone of rock body can be divided into porphyry
molybdenum sub-zone and porphyry copper sub-zone. Skarn zinc-sulphur-copper sub-
zone (divided into east and west semicircular zone) and gossan sub-zone and massive
sulfide copper sub-zone can be sub-divided from contact zone to outer contact zone.
Porphyry copper sub-zone: the sub-zone is located at the top and boundary of rock
body,which is covered on the molybdenum sub-zone in the shape of a cap. The sub-zone
is under the control of the fracture of rock body,on which 10C orebodies lies like seat-
shape. The length of the10C orebodies is comparable to that of the whole sub-zone, and
other orebodies are like arborescence-shape at the margin of the mineralized zone,
being joined together with the orebodies of skarn copper sub-zone.
Skarn zinc-sulphur-copper sub-zone: located on the rock body and the contact zone of
Carbonate-Triassic System limestone, the sub-zone is under the control of the contact
structure. The sub-zone is divided into east and west semicircular zone. The east
semicircular zone, being skarn copper mine main zone, represents 60% of the total
copper reserve in the whole area. Under the control of granodiorite porphyry and
limestone contact zone, the east semicircular zone is distributed in the south, east and
north of the mining area, forming horseshoe-shape in a north-east direction. Located at
the west of rock body and under the control of quartz porphyry and granodiorite
porphyry and limestone contact zone, the west semicircular zone is arc, which pops out
to the west and is parallel to the east semicircular zone.
Gossan sub-zone: located on the skarn copper zone and the massive sulfide copper zone,
the sub-zone belongs to gossan cap of oxidation zone. The zone is a little smaller than
the skarn zone in length and width and well- developed at the positive landform district
on the phreatic water surface.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
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Massive sulfide copper sub-zone: the sub-zone is distributed at the outer contact zone of
the south of the mining area and controlled by Wutong Formation quartzite and
Huanglong Formation limestone pseudoconformity and F2 interstratified fracture and
F1 fault zone. The zone is approximately 2,000 meters long, dipping to the north-west
and stretching 400—600 meters in length. The zone has two orebodies like 0Cu and
1Cu. The former is controlled by F1 with small size. The latter is controlled by
pseudoconformity and F2 interstratified fracture zone and also the largest copper
orebody in the whole mining area.
9.6.2 Characteristics of copper orebodies
Chengmenshan Copper Mining Area has a total of 108 inside and outside copper
mineralized bodies,which can be sub-divided into 2 copper-sulphur-zinc mineralized
bodies, 22 copper-sulphur mineralized bodies, 2 copper-zinc orebodies and 82 single
copper orebodies based on the composition of categories of minerals~. Being separated
into principal orebodies and secondary orebodies by the scale, the copper orebodie
shave 20 principal inside copper orebodies with 10 orebodies of over 50,000 tonnes
numbering 1, 3, 5, 6, 7, 10, 12, 13, 15 and 21, as well as 71 numbered secondary
mineralized bodies.
The attitudes of the principal orebodies have 5 kinds of stratiform-shape, beanpod-
shape, lens-shape, belt-shape and seat-shape.
Stratiform-shape mineralized body: With 1Cu as the representative, the mineralized
body is controlled by Wutong quartzite and Huanglong limestone pseudoconformity and
F2 interstratified fracture zone. The mineralized body is approximately 1,950 meters
long, of which the principal industrial mineralized body is 1,120 meters long. With
substantial difference in the east and west attitudes along with stable west attitudes, the
mineralized body strikes 338 and dips at angles from 48-57 with the average of 52. Due
to the control of the secondary folds, the thickness of east section intumesces at the
anticline axis and changes significantly at the steep section of stratigraphy with
thickness of 18-54 meters, partial intumescence of 75 meters and average thickness of
36.7 meters. The east section dips at an average angle of 13 and the controlled measure
depth ranges from 20-360 meters with the average of 237 meters.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 97 —
Beanpod-shape mineralized body: With 3Cu, 13Cu and 15Cu as the representative, this
kind of mineralized body is controlled by interstratified fracture zone (including various
lithologic interfaces like skarn and porphyry or limestone). The attitude approximates to
that of the original stratigraphy with medium pitching angle. The different fractured
extents of the structure of the contact zone differ on the thickness of the mineralized
body in direction just like beanpod-shape. The orebody extends largely from 750-880
meters, striking in a branch-compound direction and pinching out to both ends. It also
dips widely with average depth of 238-341 meters and a maximum extension of 570
meters. The orebody on the section usually pinches out downward, and becomes weak
and pinches out upward.
Lens-shape orebody With inclusive of other majority of orebodies in the mining area, it
has the similar control factors and attitude shapes with the beanpod-shape orebody. The
difference is that the orebody has small extension and depth. The two strike and dip like
the lens shape of middle intumescence and both ends diminishing. Except that the
orebodies like 5Cu, 6Cu and 7Cu are large-sized, other secondary orebodies are small-
sized.
Belt-shape orebody With 21Cu as the representative, the orebody is strictly controlled
by the west contact zone with the west-protruding arc belt-shape on its plane, striking
840 meters in length. The top part of the orebody dips to the southeast at angles from
48-85, with the south end being steep and the north end being lessened. The low part
dips to the north-west. The controlled measure depth ranges from 67-480 meters with
the average of 282 meters. The thickness ranges from 5-22 meters with a maximum
thickness of 35 meters and the average of 10 meters.
Seat-shape orebody: The mineralized body, being 10Cu orebody, is formed by
accumulation of the secondary sulfide enrichment on the basis of copper mineralized
porphyries. The east-west length is 880 meters and the south-north width is 740 meters.
The thickness is 76.3-2 meters with the average of 27.3 meters.
9.6.3 Ore characteristics
Ore textures: Including 5 classifications and 16 textures by the formation mode, mainly
comprising crystallized granular texture and metasomatic dissolution texture, seldom
pseudomorph, sub-graphic and graphic-vermicular structure.
Structure of ores: Mainly including 3 type: massive, disseminated and stringer vein-
disseminated, then loose, breccia, banded and quasi-banded, circular structure, etc.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 98 —
Ore mineral composition: 1) Metallic minerals, which principally include pyrite,
chalcopyrite, chalcocite, blue chalcocite, bornite, covellite, enargite, erythroconite,
zincblende, galenite, molybdenite, arsenopyrite, malachite, azurite, magnetite, hematite,
native copper, etc. 2) Gangue minerals, which principally include quartz, garnetite,
calcite, feldspar, kaolinite, etc.
Ore chemical composition: Main beneficial elements include copper, sulphur,
association of zinc, molybdenum and ferrum. Accompanying beneficial elements
include gold and silver. Main harmful elements include arsenic, then fluorin and
magnesia. Content of fluorin and magnesia in ore concentrates range from 0.02 to
0.103% and 0.02 to 1.72% respectively, both falling below the quality criterion of ore
concentrate.
Ore natural type: Including oxidized ore, mixed ore and primary ore. Oxidized ore
(average oxidation rate of 37%) accounts for 7.2% of the total ore reserve of the whole
copper mine, and 8.9% of the total metal reserve. bedded ore (average oxidation rate of
19%) accounts for 29.4% of the total ore reserve of the whole copper mine, and 29.4%
of the total metal reserve; original ore (average oxidation rate of 5%) accounts for
63.3% of the total ore reserve of the whole copper mine, and 57.8% of the total metal
reserve.
Ore industrial type: Categorized as iron ore, copper-sulphur ore, sulphur ore, zinc ore
and molybdenum ore. Copper-sulphur ore is further categorized as copper-bearing
pyrite ore, copper-bearing skarn ore, copper-bearing porphyry ore, copper-bearing
breccia ore and copper-contained pyrite/magnetite ore, where copper-bearing pyrite ore,
copper-contained skarn ore and copper-bearing porphyry ore account for the most.
Copper-bearing pyrite ore is one of the most popular copper-sulphur ores, in which the
copper content and ore reserve account for 40.4% and 24.5% of the total reserve of the
whole mine respectively, representing an average copper content of 1.24%. Copper-
bearing skarn ore is also a major type of ores, in which the copper content and ore
reserve account for 34.4% and 42.4% of the total reserve of the whole mine
respectively, representing an average copper content of 0.61%. Copper-contained
porphyry ore accounts for 27.2% of the total ore reserve of the whole mine, in which
the copper content accounts for 19.8% of the copper reserve of the whole mine,
representing an average copper content of 0.55%.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
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9.7 Technical conditions for ore processing
Through dressability test, laboratory process test and pilot-plant test, the ore-dressing
characteristics of Chengmenshan Mine are: Pyrite in each type of ores is easy to dress, with
grade of pyrite concentrates higher than 46% and sulphur recovery ratio higher than 85%.
Copper minerals in primary ore in each type of ores are easy to dress, with copper recovery
ratio higher than 80%. Various type of ores can be processed in a mixed way, where normal
and simple process can deliver a good recovery ratio.
The ores in Chengmenshan Copper Mine is of “moderate hard” in terms of ore-dressing.
9.8 Hydrogeological condition characteristics of mineral deposit
Most ore body of Chengmenshan Mine is submerged below the erosion basis. A half of mining
area is located in seasonal lakes where karstic limestone is widely distributed and well-
developed, with an average karst ratio of 3.41% and fill ratio of 78%. Pit water inflow is
calculated at 7.1 x 104m3/d at -106 meters. Under dewatering conditions, the lake district may
be subject to surface collapse, chink or subsidence, thus constituting complicated
hydrogeological condition of the mining area. This necessitates developing and employing a
comprehensive solution to control surface water and groundwater according to such condition
to ensure smooth production of the mine.
9.9 Engineering geological condition characteristics of mineral deposit
In terms of geological structure development, the mine features various rocks with deep
weathered zone, well-developed karst, rich surface water and groundwater as well as thick
layer of lake clay settlement, which all have an adverse impact on production of the mine.
Both the southern F1 and F2 fractured fault zone and the southern rock formation are
consequent to the slope which may result in small-scaled plane shear destruction potentially
threatening the slope stability. Both limestone karstic sites of Maokou and Xixia located at east
and west of the mining area respectively contain rich groundwater, where as a result of
hydrodynamism, structural zone, contact zone, weathered zone, water-eroded cave deposits
may cause unfavourable engineering geological phenomena of slope unstability, mud flowing
and sand flowing which shall be attached with enough importance during mining.
9.10 Current development and utilization of the mine
Chengmenshan Copper Mine of JCC is under small-scale mining currently.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 100 —
10. EVALUATION METHOD
According to A Guidebook on Valuation of Mining Right (2004 revised) and the Provisional
Management Methods for Valuation of Exploration Right and Extraction Right, Chengmenshan
Copper Mine of JCC is currently engaged in small-scale mining and has not yet reached the designed
production capacity. With regard to the reference transactions we gathered from the mining right
exchange market (i.e. the mining right of D Copper Mine in Yunan province and the mining right of T
Copper Mine in A province), comparable sales method is adopted for purpose of this valuation.
The theory of comparable sales advocates that in accordance with the substitution principle, the value
of a mining right is evaluated only after it is compared with reference to the mining right with similar
geology and environment that are recently exchanged on an open basis in terms of geology,
exploration and ore-dressing and other techniques and economic parameters for any difference
between them. The ultimate value of the subject mining right is an adjustment on the value of such
reference mining right.
The calculation formula is as follows:
n
Σ (px · µ · ω · t · ϕ · ι) ii = 1 PS =
n
Where: Ps – value of the subject mining right;
Px – concluded price of reference mining right;
µ – modified coefficient of extractable reserve;
ω – modified coefficient of grade ;
t – modified coefficient of production capacity;
ϕ – modified coefficient of price;
ι – modified coefficient of difference;
n - number of reference mining right.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 101 —
11. BASIS OF ADOPTION OF MAJOR TECHNICAL PARAMETERS FOR THE SUBJECT
MINING RIGHT
11.1 For purpose of this valuation, ore reserve is adopted based on the geological reserve as
approved by The Ministry of Land and Resource in its “Certification of Mineral Resource
Reserves Review Record in relation to the Check Report on Chengmenshan Copper Resource
Reserves of Jiujiang County of Jiangxi Province of Ministry of Land and Resources GTZCBZ
[2003] No.136” dated 11 December 2003 (Check Report on Chengmenshan Copper Resource
Reserves of Jiujiang County of Jiangxi Province) was submitted by Jaingxi Provincial Land
and Resource Office in December 2003).
11.2 Adoption of other major technical indicators
Other major technical indicators are selected by reference to the designed technical indicators
specified in the “Pre-feasibility Study Report on Chengmenshan Copper Mine of Jiangxi
Copper Corporation (12000t/d)” prepared by Nanchang Engineering & Research Institute of
Nonferrous Metals, the production economic indicators employed by Chengmenshan Copper
Mine of JCC and the data available to our evaluators and reference mining right materials
gathered from the market.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 102 —
12. SELECTION AND CALCULATION OF TECHNOLOGICAL PARAMETERS FOR THE
SUBJECT MINING RIGHT
12.1 Retained resource reserve
The following table gives the breakdown of retained resource reserve of Chengmenshan
Copper Mine as at 30 September 2003 according to “Check Report on Chengmenshan Copper
Resource Reserves of Jiujiang County of Jiangxi Province” and document GTZCBZ [2003]
No. 136 (Certification of Mineral Resource Reserves Review Record in relation to the Check
Report on Chengmenshan Copper Resource Reserves of Jiujiang County of Jiangxi Province
of Ministry of Land and Resources) issued by The Ministry of Land and Resources.
Reserve of resources (tonne)
Category of Grade of Cu S Mo Zn TFe
resource resource New Ore Metal Ore Metal Ore Metal Ore Metal Ore Metal
Class reserve reserve classification reserve reserve reserve reserve reserve reserve reserve reserve reserve reserve
Major In-table B 111b 7400786 85899 7791317 2570908
C 111b 97747649 704575 50912140 12731741
D 122b 74594316 535798 53643006 10897499 319794 14775
B+C+D 179742751 1326272 112346463 26200148 319794 14775
Out of table B 2S11 3563450 21049
C 2S22 23481592 105836 9604282 395706 28384680 11456.3
D 2S22 20133882 68053 6238717 341902 37852124 16328.1 157714 1668 2788305 959382
B+C+D 47178924 194938 15842999 737608 66236804 27784.4 157714 1668 2788305 959382
By-production In-table D 122b 7680390 9954 74936006 5193353
Au Ag Te Ga Cd
Ore Metal Ore Metal Ore Metal Ore Metal Ore Metal
reserve reserve reserve reserve reserve reserve reserve reserve reserve reserve
Associated ore Out of table D 122b 240758161 61.896 240758161 2426.26 240758161 5013.26 240758161 3572.8 240758161 6065.69
As revised in accordance with “Technological Requirement on Systematic Adjustment to Solid
Mineral Resource Reserve”, the reserve is as follows:
Proven (feasible) economic basic reserve (111b): copper ore of 105,148,400 tonnes with
copper metal of 790,474 tonnes; sulphur ore of 58,703,400 tonnes with sulphur metal of
15,302,649 tonnes
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 103 —
Indicated (pre-feasible) economic basic reserve (122b): copper ore of 82,274,700 tonnes with
copper metal of 545,752 tonnes; sulphur ore of 128,579,000 tonnes with sulphur metal of
16,090,852 tonnes; zinc ore of 319,800 tonnes with zinc metal of 14,775 tonnes; gold ore of
240,758,200 tonnes with gold metal of 618,960 tonnes; silver ore of 240,758,200 tonnes with
silver metal of 24,262,600 tonnes; Te ore of 240,758,200 tonnes with Te metal of 50,132,640
tonnes; gallium ore of 240,758,200 tonnes with gallium metal of 3,572.8 tonnes; cadmium ore
of 240,758,200 tonnes with cadmium metal of 60,656,900 tonnes. The average geological
grade of (111b) + (122b) copper is 0.713% while that of sulphur is 16.76%.
Proven submarginal economic resources (2S11): copper ore of 3,563,500 tonnes with copper
metal of 2,104,900 toones
Indicated submarginal economic resources (2S22): copper ore of 43,615,500 tonnes with
copper metal of 173,889 tonnes; sulphur ore of 15,843,000 tonnes with sulphur metal of
737,608 tonnes; molybdenum ore of 66,236,800 tonnes with molybdenum metal of
277,844,000 tonnes; zinc ore of 157,700 tonnes with zinc metal of 1,668 tonnes; total iron ore
of 2,788,300 tonnes with total iron metal of 959,382 tonnes
12.2 Utilisable resource reserve
In accordance with “Guide to Mining Right Valuation (2004 Revision)”, both economic and
marginal economic basic reserves shall be accounted for in valuing mining right while
submarginal economic reserve shall not in principle except for the designed or utilised reserve
which shall be converted by confidence factor. We understand from technicians of
Chengmenshan Copper Mine that submarginal economic resource reserves within the orefield
of Chengmenshan Copper Mine are not utilised in the production and nor are they designed for
utilisation in the “Pre-Feasibility Study Report on Chengmenshan Copper Mine (12000t/d) of
Jiangxi Copper Company Limited” prepared by Nanchang Engineering & Research Institute of
Nonferrous Metals. Therefore, resource reserve adopted in this valuation is the basic reserve as
confirmed in document GTZCBZ [2003] No. 136 (Certification of Mineral Resource Reserves
Review Record in relation to the Check Report on Chengmenshan Copper Resource Reserves
of Jiujiang County of Jiangxi Province of Ministry of Land and Resources) issued by The
Ministry of Land and Resources, i.e. copper ore (111b + 122b) of 187,423,100 tonnes
(105,148,400 tonnes + 82,274,700 tonnes respectively) including copper metal of 1,336,200
tonnes (790,500 tonnes + 545,700 tonnes respectively) and sulphur ore (111b + 122b) of
187,282,400 tonnes (58,703,400 tonnes + 128,579,000 tonnes respectively) including sulphur
metal of 31,393,500 tonnes (15,302,600 tonnes + 16,090,900 tonnes), totalling 374,705,500
tonnes of copper ore and sulphur ore.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 104 —
According to the “major technical indications for mining and milling of Chengmenshan
Copper Mine of JCC Group” provided by Chengmenshan Copper of Jiangxi Copper
Corporation, in 2004 the utilised geologic ore reserve was 430,900 tonnes with copper metal
of 90,273,600 tonnes and sulphur metal of 717,448,500 tonnes; in 2005 the utilised geologic
ore reserve was 433,880 tonnes with copper metal of 8,469.34 tonnes and 60,960.14 tonnes of
sulphur metal; in the period from January to June 2006 the utilised geologic ore reserve was
229,020 tonnes with copper metal of 4,342.22 tonnes and 36,116.45 tonnes of sulphur metal.
In aggregation, from the year 2004 to June 2006, Chengmenshan Copper Mine has utilised
1,093,800 tonnes of geologic ore reserve with 21,838.92 tonnes of copper metal and
168,821.44 tonnes of sulphur matal.
Therefore, for purpose of this valuation, utilisable resource reserve as at 30 June 2006 (the
base date) is determined at 373,611,700 tonnes of ore reserve (374,705,500 tonnes - 1,093,800
tonnes) with copper metal of 1,314,400 tonnes (1,336,200 tonnes - 21,800 tonnes) and sulphur
metal of 31,224,700 tonnes (31,393,500 tonnes - 168,800 tonnes).
According to “Pre-Feasibility Study Report on Chengmenshan Copper Mine (12000t/d) of
Jiangxi Copper Company Limited” prepared by Nanchang Engineering & Research Institute of
Nonferrous Metals, polymetallic (associated) molybdenum, tellurium, cadmium and gallium
are less utilisable due to their low grades, and zinc will not be recovered as it is difficult to
separate from copper in ore-dressing test and is a harmful element during copper recovery
process.
12.3 Mining and ore-dressing plans
12.3.1 Mine Plan
Many orebodies are widely distributed in the mine area of Chengmenshan Copper Mine.
With various types of ore, the hydrological and engineering geological conditions of the
mine area are complicated. Hence, open pit mining is more favourable than
underground mining. In this regard, we determine that open pit mining and haul truck
transport system are employed to this ore deposit.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 105 —
12.3.2 Ore-dressing plan
According to “Pre-Feasibility Study Report on Chengmenshan Copper Mine (12000t/d)
of JCC” prepared by NERIN in October 2003, ore-dressing process is designed as
follows: the out-of-the-mine ore, having been crushed at the primary ore crushing
station, is transported through the rubber conveyor to the raw ore pile at the milling
plant where it is unloaded through the apron feeder located in the underground traverse
to the adhesive tape conveyor again and then fed into the semi-autogenous grinder. The
semi-autogenous grinder discharges ore to vibrating screening, oversize materials of
which was returned to the semi-autogenous grinder while the undersize materials flows
into ore feeding bump sump of the cyclone. The bottom of cyclone flows into ball mill
where the ore is further discharged into the bump sump. Hence, the cyclone and ball
mill form a close circuit. After conditioning, cyclone overflows will be dressed and
selected. Copper is first dressed and then sulphur in copper tailings. Rough copper
concentrate is acquired from rough flotation and the 1st clean flotation. After regrinding
of rough copper concentrate and three times of fine flotation, final copper concentrate is
output. Before sulphur dressing, scavenged copper ore tailings are conducted to
thickener to lower PH value, and then pumped into the plant for sulphur dressing. Two
rough processes, one fine process and one scavenging process are employed during
desulphurization to output sulphur concentrates and final trailing (for details please
refer to Appendix 13 “Process Flow Diagram for Ore-dressing”).
12.4 Product Scheme
According to the Pre-feasibility Study Report on Chengmenshan Copper Mine of JCC (12,000t/d)
prepared by NERIN in October, 2003 and the actual production status of Chengmenshan Copper
Mine, the final products of Chengmenshan are copper concentrate , sulfur concentrate,and
comprehensive recovery of gold and silver. It is hard to utilize the low grade accompanied/
concomitant molybdenum, tellurium, cadmium and gallium; it is also difficult to separate zinc and
copper during an ore-dressing experiment. Since zinc is a harmful element for dressing, smelting
and recollecting copper, the recovery of zinc has been disregarded. There is 959,400 tons of TFe,
belonging to 2S22 reserves. In view of these factors, the product scheme adopted during the project
assessment is copper concentrate (18%), sulfur concentrate (45%) and comprehensive recovery of
gold and silver .
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 106 —
12.5 Production Scale
The production scale set out on the mining licence of Chengmenshan Copper Mine of JCC is
3,960,000 tons per year. Its designing production scale is 12000 tons per day(3,960,000 tons/
year) according to the Pre-feasibility Study Report on Chengmenshan Copper Mine of JCC
(12000t/d) prepared by NERIN in October, 2003. Pursuant to the principle that the reserve
scale of mine products, production scale of mine and the mine life should be consistent with
each other, we determine to adopt the production capability of 12,000 tons/day during the
project assessment. On continuous duty, the mine will operate 330 days per year, 3 shifts per
day and 8 hours per shift with annual handling capability of 3,900,000 tons ores.
12.6 Dilution rate of ore, loss rate of mining, recovery rate of ore dressing and grade of
concentrate
According to the Pre-feasibility Study Report on Chengmenshan Copper Mine of JCC (12000t/
d) prepared by NERIN in October of 2003 , the loss rate of mining and dilution rate of ore are
8% and 8% respectively. The designing indexes for ore dressing are as follows:
rate of Grade Recovery rate of ore dressing
Product recovery Cu S Au Ag Cu S Au Ag
% % % g/t g/t % % % %
Copper Concentrate 3.21 18 35 2.73 233 80 6.00 30 60
Sulfur concentrates 32.96 0.18 45 8.2 85
Tailing 63.83 0.18 2.19 11.8 9
Run-of-mine 100.00 0.72 18.77 0.29 12.47 100.00 100.00 100.00 100.00
Stemming from small scale exploitation, the actual production and technology indexes of
Chengmenshan Copper Mine cannot represent the corresponding levels of future large scale
mining. Therefore, during the project assessment, we adopt the designing indexes provided by
the Pre-feasibility Study Report on Chengmenshan Copper Mine of JCC (12000t/d) prepared
by NERIN, viz. the recovery rate of ore dressing for copper concentrate and sulphur
concentrate are 80% and 85% respectively, 8% loss rate of mining, 8% dilution rate of ore.
The grade, gold content, silver content and sulphur content of copper concentrate are 18%,
2.73g/t, 233.00g/t and 35% respectively. The grade of sulphur concentrate is 45%.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 107 —
12.7 Proven Reserves
Proven reserves = assessed available resources reserves-designing loss-mining loss
= (assessed available resources reserves-designing loss) x rate of recovery
Since Chengmenshan Copper Mine operates based on open pit, its designing loss is zero. The
recovery rate in respect of mining is 92% (1-8%).
Proven reserves = 373,611,700 tons x 92%
= 343,722,800 tons
As at June 30,2006, the benchmark day of assessment, the assessed available proven reserves
for Chengmenshan Copper Mine is 343,722,800 tons.
12.8 Mine Life
12.8.1 The reasonable mine life is based on the following formulation:
T =Q
A x (1 – ρ)
Where: T represents the reasonable mine life
A represents the production scale
Q represents proven reserves
ρ represents dilution rate of ore
12.8.2 Corresponding parameters selection and calculated result
The proven reserve is 343,722,800 tons; production scale of mine is 3,960,000 tons per
year; dilution rate of ore is 8%.
Put them into the above formulation, we find T, the reasonable mine life, is 94.34 years.
According to the Assessment Guidance for Mining Right (the revised version 2004), the
mine life for mining right assessment projects should not be more than 30 years.
Segmentation assessment could be adopted when the mine life is above 30 years. The
calculation period for the project assessment is 30 years (excluding the expansion
period).
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 108 —
Based on the Pre-feasibility Study Report on Chengmenshan Copper Mine of JCC (12000t/d)
prepared by NERIN in October, 2003, the designing production scale is 3,960,000 tons per year.
According to which, 3 years (36 months) construction period is required. However, the
Chengmenshan Copper Mine is still in small scale mining, remaining far below the designing
production scale. The production capabilities for 2004, 2005 and first 6 months of 2006 are 431,390
tons, 433,070 tons and 228,400 tons respectively. The daily production capability from 2004 to June
of 2006 is 1310-1380 tons per day, only accounting for 1/10 of the designing production capability.
Accordingly, the expansion period of Chengmenshan Copper Mine is fixed on 3 years during the
assessment of the project. The daily production capability during the expansion period is 1,350 tons
per day (annual production scale is 445,500 tons), which belongs to small scale mining. The
calculation period of assessment is from July of 2006 to June of 2039. On the completion of
expansion period, the production capabilities for the first and second year would reach 1,980,000 tons
and 3,960,000 tons respectively. Therefore, total 118,156,500 tons (44.55 x 3+198+29 x 396) of
proven reserves would be mined during this period.
12.9 Products selling price
The benchmark day of the project assessment is June 30, 2006. According to the financial
information and related notes of Chengmenshan Copper Mine for 2004 to 2006, the average
selling price of its products (tax exclusive) is :
Contained copper in copper concentrate: RMB26,100.08/tonne
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 109 —
13. PROFILE OF REFERENCE MINING RIGHT
We select the mining right of D Copper Mine in Yunan Province and T Copper Mine in Yunan
Province as reference mining right, both of which are successfully traded in 2006. We have obtained
the information regarding these two mines from industry referrals. They possess of approximately
same type of deposits and complete set of parameters with comparability, which will satisfy the
conditions of the Comparable Sales. Since the information obtained from the public means on the
mine type is not consistent with the mine type of Chengmenshan Copper Mine, we selected the
copper mine below for comparison.
The information below for comparison are not publicly available, they are obtained from industry
referrals. The use of information from non-public and industry referrals does not affect the validity
and reliability of using and referring such information by us.
13.1 Mining right for D Copper Mine in Yunan Province
D Copper Mine in Yunan Province is engaged in Copper mining. Its benchmark day for mining
right trading is May 31, 2006.
13.1.1 Location, Access and Geographical profile
D Copper Mine in Yunan Province is located in a county of Yunan Province. The mine
is 6 kilometers from such county and 264 kilometers from Yunan Province. It is quite
convenient in transportation.
The mining area is situated in altiplano region. It is mountainous in topography, with an
elevation range of 500-1850 meters and verified elevation range of 700-1400 meters.
Mountain ranges generally trend south-north with sharp fluctuation in physiography and
acute cutting shape. They belong to the Red River drainage areas. The elevation for the
lowest base level of erosion in deposit is 670 meters.
The area is in a subtropical zone. Annual precipitation generally ranges from 700-
1200mm and the rainy season is from June to September. The average annual
precipitation is 930.8mm. The temperature ranges from 1°C to 45°C with an average
temperature of 23°C. Featured with vertical zonation, it is hot in summer and autumn
and mild in winter and spring.
The mining area is sparsely populated. The residents plant primarily rice in the area,
together with subtropical economic crops such as sugar cane and mango. In respect of
industry, it involves mainly mineral development and sugar industry which is
supplementary to agriculture. Power infrastructures such as power grid have been
constructed, satisfying the demand for mine development basically. Currently, the
constructions of auxiliary living, production and water conservancy facilities have been
completed to meet the needs for production and daily life.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 110 —
13.1.2 Geological Setting of the Mine Field
The mining area has a two strata structure, including the exposed basement and cover.
The basement is originated from the Lower Proterozoic Dahongshan group. It is made
of a suite of volcano-sedimentary rocks of light-middle metamorphism with rich iron
and copper. It is a kind of metamorphism rock from Palaeo-Marine Volcanism and
sediment. The cover is made of terrigenous clastic rocks of the Ganhaizi and Shezi
groups of Upper Triassic, which are widely distributed in the surrounding mountainous
area.
The mining area is divided into 7 mineralized zones (No.1-No.7). The D Copper Mine
refers to No.1 zone.
The No.1 zone is iron-copper mineralized zone and major copper mineralized zone of the
mining area. It is originated from garnet biotite hornblendite and metamorphosed sodium
tuff (morphed-sodic tuff) (Ptdm3) of middle-upper Manganghe groups. It consists of 7 ore-
body groups with iron and copper coexisting, including Ic→I3→Ib→I2→Ia→I1→I o from
top to bottom. Amongst them, I3,I2 andI1 are iron-copper ore-body groups, while Ic,Ib,Ia
andIo are copper-iron ore-body groups. The No.2 zone is the major iron mineralized zone
in Dahongshan mining area. It is originated from the metamorphosed sodium lava section
(Ptdh1) of lower Hongshan group. It comprises the following ore-bodies: II1, II2 (II2–1,
II2–2, II2–3, II2–4), II3 (II3–1a, II3–1b, II3–1c, II3–1d, II3–2, II3–3), II4, II5 (II5–1, II5–2,
II5–3, II5–4). The No.3 zone is iron-copper mineralizated zone. It is stemmed from garnet
amphibolite chlorite schist section (Ptdh2) of middle Hongshan group and consists of ore-
body III1, III2 (III2–1, III2–2, III2–3, III2–4) . The No.4 zone is iron mineralized zone. It is
derived from amphibolite metamorphosed sodium lava (Ptdh3) of lower Hongshan group
and consists of ore-body IV1 (IV1–1, IV1–2), IV2. The No.5 zone is iron mineralized zone.
It is derived from amphibolite metamorphosed sodium lava section (Ptdh3) of upper
Hongshan group and neighbouring F1 and F2 fault belts of mining area. It consists of ore-
body V1, V2, V3, V4. The No.6 zone is a lean iron mineralized zone. It is originated from
amphibolite metamorphosed sodium tuff (Ptdm2) of middle-lower Manganghe group and
consists of ore-body VI1 and VI2. The No.7 zone is a lean iron-copper mineralized zone. It
is originated from epidote amphibolite metamorphosed sodium lava section (Ptdm1) of
lower Manganghe group and consists of ore-body VII.
Copper exists in sulphides with chalcopyrite as its major minerals. Bornite and
chalcocite can also be found occasionally. Iron is hosted by oxides and iron carbonate.
Its main mineral is magnetite, together with some siderite and little hematite.
According to the ore type, it is divided into ores containing iron-copper and ores
containing copper-iron.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 111 —
The I3, I2 and I1 ore-bodies in No.1 zone are ores containing iron-copper. Their major
minerals are chalcopyrite and magnetite, followed by bornite, siderite and pyrite .
Depending on the ore type, gangue minerals include mainly albite, quartz and biotite
while minor minerals include dolomite, chlorite and garnet. With granular structure and
separated structure of solid solution, the ores are constructed mainly with striated and
banded texture, supplemented with scattered specks, disseminated structure, vein and
massive structure. The copper minerals in copper rich ores are basically distributed in
lamellar structure, mixed with irregular discordant veinlets and conglomerations. The
chalcopyrite is distributed in the albites and dolomites in the form of particulates or
granules. The ore-body Ic, Ib, Ia, I o in No.1 zone are ores containing copper-iron.
Their major minerals are magnetite and siderite, followed by chalcopyrite, bornite and
pyrite . Gangue minerals include mainly albite, quartz, dolomite and biotite while minor
minerals include chlorite and garnet. Combined in different ways, they have formed
albite-quartz magnetite ore, dolomite-blackband ironstone magnetite ore, biotite-
dolomite siderite ore. The ores are medium-to-fine hypidiomorphic granular blastic
texture with disseminated, striped and banded structure. The magnetite and siderite are
disseminated in the form of symmetrical fine-to-medium granules or asymmetrical
stripes or bands.13.1.3 Resource Reserves.
13.1.3.1 Ensured Resource Reserves
According to the review record of minerals resource reserves of the Ministry of Land
and Resources, as at May 31, 2006, there are (111b) + (122b) + (331) + (332) + (333)of
the ensured resource reserves in a copper mine in Yunan Province, of which tonnage is
79,562,700 tonnes and metal contentare 640553.68 tonnes and the average geological
grade of which is 0.81%. The grade of the accompanying iron is 21.95%, the metal
content of the accompanying gold are 7749.93 kg with its average grade of 0.18g/tonne.
The metal content of the accompanying silver is 100637.87kg with its average grade of
1.86g/tonne.
Total ensured resource reserves of the symbiotic iron: tonnage is 10,886,300 tonnes
with its grade of 26.66%; the metal content of the accompanying copper, 17,670.14
tonnes, with its grade of 0.16%; the metal content of the accompanying gold,
19,593.00kg, with its grade of 6.39g/tonne; the metal content of the accompanying
silver, 7347.01kg, with its average grade of 1.45g/tonne.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 112 —
13.1.3.2 Valuation of the Utilized Resource Reserves
According to the Guide to Valuation of Mining right (2004 Revision), measured
(researchable) economic basic reserves (111b) and indicated economic basic reserves
(122b) are all calculated for valuation according to the regulations. As to the measured
intrinsic economic resources (331) and indicated intrinsic economic resource (332), the
following conclusion is drawn after analysis: The mine has been utilized in the actual
mining process and the market quotation of copper is relatively considerable, and thus
mining is economic and rational. According to the regulations, 331 and 333 correspond
with 111b and 122b, all of which are calculated for valuation. It is unallowable to adjust
the confidence coefficient. The value of the inferred intrinsic economic resource (333)
is taken from the confidence coefficient scope of 0.5-0.8. The geological degree of the
mineral bed is high and the high grade of resource reserves are near the (333) resources,
and thus the (333) resource is calculated for valuation as the confidence coefficient of
0.8.
Valuation of the utilized resource reserves = Σ (basic reserves + all grades of resources
+ confidence coefficient)
Valuation of the utilized copper resource reserves = (111b) + (122b) + (331) + (332) +
(333) x 0.8
= 78,825,400 tonnes
Valuation of the utilized iron resource reserves = (111b) + (122b) + (331) + (332) +
(333) x 0.8
= 10,572,100 tonnes
Thus, in the mining right valuation of Copper Mine D in Yunan Province, the utilized
copper resource reserves are 78,825,400 tonnes, and the symbiotic iron resource
reserves are 10,572,100 tonnes, and the utilized resource reserves in the valuation are
89,397,600 tonnes in total.
13.1.3.3 Proven Reserves
The tonnage of the proven reserves of Copper Mine D in Yunan Province is 81,351,700
tonnes with the average grade of 0.81%.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 113 —
13.1.4 Mining and Milling Methods and Product Schemes
In the light of the ore body occurrence and the mining technology conditions of Copper
D in Yunan Province, adopt the open stope method to fill after recovery. Adopt the flank
and deviated hole to explore. As to the milling process, select the process of floatation
and subsequent magnetic separation, grind the original mine to -200, and molybdenum
accounts for 70%, and then the copper concentrate through floatation is acquired after it
is roughly floated and swept once and finely floated twice. The rough iron concentrate
is acquired from the remaining mine floatation through rough floatation of weak
magnetic. The magnetic separation of rough concentrate is ground to -200, and
molybdenum accounts for 92%, and then the iron concentrate is acquired after it is
finely floated twice.
Product Schemes According to the production process, its products are copper
concentrate and iron concentrate, and gold, silver and sulphur are comprehensively
recycled. But the silver and sulphur content in the copper concentrate in the actual
products for sale do not conform to the valuation standards and are not valued. Thus,
the products applied to the valuation are copper concentrate, iron concentrate and the
comprehensive recovery of gold.
13.1.5 Production Scale
The production scale of the mining license of Copper Mine D in Yunan Province is
800,000 tonnes/year. Its project II was put into production in 2004. The actual mining
yield was 1,920,000 tonnes in 2004 and that was 2,440,000 tonnes in 2005. The
valuation of the utilized production scale is 2,500,000 tonnes/year.
13.1.6 Product Price
On the base day of transaction, the average sales price (pre-tax) of copper-bearing
copper concentrate with copper is RMB21,832.60/tonne.
13.17 Transaction price of mining price of Copper Mine D in Yunan Province
Transaction price of mining price of Copper Mine in Yunan Province is
RMB704,679,500 and RMB seven hundred and four million, six hundred and seventy-
nine thousand, five hundred only in words (the calculation term of valuation is 30 years,
and 71,703,300 tonnes of proven reserves are used, and the base date of transaction is
31 May, 2006.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 114 —
13.2 Mining right of Copper Mine T in Yunan Province
The mining type of Copper Mine T in Yunan Province was a copper mine, and the base date of
transaction of mining right was 30 June, 2006.
13.2.1 Overview of Location and Geology
Copper Mine T in Yunan Province is located in City C of Yunan Province. The mining
area is 30km away from the urban area of City C, with convenient communications.
On the east, west and south of the mining eare are hills, and valleys are to its north, and
its surface water systems do not develop, enjoying damp and warm climate. The mine is
in the hills.
It is a north temperate monsoon climate area with average annual rainfall of 1510.8mm
which mainly concentrated from April to July. The average temperate is 16.04ºC.
Labour resources are rich, and agriculture of which rice is prevailing is highly
developed in the mining area. The mining area and its surroundings are abundant in
mineral resources which are subject to copper and they are also rich in sulphur, iron,
gold, silver, coal, manganese, limestone. Electric power is sufficient in the mining area.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 115 —
13.2.2 Geological Overview of the Mine
Strata in the mining area are distributed from the upper Silurian System Maoshan
Formation to the lower Nanling Lake Section of Triassic System Qinglong Formation,
with the platform sediment which is subject to shallow-sea facies, and the main rock
characteristics are as follows: below the Devonian System are all clastic rocks
(sandstone and sandshale), and above it are mainly carbonates. Carboniferous System -
Permian System Qixia Formation is the main controlled seam position.
The bed of Copper Mine T consists of three ore blocks and 86 ore bodies which include
9 major ore bodies and 77 minor ore bodies. The ore bodies are produced in the contact
zone of granodiorite-porphyry body and favorable host rock and on the granodiorite-
porphyry body. Host rocks nearby the mine have also been mineralized, and
granodiorite-porphyry itself nearby to the contact zone has also been mineralized to an
ore body. The location of the ore body mostly inclines to the south, and the obliquity is
changed greatly. The ore body is layer-shaped, lens-shaped, bursa-shaped or haricot -
bean-shaped. Major ore bodies are medium in size.
Copper exists as sulfides, and the major mineral are chalcopyrite, the minor ones are
magnetite and pyrite.
Ore types mainly include copper-bearing pyrite ore, copper-bearing magnetite ore,
copper-bearing skarn ore, copper-bearing granodiorite-porphyry ore, copper-bearing
flinty rock ore , copper-bearing marble ore and copper-bearing shale ore.
Ore textures mainly include xenomorphic crystal, idiomorph texture, colloid texture,
poikilitic texture, and also include pressure texture, metasomatic relict texture, and netted
texture. Ore structures mainly include massive structure and disseminated structure, and also
include banded structure, mesh-vein structure and brecciated structure.
13.2.3 Resource Reserves
13.2.3.1 Ensured Resource Reserves
According to the review record of mineral resource reserves of the Ministry of
Land and Resources, as at 30 June, 2006, there are (111b) + (122b) + (332) +
(333)of the ensured resource reserves in Copper mine T in Yunan Province, of
which mineral content are 62,267,100 tonnes and metal contents are 752,167
tonnes, the average geological grade of which is 1.21%. The total symbiotic
sulphur minerals (111b) + (122b) + (333) are 61,353,600 tonnes, and the sulphur
content is 9, 711,500 tonnes with its average grade of 15.83%. The ore content of
the accompanying iron is 61,353,600 tonnes with its average grade of 20.20%;
the metal content of the accompanying gold is 26418.63 kg with its average
grade of 0.43kg/tonne. The metal content of the accompanying silver is 496.86
tonnes with its average geological grade of 8.10g/tonne. 13.2.3.2 Evaluation of
the Utilized Resource Reserves
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 116 —
13.2.3.2 Valuation of the utilized resource reserves
According to the Guide to Assessment of Mining right (2004 revision), measured
(researchable) economic basic reserves (111b) and indicated economic basic
reserves (122b) are all calculated according to the regulations. As to the
indicated intrinsic economic resource (332), the following conclusion is drawn
after analysis: The mine has been utilized in the actual mining process and the
market quotation of copper is relatively considerable, and thus mining is
economic and rational. According to the regulations, 332 and 333 correspond
with 111b and 122b, all of which are calculated for valuation. It is unallowable to
adjust the confidence coefficient. The value of the inferred intrinsic economic
resource (333) is taken from the confidence coefficient scope of 0.5-0.8. As the
geological degree of mineral bed is relatively low and there is no high grade of
resource reserves near the (333) resource, the (333) resource is calculated for
valuation as the confidence coefficient of 0.6.
Valuation of the utilized resource reserves = Σ (basic reserves + all grades of
resources + confidence coefficient)
Valuation of the utilized copper resource reserves= (111b) + (122b) + (332) +
(333) x 0.6 = 53,769,500 tonnes
13.2.3.3 Exploitable Ore Reserve
It is assessed that the exploitable ore reserve is 46.6837 million tonnes with an
average ore grade of 1.21%.
13.2.4 Mining and Milling Methods, and Product Solution
The mining methods are varied (such as Vacant Field Mining Method) according to the
ore body occurrence and the mining technological conditions of T Copper Mine of
Yunan Province. The milling technology is as follows: three-stage open-circuit ore
breaking, one-stage closed-circuit ore grinding, acquiring copper concentrate through
one-time rough floatation, twice fine floatation and twice sweeping by selecting copper
from the original mine; acquiring sulphur concentrate by selecting sulphur after
conditioning from the tailings of copper selecting; acquiring iron concentrate through
one-time rough floatation and one-time fine floatation by selecting iron from the
tailings; comprehensive recycle of gold and silver from the copper concentrate.
Product Solution: According to the production process, such products as copper
concentrate, iron concentrate and sulphur concentrate are produced, and gold, silver and
sulphur are recycled comprehensively.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 117 —
13.2.5 Production Capacity
The annual production capacity is 2,200,000 tonnes under the Mining License for T
Copper Mine of Yunan Province. Therefore, it is assessed that the production capacity is
2,200,000 tonnes per year.
13.2.6 Product Price
The average selling price (tax excluded) of copper-bearing copper concentrate was
RMB 28629.00 yuan per tonne as at the trading base day.
13.2.7 Trading Price for Mining Right of T Copper Mine of Yunan Province
The trading price for the mining right of T Copper Mine of Yunan Province was RMB
509,126,200 yuan (i.e, RMB five hundred and ninety-one million twenty-six thousand
two hundred yuan) with an exploitable ore reserve of 46,683,700 tonnes as at the
trading date 30 June, 2006.
14. PARAMETER SELECTION AND CALCULATION
14.1 The exploitable ore reserve, average geologic grade, product price, production capacity and
traded price of the mining right to be assessed and the reference mining right are shown as in
the following table:
Mining
Right for
Mining Right T Copper Mining Right
No. Item for D Copper Mine to be Assessed
1 Production capacity
(in ten thousand tonnes per year) 250 220 396
2 Assessed exploitable reserve
(in ten thousand tonnes) 7170.33 4668.37 11815.65
3 Average geologic grade (%) 0.81 1.21 0.713
4 Price of copper concentrate
(RMB/tonne) 21832.60 28629.00 26100.08
5 Assessed price for the mining right
(in RMB ten thousand) 70467.95 50499.32
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 118 —
14.2 Adjustment Coefficient Calculation
14.2.1 Adjustment Coefficient of Exploitable Ore Reserve
Based on the formula: µ =Qs
Qx
In which: Qs – Exploitable reserve of the mining right to be assessed;
Qx – Exploitable reserve of the reference mining right;
Compared with Mining Right I:
µ =11815.65
= 1.64797170.33
Compared with Mining Right II:
µ =11815.65
= 2.5314668.37
14.2.2 Adjustment Coefficient of Grade
Based on the formula: ω =ars – abj
arx – abj
In which: ars — Geologic grade of the mining right to be assessed;
arx
— Geologic grade of the reference mining right;
abj — Cut-off grade;
The cut-off grade of copper mine is 0.2% under the Industrial Index of Mineral
Products.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 119 —
Compared with Mining Right I:
ω =0.713 – 0.2
= 0.84100.81 – 0.2
Compared with Mining Right II:
ω =0.713 – 0.2
= 0.60071.054 – 0.2
14.2.3 Adjustment Coefficient of Price
Based on the formula: ϕ =Pss
Pxx
In which: Pss — Current price of copper concentrate for the mining right to be
assessed;
Pxx — Price of copper concentrate of the reference mining right;
Compared with Mining Right I:
ϕ =26100.08
= 1.195521832.60
Compared with Mining Right II:
ϕ =26100.08
= 0.911728629.00
14.2.4 Adjustment Coefficient of Production Capacity
Based on the formula: t =Tts
Ttx
In which: Tts — Production capacity of the mining right to be assessed;
Ttx — Production capacity of the reference mining right;
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 120 —
Compared with Mining Right I:
t =396.00
= 1.584250.00
Compared with Mining Right II:
t =396.00
= 1.80220.00
14.2.5 Adjustment Coefficient of Differences
According to the feature differences between the mining right to be assessed and the
reference mining right of D Copper Mine of Yunan Province and of the T Copper Mine
of Yunan Province , the values of these elements are assessed by experts based on on-
site survey and by referring to the geology statistical yearbook. The details are shown as
follows:
Mining Right Mining Right
Mining for D Copper for T Copper
Right to Mine of Mine of
Element Item Weight be Assessed Yunan Province Yunan Province
(%)
Transportation Highway type 35 2 3 5
Distance to national
highways 3 3 5
Distance to
railway stations 4 3 3
Subtotal 3 3 4.3333
Natural and Terrain 30 3 3 5
Economic
Environment
Climate 3 3 2
Income per capita 1 3 3
Water resource 5 5 5
Electricity supply 5 5 5
Subtotal 3.4 3.8 4
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 121 —
Geologic Embedding depth 35 3 3 4
Conditions
for Mining
and Milling
Type of ore deposit
prospection 1 3 3
Mining method 5 2 2
Mineral milling
performance 1 3 3
Subtotal 2.5 2.75 3
Total 2.945 3.1525 3.7667
Based on the formula: τ = As
Ax
In which: As — total assessment value of the difference elements for the mining
right to be assessed;
Ax — total assessment value of the difference elements for the reference
mining right;
Compared with Mining Right I:
t =2.945
= 0.93423.1525
Compared with Mining Right II:
t =2.945
= 0.78183.7667
14.3 Value Calculation of the Mining Right to be Assessed
(70467.95 x 1.6479 x 0.841 x 1.1955 x 1.584 x 0.9342)
Ps =+ (50499.32 x 2.531 x 0.6007 x 0.9117 x 1.8 x 0.7818)
2
= 1,359,602,700
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 122 —
15. CONCLUSION
Based on the investigation, understanding and analysis of the actual situation of the valuation object,
and after assessment and estimation by using a scientific valuation procedure and reasonable
valuation methods, we hereby evaluate that the valuation period for “Chengmenshan Copper Mine
Mining Right of Jiangxi Copper Corporation” is 30 years, the exploitable ore reserve is 118,156,500
tonnes and the assessed value is RMB 1,359,602,700 yuan (i.e., RMB thirteen billion fifty-nine
million six hundred and two thousand seven hundred yuan). Although the existing mining right
certificate is for a period of 10 years since 2004, according to the representation of the directors of
the Company, the mining right may be extended to 30 years upon application to the relevant
governmental authorities.
16. NOTES
16.1 Period of Validity of Valuation Results
The valuation base date of this report is 30 June, 2006. In accordance with the applicable laws
and regulations, the period of validity of the valuation results is one year, namely, the results
are valid within one year from the valuation base date. Should the valuation results be used
beyond the period of validity, Beijing Jingwei Property Appraisal Co., Ltd. takes no
responsibility for any loss whatsoever arising therefrom.
Should the number of assets be changed within the validity of the valuation results, the
assessed value shall be adjusted accordingly based on the valuation methods; should the price
standard of the assets be changed within the validity of the valuation results, which obviously
has an impact on the assessed value of the assets, the entrusting party shall hire a valuation
organization to reassess and determine the value on a timely basis; should the method of
adjusting asset price be simple and easy to operate, the entrusting party can make the
adjustment accordingly to the actual price of the assets.
16.2 Adjustment after Valuation Base Date
No other adjustment is made that affects the valuation results between the valuation base day
and the valuation report issuance day.
16.3 Division of Other Responsibilities
We only take responsibility for whether the valuation results of this project are in line with the
practice compliance, rather than asset pricing policy. Made for the purpose of this specific
valuation only, the valuation results of this project shall not be used for other purposes.
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 123 —
16.4 Valid Use Situation of Valuation Results
The valuation results for Chengmenshan Copper Mine mining right of Jiangxi Copper
Corporation shall only be used for the purpose of transferring the mining right of Jiangxi
Copper Corporation and for submitting to the valuation authorities for review. The right to use
this valuation report rests with the entrusting party, and it shall not be provided to others or
disclosed without permission from the entrusting party.
17. ASSUMPTIONS OF PROJECT VALUATION
17.1 The mining right valuation is based on the mineral resource reserve reviewed and recorded in
the document of the Ministry of Land and Resources PRC MLR Reserve Zi [2003] No. 136,
Certification of Review and Filing of Mineral Resource Reserve under Report on Reviewing
Mineral Resource Reserve of Chengmenshan Copper Mine of Jiujiang County, Jiangsu
Province (11 December, 2003).
17.2 The proposed future production capacity and product solution of the mine will remain
unchanged.
17.3 There will be no material change in the state’s industrial, financial and tax policies within the
forecast period.
17.4 The technology is based on current technology level.
17.5 The mining rght may be extended to 30 years.
17.6 The market supply will hold the line.
18. VALUATION REPORT DATE
20 August, 2006
APPENDIX VIII VALUATION REPORT ON THE MINING RIGHTOF CHENGMENSHAN COPPER MINE
— 124 —
19. PERSONS RESPONSIBLE FOR VALUATION
Legal representative: Liu Zhongzhen (Certified Mining Right Assessor registered
with the Ministry of Land and Resources of the PRC, Certified
Public Valuer of the PRC, with 15 years of experience in
valuation of assets and mining right in the PRC)
Project chief: Li Xiuzhi (Certified Mining Right Assessor registered with the
Ministry of Land and Resources of the PRC, Certified Public
Valuer of the PRC, with 10 years of experience in valuation of
assets and mining right in the PRC)
Certified Mining right Assessor: Liu Zhongzhen,Li Xiuzhi
20. VALUATION PERSONNEL
Liu Zhongzhen (Certified Mining Right Assessor registered with the Ministry of Land an Resources
of the PRC, Certified Public Valuer of PRC, with 15 years of experience in valuation of assets and
mining right in the PRC)
Li Yan (Certified Mining Right Assessor registered with the Ministry of Land an Resources of the
PRC, Certified Public Valuer of PRC, with 13 years of experience in valuation of assets and mining
right in the PRC)
Li Xiuzhi (Certified Mining Right Assessor registered in the Ministry of Land an Resources of the
PRC, Certified Public Valuer of PRC, with 10 years of experience in valuation of assets and mining
right in the PRC)
Deng Jufu (Accountant, with 5 years of experience in valuation of mining right in the PRC)
Beijing Jingwei Property Appraisal Co., Ltd.
20 August, 2006
APPENDIX IX GENERAL INFORMATION
— 125 —
1. RESPONSIBILITY STATEMENT
This circular includes particulars given in compliance with the Listing Rules for the purpose of giving
information with regard to the Company. The Directors collectively and individually accept full
responsibility for the accuracy of the information contained in this circular and confirm, having made
all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the
omission of which would make any statement herein misleading.
2. SHARE CAPITAL
The total registered capital of the Company as at the Latest Practicable Date were, and immediately
after completion of the A Share Issue will be as follows:-
(a) Share Capital as at the Latest Practicable Date
Class of Shares Number of Shares RMB
A Shares (including A Shares with
trading moratorium and
without trading moratorium) in issue 1,507,556,200 1,507,556,200
H Shares in issue 1,387,482,000 1,387,482,000
Total number of Shares : 2,895,038,200 2,895,038,200
(b) Share Capital immediately after completion of the A Share Issue
Class of Shares Number of Shares RMB
A Shares (including A Shares with
trading moratorium and
without trading moratorium) in issue 1,507,556,200 1,507,556,200
A Share to be issued under
the A Share Issue
(including the Consideration
Shares and Placing Shares) 290,000,000 290,000,000
Total number of A Shares 1,797,556,200 1,797,556,200
H Shares in issue 1,387,482,000 1,387,482,000
Total number of Shares : 3,185,038,200 3,185,038,200
APPENDIX IX GENERAL INFORMATION
— 126 —
3. DISCLOSURE OF INTERESTS
(i) Directors and Supervisors
As at the Latest Practicable Date, neither the Directors nor the Supervisors had any interests
and short positions in the shares, underlying shares and debentures of the Company or any
associated corporation (within the meaning of Part XV of the SFO) which were required to be
notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of
the SFO (including interests and short positions which they are taken or deemed to have under
such provisions of the SFO), or any interests and short positions recorded in the register
required to be kept under section 352 of the SFO, or otherwise notified to the Company and
the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Companies.
(ii) Interest discloseable under the SFO
As at the Latest Practicable Date, so far as is known to any Directors or chief executive of the
Company, the following parties (other than Directors, Supervisors or chief executive of the
Company) had, or were deemed or taken to have an interest or short positions in the Shares
and underlying Shares which would fall to be disclosed to the Company under the provision of
Divisions 2 and 3 of Part XV of the SFO:
Approximate
percentage of Approximate
shareholding percentage of
Name of Number of in the relevant shareholding in
Substantial Class of Shares class of share the total issued
Shareholder Shares interested Capacity capital share capital
(Note 1)
JCC Domestic Shares 1,354,462,414(L) Beneficial owner 89.84% (L) 46.79%(L)
(Note 2)
Halibis Capital H Shares 109,515,000 (L) Investment Manager 7.89% (L) 3.78% (L)
Management
(Hong Kong) Limited
JPMorgan Chase & Co. H Shares 86,735,890 (L) Note 3 6.25% (L) 3.00% (L)
26,892,000 (P) 1.94% (P) 0.93% (P)
APPENDIX IX GENERAL INFORMATION
— 127 —
Note 1 “L” means long position of the relevant persons/entities in the shares. “S” means short position of therelevant persons/entities in the shares. “P” means interest in a lending pool.
Note 2 According to the corporate substantial shareholder notice filed by JCC on 20 March 2007, JCC is interestedin an aggregate of 1,354,462,414 A Shares. So far as the Directors are aware, the block of 1,354,462,414 AShares held by JCC comprised the 1,225,035,414 A Shares and 129,427,000 Consideration Shares. Asdisclosed in the Letter from the Board of this circular, the issue price and the number of A Shares to beissued under the A Share Issue and the issue price and the number of Consideration Shares have not beenfixed and the A Share Issue is subject to certain conditions, including but not limited to the approvals of theIndependent Shareholders and the relevant governmental authorities. The number of Consideration Sharesdisclosed in the corporate substantial shareholder notice is based on the assumption that that the number ofConsideration Shares will not be less than 44.63% of the total number of A Shares to be issued under the AShare Issue.
Mr. Li Yihuang, an executive Director and the Chairman of the Company, is the legal representative of JCC.
Note 3 According to the corporate substantial shareholder notice filed by JPMorgan Chase & Co. on 27 March2007, the H Shares were held in following capacities:
Number of H Shares Capacity
45,178,890 H Shares Beneficial owner14,665,000 H Shares Investment manager26,892,000 H Shares Custodian corporation/approved lending agent
So far as is known to any Director or chief executive of the Company, the parties, other than
member of the Group, directly of indirectly, interested in 10% or more of the voting power at
general meetings of the members of the Group as at the Latest Practicable Date were as
follows:-
Approximate
percentage of total
Name of Shareholder Name of subsidiary issued shares/equity interest
JCC Jiangxi Copper Products 40%
Company Limited
JCC Zhejiang Xiao Shan Tong Da 40%
Chemical Industry Limited
Liability Company
(浙江蕭山銅達化工有限公司)
Liang Shan Zhou State-owned Sichuan Kang Xi Copper 11.15%
Asset Operation Management Limited Liability Company
Limited Liability Company (四川康西銅業有限責任公司)
( 山州國有資產
經營管理有限責任公司 )
APPENDIX IX GENERAL INFORMATION
— 128 —
Sichuan Minzu Investment Sichuan Kang Xi Copper 11.68%
Company Limited Liability Company
(四川省民族投資公司) (四川康西銅業有限責任公司)
Xichang Power Joint Stock Sichuan Kang Xi Copper 28.25%
Company Limited Limited Liability Company
(西昌電力股份有限公司 ) (四川康西銅業有限責任公司)
Daitong Gold and Shanxi Province Diaoquan 20.78%
Non-ferrous Metals Silver & Copper Mine
Company Limited Company Limited
(大同市黃金有色 (山西省刁泉銀銅
金屬有限公司) 礦業有限公司)
Shanxi Non-ferrous Shanxi Province Diaoquan 12.23%
Metals Industrial Silver & Copper Mine
Corporation Company Limited
(山西省有色金屬 (山西省刁泉銀銅
工業總公司) 礦業有限公司)
Xinda Gold & Silver Shanxi Province Diaoquan 13.27%
Development Centre Silver & Copper Mine
(鑫達金銀開發中心) Company Limited
(山西省刁泉銀銅
礦業有限公司)
Save as disclosed, as at the Latest Practicable Date, the Directors or chief executive of the
Company are not aware of any other person (other than Directors, Supervisors or chief
executive of the Company) who has an interest or short position in the Shares or underlying
shares of the Company which would fall to be disclosed to the Company under the provisions
of Divisions 2 and 3 of Part XV of the SFO, or who is interested in 10% or more of the
nominal value of any class of share capital carrying rights to vote in all circumstances at
general meeting of any other member of the Group.
APPENDIX IX GENERAL INFORMATION
— 129 —
(iii) Material interests
None of the Directors or the Supervisors has any direct or indirect interest in any assets which
have since 31 December 2005 (being the date to which the latest published audited financial
statements of the Company were made up) been acquired or disposed of by or leased to any
member of the Group, or are proposed to be acquired or disposed of by or leased to any
member of the Group.
None of the Directors or the Supervisors is materially interested in any contract or
arrangement entered into by the Company subsisting at the date of this circular which is
significant in relation to the business of the Group.
4. COMPETITING INTERESTS
None of the Directors or the Supervisors and their respective associates had any interest in a business
which competes or may compete with the business of the Group.
5. MATERIAL ADVERSE CHANGES
As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the
financial or trading position of the Group since 31 December 2005, the date to which the latest
published audited consolidated financial statements of the Company were made up.
6. SERVICE CONTRACT
Each of the executive Directors entered into a service contract with the Company for a term of three
years commencing from 15 June 2006 and up to the date of the annual general meeting of the
Company for the year 2008. Each of the independent non-executive Directors entered into an
appointment letter with the Company for a term of three years commencing from 15 June 2006 and
up to the date of the annual general meeting of the Company for the year 2008.
Save as disclosed, as at the Latest Practicable Date, none of the Directors or Supervisors has entered
into any service contracts with the Company or any of its subsidiaries which may not be terminated
by the employer within one year without payment other than statutory compensation.
7. LITIGATION
As at the Latest Practicable Date, no member of the Group is engaged in any litigation or arbitration
of material importance and there is no litigation or claim of material importance known to the
Directors to be pending or threatened against any member of the Group.
APPENDIX IX GENERAL INFORMATION
— 130 —
8. EXPERT
(a) The followings are the qualifications of Goldbond Capital, Grant Sherman and Beijing Jingwei
which have given its their report, opinion or advice which are contained in this circular:
Name Qualifications
Goldbond Capital a corporation licensed under the SFO to conduct type 1 (dealing in
securities) and type 6 (advising on corporate finance) regulated
activities under the SFO
Grant Sherman professional surveyors and valuers
Beijing Jingwei qualified valuer in the PRC
(b) As at the Latest Practicable Date, none of Goldbond Capital, Grant Sherman and Beijing
Jingwei had any shareholding, direct or indirect, in any member of the Group or any right
(whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for
securities in any member of the Group.
(c) Goldbond Capital, Grant Sherman and Beijing Jingwei have given and have not withdrawn
their respective written consent to the issue of this circular with the inclusion of their
respective letters and references to their respective names in the form and context in which
they are included.
(d) Goldbond Capital, Grant Sherman and Beijing Jingwei do not have any interest, direct or
indirect, in any assets which have been acquired or disposed of by or leased to any member of
the Group, or which are proposed to be acquired or disposed of by or leased to any member of
the Group since 31 December 2005, the date to which the latest published audited financial
statements of the Company were made up.
(e) The letter and recommendation from Goldbond Capital and the letters and reports from Grant
Sherman are given as of the date of this circular for incorporation herein. The report from
Beijing Jingwei is given for incorporation in this circular.
9. GENERAL
The company secretaries of the Company are Mr. Pan Qifang and Mr. Tung Tat Chiu, Michael. Mr.
Pan Qifang is a senior economist in the PRC. Mr. Tung Tat Chiu, Michael is the principal of Tung &
Co., the Company’s Hong Kong legal advisers, and has over 10 years experience as a practicing
solicitor in Hong Kong.
APPENDIX IX GENERAL INFORMATION
— 131 —
The Company has not appointed qualified accountant pursuant to Rule 3.24 of the Listing Rules. Mr.
Wu Jinxing, an executive Director, is currently the chief financial officer and in charge of the Finance
Department of the Company. Mr. Wu has over 20 years of experience in finance management and has
rich experiences in finance management. Mr. Wu was graduated from Zhejiang Metallurgical
Economic Professional School with major in accounting.
10. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection during normal business hours at 19th
Floor, 8 Wyndham Street, Central, Hong Kong from 2 April 2007 to 18 April (both days inclusive):
(a) the letter from the Independent Board Committee, the text of which is set out on page 19 of
this circular;
(b) the letter from Goldbond Capital, the text of which is set out on pages 20 to 35 of this circular;
(c) the written consent of Goldbond Capital, Grant Sherman and Beijing Jingwei as referred to
paragraph 8 above;
(d) the Acquisition Agreement;
(e) valuation report on properties, the text of which is set out in Appendix I to this circular;
(f) valuation report on plant and machinery of Chengmenshan Copper Mine, the text of which is
set out in Appendix II to this circular;
(g) valuation report on plant and machinery of Xiangxi Railway, the text of which is set out in
Appendix III to this circular;
(h) valuation report on plant and machinery of Copper Alloy Company, the text of which is set out
in Appendix IV to this circular;
(i) valuation report on plant and machinery of Copper Product Company, the text of which is set
out in Appendix V to this circular;
(j) valuation report on plant and machinery of JCC Dexing Transportation Company, the text of
which is set out in Appendix VI to this circular;
(k) valuation report on plant and machinery of JCC Chemical Copmany, the text of which is set
out in Appendix VII to this circular;
(l) valuation report on the mining right of Chengmenshan Copper Mine, the text of which is set
out in Appendix VIII to this circular; and
(m) the service contracts and the appointment letters referred to in paragraph 6 of this appendix.
NOTICE OF EXTRAORDINARY GENERAL MEETING
— 132 —
江西銅業股份有限公司JIANGXI COPPER COMPANY LIMITED
(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China)
(Stock Code: 0358)
NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Jiangxi Copper Company Limited
(the “Company”) will be held at the Conference Room of the Company at 15 Yejin Avenue, Guixi City,
Jiangxi, the People’s Republic of China on Thursday, 17 May 2007 at 9:00 a.m. for the purpose of considering
and, if thought fit, passing the following resolutions as special resolutions and ordinary resolutions of the
Company:
SPECIAL RESOLUTIONS
1. “THAT
each of the following proposed items in respect of the issue of domestic-listed Renminbi denominated
ordinary shares (“A Shares”) (“A Share Issue”) in the People’s Republic of China (“PRC”) be and is
hereby individually approved, and shall be implemented subsequent to the granting of the approval
from the relevant governmental authorities in the PRC upon application:
(1) Class of shares to be issued and the nominal value: domestic-listed Renminbi denominated
ordinary shares of RMB1.00 each (A Shares).
(2) Number of A Shares to be issued: not exceeding 290,000,000 A Shares.
(3) Target subscribers and subscription method : not exceeding ten subscribers, including Jiangxi
Copper Corporation (“JCC”). The A Shares will be issued by way of settlement of consideration
and subscribed by cash.
(4) Proposed place for listing of the A Shares to be issued: Shanghai Stock Exchange.
(5) Determination of issue price: will not be less than 90% of the average trading price of the A
Shares on the Shanghai Stock Exchange for 20 trading days immediately before the date of the
issue of the announcement relating to the sixth meeting of the fourth session of the board of
directors of the Company (i.e. 20 March 2007). Authorization is hereby given to the directors
of the Company to determine the final issue price in accordance with the market conditions.
NOTICE OF EXTRAORDINARY GENERAL MEETING
— 133 —
(6) Method of issue : the A Shares will be issued (i) to JCC as consideration under the acquisition
agreement dated 16 March 2007 entered into between the Company and JCC (the “Agreement”),
and (ii) to institutional investors by placing.
(7) Use of proceeds of the A Share Issue : to satisfy the consideration under the Agreement and
to finance the following projects :-
(i) RMB498,000,000 to be invested to finance the expansion of the expansion of phase II
of Chengmenshan Copper Mine;
(ii) RMB387,520,000 to be invested to finance the renovation of technology for mining
method of Yongping Copper Mine;
(iii) RMB300,560,000 to be invested to finance the technology renovation of the Fujiawu
Copper Mine;
(iv) RMB120,240,000 to be invested to finance the expansion of the processing capacity of
Wushan Copper Mine to 5,000 tonnes per day;
(v) RMB189,530,000 to be invested in the expansion of copper recovering from slag;
(vi) RMB194,270,000 to be invested in the expansion of anode mud treatment and
comprehensive utilisation; and
(vii) RMB272,610,000 to be invested in the utilization of the heat recovered from smelting
process.
(8) Sharing of accumulated profits : the accumulated profits after completion of the A Share Issue
will be shared among the existing and prospective shareholders of the Company.
(9) Validity period of this resolution: one year after approval in this extraordinary general meeting.
NOTICE OF EXTRAORDINARY GENERAL MEETING
— 134 —
(10) The board of directors of the Company (the “Board”) (or the committee of the directors as may
be appointed by the Board) be and is hereby authorized with full power to deal with all matters
relating to the A Share Issue, including but not limited to the following matters (the term of
authorization is one year from the day of this extraordinary general meeting):
(i) to deal with the issue and listing with respect of the A Share Issue and other related
application procedures and other formalities;
(ii) to confirm the appropriate manner of issue, and to determine the final issue price and
issue quantity according to the market conditions and in compliance with the relevant
regulations upon sufficient negotiations with investors;
(iii) to approve each of the documents and contracts relating to the A Share Issue;
(iv) to make appropriate and necessary amendments to the relevant provisions of the articles
of association of the Company in order to reflect the changes in the registered capital
and shareholding structure of the Company as a result of the A Share Issue;
(v) to deal with the registration procedures in respect of the change in the registered capital
and the amendment in the articles of association of the Company upon completion of
the A Share Issue; and
(vi) to deal with all procedures relating to the A Share Issue according to laws including all
the procedures that are required to be followed under the laws, regulation and listing rules
of the places where shares of the Company are listed.”
ORDINARY RESOLUTIONS
2. “THAT
(a) the acquisition agreement entered into between the Company and Jiangxi Copper Corporation
(江西銅業集團公司) (“JCC”) dated 16 March 2007 (a copy of which marked “A” has been
produced to the meeting and signed by the chairman of the meeting for the purpose of
identification), pursuant to which JCC agreed to sell and the Company agreed to purchase the
mining rights and the related operating assets and liabilities of the Chengmenshan Copper Mine,
operating assets and related liabilities of the Xiangsi Railway, 40% equity interest of the Jiangxi
Copper Alloy Company Limited, 40% equity interest of Jiangxi Copper Products Company
Limited, 100% equity interest of Jiangxi Copper Group Chemical Company Limited and 100%
equity interest of the Jiangxi Copper Group (Dexing) Transportation Company Limited at the
aggregate consideration of RMB1,785,335,700 (subject to adjustment) (the “Agreement”) be
and is hereby approved, ratified and confirmed; and
NOTICE OF EXTRAORDINARY GENERAL MEETING
— 135 —
(b) the issuance of new A Shares (as defined in the special resolution No. 1 of the notice convening
this meeting) to JCC as payment for the consideration under the Agreement be and is hereby
approved; and
(c) the directors of the Company be and are hereby authorized for and on behalf of the Company
to sign, seal, execute, perfect, deliver and do all such documents, deeds, acts, matters and things
as they may in their discretion consider necessary or desirable or expedient for the purpose of
or in connection with the Agreement and to make and agree such variations of a non-material
nature in or to the terms of the Agreement as they may in their discretion consider to be desirable
and in the interests of the Company.”
3. “THAT the report relating to the private issue of shares involving material connected transaction of
the Company (非公開發行股票涉及重大關聯交易的報告) (the “Report”) (a copy of which marked
“B” has been produced to the meeting and signed by the chairman of the meeting for the purpose of
identification) which contains details of the A Share Issue (as defined in the special resolution No.
1 of the notice convening this meeting) and the details of the assets to be acquired and the transaction
under the Agreement (as defined in the ordinary resolution No. 2 of the notice convening this meeting)
be and is hereby approved and confirmed and the directors of the Company be and are hereby
authorized to do all things and acts and sign all documents which they consider desirable or expedient
to implement or give effect to any matters relating to or in connection with the Report.”
4. “ THAT the feasibility report for the use of proceeds from the A Share Issue (as defined in the
resolution No. 1 of the notice convening this meeting) (“Feasibility Report”) (a copy of which marked
“C” has been produced to the meeting and signed by the chairman of the meeting for the purpose of
identification) be and is hereby approved and confirmed. The proceeds from the A Share Issue will
be used to satisfy:
(1) the consideration under the Agreement (as defined in the ordinary resolution No. 3 of the notice
convening this meeting) including the followings :-
(a) the mining rights and the related operating assets and liabilities of the Chengmenshan
Copper Mine;
(b) operating assets and related liabilities of the Xiangsi Railway;
(c) 40% equity interest of Jiangxi Copper Alloy Company Limited;
(d) 40% equity interest of Jiangxi Copper Products Company Limited;
(e) 100% equity interest of Jiangxi Copper Group Chemical Company Limited; and
(f) 100% equity interest of the Jiangxi Copper Group (Dexing) Transportation Company
Limited;
NOTICE OF EXTRAORDINARY GENERAL MEETING
— 136 —
(2) the cash proceeds from the A Share Issue will be used to finance the following projects:-
(g) the expansion of phase II of Chengmenshan Copper Mine;
(h) the renovation of technology for mining method of Yongping Copper Mine;
(i) the technology renovation of the Fujiawu Copper Mine;
(j) the expansion of the processing capacity of Wushan Copper Mine to 5,000 tonnes per
day;
(k) the expansion of copper recovering from slag;
(l) the expansion of anode mud treatment and comprehensive utilisation; and
(m) the utilization of the heat recovered from smelting process,
and the directors of the Company be and are hereby authorized to do all things and acts and
sign all documents which they consider desirable or expedient to implement or give effect to
any matters relating to or in connection with the Feasibility Report.”
5. “THAT the use of the previous proceeds of the Company be end is hereby approved and confirmed.
The total proceeds from the issue of 230,000,000 A shares of the Company amounted to RMB510,140,000
(after deductions of expenses for underwriting, publicity campaigns and fee for issue on the internet
amounting to RMB11,960,000) was received on 28 December 2001. The net amount of RMB494,850,000
after deduction of issuing expenses amounting to RMB15,290,000, which was all received on 28
December 2001 and a specific report on capital verification as verified by Deloitte Touche Tohmatsu
Shanghai Certified Public Accountants Ltd. was issued. Subsequently, the proceeds was invested in
the third phase project of technological renovation of Guixi Smelter, the acquisition of the net operating
assets of Wushan Copper Mine from Jiangxi Copper Corporation and the technological renovation for
open-pit mining of Fujiawu Copper Mine. The use of proceeds was completed on 31 December 2002.
Details of the use of the proceeds are as follows:
Total planning Including: Progress as at
Project investment use of proceeds 31 December 2005
(RMB) (RMB)
The third phase project of technological
renovation of Guixi Smelter 1,500,000,000 260,050,000 Completed
Acquisition of Wushan Copper Mine 193,810,000 193,810,000 Completed
Development of Fujiawu Copper Mine 810,000,000 40,990,000 Not yet completed
Total 2,503,810,000 494,850,000 —”
NOTICE OF EXTRAORDINARY GENERAL MEETING
— 137 —
6. “THAT the waiver (the “Waiver”) for Jiangxi Copper Corporation (“JCC”) from its obligations which
may arise under the relevant rules and regulations under the laws of the People’s Republic of China
to make a mandatory general offer to the shareholders of the Company for all the issued shares of
the Company not already owned by it as a result of the issue of renminbi-denominated domestic shares
of RMB1.00 each (“A Shares”) in the ordinary share capital of Jiangxi Copper Company Limited (the
“Company”) to JCC as consideration under the acquisition agreement dated 16 March 2007 entered
into between the Company and JCC (“Consideration Shares”) be and is hereby approved and the
directors of the Company be and are hereby authorized to do all things and acts and sign all documents
which they consider desirable or expedient to implement or give effect to any matters relating to or
in connection with the Waiver.”
By order of the Board
Pan Qifang
Company Secretary
2 April 2007, Guixi City, Jiangxi, the PRC
Notes:
(a) Any shareholder entitled to attend and vote at the meeting mentioned above is entitled to appoint one or more proxies to attendand vote at the meeting on his/her behalf in accordance with the articles of association of the Company. A proxy need notbe a shareholder of the Company.
(b) In order to be valid, the proxy form of holders and, if such proxy form is signed by a person under a power of attorney orother authority on behalf of the appointer, a notarially certified copy of that power of attorney or authority shall be depositedat the Company’s legal address (in the case of the proxy form by holders of Domestic Shares) or at the Company’s H ShareRegistrars, Hong Kong Registrars Limited at 46/F, Hopewell Centre, 183 Queens’ Road East, Wanchai, Hong Kong (in thecase of proxy form of holder of H Shares) not less than 24 hours before the time for holding the meeting or 24 hours beforethe time appointed for taking the poll.
(c) Shareholders or their proxies shall produce their identification documents when attending the meeting.
(d) The register of members of the Company will be closed from 17 April 2007 to 17 May 2007 (both days inclusive), duringsuch period no transfer of shares will be registered.
(e) Shareholders whose names appear in the register of members of the Company on 17 April 2007 are entitled to attend andvote at the meeting.
(f) Shareholders who intend to attend the meeting shall complete and lodge the reply slip for attending the meeting at theCompany’s legal address at 15 Yejin Avenue, Guixi City, Jiangxi Province, the People’s Republic of China on or before 27April 2007. The reply slip may be delivered to the Company by hand, by post or by fax (fax no. (86) 701-3777013).
(g) The Extraordinary General Meeting is expected to last for less than half a day. Shareholders or their proxies attending theExtraordinary General Meeting shall be responsible for their own traveling and accommodation expenses.
NOTICE OF A SHARE CLASS MEETING
— 138 —
江西銅業股份有限公司JIANGXI COPPER COMPANY LIMITED
(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China)
(Stock Code: 0358)
NOTICE OF CLASS MEETING OF A SHARES
NOTICE IS HEREBY GIVEN that a class meeting of holders of A Shares (including A Shares with trading
moratorium and A Shares without trading moratorium) of Jiangxi Copper Company Limited (the “Company”)
will be held at the Conference Room of the Company at 15 Yejin Avenue, Guixi City, Jiangxi, the People’s
Republic of China on Thursday, 17 May 2007 at 9:30 a.m. or so soon thereafter as the Extraordinary General
Meeting of the Company to be convened on the same day at the same place shall have been concluded or
adjourned for the purpose of considering and, if thought fit, passing the following resolution which will be
proposed as special resolution of the Company:
SPECIAL RESOLUTION
1. ‘’THAT
each of the following proposed items in respect of the issue of domestic-listed Renminbi denominated
ordinary shares (“A Shares”) (“A Share Issue”) in the People’s Republic of China (“PRC”) be and is
hereby individually approved, and shall be implemented subsequent to the granting of the approval
from the relevant governmental authorities in the PRC upon application:
(1) Class of shares to be issued and the nominal value: domestic-listed Renminbi denominated
ordinary shares of RMB1.00 each (A Shares).
(2) Number of A Shares to be issued: not exceeding 290,000,000 A Shares.
(3) Target subscribers and subscription method : not exceeding ten subscribers, including Jiangxi
Copper Corporation (“JCC”). The A Shares will be issued by way of settlement of consideration
and subscribed by cash.
(4) Proposed place for listing of the A Shares to be issued: Shanghai Stock Exchange.
NOTICE OF A SHARE CLASS MEETING
— 139 —
(5) Determination of issue price: will not be less than 90% of the average trading price of the A
Shares on the Shanghai Stock Exchange for 20 trading days immediately before the date of the
issue of the announcement relating to the sixth meeting of the fourth session of the board of
directors of the Company (i.e. 20 March 2007). Authorization is hereby given to the directors
of the Company to determine the final issue price in accordance with the market conditions.
(6) Method of issue : the A Shares will be issued (i) to JCC as consideration under the acquisition
agreement dated 16 March 2007 entered into between the Company and JCC (the “Agreement”),
and (ii) to institutional investors by placing.
(7) Use of proceeds of the A Share Issue : to satisfy the consideration under the Agreement and
to finance the following projects :-
(i) RMB498,000,000 to be invested to finance the expansion of the expansion of phase II
of Chengmenshan Copper Mine;
(ii) RMB387,520,000 to be invested to finance the renovation of technology for mining
method of Yongping Copper Mine;
(iii) RMB300,560,000 to be invested to finance the technology renovation of the Fujiawu
Copper Mine;
(iv) RMB120,240,000 to be invested to finance the expansion of the processing capacity of
Wushan Copper Mine to 5,000 tonnes per day;
(v) RMB189,530,000 to be invested in the expansion of copper recovering from slag;
(vi) RMB194,270,000 to be invested in the expansion of anode mud treatment and
comprehensive utilisation; and
(vii) RMB272,610,000 to be invested in the utilization of the heat recovered from smelting
process.
(8) Sharing of accumulated profits : the accumulated profits after completion of the A Share Issue
will be shared among the existing and prospective shareholders of the Company.
(9) Validity period of this resolution: one year after approval in this class meeting.
NOTICE OF A SHARE CLASS MEETING
— 140 —
(10) The board of directors of the Company (the “Board”) (or the committee of the directors as may
be appointed by the Board) be and is hereby authorized with full power to deal with all matters
relating to the A Share Issue, including but not limited to the following matters (the term of
authorization is one year from the day of this meeting):
(i) to deal with the issue and listing with respect of the A Share Issue and other related
application procedures and other formalities;
(ii) to confirm the appropriate manner of issue, and to determine the final issue price and
issue quantity according to the market conditions and in compliance with the relevant
regulations upon sufficient negotiations with investors;
(iii) to approve each of the documents and contracts relating to the A Share Issue;
(iv) to make appropriate and necessary amendments to the relevant provisions of the articles
of association of the Company in order to reflect the changes in the registered capital
and shareholding structure of the Company as a result of the A Share Issue;
(v) to deal with the registration procedures in respect of the change in the registered capital
and the amendment in the articles of association of the Company upon completion of
the A Share Issue; and
(vi) to deal with all procedures relating to the A Share Issue according to laws including all
the procedures that are required to be followed under the laws, regulation and listing rules
of the places where shares of the Company are listed.”
By order of the Board
Pan Qifang
Company Secretary
Notes:
(a) Any shareholder entitled to attend and vote at the meeting mentioned above is entitled to appoint one or more proxies to attendand vote at the meeting on his/her behalf in accordance with the articles of association of the Company. A proxy need notbe a shareholder of the Company.
(b) In order to be valid, the proxy form of holders and, if such proxy form is signed by a person under a power of attorney orother authority on behalf of the appointer, a notarially certified copy of that power of attorney or authority shall be depositedat the Company’s legal address (in the case of the proxy form by shareholders of domestic Shares) not less than 24 hoursbefore the time for holding the meeting or 24 hours before the time appointed for taking the poll.
(c) Shareholders or their proxies shall produce their identification documents when attending the meeting.
(d) The A Share Class Meeting is expected to last for less than half a day. Shareholders or their proxies attending the A ShareClass Meeting shall be responsible for their own traveling and accommodation expenses.
NOTICE OF H SHARE CLASS MEETING
— 141 —
江西銅業股份有限公司JIANGXI COPPER COMPANY LIMITED
(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China)
(Stock Code: 0358)
NOTICE OF CLASS MEETING OF H SHARES
NOTICE IS HEREBY GIVEN that a class meeting of holders of H Shares of Jiangxi Copper Company
Limited (the “Company”) will be held at the Conference Room of the Company at 15 Yejin Avenue, Guixi
City, Jiangxi, the People’s Republic of China on Thursday, 17 May 2007 at 9:40 a.m. or so soon thereafter
as the A Share Class Meeting of the Company to be convened on the same day at the same place shall have
been concluded or adjourned for the purpose of considering and, if thought fit, passing the following
resolution which will be proposed as special resolution of the Company:
SPECIAL RESOLUTION
1. “THAT
each of the following proposed items in respect of the issue of domestic-listed Renminbi denominated
ordinary shares (“A Shares”) (“A Share Issue”) in the People’s Republic of China (“PRC”) be and is
hereby individually approved, and shall be implemented subsequent to the granting of the approval
from the relevant governmental authorities in the PRC upon application:
(1) Class of shares to be issued and the nominal value: domestic-listed Renminbi denominated
ordinary shares of RMB1.00 each (A Shares).
(2) Number of A Shares to be issued: not exceeding 290,000,000 A Shares.
(3) Target subscribers and subscription method : not exceeding ten subscribers, including Jiangxi
Copper Corporation (“JCC”). The A Shares will be issued by way of settlement of consideration
and subscribed by cash.
(4) Proposed place for listing of the A Shares to be issued: Shanghai Stock Exchange;
NOTICE OF H SHARE CLASS MEETING
— 142 —
(5) Determination of issue price: will not be less than 90% of the average trading price of the A
Shares on the Shanghai Stock Exchange for 20 trading days immediately before the date of the
issue of the announcement relating to the sixth meeting of the fourth session of the board of
directors of the Company (i.e. 20 March 2007). Authorization is hereby given to the directors
of the Company to determine the final issue price in accordance with the market conditions.
(6) Method of issue : the A Shares will be issued (i) to JCC as consideration under the acquisition
agreement dated 16 March 2007 entered into between the Company and JCC (the “Agreement”),
and (ii) to institutional investors by placing.
(7) Use of proceeds of the A Share Issue : to satisfy the consideration under the Agreement and
to finance the following projects:-
(i) RMB498,000,000 to be invested to finance the expansion of the expansion of phase II
of Chengmenshan Copper Mine;
(ii) RMB387,520,000 to be invested to finance the renovation of technology for mining
method of Yongping Copper Mine;
(iii) RMB300,560,000 to be invested to finance the technology renovation of the Fujiawu
Copper Mine;
(iv) RMB120,240,000 to be invested to finance the expansion of the processing capacity of
Wushan Copper Mine to 5,000 tonnes per day;
(v) RMB189,530,000 to be invested in the expansion of copper recovering from slag;
(vi) RMB194,270,000 to be invested in the expansion of anode mud treatment and
comprehensive utilisation; and
(vii) RMB272,610,000 to be invested in the utilization of the heat recovered from smelting
process.
(8) Sharing of accumulated profits : the accumulated profits after completion of the A Share Issue
will be shared among the existing and prospective shareholders of the Company.
(9) Validity period of this resolution: one year after approval in this class meeting.
NOTICE OF H SHARE CLASS MEETING
— 143 —
(10) The board of directors of the Company (the “Board”) (or the committee of the directors as may
be appointed by the Board) be and is hereby authorized with full power to deal with all matters
relating to the A Share Issue, including but not limited to the following matters (the term of
authorization is one year from the day of this meeting):
(i) to deal with the issue and listing with respect of the A Share Issue and other related
application procedures and other formalities;
(ii) to confirm the appropriate manner of issue, and to determine the final issue price and
issue quantity according to the market conditions and in compliance with the relevant
regulations upon sufficient negotiations with investors;
(iii) to approve each of the documents and contracts relating to the A Share Issue;
(iv) to make appropriate and necessary amendments to the relevant provisions of the articles
of association of the Company in order to reflect the changes in the registered capital
and shareholding structure of the Company as a result of the A Share Issue;
(v) to deal with the registration procedures in respect of the change in the registered capital
and the amendment in the articles of association of the Company upon completion of
the A Share Issue; and
(vi) to deal with all procedures relating to the A Share Issue according to laws including all
the procedures that are required to be followed under the laws, regulation and listing rules
of the places where shares of the Company are listed.”
By order of the Board
Pan Qifang
Company Secretary
NOTICE OF H SHARE CLASS MEETING
— 144 —
Notes:
(a) Any shareholder entitled to attend and vote at the meeting mentioned above is entitled to appoint one or more proxies to attendand vote at the meeting on his/her behalf in accordance with the articles of association of the Company. A proxy need notbe a shareholder of the Company.
(b) In order to be valid, the proxy form of holders and, if such proxy form is signed by a person under a power of attorney orother authority on behalf of the appointer, a notarially certified copy of that power of attorney or authority shall be depositedat the Company’s H Share Registrars, Hong Kong Registrars Limited at 46/F, Hopewell Centre, 183 Queens’ Road East,Wanchai, Hong Kong not less than 24 hours before the time for holding the meeting or 24 hours before the time appointedfor taking the poll.
(c) Shareholders or their proxies shall produce their identification documents when attending the meeting.
(d) The register of members of the Company will be closed from 17 April 2007 to 17 May 2007 (both days inclusive), duringsuch period no transfer of shares will be registered.
(e) Shareholders whose names appear in the register of members of the Company on 17 April 2007 are entitled to attend andvote at the meeting.
(f) Shareholders who intend to attend the meeting shall complete and lodge the reply slip for attending the meeting at theCompany’s legal address at 15 Yejin Avenue, Guixi City, Jiangxi Province, the People’s Republic of China on or before 27April 2007. The reply slip may be delivered to the Company by hand, by post or by fax (fax no. (86) 701-3777013).
(g) The H Share Class Meeting is expected to last for less than half a day. Shareholders or their proxies attending the H ShareClass Meeting shall be responsible for their own traveling and accommodation expenses.