Jin Cheng Mining Limited provides $404.6 million shareholder loan for Kolwezi Copper Mine Acquisition Project (Linked to Record ID#102974 and #102986)

Project narrative

A geological survey of the Kolwezi copper mine began in 1921, and Belgian mining companies subsequently carried out mining activities. In 2011, Zhejiang Huayou Cobalt Co., Ltd. began to conduct regional geological surveys and further exploration on the Kolwezi copper mine, and it prepared a verification report on the volume of reserves. According to a feasibility study report on the Kolwezi copper mine prepared by China ENFI Engineering Corporation in April 2014, the resources at the mine include: ore volume of 39.149 million tons with copper grading 3.93% and copper metal volume of 1.5384 million tons. In which, indicated ore volume is 23.248 million tons with copper grading 4.21% and copper metal volume of 0.9777 million tons; inferred ore volume is 15.893 million tons with copper grading 3.53% and copper metal volume of 0.5607 million tons. On November 3, 2014, Zijin Mining Group Co., Ltd. and Jin Cheng Mining Limited — a subsidiary of Zijin Mining Group Co., Ltd. that is legally incorporated in the British Virgin Islands — jointly entered into a share acquisition agreement with Zhejiang Huayou Cobalt Co., Ltd. Under the terms of the agreement, Jin Cheng Mining Limited acquired a 51% equity interest in La Compagnie Minière de Musonoie Global SAS held by Zhejiang Huayou Cobalt Co., Ltd. with a consideration of $77.9167 million. The acquisition was completed on December 3, 2014. As part of the acquisition, Jin Cheng Mining Limited agreed to provide a $122,825,000 interest-free shareholder loan to La Compagnie Minière de Musonoie Global SAS (see Record ID#102974) until commercial production commenced at the Kolwezi Copper Mine. Jin Cheng Mining Limited also agreed to provide a $404,600,000, interest-bearing shareholder loan to La Compagnie Minière de Musonoie Global SAS until commercial production commenced at the Kolwezi Copper Mine. The loan was expected to carry an interest rate somewhere between LIBOR plus a 1% margin and LIBOR plus a 3.5% margin. Additionally, Zhejiang Huayou Cobalt Co., Ltd. agreed to provide a $50,575,000 interest-free shareholder loan to La Compagnie Minière de Musonoie Global SAS (see Record ID#102986) until commercial production commenced at the Kolwezi Copper Mine. On August 21, 2015, National Development and Reform Commission of the PRC issued “National Development and Reform Commission’s Approval in relation to the Investment in the Construction of Kolwezi Copper Mine Project in the DR Congo by Companies Including Zijin Mining Group Co., Ltd.” (Fagaiwaizi [2015] No.1909), which authorized Zijin Mining Group Co., Ltd. to invest in the construction of the Kolwezi copper mine project. Then, on August 7, 2015, Zijin Mining Group Co., Ltd. obtained the “Enterprise Overseas Investment Certificate” (Overseas Investment Certificate No. N3500201500130) granted by the Ministry of Commerce of the PRC. On July 8, 2016, Zijin Mining Group Co., Ltd. and Jin Cheng Mining Limited jointly entered into another share acquisition agreement with Zhejiang Huayou Cobalt Co., Ltd. Under the terms of the agreement, Jin Cheng Mining Limited acquired a 21% equity interest in La Compagnie Minière de Musonoie Global SAS held by Zhejiang Huayou Cobalt Co., Ltd. with a consideration of $34 million. Upon completion of the acquisition, Zijin Mining Group Co., Ltd. held a 72% equity interest in La Compagnie Minière de Musonoie Global SAS via Jin Cheng Mining Limited., while Gécamines held a 28% non-dilutable equity interest in La Compagnie Minière de Musonoie Global SAS. Jin Cheng Mining Limited also assumed responsibility for the $50,575,000 interest-free shareholder loan from Zhejiang Huayou Cobalt Co., Ltd. The Kolwezi copper mine project in the DR Congo is located in the west of Kolwezi city, Katanga Province, the DR Congo. It covers a mining area of 3.37 square kilometers, with copper reserves volume of approximately 1.54 million tonnes grading 4% on average. After completion, the project can process 1.65 million tonnes of crude copper ores per year, producing 7,212 tonnes of copper sulfide concentrates (containing 60% copper), 43,616 tonnes of blister copper (containing 90% copper) by pyrometallurgy and 8,203 tonnes of copper cathode by hydrometallurgy per year. The total investment in the project was expected to be $577,633,000. The expected construction period and payback period (after tax, including the construction period) of the construction of the Kolwezi copper mine project in the DR Congo were 2.5 years and 7.11 years, respectively. After mineral production commenced, the scale of ore production at the mine was expected to be 1.65 million tons/year, the service life of the mine was expected to be 12 years, and the processing scale of ore was expected to be 5,000 tons/day. Construction of the mine commenced in June 2015. Then, on June 13, 2017, the mine was put into operation and the first batch of crude copper products was successfully produced. A second phase of the project commenced on March 24, 2018 and reached completion on December 26, 2018.