China Merchants Bank provides EUR 188 million loan for Boguty Tungsten Ore Mining and Processing Complex Construction Project

Project narrative

After the Boguty tungsten mine was discovered in 1941, several small-scale exploration programs were conducted in the area by different groups prior to 1969 with limited documentation. In the period between 1969 and 1974, the Geological Survey of South Kazakhstan, a former Soviet Union organization, carried out a systematic exploration program. The Boguty Project is covered by a mining license which was granted to the then called Social Entrepreneurial Corporation “Zhetysu” National Company Joint Stock Company (currently known as “Regional Development Institute” Social-Entrepreneurial Corporation “Zhetisu” Joint Stock Company) (“Zhetisu”) — a Kazakhstan state-owned company — on May 20, 2014, covering an area of approximately 1.16 km2 and allows exploitation of up to a maximum depth of 300 meters below surface. The rights for production of tungsten ore at the Boguty tungsten mine were initially acquired by the then called Social Entrepreneurial Corporation “Zhetysu” National Company Joint Stock Company pursuant to a subsoil use (SSU) contract dated June 2, 2015. The term of the SSU contract is 25 years (June 2, 2015, to June 2, 2040). Then, in November 2015, Jiaxin International Resources Investment Limited (佳鑫國際資源投資有限公司)— a special purpose vehicle and joint venture of Jiangxi Copper Investment Company and Ever Trillion International (Hengzhao International) that was legally incorporated in Hong Kong in August 2014 —acquired indirect control over Zhetisu through the acquisition of Aral-Kegen LLP. By addendum No. 1 dated March 1, 2016, the mining rights and obligations of Social Entrepreneurial Corporation “Zhetysu” National Company Joint Stock Company were assigned to Zhetisu. In this way, Jiaxin International Resources Investment Limited effectively acquired the SSU contract for the Boguty Project. On April 25, 2018, the Boguty Tungsten Ore Mining and Processing Complex Construction Project was listed as one of the 51 Sino-Kazakh Key Cooperation Projects (中哈產能重點合作項目) by China’s National Development and Reform Commission (中國國家發展和改革委員會) and the Ministry of Investments and Development of Kazakhstan. Then, in September 2020, China Merchants Bank and Jiaxin International Resources Investment Limited signed an EUR 188 million loan (facility) agreement for the Boguty Tungsten Ore Mining and Processing Complex Construction Project. The loan carried an upfront arrangement (management) fee of 1.1%. Between September 2020 and November 2022, the loan bore a fixed, 1% interest rate, with quarterly interest and principal repayable over an 7.75-year period (final maturity date: June 14, 2028). After November 2022, the loan carried an interest rate of EURIBOR and was repayable in semi-annual installments. As a result, Jiaxin International Resources Investment Limited’s borrowings as of December 31, 2021 and 2022 of HK$180.3 million and HK$381.3 million, respectively, bore interest at 1% per annum. Its HK$382.1 million and HK$393.8 million borrowings as of September 30 and November 30, 2023, bore interest at 1% per annum. Its HK$667.2 million and HK$1,213 million borrowings as of September 30 and November 30, 2023, bore floating interest rates ranging from 3.488% to 5.006% per annum. The loan is backed by a Sinosure credit insurance policy and a repayment guarantee from Jiangxi Copper Corporation Limited (江西銅業集團有限公司). Then, in February 2023, Jiaxin International Resources Investment Limited signed a supplemental agreement with China Merchants Bank and extended the drawdown period of the unutilized facility to November 2023. The purpose of the project is to construct a mining and processing complex at the Boguty tungsten mine, which is located in the Yenbekshikazakh district, Almaty Oblast. The project site can be accessed via the national highway from both Almaty, Kazakhstan, and the Khorgos crossing that connects Kazakhstan to China. China Civil Engineering Construction Corporation Ltd. (CCECC or 中國土木工程集團有限公司) is the contractor responsible for project implementation. The preliminary design of the project was completed in June 2020, and preliminary construction activities began in November 2020. Full-scale construction commenced in May 2021. Jiaxin International Resources Investment Limited entered into a general construction (EPC) contract and an equipment procurement agreement with CCECC in July 2021, which went into effect on August 1, 2021, with an expected duration of 730 days. Jiaxin International Resources Investment Limited originally anticipated completing construction, installing processing plant equipment, and conducting testing by mid-2024, followed by trial production in the third quarter of 2024 and commercial production in the first quarter of 2025. In practice, the project was completed slightly ahead of schedule: as of November 8, 2024, the mine had entered its operational phase, with Phase I commercial production commencing in April 2025.