MMG : Announcements and Notices – Continuing Connected Transaction – Dugald River Zinc Concentrate Sales Agreement

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MMG LIMITED 五礦資源有限公司

(Incorporated in Hong Kong with limited liability)

(HKEX STOCK CODE: 1208)

(ASX STOCK CODE: MMG)

CONTINUING CONNECTED TRANSACTION DUGALD RIVER ZINC CONCENTRATE SALES AGREEMENT

DUGALD RIVER ZINC CONCENTRATE SALES AGREEMENT

On 8 December 2017, the Seller entered into the Dugald River Zinc Concentrate Sales Agreement with Minmetals North-Europe in relation to the sale of the Product by the Seller to Minmetals North-Europe during 2018.

Minmetals North-Europe is a wholly owned subsidiary of CMC, the ultimate controlling shareholder of the Company, and is therefore an associate of CMC and a connected person of the Company under the Listing Rules. As a result, the Dugald River Zinc Concentrate Sales Agreement constitutes a continuing connected transaction for the Company.

As the relevant percentage ratios in respect of the maximum transaction value on an annual basis relating to the Dugald River Zinc Concentrate Sales Agreement are more than 0.1% and less than 5%, it constitutes a continuing connected transaction which is subject to the reporting, annual review and announcement requirements under Rule 14A.76 of the Listing Rules, but exempt from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

DUGALD RIVER ZINC CONCENTRATE SALES AGREEMENT

As part of the ordinary and usual course of business, the Group sells its products to the CMC Group.

On 8 December 2017, the Seller entered into the Dugald River Zinc Concentrate Sales Agreement with Minmetals North-Europe in relation to the sale of the Product to Minmetals North-Europe during 2018. The principal terms of the Dugald River Zinc Concentrate Sales Agreement are set out below.

Parties

• : (1) Seller: MMG Dugald River

  (2) Buyer: Minmetals North-Europe

  Term

• : From the date of the Dugald River Zinc Concentrate Sales Agreement for sales during 2018 until all obligations of the parties are fulfilledQuantity

• : Approximately 100,000 dry metric tonnes of Product (+/- 10% at Seller's option)

  Pricing

• : The pricing of the concentrate was determined after arms' length negotiations and is comparable with the market for concentrate qualities such as Dugald River zinc concentrate.

  Prices shall be:

  •  calculated based on agreed amounts of:

    • o zinc contained in the Product at the Special High Grade Settlement Price for zinc as quoted on the London Metal Exchange; and

    • o silver contained in the Product at London Bullion Market Association Silver Price spot quotation, each averaged over the agreed quotational period;

  •  less an agreed treatment charge which is consistent with those charges prevailing for comparable zinc concentrate contracts.

  Delivery Terms

• : Shipment shall be arranged by the Seller from the delivery point nominated by the Seller to the place of final destination nominated by Minmetals North-Europe on a CIF (Incoterms 2010®) basis.

The Dugald River Zinc Concentrate Sales Agreement will also set out, among other things, specifications, shipping schedule, delivery terms, payment terms, quotational period and other usual conditions (including those dealing with title and risk, insurance requirements and termination and suspension rights).

The terms of the Dugald River Zinc Concentrate Sales Agreement were arrived at after arm's length negotiations between the Seller and Minmetals North-Europe and these terms are consistent with prevailing market rates and conditions for comparable zinc concentrate.

PROPOSED ANNUAL CAP

MMG proposes that the maximum aggregate amount payable by Minmetals North-Europe to the Seller under the Dugald River Zinc Concentrate Sales Agreement for the financial year ending 31 December 2018 is US$123.0 million.

The Annual Cap was determined by reference to internal projections of the agreed maximum number of tonnes of the Product that may potentially be sold to Minmetals North-Europe, the estimated assays of the Product, an estimated zinc price for 2018 by an independent third party based upon forecasts made by a wide range of market participants, and the treatment charge agreed between the parties.

REASONS FOR AND BENEFITS OF THE DUGALD RIVER ZINC CONCENTRATE SALES AGREEMENT

The Group's principal activities include the production and sale of metal products, including copper, zinc and lead concentrates. As part of its ordinary and usual course of business, the Group sells some of its products to the CMC Group at prices and on terms which are consistent with prevailing market rates and conditions for the relevant products.

The Dugald River operation will produce approximately 340,000 dry metric tonnes per annum of zinc concentrate at full production. China is an important market for zinc concentrate and the CMC Group has investments in several major Chinese zinc smelters which are in a position to process Dugald River zinc concentrates. CMC also has trading relationships with other Chinese zinc smelters which may process Dugald River zinc concentrates. The Dugald River Concentrate Sales Agreement therefore provides efficient access to these end users.

The Dugald River Zinc Concentrate Sales Agreement has been reviewed and approved by the Directors (including the independent non-executive Directors but excluding the Interested Directors), who are of the view that the terms of the Dugald River Zinc Concentrate Sales Agreement and the transactions contemplated thereunder are on normal commercial terms, and are fair and reasonable and in the interests of the shareholders of the Company as a whole.

The Interested Directors, each holding position(s) at CMC and/or CMN, have abstained from voting on the Board resolution approving the Dugald River Zinc Concentrate Sales Agreement in order to avoid any possible conflict of interest issue.

IMPLICATIONS UNDER THE LISTING RULES

Minmetals North-Europe is a wholly owned subsidiary of CMC, the ultimate controlling shareholder of the Company, and is therefore an associate of CMC and a connected person of the Company under the Listing Rules. As a result, the Dugald River Zinc Concentrate Sales Agreement constitutes a continuing connected transaction for the Company.

As the relevant percentage ratios in respect of the maximum transaction value relating to the Dugald River Zinc Concentrate Sales Agreement are more than 0.1% and less than 5%, it constitutes a continuing connected transaction which is subject to the reporting, annual review and announcement requirements under Rule 14A.76 of the Listing Rules, but exempt from the independent shareholders' approval requirements, under Chapter 14A of the Listing Rules.

INFORMATION ABOUT THE GROUP

The Group is engaged in the exploration, development and mining of zinc, copper, gold, silver and lead deposits around the world.

INFORMATION ABOUT THE CMC GROUP

The CMC Group is one of the largest state-owned enterprises in the mining sector in the PRC. It is engaged in the exploration, development, mining, processing and sale of a wide range of non-ferrous metals including tungsten, rare earth, copper, alumina, lead and zinc.

Minmetals North-Europe is engaged in the purchase and sale of a wide range of non-ferrous metals including copper, lead and zinc.

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise.

Unless otherwise specified, conversion of US$ into HK$ in this announcement is based on the exchange rate of US$1.00 = HK$7.8 for the purpose of illustration only. No representation is made and there is no assurance that US$ or HK$ can be purchased or sold at such rate.

By order of the Board

MMG Limited

Jiao Jian

CEO and Executive Director

Hong Kong, 8 December 2017

As at the date of this announcement, the Board comprises nine directors, of which two are executive directors, namely Mr Jiao Jian and Mr Xu Jiqing; three are non-executive directors, namely Mr Guo Wenqing (Chairman), Mr Gao Xiaoyu and Mr Zhang Shuqiang; and four are independent non-executive directors, namely Dr Peter William Cassidy, Mr Leung Cheuk Yan, Ms Jennifer Anne Seabrook and Professor Pei Ker Wei.