Greentech Technology International : Announcements and Notices - Continuing Connected Transactions - Renewal of Tin Supply Contract

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GREENTECH TECHNOLOGY INTERNATIONAL LIMITED 綠 科科 技 國 際 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00195)

CONTINUING CONNECTED TRANSACTIONS

RENEWAL OF TIN SUPPLY CONTRACT

Reference is made to the announcements of the Company dated 19 February 2016 in respect of the entering into of the Previous Tin Supply Contract for the supply of tin concentrates between Yunnan Tin Australia TDK Resources Pty Ltd. (being the Buyer) and YT Parksong Australia Holding Pty Limited (being the Seller) respectively. In view of the expiry of the Previous Tin Supply Contract, the Buyer and the Seller decided to enter into the New Tin Supply Contract, pursuant to which the Seller agreed to supply and the Buyer agreed to buy tin concentrates for a three-year term commencing from 1 February 2019 to 31 January 2022.

As the Buyer is wholly-owned by Yunnan Tin PRC, which is a substantial shareholder of Yunnan Tin HK (a non wholly-owned subsidiary of the Company), the Buyer is therefore a connected person of the Company and the transactions contemplated under the New Tin Supply Contract will constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As the transactions contemplated under the New Tin Supply Contract are connected transactions between a non-wholly owned subsidiary of the Company (namely the Seller) and a connected person at the subsidiary level (namely the Buyer) on normal commercial terms, such transactions are only subject to the reporting, announcement and annual review requirements but are exempt from the circular, independent financial advice and shareholders' approval requirements under Rule 14A.101 of the Listing Rules.

THE NEW TIN SUPPLY CONTRACT

Date:	31 January 2019
Parties:
Seller:	YT Parksong Australia Holding Pty Limited, a non wholly-owned subsidiary of the
Company
Buyer:	Yunnan Tin Australia TDK Resources Pty Ltd.. As the Buyer is wholly-owned by Yunnan
Tin PRC and Yunnan Tin PRC is a substantial shareholder of a non-wholly owned
subsidiary of the Company (namely Yunnan Tin HK), the Buyer is therefore a connected
person of the Company under Chapter 14A of the Listing Rules.
Term:	1 February 2019 to 31 January 2022

Nature of transaction:

Pursuant to the New Tin Supply Contract, the Seller agreed to supply tin concentrates from Australia to the Buyer in accordance with the terms of the New Tin Supply Contract.

Quantity:

Total quantity of the tin concentrates to be supplied within the contract period of the New Tin Supply Contract should be between 2,400-6,000 wmt per annum (plus/minus 5%) with shipment of about 200 to 500 wmt (plus/minus 5%) per month. The supply quantity is at option of the Seller.

Purchase formula:

(a) Pricing basis

The price of tin concentrates per dry metric ton was agreed by the parties to the New Tin Supply Contract after taking into account: (i) the official LME cash settlement average price of tin metal in the quotational period; (ii) deduction of a treatment charge calculated at an agreed fixed rate per dmt specified in the New Tin Supply Contract; (iii) deduction based on the final tin content; and (iv) penalty for impurity.

The Buyer will deduct base units of the final tin content and will pay 100% of commercial value of the balance after deduction at the official LME cash settlement for tin in USD as published London Metal Bulletin averaged over the quotational period.

The Seller will inform the Buyer LME cash settlement average price for tin in the quotational period within 3 work days after the quotational period. The price will be final balance price after the Seller confirmed the price.

(b) Quotational period

The quotational period will be 45 calendar days after the date of the bill of lading.

• (c) Deduction based on the final tin content

  Deduction of agreed fixed units based on 55% final tin content.

  If final tin content is higher or lower than 55%, the deduction will be adjusted at specified rates set out in the New Tin Supply Contract depending on the percentage of final tin content.

  If final tin content is lower than 45%, the parties will renegotiate for tin concentrates price.

• (d) Impurity penalty

  If the tin concentrates contain sulphur, arsenic, antimony, copper, bismuth, lead or zinc at a level higher than that specified in the New Tin Supply Contract, the price of the tin concentrates will be subject to the respective deduction of impurity penalty calculated at the specified rates set out therein.

Payment terms:

The Buyer will pay 85% of the provisional value of each lot of the tin concentrates based on the average official LME cash price within 5 days prior to the bill of lading date by telegraphic transfer within three working days after the Buyer receives all shipment documents and the remaining part will be settled within 10 working days after the final analysis and weights of tin concentrates are confirmed by both the Seller and the Buyer which is not later than 50 days from the bill of lading date.

Legal compliance:

The Buyer undertakes that it will provide the auditors of the Company with sufficient access to the Buyer's records for the purpose of reporting on the transactions under the New Tin Supply Contract.

THE ANNUAL CAPS

Previous Annual Caps

The historical aggregate transaction amount and the annual caps under the Previous Tin Supply Contract are set out as follows:

From	From	From	From
1 February	1 January	1 January	1 January
2016 to	2017 to	2018 to	2019 to
31 December	31 December	31 December	31 January
2016	2017	2018	2019
(HK$ million)	(HK$ million)	(HK$ million)	(HK$ million)
Approved annual cap under the
Previous Tin Supply Contract	484	655	814	84
Historical aggregate transaction
amount	354	429	432	32

The Company has confirmed that the annual caps for the Previous Tin Supply Contract have not been exceeded.

Proposed Annual Caps

The Annual Cap in respect of the transactions contemplated under the New Tin Supply Contract for 1 February 2019 to 31 December 2019, 1 January 2020 to 31 December 2020, 1 January 2021 to 31 December 2021, and 1 January 2022 to 31 January 2022 is HK$480,000,000, HK$633,000,000, HK$765,000,000 and HK$77,000,000 respectively. The Annual Caps were determined with reference to (a) the historical transaction amounts between the Buyer and the Seller, (b) the historical settlement value between the Buyer and the Seller; (c) the estimated volume for the supply of tin concentrates from Australia from 1 February 2019 to 31 January 2022; and (d) the historical fluctuation of the LME cash settlement average price of tin metal.

PRICING POLICY

The Company has adopted the following procedures to ensure the pricing basis of tin prices (after the relevant deductions and penalties) under the New Tin Supply Contract are no less favourable to the Company than those prevailing in the market.

As disclosed above, the tin concentrate settlement prices under the New Tin Supply Contract will be determined with reference to the average LME cash settlement price of tin metal during the relevant quotational period after the relevant deductions, penalties and treatment charges, which are in line with market practice.

In preparing the tin supply contract, the Company reviewed and ascertained the reasonableness and fairness of the deduction terms and payment terms by comparing the terms offered by the Buyer with those for the supply to an independent third party and our joint-venture partner respectively at that time.

The terms of the New Tin Supply Contract are subject to annual review by the parties to be performed by end of each year and the parties will determine whether the terms of these contracts require any amendment. The Seller would check the quotation or offer (as the case may be) from third parties (if available), compare the price therein with that under the New Tin Supply Contract and discuss internally and negotiate with the Buyer for favorable improvement during such annual review process if there exists any better terms including pricing basis prevailing in the market.

INFORMATION OF THE BUYER

The Buyer is a limited liability company incorporated in Australia and is principally engaged in tin mining in Australia. The Buyer is wholly owned by Yunnan Tin PRC, a substantial shareholder of Yunnan Tin HK (a non-wholly owned subsidiary of the Company which holds 100% equity interest of the Seller). Yunnan Tin PRC has the largest production and manufacturing base in the world for tin metal and the largest production centre for tin profiles, tin chemicals and arsenic chemicals in the PRC. It also owns the state-level enterprise technology centre and the biggest tin research and precious metals research and development organization in the PRC.

REASONS FOR AND BENEFIT OF THE CONTINUING CONNECTED TRANSACTIONS

The Group is principally engaged in exploration of non-ferrous metal resources including mining and sale of tin resource. The Seller had sold the tin concentrates to the Buyer and/or its associate since 2011. The tin concentrates which the Company proposes to sell to the Buyer under the New Tin Supply Contract are the products and the by-products from the exploration of tin of a mining project of the Group in Tasmania of Australia. The Board is of the view that the entering into of the New Tin Supply Contract will allow the Group to secure a stable source of revenue which will improve Shareholders' return given the considerable size and business operations of Yunnan Tin PRC as aforementioned.

The Board has further advised that given the size and reputation of the Yunnan Tin PRC Group as described under the section headed information of the Buyer of this announcement, it is the corporate strategy of the Company, through the Continuing Connected Transactions with the Buyer, to maintain business relationship with the Yunnan Tin PRC Group and to explore further investment opportunities in the future.

LISTING RULES IMPLICATIONS

As the Buyer is wholly-owned by Yunnan Tin PRC and Yunnan Tin PRC is a substantial shareholder of Yunnan Tin HK (a non-wholly owned subsidiary of the Company), the Buyer is a connected person of the Company and the transactions contemplated under the New Tin Supply Contract will constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.