Shoucheng : VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED RESTRUCTURING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(Incorporated in Hong Kong with limited liability)

(Stock Code: 697)

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

IN RELATION TO

THE PROPOSED RESTRUCTURING

THE PROPOSED RESTRUCTURING

The Sale and Purchase Agreement

On 15 January 2021, the Vendor, a wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement with King Rich, a connected person of the Company, pursuant to which the Vendor has conditionally agreed to sell, and King Rich has conditionally agreed to purchase, the Sale Shares, which represent the entire issued share capital of each of the Subject Companies, at a consideration of HK$3,513,509,976.

The Consideration

The consideration of HK$3,513,509,976 was agreed after arms' length negotiations between the Vendor and King Rich and having taken into account the recent market price of Shougang Resources Shares and the trading liquidity of Shougang Resources Shares, which has been relatively low prior to the Last Trading Date. The consideration of HK$3,513,509,976 reflects an indirect transfer of 1,463,962,490 Shougang Resources Shares at a consideration of HK$2.40 per Shougang Resources Share.

The consideration is to be settled by way of cash upon completion of the Proposed Restructuring.

The Directors (excluding (i) Mr. Zhao Tianyang, Mr. Xu Liang and Mr. Liang Hengyi, the executive Directors who have abstained from voting in respect of the Board resolutions approving the Proposed Restructuring; and (ii) the members of the Independent Board Committee who will form their view after receiving advice from the independent financial adviser of the Company) consider that the consideration is fair and reasonable and is in the

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interests of the Company and the Shareholders as a whole.

Conditions

Completion of the Proposed Restructuring is subject to and conditional upon the fulfillment (or waiver thereof, if applicable) of following conditions precedent (the "Conditions"):

1. the approval from the Independent Shareholders of the Sale and Purchase Agreement and the Proposed Restructuring contemplated thereunder at the GM convened in accordance with the Listing Rules, and such approval remaining valid, effective and not having been rescinded or revoked;
2. the filing, registration or approval, as applicable, with or by the State-Owned Assets Supervision and Administration Commission of the State Council of PRC, or its local authorities, and such other applicable PRC governmental approvals in respect of the Sale and Purchase Agreement and the Proposed Restructuring contemplated thereunder having been obtained or completed, and such filing, registration or approval, as applicable, remaining valid, effective and not having been rescinded or revoked;
3. the waiver from the Purchaser's and/or Shougang Holding's obligation to make a mandatory general offer for Shougang Resources Shares not already owned or agreed to be acquired by King Rich and its parties acting in concert (as defined in the Takeovers Code) under Rule 26.1 of the Takeovers Code as a result of the transactions contemplated under the Sale and Purchase Agreement having been obtained and remaining valid, effective and not subsequently revoked by the Executive and all conditions (if any) imposed by the Executive in respect of such waiver have been satisfied in all respects;
4. (if necessary after consultation with the Executive pursuant to the Takeovers Code)
   (i) the ruling from the Executive that the Proposed Restructuring does not constitute a special deal referred to under Rule 25 of the Takeovers Code or (ii) consent from the Executive having been obtained (in the event that the Proposed Restructuring is considered as a special deal) and remains valid, effective and not subsequently revoked by the Executive and all conditions (if any) imposed by the Executive in respect of such consent have been satisfied in all respects or (iii) Rule 25 of the Takeovers Code ceases to apply to the transaction contemplated under the Sale and Purchase Agreement;
5. the representations, warranties and undertakings made in respect of the Vendor, the Subject Companies and the Sale Shares are true, accurate and not misleading in any material respects; and
6. the representations, warranties and undertakings made in respect of King Rich are true, accurate and not misleading in any material respects under the Sale and Purchase Agreement.

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Upon Completion, the Subject Companies will cease to be subsidiaries of the Company. As at the date of this announcement, the Subject Companies hold, directly and indirectly, approximately 28.98% in aggregate of all issued shares of Shougang Resources. Accordingly, upon Completion, the Company will also cease to have any indirect interest in Shougang Resources as a result of the Proposed Restructuring.

Shougang Resources is a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 0639). Shougang Resources is an integrated coking coal corporation in central-western China, principally engaged in mining of coking coal, production and sales of raw and clean coking coal.

APPLICATION FOR WAIVER

The Proposed Restructuring may lead to a general offer for all Shougang Resources Shares under the Takeovers Code unless otherwise waived by the Executive. As informed by King Rich, King Rich and Shougang Holding have applied to the Executive for a waiver to dispense with the obligation to make a mandatory general offer for Shougang Resources Shares not already owned or agreed to be acquired by them pursuant to Rule 26.1 of the Takeovers Code as a result of the Proposed Restructuring.

The Proposed Restructuring is an arrangement between the Vendor (being an indirect shareholder of Shougang Resources) and King Rich (being a direct and indirect shareholder of Shougang Resources), which is not capable of being extended to all shareholders of Shougang Resources and takes place within the six-month period from the close of the Share Buy-back Offer. As such, the Proposed Restructuring may be considered by the Executive as a special deal falling within Rule 25 of the Takeovers Code. Following consultation with the Executive pursuant to the Takeovers Code, if necessary, an application will be made to the Executive for its ruling as to whether the Proposed Restructuring constitutes a special deal under Rule 25 of the Takeovers Code and if so, the Executive's consent thereto pursuant to Rule 25 of the Takeovers Code.

As at the date of this announcement, the Executive has not granted any waiver or ruling pursuant to Rule 26.1 and Rule 25 of the Takeovers Code in respect of the Proposed Restructuring. In the event that Condition(s) (iii) or (iv), as applicable, as set out in the section headed "Conditions" in this announcement is/are not fulfilled, the parties to the Proposed Restructuring may negotiate for an alternative arrangement, subject to compliance with the Listing Rules and the Takeovers Code.

IMPLICATIONS UNDER THE LISTING RULES

As King Rich is indirectly wholly-owned by Shougang Group, the controlling shareholder of the Company, King Rich is a connected person of the Company pursuant to Rule 14A.07 of the Listing Rules.

As the highest applicable percentage ratio (calculated in accordance with Rule 14.07 of the Listing Rules) in respect of the Sale and Purchase Agreement and the transactions

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contemplated thereunder exceeds 75%, the Proposed Restructuring constitutes a very substantial disposal of the Company under Chapter 14 of the Listing Rules and a connected transaction of the Company under Chapter 14A of the Listing Rules.

The Proposed Restructuring is therefore subject to reporting, announcement and Independent Shareholders' approval requirements under Chapters 14 and 14A of the Listing Rules and the resolution(s) approving the Sale and Purchase Agreement and the Proposed Restructuring contemplated thereunder will be voted on by the Independent Shareholders by poll at the GM.

The GM will be convened for Shareholders to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder. Only Independent Shareholders will be entitled to vote at the GM on the resolution to approve the Sale and Purchase Agreement and the transactions contemplated thereunder.

Shougang Group, King Rich and their respective associates, which together own and control approximately 35.95% of the issued Shares as at the date of this announcement, will be required to abstain from voting on the resolution to approve the Sale and Purchase Agreement and the Proposed Restructuring contemplated thereunder.

GENERAL

A circular containing, among other things, (i) further details of the Proposed Restructuring;

1. a letter of recommendation from the Independent Board Committee to the Independent Shareholders and a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Sale and Purchase Agreement and the Proposed Restructuring contemplated thereunder; and (iii) a notice convening the GM, will be despatched to the Shareholders on or before 15 April 2021 as the Company expects that additional time will be required for preparing the information to be contained in the circular.

WARNING

As completion of the Proposed Restructuring is subject to the satisfaction of the Conditions, the Proposed Restructuring may or may not materialize. Shareholders and potential investors are advised to exercise caution when dealing in the securities of the Company.

There is no assurance that any forward-looking statements regarding the business development of the Group in this announcement or any of the matters or transactions set out herein are attainable, will actually occur or will be realized or are complete or accurate. The financial and other data relating to the Group as disclosed in this announcement has also not been audited or reviewed by its auditors. Shareholders and/or potential investors of the Company are advised to exercise caution when dealing in the securities of the Company and not to place any excessive reliance on the information disclosed herein. Any shareholder or potential investor who is in doubt is advised to seek advice from professional advisors.

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