China Precious Metal Resources Holdings Co., Ltd. Concludes Sale and Purchase Agreement for Acquisition of Henan Gold Mines

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• USA - English

HONG KONG, Sept. 3 /PRNewswire-Asia/ -- Gold mining and processing company China Precious Metal Resources Holdings Co., Ltd. ("CPM", HKEx: 1194) announces that a sale and purchase agreement was entered into on 2 September 2010 in respect of the acquisition of gold mine assets in Henan Province, the PRC, at a total consideration of HK$1.38 billion.

The two mines to be acquired are both located at Kangshan Village of Baitu Town of Luanchuan County, Henan Province. Mine I has an aggregate area of mine field of 4.5323 sq km. Independent technical advisor Minarco-MineConsult confirmed that the exploration activity at Mine I had been completed and Mine I is currently at the exploitation and production stage. The current business operation and scale of production of Mine I supports annual practical output of more than 70,000 tonnes of ores. According to the technical report issued by Minarco-MineConsult, the indicated gold resource reserves under the JORC Code amount to 14.9 tonnes, at an average grade of 6.08 grams/tonne.

Dr. Dai Xiaobing, Chief Executive Officer and Executive Director of CPM said: "The sale and purchase agreement for Mine I follows the letter of intent entered into on 4 February 2010 for the acquisition of Mine I at a consideration of not more than HK$1 billion. Subsequently, we plan to additionally acquire Mine II which will significantly expand the scale of the entire project. For a purchase price equivalent to approximately HK$380 million, Mine II presents excellent investment value in view of the mine area and quality."

Mine II has an aggregate area of mine field of 17.06 sq km. As represented by the vendor, since Mine II has already completed the exploration stage, the mining company is in the process of applying for a mining licence for carrying out exploitation and mining activities in Mine II. The mining licence is expected to be issued before March 2011.

The consideration of HK$1.38 billion will be settled, as to HK$460 million by cash, HK$460 million by the issue of 219,047,619 consideration shares at the issue price of HK$2.10, and HK$460 million by the issue of convertible notes at the conversion price of HK$2.10.

The issue price and conversion price of HK$2.10 represents a premium of approximately 22.09% over the closing price of the Company's shares on the date of the sale and purchase agreement, or a premium of approximately 32.08% over the average of the closing prices for the last five executive trading days.

The consideration was determined taking into account of the preliminary valuation of the mining company to be acquired of approximately RMB1.316 billion (equivalent to approximately HK$1,506,820,000) as at 31 July 2010.

Dr. Dai added: "In light of the increase in gold prices from second half of 2009 onwards, we are optimistic about the future prospects of gold metal. The directors consider that the acquisition is in line with our strategy to develop in the gold mining industry. It will also help broaden our income base, thereby enhancing our future financial performance and profitability."

An extraordinary general meeting will be convened to approve the transactions. The Company expects the circular to be dispatched on or before 6 October 2010.

About CPM

China Precious Metal Resources Holdings Co., Ltd. (HKEx: 1194) focuses on the mining, processing and production of gold. The Company owns seven gold mines in Chifeng, Inner Mongolia, aggregating to a total mining area of 0.926 sq km and with proven reserves of 15.7 tonnes at average grade of 9.72 gram per tonne.

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SOURCE China Precious Metal Resources Holdings Co., Ltd.