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Yunnan Chihong to raise 4.70B yuan to repay bank loans

said July 8 that it will raise 4.70 billion Chinese yuan byissuing no more than 556,557,121 shares at a price of 8.45 yuan per share undera private placement.

State-ownedparent, Yunnan MetallurgicalGroup Co. Ltd., has agreed to pay 1.4 billion yuan to subscribe for165,680,473 shares, in addition to 24,012,745 shares that will be subscribedfor under an employee stock ownership plan.

Theremaining shares will be purchased by eight individual or institutionalinvestors. Upon completion, the Yunnan Metallurgical Group's stake in thecompany will be reduced to 36.70% from 38.49%, but it will remain a controllingshareholder.

Ofthe total proceeds, 3.70 billion yuan will be used to repay bank loans, whilethe remaining will fund exploration projects as well as construction of a leadrecycling facility.

Asof March 31, the company's debt to asset ratio was 69.14%, which was muchhigher than the average 44.91% among five peers including and WesternMining Co. Ltd., according to Yunnan Chihong.

Therepayment is expected to reduce the company's finance cost by 160.8 millionyuan per year.

Meanwhile,Yunnan Chihong plans to invest about 482.8 million yuan in a three-yearexploration and construction program at its wholly owned lead-zinc-silverunderground project, which covers an area of 2.822 square kilometers in InnerMongolia, China.

Jiawulaproject's annual production capacity is expected to increase to 1 milliontonnes from 700,000 tonnes upon completion.

Atotal of 203.4 million yuan will be used to fund drilling programs as well asfeasibility studies at the Chaganbulagen lead-zinc-silver project, which isclose to Jiawula.

Theremaining 321.1 million yuan from the placement will fund construction of arecycling facility for lead-acid batteries in the city of Qujing, in Yunnanprovince, which has a designed capacity of 160,000 tonnes per year.

Thecompany is also seeking toraise up to 2.5 billion yuan via bond offers in order to reducefinancing costs.

As of July 8, US$1 wasequivalent to 6.69 Chinese yuan.