China Billion Resources : DISCLOSEABLE AND CONNECTED TRANSACTIONS - SETTLEMENT ARRANGEMENTS ENTAILING THE PROPOSED DISPOSAL OF 29% EQUITY INTEREST IN HUNAN WESTRALIAN MINING CO., LIMITED AND THE RECEIPT OF FINANCIAL ASSISTANCE FROM A CONNECTED PERSON AT SUBSIDIARY LEVEL

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CHINA BILLION RESOURCES LIMITED

中富資源有限公司

(incorporated in the Cayman Islands with limited liability)

(stock code: 274)

DISCLOSEABLE AND CONNECTED TRANSACTIONS -

SETTLEMENT ARRANGEMENTS ENTAILING THE

PROPOSED DISPOSAL OF 29% EQUITY INTEREST IN HUNAN WESTRALIAN

MINING CO., LIMITED AND THE RECEIPT OF FINANCIAL ASSISTANCE FROM A

CONNECTED PERSON AT SUBSIDIARY LEVEL

On 10 August 2020, the Company and its wholly-owned subsidiary, Westralian Resources, entered into the Settlement Agreement with Mr. Cai with respect to the settlement and rescheduling of RMB58,485,000, being the amount owed by the Company to Mr. Cai under the Loan Agreement as at 31 July 2020. In connection with the settlement arrangements, the Company and Westralian Resources have agreed to sell the 29% equity interest in Hunan Westralian, a company owned as to 80% by Westralian Resources, to Mr. Cai for RMB38,485,000 to partially settle the outstanding amount owed to Mr. Cai on a dollar for dollar basis. In return, Mr. Cai has agreed to extend the maturity date and the drawdown period under the Loan Agreement to 31 August 2021.

The Proposed Disposal constitutes a "transaction" under Chapter 14 of the Listing Rules. As the highest percentage ratio applicable for the Proposed Disposal is above 5% but below 25%, the Proposed Disposal constitutes a discloseable transaction for the Company and is therefore subject to the reporting and announcement requirements, but exempt from the circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

As Mr. Cai is a director of Hunan Westralian, which is a subsidiary of Westralian Resources, he is regarded as a connected person of the Company at subsidiary level. As such, the Proposed Disposal and the Proposed Extension also constitute connected transactions of the Company under Chapter 14A of the Listing Rules. The Proposed Disposal and the Proposed Extension are exempt from the circular, independent financial advice and shareholders' approval requirements under Rule 14A.101 of the Listing Rules.

BACKGROUND

On 6 August 2019, the Company as borrower, Westralian Resources, a wholly-owned subsidiary of the Company as co-borrower and Mr. Cai, a director of Hunan Westralian since 15 August 2019 as lender entered into the Loan Agreement pursuant to which Mr. Cai agreed to advance principal amount of up to RMB80,000,000 to the Company. Principal terms of the Loan Agreement are set out below:

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proceedings, material loss of assets, cross defaults, insolvency of the Company

As at the date of this announcement, the principal amount outstanding under the Loan Agreement is RMB50,000,000. Such amount together with interest accrued thereon is due on 20 August 2020. As at 31 July 2020, interest accrued was RMB8,485,000 and the total amount outstanding was RMB58,485,000 ("Outstanding Amount").

SETTLEMENT ARRANGEMENTS

On 10 August 2020, the Company, Westralian Resources and Mr. Cai entered into the Settlement Agreement in relation to the settlement of the Outstanding Amount. Pursuant to the Settlement Agreement:

Partial settlement of Westralian Resources has agreed to sell 29% equity interest in Hunan

the Outstanding Westralian to Mr. Cai (or his nominee) for RMB38,485,000 ("Proposed

Amount:Disposal"), which equals the sum of part of the outstanding principal amount (RMB30,000,000) and all unpaid interest accrued as at 31 July 2020 on all of the outstanding principal amount (RMB50,000,000), in partial settlement of the Outstanding Amount on a dollar for dollar basis. Such consideration is based on arm's length negotiations between the Group and Mr. Cai taking into account (i) the fair value of the mining business of Hunan Westralian (which is its sole business) as at 31 December 2019 as recognised in the audited consolidated financial statements of the Group as at 31 December 2019 of RMB172,000,000 on the basis that there is no material change to the operating condition of Hunan Westralian; and (ii) a discount of approximately 20% for the non-controlling minority stake which is the subject of the Proposed Disposal. Having considered the above, the Directors are of the view that the consideration for the Proposed Disposal is fair and reasonable.

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Extension"):

The drawdown period of the Loan Agreement with respect to the RMB30,000,000 unutilised facility is extended to 31 August 2021, and the maturity date of any further amount to be drawn under the extended drawdown period is the 365th day after the relevant drawdown date.

The facility so extended is to be secured by a charge over 51% equity interest in Hunan Westralian held by the Group as mentioned above.

The Directors, having taken into account the fact the security under the Share Charge would represent a loan-to-value ratio of approximately 60% (i.e. the sum of outstanding principal and unutilised facility (RMB50,000,000) divided by 51% of the fair value of Hunan Westralian's mining business as at 31 December 2019 mentioned above) and the interest rate of 24% per annum under the Loan Agreement which is comparable to or more favourable (from the perspective of the Group) than loan-to-value requirements for security and interest rates charged by financial institutions in the PRC to borrowers and assets that are comparable in financial position and operating condition, are of the view that the terms of the Proposed Extension are fair and reasonable.

Other arrangements: Mr. Cai also agreed that, upon completion of the Proposed Disposal:

1. he will resign as a director of Hunan Westralian and Westralian Resources will nominate one director to Hunan Westralian in his place; and
2. he will (and will procure his nominee to) act in accordance with the direction of Westralian Resources when exercising the voting right and the right to make requisitions as a shareholder of Hunan Westralian.

On 10 August 2020, the parties also entered into the Supplemental Loan Agreement and the Supplemental Share Charge to give effect to the settlement arrangements set out above. Save as disclosed above, the terms of the Loan Agreement and the Share Charge remain unchanged.

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