2. IMPORTANT If you are in any doubt about any of the contents
of this prospectus, you should seek independent professional
advice. Chinalco Mining Corporation International (Incorporated
under the laws of the Cayman Islands with limited liability) GLOBAL
OFFERING Number of Offer Shares under the Global Offering :
1,764,913,000 Shares (subject to adjustment and the Over-allotment
Option) Number of International Placing Shares : 1,588,421,000
Shares (subject to adjustment and the Over-allotment Option) Number
of Hong Kong Offer Shares : 176,492,000 Shares (subject to
adjustment) Maximum Offer Price : HK$1.91 per Offer Share plus
brokerage of 1%, Stock Exchange trading fee of 0.005% and SFC
transaction levy of 0.003% (payable in full on application in Hong
Kong dollars subject to refund on final pricing) Nominal value :
US$0.04 per Share Stock code : 3668 Joint Global Coordinators Joint
Sponsors Joint Bookrunners and Joint Lead Managers (In alphabetical
order) Hong Kong Exchanges and Clearing Limited, The Stock Exchange
of Hong Kong Limited and Hong Kong Securities Clearing Company
Limited take no responsibility for the contents of this prospectus,
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 prospectus. A copy of this prospectus, having
attached thereto the documents specified in Appendix VII Documents
Delivered to the Registrar of Companies and Available for
Inspection, has been registered by the Registrar of Companies in
Hong Kong as required by section 342C of the Hong Kong Companies
Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and
Futures Commission and the Registrar of Companies in Hong Kong take
no responsibility as to the contents of this prospectus or any of
the other documents referred to above. The Offer Price is expected
to be fixed by agreement between the Joint Bookrunners (on behalf
of the Underwriters) and the Company on the Price Determination
Date which is expected to be on or around Thursday, January 24,
2013 and, in any event, not later than Tuesday, January 29, 2013.
The Offer Price will not be more than HK$1.91 per Offer Share and
is currently expected not to be less than HK$1.52 per Offer Share.
If, for any reason, the Offer Price is not agreed by Tuesday,
January 29, 2013 between the Joint Global Coordinators (on behalf
of the Underwriters) and us, the Global Offering will not proceed
and will lapse. The Joint Bookrunners (on behalf of the
Underwriters) may reduce the indicative offer price range and/or
the number of Hong Kong Offer Shares below that stated in this
prospectus at any time prior to the morning of the last day for
lodging applications under the Hong Kong Public Offer. In the case
of such reduction, notices of the reduction in the indicative offer
price range and/or the number of Hong Kong Offer Shares will be
published in the South China Morning Post (in English) and the Hong
Kong Economic Times (in Chinese) as soon as practicable following
the decision to make such reduction, and in any event not later
than the morning of the day which is the last day for lodging
applications under the Hong Kong Public Offer. Further details are
set out in the sections entitled Structure of the Global Offering
starting on page 289 and How to Apply for Hong Kong Offer Shares
starting on page 297 in this prospectus. The obligations of the
Hong Kong Underwriters under the Hong Kong Underwriting Agreement
are subject to termination by the Joint Global Coordinators (on
behalf of the Underwriters) if certain grounds arise prior to 8:00
a.m. on the day that trading in the Offer Shares commences on the
Stock Exchange of Hong Kong Limited. Such grounds are set out in
the section entitled Underwriting Underwriting Arrangements and
Expenses Hong Kong Public Offer Grounds for Termination on page 279
of this prospectus. Prior to making an investment decision,
prospective investors should consider carefully all of the
information set out in this prospectus, including the risk factors
set out in the section titled Risk Factors in this prospectus.
January 18, 2013
3. EXPECTED TIMETABLE(1) Latest time to complete electronic
applications under White Form eIPO service through the designated
website www.eipo.com.hk(2) . . . . . . . . . . . 11:30 a.m. on
January 23, 2013 Application Lists open(3) . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11:45
a.m. on January 23, 2013 Latest time for lodging WHITE and YELLOW
Application Forms . . . . . . . 12:00 noon on January 23, 2013
Latest time to complete payment of White Form eIPO applications by
effecting internet banking transfers or PPS payment transfer(s) . .
. . . . . . . 12:00 noon on January 23, 2013 Latest time to give
electronic application instructions to HKSCC(4) . . . . . . 12:00
noon on January 23, 2013 Application Lists close(2) . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12:00 noon on January 23, 2013 Expected Price Determination Date(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 24, 2013 Announcement of the Offer Price; the level of
applications in the Hong Kong Public Offer; the level of
indications of interest in the International Placing; and the basis
of allotment of the Hong Kong Offer Shares to be published in South
China Morning Post (in English) and Hong Kong Economic Times (in
Chinese) on or before and on our website at www.chinalco-cmc.com
and the website of the Stock Exchange at www.hkexnews.hk on or
before . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 30, 2013 Results of allocations in the Hong Kong Public
Offer (with successful applicants identification document numbers,
where appropriate) to be available through a variety of channels,
including the websites of the Stock Exchange at www.hkexnews.hk and
our website at www.chinalco-cmc.com (see How to Apply for Hong Kong
Offer Shares Publication of Results) from . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . January 30, 2013 Results
of allocations in the Hong Kong Public Offer will be available at
www.iporesults.com.hk with a search by ID function . . . . . . . .
. . . . . . . January 30, 2013 Despatch of Share certificates or
deposit of the Share certificates into CCASS on or before(6) . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . January 30, 2013 Despatch of White Form e-Refund payment
instructions/refund cheques on or before(6) . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . January 30, 2013 Dealings in the Shares on the Main Board
to commence at 9:00 a.m. on . . . . January 31, 2013 (1) All times
and dates refer to Hong Kong local time and dates. Details of the
structure of the Global Offering, including its conditions, are set
forth in the section headed Structure of the Global Offering in
this prospectus. (2) You will not be permitted to submit your
application through the designated website at www.eipo.com.hk after
11:30 a.m. on the last day for submitting applications. If you have
already submitted your application and obtained an application
reference number from the designated website prior to 11:30 a.m.,
you will be permitted to continue the application process (by
completing payment of application monies) until 12:00 noon on the
last day for submitting applications, when the application lists
close. (3) If there is a black rainstorm warning or a tropical
cyclone warning signal number 8 or above in force in Hong Kong at
any time between 9:00 a.m. and 12:00 noon on January 23, 2013, the
Application Lists will not open or close on that day. Further
information is set forth in the section headed How to Apply for
Hong Kong Offer Shares Effect of Bad Weather Conditions on the
Opening of the Application Lists in this prospectus. (4) Applicants
who apply for Hong Kong Offer Shares by giving electronic
application instructions to HKSCC should refer to the section
headed How to Apply for Hong Kong Offer Shares Applying by Giving
Electronic Application Instructions to HKSCC via CCASS in this
prospectus. i
4. EXPECTED TIMETABLE(1) (5) The Price Determination Date is
expected to be on or around Thursday, January 24, 2013 (Hong Kong
time) and, in any event, not later than Tuesday, January 29, 2013
(Hong Kong time). If, for any reason, the Offer Price is not agreed
between the Joint Global Coordinators (on behalf of the Hong Kong
Underwriters) and our Company by Tuesday, January 29, 2013, the
Global Offering will not proceed and will lapse. (6) e-Refund
payment instructions/refund cheques will be issued in respect of
wholly successful applications if the final Offer Price is less
than the Offer Price payable on application and wholly or partially
unsuccessful applications. Applicants who apply on WHITE
Application Forms for 1,000,000 Hong Kong Offer Shares or more and
have indicated in the WHITE Application Forms that they wish to
collect any refund cheque(s) (if applicable) and/or Share
certificate(s) (if applicable) in person and have provided all
information required by their Application Form, may collect their
Share certificates and/or refund cheques (where applicable) in
person from the Hong Kong Share Registrar between 9:00 a.m. and
1:00 p.m. on Wednesday, January 30, 2013 or on the date notified by
our Company as the date of despatch of Share certificates/e-Refund
payment instructions/refund cheques. In order to do so, the
applicant must complete the appropriate box on the WHITE
Application Form. Applicants being individuals who opt for
collection in person must not authorize any other person to make
their collection on their behalf. Applicants being corporations
that opt for collection in person must attend by their authorized
representatives bearing letters of authorization from their
corporations stamped with the corporations chop. Both individuals
and authorized representatives, as the case may be, must produce at
the time of collection evidence of identity acceptable to the Hong
Kong Share Registrar. If an applicant has opted for collection in
person but does not collect the Share certificate and/or refund
cheque (where applicable) by 1:00 p.m. on Wednesday, January 30,
2013, the Share certificate and/or refund cheque (where applicable)
will be sent to the address as it appeared on the relevant
Application Form in the afternoon on the date of despatch by
ordinary post at the applicants own risk. Applicants who apply
through the White Form eIPO service by paying the application
monies through a single bank account, may have e-Refund payment
instructions (if any) despatched to the application payment
account. Applicants who apply through the White Form eIPO service
by paying the application monies through multiple bank accounts,
may have refund cheque(s) sent to the address specified in their
application instructions to the designated White Form eIPO Service
Provider by ordinary post and at their own risk. Applicants who
apply on YELLOW Application Forms for 1,000,000 Hong Kong Offer
Shares or more and have indicated in the YELLOW Application Forms
that they wish to collect any refund cheque(s) (if applicable) in
person and have provided all information required by their
Application Form, may collect their refund cheques (where
applicable) in person from the Hong Kong Share Registrar between
9:00 a.m. and 1:00 p.m. on Wednesday, January 30, 2013 or on the
date notified by the Company as the date of despatch of refund
cheques. In order to do so, the applicant must complete the
appropriate box on the YELLOW Application Form. The procedure for
collection of the refund cheque (where applicable) is the same as
that for WHITE Application Form applicant. Share certificate for
successful applicant using YELLOW Application Form will be
deposited into CCASS for credit to the applicants investor
participant stock account or the stock account of the applicants
designated CCASS participant. Detailed arrangements are set forth
in the section headed How to Apply for Hong Kong Offer Shares
Despatch/collection of Share certificates and refund monies in this
prospectus. For Applicants who apply for less than 1,000,000 Hong
Kong Offer Shares or apply for 1,000,000 Hong Kong Offer Shares or
more but have not indicated on their Application Forms that they
will collect their Share certificate and/or refund cheques (where
applicable) in person, their Share certificate and/or refund cheque
(where applicable) will be sent to the address as it appeared on
the relevant Application Form in the afternoon on the date of
despatch by ordinary post at the applicants own risk. Our Company
will not issue any temporary documents of title in respect of the
Offer Shares. Share certificates will become valid certificates of
title only if the Global Offering has become unconditional and the
Underwriting Agreements have not been terminated in accordance with
their respective terms, which are expected to be not later than
8:00 a.m. (Hong Kong time) on Thursday, January 31, 2013. ii
7. SUMMARY This summary aims to give you an overview of the
information contained in this prospectus. As it is a summary, it
does not contain all the information that may be important to you.
You should read the whole document before you decide to invest in
our Shares. There are risks associated with any investment. Some of
the particular risks in investing in our Shares are set forth in
the section titled Risk Factors in this prospectus. You should read
that section carefully before you decide to invest in our Shares.
OVERVIEW We are a resource development company acting as Chinalcos
core platform for the future acquisition, investment, development
and operation of non-ferrous and non-aluminum mineral resources and
projects overseas. We envision capitalizing on Chinas growing
demand for natural resources. Our strong growth potential is driven
significantly by Chinalcos active global expansion strategy, which
is in line with Chinas initiatives in securing mineral resources
overseas to satisfy its growing demand, as well as by Chinalcos
proven track record, strong brand recognition and the broad range
of acquisition opportunities available to it. Currently, we are
focusing on developing the Toromocho Project, which is located in
central Peru in the core of the Morococha mining district.
According to CRU, the Toromocho Project is the worlds second
largest pre-production copper project, as measured by proved and
probable copper ore reserves, and the third largest pre-production
copper project, as measured by average planned annual production
between 2012 and 2020, among the top 20 firm copper mining projects
scheduled to commence production of copper concentrates from 2012
to 2016. Three of these mining projects had commenced production as
of December 31, 2012. According to the Competent Persons Report,
the proved and probable JORC-compliant reserves of the Toromocho
Project deposit are estimated to contain approximately 7.3 million
tonnes of copper, 290,000 tonnes of molybdenum and 10,500 tonnes of
silver. The Toromocho Project is currently our only mining asset,
which we expect to rely on for substantially all of our revenue and
cash flows for the foreseeable future. We expect to commence
production during the fourth quarter of 2013 and reach full
production capacity in the third quarter of 2014. Upon commencement
of commercial production, we plan to process the copper sulphide
ores on-site and sell the copper concentrates primarily to China
for smelting and production of refined copper. We expect China to
be our primary market. Subject to us receiving arms-length
commercial terms, we may also sell our products to Chinalco and its
affiliates. We have entered into four binding offtake agreements
including definitive pricing terms with four cornerstone investors
for the sale of an aggregate of 60% of the Toromocho Projects
annual production of copper concentrates for a period of five years
from the starting date of production at the Toromocho Project, two
of which will automatically continue for another five years
thereafter. The Toromocho Project has a long estimated mine life
with significant potential for further exploration. Based on the
current estimated reserves and production plan, it is estimated
that the Toromocho Project can produce ores for 32 years and thus
has an estimated mine life of 32 years. Based on the current
design, the processing facilities will continue to process
recovered ores for four years after the end of the mine life, thus
giving the Toromocho Project a projected operating life of 36
years. According to the Competent Persons Report, there are
additional resources adjacent to the 1
8. SUMMARY planned open pit, which are also covered by our
mining concessions, and are estimated to contain approximately 2.7
million tonnes of copper, 92,000 tonnes of molybdenum and 5,200
tonnes of silver in measured, indicated and inferred JORC-compliant
resources. We believe that we will be able to further explore and
develop these resources once we complete the highway relocation
plan in connection with the Toromocho Project. We are currently in
discussion with and have submitted our proposed relocation plan to
the MTC. Upon our receipt of approval from the MTC, we will
commence the detailed engineering study, which we expect to
complete in approximately four months. The following tables
summarize our estimated ore reserves and mineral resources in
respect of the Toromocho Project as detailed in Appendix IV
Competent Persons Report. As our estimated ore reserves and mineral
resources come from different parts of the same ore body, they are
presented separately. JORC Ore Reserve Category Tonnes (millions)
Grade Metal Content Copper (%) Molybdenum (%) Silver (grams/tonne)
Copper (million tonnes) Molybdenum (tonnes) Silver (tonnes) Proved
. . . . . . . 756 0.51 0.02 6.39 3.9 150,000 4,800 Probable . . . .
. . 784 0.434 0.018 7.31 3.4 140,000 5,700 Total . . . . . . . .
1,540 0.471 0.019 6.86 7.3 290,000 10,500 JORC Measured and
Indicated Mineral Resources Category Grade Metal Content Tonnes
(millions) Copper (%) Molybdenum (%) Silver (grams/tonne) Copper
(million tonnes) Molybdenum (tonnes) Silver (tonnes) Measured . . .
. . 156 0.41 0.014 6.20 0.6 22,000 1,000 Indicated . . . . . 364
0.36 0.012 6.06 1.3 44,000 2,200 Total . . . . . . . . 520 0.37
0.013 6.10 1.9 66,000 3,200 JORC Inferred Mineral Resources
Category (Note) Tonnes (millions) Grade Metal Content Copper (%)
Molybdenum (%) Silver (grams/tonne) Copper (million tonnes)
Molybdenum (tonnes) Silver (tonnes) Inferred . . . . . . 174 0.460
0.015 11.54 0.8 26,000 2,000 Note: Measured, indicated and inferred
mineral resources are not included in the economic analysis in the
Competent Persons Report. We expect to enjoy competitive operating
and mining costs as a result of the Toromocho Projects rich ore
reserves, location and favorable geology. According to the
Competent Persons Report, the Toromocho Project is estimated to
have low operating cash costs after credits of approximately
US$1,508.8 per tonne (or approximately US$0.684 per pound) of
copper produced as compared with a large number of copper mines
across the globe. For example, the average operating cash costs of
the major copper mines in Peru and Chile are approximately
US$3,624.0 per tonne of copper produced and US$3,963.0 per tonne of
copper produced, respectively. Operating cash costs include mining
costs, processing costs, general and administration costs, selling
costs, environmental protection costs, production taxes, the
resource compensation levy, other cash cost items and the by-
product credit, and are generally recognized as a reliable
indicator for measuring the operating and mining costs of copper
mines. As a result of the geological characteristics, we are able
to employ the 2
9. SUMMARY conventional open pit mining technique, which
entails lower costs and fewer risks than underground mining. The
Toromocho Project also has a low estimated strip ratio at 0.79:1,
meaning that for every tonne of ore we mine, 0.79 tonnes of waste
materials will need to be removed. As a result, we expect to incur
low costs for the removal of waste materials, which results in
lower per unit mining costs. Established infrastructure support for
the Toromocho Project reduces our construction and operational
costs and lowers our operational risks. The Toromocho Project is
easily accessible via readily available transportation networks,
including public highways and railroads from both the Peruvian
capital city of Lima and the major exporting port of Callao. Water
and electricity supplies, which are essential to the mining
activities, will also be available from nearby facilities developed
by us. For example, water for the processing plant will be supplied
to the Toromocho Project from the Kingsmill Tunnel water treatment
plant developed and operated by us. Electricity will be supplied
from the nearby Pomacocha power station, and a 220 MW transmission
line will be installed between the power station and the Toromocho
Project, which is expected to be ready by the first quarter of
2013. Since the completion of our acquisition of the Toromocho
Project in May 2008, we have devoted substantial effort to
developing the Toromocho Project into an advanced development stage
and accomplished all its key pre-production milestones. We have
engaged Aker Solutions, a reputable leading mining consulting firm,
for EPCM services in relation to the Toromocho Project. We have
outsourced all of our exploration engineering work and most of the
Toromocho Project construction work to third-party contractors,
including Aker Solutions. We have also secured credit facilities
with an aggregate amount of US$2,118.0 million from Eximbank and
China Development Bank, which we believe, combined with our cash
and cash equivalents, the net proceeds from the Global Offering and
additional banking facilities we are negotiating, will provide
sufficient funding for us to bring the Toromocho Project to
production. The Environmental Impact Assessment in connection with
all the material aspects of the Toromocho Project was approved by
the Peruvian government in December 2010 and the construction
permit for the Toromocho Project was issued by the Peruvian
government in July 2011. Furthermore, we have purchased
substantially all of the key long-lead equipment and machinery,
completed the construction of a new town for local resident
resettlement, constructed a water treatment plant to supply and
treat water for the Toromocho Project and made investment in the
Callao port to facilitate the transportation of the products we
will produce. We plan to complete the construction of all the
mining and processing facilities in the fourth quarter of 2013. We
believe that the comprehensive preparation work that we have done
for the Toromocho Project minimizes the risk of delay and puts us
on track to achieve our target schedule for development and
production. We are controlled by Chinalco, a Fortune Global 500
company since 2008, and a leading metals and mining conglomerate
based in China, which has strong brand recognition with respect to
its mining, non-ferrous metal smelting and processing activities,
and international trading and engineering services. We believe that
we will continue to benefit from our relationship with Chinalco by
receiving its relevant technological, financial, operational,
procurement, sales and marketing support. We believe that by
leveraging our close ties with China and Chinalco, we will be able
to capitalize on our substantial mineral reserves and the strong
demand for copper and other non-ferrous metals globally,
particularly in China. 3
10. SUMMARY As of the date of this prospectus, we have not
commenced production at the Toromocho Project and have not recorded
any revenues and our pre-production activities have not generated
any positive operating cash flows. OUR COMPETITIVE STRENGTHS We
believe the following competitive strengths will not only
distinguish us from our competitors, but also contribute to our
success and potential for future growth: Acting as Chinalcos core
platform for the future acquisition, development and operation of
non-ferrous and non-aluminum mineral resources and projects
overseas Our strong growth potential stems in significant respects
from Chinalcos active global expansion strategy. As Chinalcos core
platform for the future acquisition, development and operation of
non-ferrous and non-aluminum mineral resources and projects
overseas, we believe that a wide range of potential acquisition
opportunities will be available to us. Ability to develop acquired
targets and synergistic collaboration with Chinalco We have
accumulated extensive experience in the development process of the
Toromocho Project. In developing the Toromocho Project, we have
leveraged Chinalcos technology and management expertise. We also
believe that our close ties with Chinalco will benefit us in
selling our products once production commences at the Toromocho
Project. Substantial mineral reserves and significant exploration
potential at the Toromocho Project to capture the increasing demand
for copper According to CRU, the Toromocho Project is the worlds
second largest pre-production copper project, as measured by proved
and probable copper ore reserves, and the third largest
pre-production copper project, as measured by average planned
annual production between 2012 and 2020, among the top 20 firm
copper mining projects scheduled to commence production of copper
concentrates from 2012 to 2016. We believe that our substantial
mineral reserves and our close ties with China position us well to
capitalize on the expected growth in demand for copper globally,
particularly in China. Competitive development and operational
costs of the Toromocho Project We enjoy competitive operating and
mining costs as a result of the Toromocho Projects rich ore
reserves, location and favorable geology. The Toromocho Project is
estimated to have low operating cash costs after credits of
approximately US$1,508.8 per tonne (or approximately US$0.684 per
pound) of copper produced as compared with a large number of copper
mines across the globe. The Toromocho Projects close proximity to
established infrastructure including water and power supplies and
transportation networks, including public highways and railroads,
as well as its relative close proximity to Lima, will also lead to
reduced construction and operational costs. 4
11. SUMMARY Advanced development stage of the Toromocho Project
and the favorable investment environment We have devoted
substantial effort to developing the Toromocho Project into an
advanced development stage, minimizing the risks of delay, and have
accomplished all its key pre-production milestones. We believe that
the favorable investment environment in Peru will also facilitate
us in ensuring the timely execution of the Toromocho Project.
Experienced and motivated international management team supported
by local execution experts with proven track record We have an
experienced management team with extensive knowledge and expertise
in the mining industry, and in particular, the development and
acquisition of overseas mining projects. We have proposed to adopt
an equity incentive plan designed to attract, retain and
incentivize senior management and key employees with a view to
encouraging the participants to commit to enhancing value for us
and our shareholders, as a whole. OUR BUSINESS STRATEGIES We aim to
become a leading diversified-resources company focusing on
non-ferrous and non-aluminum mining projects outside China by
implementing the following strategies: Engage in strategic and
selective acquisition to drive our growth We plan to focus on
acquiring or establishing alliances with non-ferrous and non-
aluminum mines that are already producing or near production. In
the short-term, we plan to prioritize the acquisition of copper
mining projects while assessing other non- ferrous and non-aluminum
mining projects. In the mid- to long-term, we plan to expand our
focus to include other non-ferrous and non-aluminum mines.
Geographically, we plan to focus on South America first, and then
further extend our reach to Africa and Asia (except China). Ensure
timely construction of mining and processing facilities at the
Toromocho Project We have started the construction of our mining
and processing facilities and target to complete the construction
of these facilities in the fourth quarter of 2013. We will continue
to collaborate with reputable third-party contractors to ensure a
timely and efficient construction process. We also plan to continue
to maintain collaborative relationships with the local government
and communities to ensure a smooth project development. Optimize
our operation and production capacities and further explore and
develop potential mineral reserves Our production processes are
being developed and refined by our mining and technology experts
and are expected to have low consumables and equipment costs and
5
12. SUMMARY improved minerals recovery rates. All of these are
essential for a cost efficient mining operation. We have also
engaged in detailed feasibility studies and planning activities to
efficiently utilize our potential mineral resources at the
Toromocho Project. In particular, we plan to procure additional
equipment to increase our designed ores processing rate by
approximately 26% to 148,000 tonnes per day. Further leverage on
our close relationship with Chinalco We will continue to leverage
our relationship with Chinalco to obtain relevant technological,
financial, operational, procurement, sales and marketing support
including its sales network and collaborative relationship with
infrastructure developers, equipment suppliers and governments.
Attract, motivate and develop talented and experienced staff We
plan to continue to focus on the recruitment and cultivation of a
high-quality and professional workforce, provide career development
programs for our employees, provide competitive compensation
packages and create a collegial culture that promotes our employees
personal and professional development. Promote corporate social
responsibility We plan to continue to undertake international
safety, environmental and social responsibility best practices
during the construction and production stage of the Toromocho
Project. In particular, we plan to continue our dedication in
reducing pollution from our operating and mining activities,
improving the living standard of the Morococha community and
maintaining high workplace safety standards. RELATIONSHIP WITH
CONTROLLING SHAREHOLDERS Chinalco, through its wholly-owned
subsidiary, COH, indirectly holds 100% of our issued share capital
immediately prior to the Global Offering. Although Chinalco will
indirectly hold approximately 85% of our issued share capital
immediately upon completion of the Global Offering but before the
exercise of the Over-allotment Option, the management of the Group
as well as the administration, operations and finances of the Group
will be independent of Chinalco. To strengthen the delineation of
business, Chinalco has confirmed that the Group will act as
Chinalcos core platform for the future acquisition, investment,
development and operation of non- ferrous and non-aluminum mineral
resources and projects overseas. Chinalco has also provided a non-
competition undertaking in favor of the Company to the effect that
Chinalco itself will not, and will procure its subsidiaries
(excluding its listed subsidiaries) not to, directly or indirectly
compete with our core business in the regions we operate and has
granted the Company a right to acquire competing businesses engaged
in by any member of the Chinalco Group (excluding listed
subsidiaries of Chinalco), a right of first refusal to acquire
competing business opportunities in priority to any member of the
Chinalco Group (excluding listed subsidiaries of Chinalco) and a
call option over, and a further right of first refusal on any
disposal of, any competing businesses over which our Company did
not exercise the right of first refusal referred to above. 6
13. SUMMARY The Company has not entered into any offtake
arrangements with Chinalco. Although in the cooperation agreement
between Chinalco, Yunnan Copper Group and Yunnan SASAC, it was
agreed that copper concentrates shall be first offered to Yunnan
Copper Group to satisfy its production requirements, the Company
believes that this will not affect its operational independence as
the demand for copper concentrates has continued to surpass supply
in recent years, the global demand for copper is expected to grow
in the next few years and Chinalco has undertaken that it will use
available measures to procure Yunnan Copper Group not to exercise
such right. For additional information about our relationship with
our Controlling Shareholders, see Relationship with Controlling
Shareholders. ESTIMATED CAPITAL AND OPERATING COSTS Our total
capital cost consists of mining costs, process plant and
infrastructure costs, the owners cost and contingency. The
estimated total capital cost as disclosed in the Competent Persons
Report included in Appendix IV to this prospectus was based on the
detailed engineering study completed in the second quarter of 2012.
Set forth below is our estimated total capital costs based on the
Competent Persons Report and the costs incurred as of September 30,
2012: Competent Persons Report Costs incurred as of September 30,
2012(1) (US$ in millions) Mining . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 297.4 72.9 Process Plant and Infrastructure .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 1,839.5 1,208.1 Owners Cost(2) . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 626.2 400.7 Additional Projects(3) . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 622.6 355.4 Subtotal . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 3,385.6 2,037.1 Contingency
Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Process
and Infrastructure . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 32.4 Owners Cost . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 22.0 Subtotal . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 60.5 Working Capital . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 56.0 Total . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 3,502.1 2,037.1 Notes: (1) The costs
incurred were accounted as cash used in operating activities and
cash used in investing activities. (2) Owners cost consists of
costs associated with force majeure events, project insurance,
social outreach, contract services, licenses and royalties,
financial costs, taxes, exchange rate fluctuations, commissioning
and pre-operational costs and acquisitions of property. (3)
Additional projects consist of the costs incurred in relation to
the lime processing plant, Kingsmill Tunnel water treatment plant,
double circuit overhead transmission line, central highway
relocation, investment in the Callao port, acquisition of certain
mining concessions from Pan American Silver with the relevant
financing interest, new town construction and resettlement. 7
14. SUMMARY Our estimated operating cash costs for the
Toromocho Project consist of mine operating costs, operating costs
for the concentrator, molybdenum hydrometallurgical plant and
infrastructure, general and administrative costs and our royalty
payments to Centromin. Our mine operating costs include all the
supplies, parts and labor costs associated with the mine
supervision, operation and equipment maintenance. According to the
estimation in the Competent Persons Report, which is based on the
feasibility study in 2007 with subsequent adjustments, the
estimated average annual operating cash costs for the Toromocho
Project is approximately US$444.0 million from 2013 to 2049. Over
the period, we estimate our operating cash costs to be
approximately US$16.4 billion in total. Set forth below is a
breakdown of our estimated average annual operating cash costs for
the Toromocho Project from 2013 to 2049. See Appendix IV Competent
Persons Report in this prospectus for further details. Average
Annual Operating Cash Cost from 2013 to 2049 Per unit cost (US$)
Cash cost (US$ in thousands) Mining ores and waste . . . . . . . .
. . . . . 1.66 (per tonne of material moved) 118,942 Reclaim from
stockpile . . . . . . . . . . . . 0.89(1) (per tonne of stockpile
moved) 4,516 Processing (milling) . . . . . . . . . . . . . . .
5.28 (per tonne of ores milled) 219,817 Molybdenum plant . . . . .
. . . . . . . . . . . 3,612 (per tonne of moly oxide produced)
18,535 Processing infrastructure . . . . . . . . . . . 0.06 (per
tonne of ores milled) 2,498 Processing G&A . . . . . . . . . .
. . . . . . . . 1.42 (per tonne of ores milled) 59,117 Centromin
royalty . . . . . . . . . . . . . . . . . 20,568 Total . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 443,993 (1) Not
applicable from 2013 to 2044. Based on the current estimation as
detailed in Appendix IV Competent Persons Report, income generated
by the Toromocho Project will exceed the operating costs starting
from January 2014, which is the first full year of production.
Based on our current estimation, we will spend another US$1.5
billion for the development of the Toromocho Project for the period
after September 30, 2012 and before the commencement of commercial
production in the fourth quarter of 2013. 8
15. SUMMARY SUMMARY HISTORICAL FINANCIAL INFORMATION The
following summary historical data of consolidated statements of
comprehensive income and the consolidated statements of financial
position set forth below have been derived from the Accountants
Report included in Appendix I to this prospectus. You should read
the summary historical financial information below in conjunction
with our consolidated financial information included in Appendix I
Accountants Report, which have been prepared in accordance with
IFRS. Summary Consolidated Statements of Comprehensive Income For
the year ended December 31, For the nine months ended September 30,
2009 2010 2011 2011 2012 (unaudited) (US$ in thousands, except for
per share data) Revenue . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . Other (loss)/gain, net . . . . . . .
. . . . . . . . . . . . . . . . . . . (85) 317 205 130 671
Operating costs General and administrative expenses . . . . . . . .
. . (9,053) (11,612) (19,705) (10,396) (17,910) Operating loss . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,138)
(11,295) (19,500) (10,266) (17,239) Finance income . . . . . . . .
. . . . . . . . . . . . . . . . . . . 2,896 1,507 451 373 2,169
Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . (1,723) (1,088) (2,744) (1,545) (1,887) Finance income/(costs),
net . . . . . . . . . . . . . . . . . . . . . 1,173 419 (2,293)
(1,172) 282 Loss before income tax . . . . . . . . . . . . . . . .
. . . . . . . . . (7,965) (10,876) (21,793) (11,438) (16,957)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 3,266 3,411 5,281 2,973 3,731 Loss for the year/period .
. . . . . . . . . . . . . . . . . . . . . . . (4,699) (7,465)
(16,512) (8,465) (13,226) Other comprehensive income for the
year/period, net of tax . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . Total comprehensive loss for the
year/period . . . . . . (4,699) (7,465) (16,512) (8,465) (13,226)
Loss per share for loss attributable to the equity owners of the
Company (expressed in US$ per share) Basic and diluted . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . (0.001) (0.002)
(0.001) (0.001) Dividends . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 9
16. SUMMARY Summary Consolidated Statements of Financial
Position As of December 31, As of September 30, 20122009 2010 2011
(US$ in thousands) Assets Non-current assets . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 347,986 742,898 1,505,001
2,377,368 Current assets . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 11,723 188,959 185,627 241,809 Total
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 359,709 931,857 1,690,628 2,619,177 Equity and
Liabilities Non-current liabilities . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 180,474 672,536 1,065,984 1,892,532 Current
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 157,254 189,358 246,373 361,600 Total liabilities . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
337,728 861,894 1,312,357 2,254,132 Total equity . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,981 69,963 378,271 365,045 Total Liabilities and Equity . . . .
. . . . . . . . . . . . . . . . . . . . . . . 359,709 931,857
1,690,628 2,619,177 LOSS ESTIMATE FOR THE YEAR ENDED DECEMBER 31,
2012 All statistics in this table are based on the assumptions that
the Over-allotment Option is not exercised. Estimate Estimated
consolidated loss attributable to the equity owners of the
Company(1) . . . not more than US$21 million Unaudited pro forma
estimated loss per Share(2) . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . not more than US$0.002 Notes: (1) The bases on
which the above loss estimate has been prepared are set out in
Appendix III to this prospectus. (2) The calculation of the
estimated loss per Share on a pro forma fully diluted basis is
based on the estimated consolidated loss attributable to the equity
owners of our Company for the year ended December 31, 2012,
assuming that we had been listed since January 1, 2012 and a total
of 11,766,084,428.58 Shares had been issued and outstanding during
the entire year. The estimate is presented on the bases consistent
in all material respects with the accounting policies currently
adopted by us as set out in the Accountants Report dated January
18, 2013 (the text of which is set out in Appendix I Accountants
Report to this prospectus). OFFER STATISTICS All statistics in this
table are based on the assumptions that the Over-allotment Option
is not exercised and no options are granted. Based on an Offer
Price of HK$1.52 per Share Based on an Offer Price of HK$1.91 per
Share Market capitalization(1) . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . HK$17,884.4 million HK$22,473.2 million
Unaudited pro forma adjusted net tangible assets per Share(2) . .
HK$0.46 HK$0.52 Notes: (1) The calculation of market capitalization
is based on 11,766,084,428.58 Shares expected to be issued and
outstanding following the Global Offering. (2) The unaudited pro
forma adjusted net tangible assets per Share is arrived at after
the adjustments referred to in the section entitled Financial
Information Unaudited Pro Forma Adjusted Net Tangible Assets on
page 223 of this prospectus and on the basis of 11,766,084,428.58
Shares in issue at the respective Offer Prices of HK$1.52 per Share
and HK$1.91 per Share. 10
17. SUMMARY NO MATERIAL ADVERSE CHANGE Our Directors confirmed
that, as of the date of this prospectus, there has been no material
adverse change in our financial or trading condition or prospects
subsequent to the Track Record Period. DIVIDEND AND DIVIDEND POLICY
We have not declared or paid any dividends since our incorporation.
We do not anticipate paying any dividends in the foreseeable
future. Subject to the Companies Law and its Articles of
Association, the Company in a general meeting may declare dividends
in any currency but dividends may not exceed the amount recommended
by the Directors. Dividends may not be declared or paid other than
out of the profits and reserves of the Company which are lawfully
available for distribution. Unless the rights attached to any
Shares or the terms of issue thereof otherwise provide, all
dividends shall (as regards any Shares not fully paid throughout
the period in respect of which the dividend is paid) be apportioned
and paid pro rata according to the amounts paid up on the Shares
during any period or the portion of any period in respect of which
the dividend is paid. See Financial Information Dividend Policy for
further details. We are an investment holding company incorporated
in the Cayman Islands. Currently, all of our operations are in
Peru. For the foreseeable future, our ability to pay dividends will
depend substantially on the payment of dividends to us by our
subsidiaries in Peru. Our Peruvian subsidiaries may only pay
dividends out of their accumulated distributable profits, if any,
determined in accordance with their articles of association, and
the accounting standards and the laws and regulations of Peru.
Moreover, pursuant to relevant Peruvian laws and regulations
applicable to our subsidiaries in Peru, our Peruvian subsidiaries
are required to set aside a certain amount of their accumulated
profits each year, if any, as statutory reserves. These reserves
may not be distributed as cash dividends. If any of our
subsidiaries incurs debt on its own behalf in the future, the
instruments governing the debt may restrict its ability to pay
dividends or make other payments to us. Furthermore, our Peruvian
subsidiaries with more than 20 employees are required to distribute
8% of their profits generated in any year among their employees. In
addition, our dividend distribution is subject to the terms and
restrictive covenants of our existing loans and other financing
agreements and may be subject to additional terms and covenants
from agreements into which we enter in the future. Pursuant to the
loan agreement between Chinalco Peru and Eximbank, Chinalco Peru
has agreed not to distribute dividends to its shareholders in any
form where there is any principal, interest or other sum thereunder
which is unpaid after becoming due and payable. During the Track
Record Period, we did not distribute any dividends because we did
not generate any distributable profit. 11
18. SUMMARY TAX IN PERU ON CAPITAL GAINS REALIZED ON TRANSFERS
OF OUR SHARES Please note that the following is a non-exhaustive
summary of the main requirements with regard to capital gains
taxable in Peru derived from indirect transfers. To date the
Peruvian tax authority has not published detailed rules in relation
to this tax. The Company will make an announcement if such detailed
rules are published in the future. Prospective purchasers of our
Shares should consult their own tax advisors as to the applicable
tax consequences, including capital gains subject to tax in Peru,
of the purchase, ownership and disposal of our Shares. The Company
will include references to this tax and actions that should be
taken by prospective investors to comply with it on its website and
in the formal notice published by the Company dated January 18,
2013 in relation to the Global Offering. Overview Under Peruvian
law, capital gains realized on an indirect transfer of shares in a
Peruvian company may, in certain circumstances, be subject to tax
in Peru (generally at a rate of 30%). To qualify as an indirect
transfer, the transfer must be of shares in a non-Peruvian company
which directly or indirectly holds shares in a Peruvian company,
and where at least one of the following criteria is met: the market
value of the Peruvian company accounted for 50% or more of the
market value of the non-Peruvian company at any time during the 12
months preceding the transfer; or the non-Peruvian company is
resident in a tax haven (unless the seller can demonstrate that the
criterion in the previous bullet point is not met). In addition, if
the transferor is not resident in Peru, in order to be taxable the
indirect transfer must represent in aggregate 10% or more of the
total shares in the non-Peruvian company in any 12- month period.
Conversely, if the transferor is resident in Peru, the indirect
transfer may be subject to tax in Peru regardless of the percentage
in the non-Peruvian company that the transfer represents. In this
case, the resulting gain may be subject to tax either as foreign
source or Peruvian source income at a rate that will depend on the
nature of the investor (corporate or individual). Relevance to
investors in our Company Our Company is a non-Peruvian company that
holds shares in Peruvian companies (our subsidiaries in Peru), the
market value of which subsidiaries accounted for more than 50% of
our market value during the 12 months preceding the date of this
prospectus. Our Company is also regarded as resident in a tax haven
at the date of this prospectus. As a result of this, capital gains
realized by a seller not resident in Peru on the sale of 10% or
more of our Shares in any 12- month period (or by a seller resident
in Peru on the sale of any number of our Shares) may be subject to
tax in Peru (generally at a rate of 30%). If so, the seller may be
required to undertake a self-assessment process, complete a tax
payment form or return issued by the Peruvian tax authority and pay
the tax through an authorized Peruvian bank. Alternatively, if the
purchaser 12
19. SUMMARY of such Shares is resident in Peru, it may be
required to withhold the tax when paying the purchase price. If
this tax is payable, it is the gain of the selling Shareholder, as
seller of the ultimate beneficial interest in the Shares, that is
taxed. We have been advised by Rebaza, Alcazar & De Las Casas
Abogados Financieros, our Peruvian legal advisor, that Peruvian tax
law will disregard the fact that Shares deposited in CCASS are held
in the name of HKSCC Nominees and may also be held through a broker
or custodian. Consequently, a selling Shareholders gain may be
subject to capital gains tax even where legal title to the Shares
remains with HKSCC Nominees and where the selling Shareholder
and/or the buying Shareholder hold the Shares through the same or
different custodians or brokers. The Peruvian capital gains tax
would not be payable by the broker(s) or custodian(s) or by HKSCC
Nominees, including in circumstances where HKSCC Nominees transfers
legal title to a Shareholder to hold directly. Similarly, for the
purpose of determining whether a Shareholder has transferred 10% or
more of our Shares in any 12-month period, aggregation will apply
at the level of the Shareholder (as ultimate beneficial owner) and
not at the level of HKSCC Nominees or any broker or custodian.
Hence, transfers by different Shareholders would not be aggregated
for the purpose of determining whether the 10% threshold is reached
solely because all their Shares were held legally in the name of
HKSCC Nominees and/or held through the same broker or custodian. At
the date of this prospectus, detailed rules for aggregating
transfers for the purpose of determining whether or not the 10%
threshold has been reached have not been published by the Peruvian
tax authority, although it is anticipated that future regulations
may address this point. The Company will make an announcement if
such detailed rules are published in the future. See Laws and
Regulations Relating to the Industry Summary of Peruvian Laws and
Regulations Regarding Taxation Tax in Peru on capital gains
realized on transfers of our Shares for further details. Selling
Shareholder not resident in Peru self-assessment and payment In
summary, in order to comply with the obligations imposed under
Peruvian law, a Shareholder not resident in Peru who is liable to
this tax must follow the process set out on page 117 in the section
headed Laws and Regulations Relating to the Industry Summary of
Peruvian Laws and Regulations Regarding Taxation Tax in Peru on
capital gains realized on transfers of our Shares in this
prospectus. Payment by a seller not resident in Peru of any tax due
must be made within the first twelve working days of the month
after the month in which the sale proceeds are received. Tax that
is not paid on time will accrue interest. If a Peru resident
purchaser withholds the tax due as set out in the following
section, the selling Shareholder is not required to complete the
self-assessment process referred to above or pay the tax due.
13
20. SUMMARY Purchaser resident in Peru withholding tax due from
purchase price Under Peruvian law, if tax on capital gains is due
on a transfer of our Shares by a seller not resident in Peru, a
purchaser who is resident in Peru must withhold the tax when paying
the purchase price. We have been advised by our Peruvian legal
advisor that it is reasonably expected that future regulations will
create an exception to this requirement for transfers made on a
stock exchange through a central clearing and settling system,
where it is impracticable for a purchaser to obtain sufficient
information about the seller of the Shares that it purchases.
Whilst at present no such exception exists, it is reasonably
expected that the withholding requirement would not apply to
transfers of our Shares that are centrally cleared and settled
through CCASS on the basis that the purchaser would not have
sufficient information about the seller to determine whether any
capital gains tax should be withheld. Failure by a purchaser
resident in Peru to withhold and pay tax will result in a penalty
of 50% of the amount not withheld; any unpaid tax will accrue
interest and the purchaser would become joint and severally liable
with the seller for the unpaid tax. In this case, the seller will
also remain liable to pay tax as described under the heading
Selling Shareholder not resident in Peru Self-assessment and
payment above. Selling Shareholder resident in Peru Shareholders
resident in Peru who are liable to tax on capital gains must file
the corresponding return and pay the corresponding tax taking into
account the tax regime to which they are subject. Peruvian
residents must pay tax on capital gains realized on transfers of
our Shares regardless of how many Shares they sell the 10%
threshold is only relevant to them with respect to determining the
source of the income. Failure to file the respective return and pay
the corresponding tax will result in a penalty that will depend on
the nature of the taxpayer and any unpaid tax will accrue interest.
More details in relation to the capital gains tax liability of
Shareholders are set out in the section headed Laws and Regulations
relating to the Industry Summary of Peruvian Laws and Regulations
regarding Taxation Tax in Peru on capital gains realized on
transfers of our Shares in this prospectus. Joint and several
liability and reporting obligations of our Peruvian subsidiaries A
Peruvian company whose shares are transferred indirectly is jointly
and severally liable with the non-Peru resident seller who
generates the capital gain for the resulting tax if, at any time
during a twelve-month period prior to the transfer, the seller and
the Peruvian company were related parties for the purpose of the
Peruvian Income Tax Law. It is anticipated that the definition of
related parties for this purpose will be established in regulations
to be published in the future. We have been advised by Rebaza,
Alcazar & De Las Casas Abogados Financieros, our Peruvian legal
advisor, that there are reasonable grounds to assert that the
Stability Agreement signed by Chinalco Peru with the Peruvian
Government would prevent the application of this joint and several
liability with respect to Chinalco Peru, both because of the unique
nature of the liability (which imposes a direct burden on Chinalco
Peru) and because the Stability Agreement contains a clause that
protects Chinalco Peru against any subsequent change in law which
would otherwise void the 14
21. SUMMARY guarantees granted therein. However, there is a
risk that the Peruvian tax authority would adopt the position that
the joint and several liability applies to Chinalco Peru despite
the existence of the Stability Agreement, but if it were to do so
Chinalco Peru would have reasonable grounds to defend its position
before a tax tribunal. In addition, this joint and several
liability would not apply when the purchaser is resident in Peru
since such a purchaser would be obligated to withhold the
corresponding tax from its purchase price. If we are held jointly
and severally liable for such tax liability, our overall tax burden
will increase, which may have a material and adverse effect on our
business, financial condition, results of operations and prospects.
Peruvian companies are required to report to the Peruvian tax
authority indirect transfers of their shares. This obligation is
not affected by the Stability Agreement. As there is no strict
obligation on shareholders to report their indirect transfers of
shares in a Peruvian company to that Peruvian company, it would be
difficult for the Groups Peruvian subsidiaries to obtain the
information necessary to comply with this reporting obligation. To
this end we intend to monitor the public disclosures of changes in
significant shareholdings in our Company made pursuant to Part XV
of the Hong Kong Securities and Futures Ordinance, although this
would not always allow the Company to determine whether an indirect
transfer has been made. USE OF PROCEEDS We estimate that we will
receive net proceeds from the Global Offering ranging from
approximately HK$2,565.7 million (assuming an Offer Price of
HK$1.52 per Share, being the lower end of the estimated Offer Price
range) to HK$3,254.0 million (assuming an Offer Price of HK$1.91
per Share, being the higher end of the estimated Offer Price
range), after deducting the underwriting fees and commissions and
estimated expenses payable by us in relation to the Global Offering
and assuming the Over-allotment Option is not exercised. We intend
to use the net proceeds we will receive from the Global Offering
for the following purposes: approximately 30% of the net proceeds
(approximately HK$769.7 million to HK$976.2 million) to fund the
future capital requirements of the Toromocho Project, including
commissioning the processing facilities and ramping up production
capacity; approximately 30% of the net proceeds (approximately
HK$769.7 million to HK$976.2 million) to optimize our capital
structure, including repaying the outstanding loan from COH;
approximately 30% of the net proceeds (approximately HK$769.7
million to HK$976.2 million) to pursue selective acquisitions of
suitable non-ferrous and non-aluminum mining projects and
development of the acquired projects; and approximately 10% of the
net proceeds (approximately HK$256.6 million to HK$325.4 million)
for working capital and other general corporate purposes. 15
22. SUMMARY In the event that the Over-allotment Option is
exercised in full, we estimate that we will receive additional net
proceeds ranging from approximately HK$396.4 million (assuming an
Offer Price of HK$1.52 per Share) to HK$498.1 million (assuming an
Offer Price of HK$1.91 per Share). We intend to apply the
additional net proceeds to the above uses in the proportions stated
above. To the extent that the net proceeds of the Global Offering
are not immediately used for the purposes described above, they
will be placed on deposit with banks or other financial
institutions or held in other treasury instruments. LISTING
EXPENSES As of September 30, 2012, we had incurred expenses in
connection with the proposed Global Offering of US$4.0 million,
which were accounted for as our general and administrative expenses
for the nine months ended September 30, 2012. By the completion of
the Global Offering, we expect to further incur an estimated amount
of US$11.0 million of expenses which is subject to adjustment to be
agreed by the Company, the Joint Bookrunners and other parties. We
do not believe the additional expenses will have a material impact
on our results of operations. LEGAL PROCEEDINGS Construction of New
Town We filed three lawsuits against administrative resolutions
surrounding the construction permit for the new town of Morococha.
We have obtained a preliminary relief that allows us to perform the
construction work. The construction of the new town was completed
in the third quarter of 2012. We have lost one of the lawsuits at
the entry level court and at the court of appeals. We have appealed
the decisions to the Peruvian Constitutional Court. Our Peruvian
legal advisor is of the view that we have valid ground to obtain a
favorable ruling in the appeal, and it is likely the court will
follow its decision in granting the preliminary relief and rule in
favor of us for the other two cases. Mining Council Resolution We
filed two lawsuits to challenge part of a resolution issued by the
Mining Council of the MEM that requires additional assessments on
the waste materials deposit. We argue that the Mining Council does
not have authority to impose requirement not required by law. The
land to be used as the waste materials deposit is named Cajoncillo
and is owned by us, but there is a third party conducting
underground mining activities on the land. We have filed a separate
lawsuit to evict this third party. See Land Ownership. Previously,
we secured a preliminary injunction that suspended the additional
requirement by the Mining Council. However, as the injunction has
been overturned, the MEM can request us to conduct the assessment
before issuing the mining plan 16
23. SUMMARY permit. As of the Latest Practicable Date, the MEM
has not initiated or requested the assessment. Meanwhile, we have
engaged a third party consultant to conduct the assessment and
obtained a favorable conclusion. We can deliver the assessment
report to the MEM if so requested. Based on our communication with
the MEM, we still expect to receive the mining plan permit in the
first quarter of 2013. Our Peruvian legal advisor is of the view
that, as it has been established that the Mining Council has no
authority to impose a requirement not required by law, the court
will rule in favor of us for both of the two cases and the
contingency from these two cases is remote. The local government
also challenged the Mining Councils resolution that approves the
EIA, arguing that they should have been included in the approval
process. It has been established that the claim was filed in a
restricted period during which the local government is not allowed
to challenge the Mining Councils resolution. Our Peruvian legal
advisor is of the view that this case should be dismissed on
procedural ground. Also, our Peruvian legal advisor advised us that
the Mining Councils resolution approving the EIA is valid, and that
the Mining Council has followed all the legal requirements of the
approval process. Land Ownership We filed two separate lawsuits
over the ownership of the land named Cajoncillo and evict the
tenant of another party who claims to be the owner. We plan to use
this parcel of land as our waste materials deposit. The Mining
Council has requested additional request to be conducted, and we
have filed two separate lawsuits against such request. See Mining
Council Resolution. We have obtained an injunction that prohibits
further mining activities on the land. Our Peruvian legal advisor
is of the view that we, as the record owner, are likely to prevail
in the two cases. The Yauli community also filed a lawsuit claiming
that the sales agreement for a parcel of land purchased by us is
not legally binding as we failed to satisfy certain legal
requirements. Our Peruvian legal advisor is of the view that the
sales agreement is valid and that we have satisfied all the legal
requirements, and that we should be able to obtain a favorable
ruling. 17
24. SUMMARY RISK FACTORS There are certain risks relating to an
investment in our Shares. These risks can be broadly categorized
into: (i) risks relating to our business; (ii) risks relating to
our industry; (iii) risks relating to doing business in Peru; and
(iv) risks relating to the Global Offering. We have highlighted
certain of these risks below. A detailed discussion of the risk
factors is set forth in the section titled Risk Factors. We may not
be able to identify or pursue suitable acquisition opportunities of
mining projects and mineral production assets and we may not be
able to fully realize the desired benefits from any mining projects
or mineral assets that we acquire. There can be no assurance that
we will benefit from our relationship with Chinalco to the extent
we expect in seeking acquisition opportunities. Moreover, we may
face difficulties in integrating the acquired assets into our
operations. We may not commence commercial production at the
Toromocho Project as planned, our capital expenditure for the
Toromocho Project may exceed our current estimates, and the
Toromocho Project may not achieve the predicted economic results or
commercial viability. The Toromocho Project is subject to design
and technical risks and may not operate as expected upon
completion. We expect to depend on the Toromocho Project, which is
still under development, for substantially all of our revenue and
cash flows for the foreseeable future. The Toromocho Project is
currently our only mining asset. If we fail to derive the expected
economic benefits from it, our financial condition and results of
operations may be materially and adversely affected. Failure to
achieve our production estimates could have a material adverse
effect on our future cash flow, results of operations and financial
condition. Actual production may vary from our estimates due to
certain risks and hazards. Disputes about the construction permit
of the new town of Morococha may result in delay of our
resettlement process or materially and adversely impact our
financial condition. If the Supreme Court rules against us in these
disputes, we may need to apply for a new construction permit which
could delay the resettlement process and our production schedule.
In addition, the local government may vacate and demolish the new
town that has been completed and require us to bear the additional
cost of an alternative resettlement plan initiated by the local
government, which may materially and adversely impact our financial
condition. The additional requirement imposed by the Mining Council
may delay the approval process of our mining plan permit, which may
result in a delay in our production schedule. 18
25. SUMMARY Our receipt of the mining plan permit may be
delayed by the additional requirement imposed by the Mining
Council, which may in turn delay our production schedule.
Challenges on the Mining Councils resolution may result in delay or
suspension of our production, which may have a material adverse
impact on our business, results of operations and financial
condition. If the local government of Morococha files another
judicial claim outside the restricted period and the Supreme Court
nullifies the Mining Councils resolution, our production schedule
may be delayed or our production activities may be suspended. We
may not be able to obtain sufficient financing to fund the
expansion and development of our business. In light of current
global financial condition, we may not be able to obtain sufficient
funding when it is required on commercially acceptable terms. We
recorded negative operating cash flow in 2009, 2010, 2011 and the
nine months ended September 30, 2012. There can be no assurance
that we will record positive operating cash flow in the future. We
did not have any revenues during the Track Record Period. There can
be no assurance that we will generate sufficient cash flow from our
operations in the future. Fluctuations in the market prices of
copper and other non-ferrous metals that we may produce from time
to time could materially and adversely affect our business,
financial condition, results of operations and prospects.
Historically, the market prices for copper and other non-ferrous
metals have fluctuated widely. Their market prices may fall in the
future. 19
26. DEFINITIONS In this prospectus, unless the context
otherwise requires, the following expressions have the following
meanings: Activos Mineros Activos Mineros S.A.C., a state-owned
mining company incorporated under the laws of Peru which is an
Independent Third Party and executed the Mining Concessions
Transference Agreement of the Toromocho Mining Project with the
Company Aker Solutions Aker Solutions Peru S.A., a subsidiary of
Jacobs Engineering Group and an Independent Third Party Application
Form(s) WHITE application form(s), YELLOW application form(s) and
GREEN application form(s), or where the context so requires, any of
them, relating to the Hong Kong Public Offer Argentum Compaa Minera
Argentum S.A., a company incorporated under the laws of Peru and an
Independent Third Party to which Chinalco Peru assigned certain
mining concessions Articles of Association or Articles the articles
of association of our Company, conditionally adopted on May 8, 2012
and to take effect upon Listing and as amended from time to time, a
summary of which is set out in Appendix V to this prospectus
associate(s) has the meaning ascribed thereto under the Listing
Rules AUD Australian dollars, the lawful currency of Australia
Austria Duvaz Sociedad Minera Austria Duvaz S.A.C., a company
incorporated under the laws of Peru and an Independent Third Party
which executed a framework agreement with the Company relating to
certain mining concessions located near the Toromocho Project and
to which Chinalco Peru assigned certain mining concessions Behre
Dolbear Behre Dolbear Asia, Inc., a wholly-owned subsidiary of
Behre Dolbear & Company, Inc., part of Behre Dolbear Group
Inc., our independent technical consultant BNP Paribas BNP Paribas
Capital (Asia Pacific) Limited Board or Board of Directors the
board of directors of our Company Business Day a day on which banks
in Hong Kong are generally open for normal banking business to the
public and which is not a Saturday, Sunday or public holiday in
Hong Kong 20
27. DEFINITIONS CAD Canadian dollars, the lawful currency of
Canada Cal del Centro Cal del Centro S.A.C., a company incorporated
in Peru and a subsidiary of our Company Callao Concession Agreement
the concession agreement relating to a specialized dock for mineral
concentrates located in the north of the Callao port, near to Lima,
Peru, entered into by and between Transportadora Callao and the
Government of Peru, dated January 28, 2011 CCASS the Central
Clearing and Settlement System established and operated by HKSCC
CCASS Clearing Participant a person admitted to participate in
CCASS as a direct clearing participant or general clearing
participant CCASS Custodian Participant a person admitted to
participate in CCASS as a custodian participant CCASS Investor
Participant a person admitted to participate in CCASS as an
investor participant, who may be an individual or joint individuals
or a corporation CCASS Participant a CCASS Clearing Participant, a
CCASS Custodian Participant or a CCASS Investor Participant CCBA
China Construction Bank (Asia) Corporation Limited CCBI CCB
International Capital Limited Centenario Minera Centenario S.A.C.,
a company incorporated under the laws of Peru and a subsidiary of
our Company Centromin Empresa Minera del Centro del Per S.A., a
state-owned mining company incorporated under the laws of Peru
which executed the Toromocho Project Option Agreement with Chinalco
Peru and assigned its rights and obligations under such agreement
to Activos Mineros Chalco Aluminum Corporation of China Limited (
), a subsidiary of Chinalco and listed on the Stock Exchange, New
York Stock Exchange and Shanghai Stock Exchange China or PRC the
Peoples Republic of China excluding Hong Kong, the Macau Special
Administrative Region of the PRC and Taiwan 21
28. DEFINITIONS China Great Wall China Great Wall Aluminum
Construction Corporation, a company incorporated under the laws of
the PRC and an indirectly wholly-owned subsidiary of Chinalco
Chinalco Aluminum Corporation of China ( ), a state-owned
enterprise incorporated under the laws of the PRC and our indirect
controlling shareholder Chinalco Canada Chinalco Canada B.C.
Holdings Ltd., a company incorporated under the laws of the
Province of British Columbia and a wholly-owned subsidiary of
Chinalco Chinalco Group Chinalco and its subsidiaries, excluding
the Group Chinalco Peru Minera Chinalco Per S.A. (formerly known as
Minera Peru Copper S.A. prior to July 25, 2008 and as Minera Peru
Copper Syndicate S.A. prior to May 17, 2005), a company
incorporated under the laws of Peru and a subsidiary of our Company
Chinalco Resources Chinalco Mineral Resources Co., Ltd. ( ), a
company incorporated under the laws of PRC and a wholly-owned
subsidiary of Chinalco CICC China International Capital Corporation
Hong Kong Securities Limited COH Aluminum Corporation of China
Overseas Holdings Limited ( ), a company incorporated in Hong Kong,
and our direct controlling shareholder Companies Law the Companies
Law (2012 Revision) of the Cayman Islands Companies Ordinance the
Companies Ordinance (Chapter 32 of the Laws of Hong Kong), as
amended from time to time Company and our Company Chinalco Mining
Corporation International ( ) (formerly known as Peru Copper
Syndicate, Ltd), an exempted company incorporated in the Cayman
Islands with limited liability on April 24, 2003 under the
Companies Law Competent Persons Report A technical report prepared
by Behre Dolbear dated November 2012 Connected Person has the
meaning ascribed thereto under the Listing Rules Controlling
Shareholder(s) has the meaning ascribed thereto under the Listing
Rules and, in the context of this prospectus, refers to COH and
Chinalco CRU CRU Strategies, the management consulting division of
the CRU Group, providing independent and proprietary advice to the
worlds leading metals, 22
29. DEFINITIONS mining and fertilizer companies, suppliers to
the industry, governments, and financial institutions CSRC the
China Securities Regulatory Commission of the PRC Debt
Reorganization Agreement the debt reorganization agreement dated
September 30, 2011 between the Company, COH and Chinalco Peru in
relation to the Reorganization DGAAM General Bureau of
Environmental Matters in Mining Activities under the MEM
Director(s) the director(s) of our Company Environmental Impact
Assessment or EIA means the Environmental Impact Assessment
relating to the Toromocho Project approved by the Mining Council of
MEM on December 14, 2010 Eximbank the Export-Import Bank of China,
a bank solely owned by the PRC government Global Offering the Hong
Kong Public Offer and the International Placing Green Application
Form(s) the application form(s) to be completed by the White Form
eIPO Service Provider, Computershare Hong Kong Investor Services
Limited Group, our Group, we, our, and us our Company and any or
all of its subsidiaries together or individually or, where the
context so requires in respect of the period before our Company
became the holding company of our present subsidiaries, the present
subsidiaries of our Company and the businesses carried on by such
subsidiaries HK$ and cents Hong Kong dollars and cents
respectively, the lawful currency of Hong Kong HKSCC Hong Kong
Securities Clearing Company Limited HKSCC Nominees HKSCC Nominees
Limited Hong Kong or HK the Hong Kong Special Administrative Region
of the PRC Hong Kong Offer Shares the 176,492,000 Shares being
initially offered by our Company for subscription under the Hong
Kong Public Offer at the Offer Price (subject to adjustment as
described in the section headed Structure of the Global Offering to
this prospectus) Hong Kong Public Offer the offer of the Hong Kong
Offer Shares for subscription by the public in Hong Kong for cash
at the Offer Price, on and subject to the terms and conditions
described in this prospectus and in the Application Forms relating
thereto 23
30. DEFINITIONS Hong Kong Underwriters the underwriters of the
Hong Kong Public Offer listed in Underwriting Hong Kong
Underwriters in this prospectus Hong Kong Underwriting Agreement
the underwriting agreement dated January 17, 2013 relating to the
Hong Kong Public Offer entered into among us, COH and the Hong Kong
Underwriters, among others HSBC The Hongkong and Shanghai Banking
Corporation Limited IFRS International Financial Reporting
Standards issued by the International Accounting Standards Board
Independent Third Party entity or person who as far as the
Directors are aware after having made all reasonable enquiries is
not a Connected Person of the Company INGEMMET the Geological,
Metallurgical and Mining Institute of Peru International Placing
the conditional placing of the International Placing Shares (a) in
the United States to qualified institutional buyers in reliance on
Rule 144A under the U.S. Securities Act or another exemption from
the registration requirement under the U.S. Securities Act, and (b)
outside the United States in offshore transactions in reliance on
Regulation S under the U.S. Securities Act, including to
professional investors in Hong Kong, as further described in the
section headed Structure of the Global Offering in this prospectus
International Placing Shares the 1,588,421,000 Shares being
initially offered for subscription under the International Placing
together, where relevant, with any additional Shares that may be
issued pursuant to any exercise of the Over-allotment Option,
subject to adjustment as described in the section headed Structure
of the Global Offering in this prospectus International
Underwriters the group of underwriters which is expected to enter
into the International Underwriting Agreement to underwrite the
International Placing International Underwriting Agreement the
underwriting agreement relating to the International Placing and
expected to be entered into among us and the International
Underwriters on or around January 24, 2013 Joint Bookrunners or
Joint Lead Managers Morgan Stanley, BNP Paribas, CICC, Standard
Chartered, HSBC and CCBI Joint Global Coordinators Morgan Stanley
and BNP Paribas 24
31. DEFINITIONS Joint Sponsors Morgan Stanley, BNP Paribas,
CICC and Standard Chartered Juanita Sociedad Minera de
Responsabilidad Limitada Juanita de Huancayo, a company
incorporated in Peru and 50% of which is currently owned by us
Latest Practicable Date January 11, 2013, being the latest
practicable date prior to the printing of this prospectus for the
purpose of ascertaining certain information contained in this
prospectus Listing the listing of the Shares on the Main Board of
the Stock Exchange Listing Date the date, expected to be on or
about January 31, 2013, on which our Shares are first listed and
from which dealings therein are permitted to take place on the
Stock Exchange Listing Rules The Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (as amended
from time to time) MEM the Ministry of Energy and Mines of Peru
Memorandum or Memorandum of Association the memorandum of
association of the Company, conditionally adopted on May 8, 2012
and to become effective upon the Listing Date, as amended from time
to time MOFCOM the Ministry of Commerce of the PRC Morgan Stanley
Morgan Stanley Asia Limited MTC the Ministry of Transportation and
Communications of Peru Offer Price the final price per Share in
Hong Kong dollars (exclusive of brokerage, SFC transaction levy and
the Stock Exchange trading fee) at which the Offer Shares are to be
subscribed for and issued, or purchased and sold pursuant to the
Global Offering, to be determined as further described in the
section headed Structure of the Global Offering Pricing and
Allocation Determination of the Offer Price in this prospectus
Offer Shares the Hong Kong Offer Shares and the International
Placing Shares together, where relevant, with any additional Shares
issued pursuant to the exercise of the Over-allotment Option
Over-allotment Option the option to be granted by our Company to
the International Underwriters exercisable by the Joint Global
Coordinators on behalf of the International Underwriters, pursuant
to which our Company may be required to allot and 25
32. DEFINITIONS issue up to 264,736,000 additional new Shares,
representing approximately 15% of the Shares initially available
under the Global Offering at the Offer Price, to, among other
things, cover over-allocations in the International Placing (if
any) as further described in the section titled Structure of the
Global Offering in this prospectus Pembrook Mining Pembrook Mining
Corp., a company incorporated under the laws of Canada and an
Independent Third Party Peru the Republic of Peru (Repblica del
Per) Pesares Sociedad Minera Pesares S.A., a company incorporated
in Peru and a subsidiary of our Company Phongsaiy Mining Yunnan
Copper Industry (Group) Phongsaiy Mining Sloe Co, a company
incorporated under the laws of Laos and a subsidiary of Yunnan
Copper Group Pomacocha Power Pomacocha Power S.A.C., a company
incorporated in Peru and 10% equity interest is owned by our
Company Price Determination Date the date, expected to be on or
around January 24, 2013 but no later than January 29, 2013, on
which the Offer Price is fixed for the purposes of the Global
Offering Proinversion the Peruvian Governmental Committee for
Private Investment (Comit de la Agencia de Promocin de la Inversin
Privada) Proinversion Stability Agreement the tax stability
agreement entered into between the Company and Proinversion on
November 22, 2011 QIBs qualified institutional buyers as such term
is defined in Rule 144A Regulation S Regulation S under the U.S.
Securities Act Reorganization the reorganization of the Group, the
particulars of which are described in History, Reorganization and
Group Structure in this prospectus RMB Renminbi, the lawful
currency of the PRC Rule 144A Rule 144A under the U.S. Securities
Act SAFE the State Administration of Foreign Exchange of the PRC
26
33. DEFINITIONS SAIC the State Administration for Industry and
Commerce of the PRC SASAC State-owned Assets Supervision and
Administration Commission of the PRC SAT the State Administration
of Taxation of the PRC SCB Standard Chartered Bank (Hong Kong)
Limited SERNANP State Protected Natural Areas Agency (Servicio
Nacional de Areas Naturales Protegidas por el Estado) SFC the
Securities and Futures Commission of Hong Kong SFO the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
Share(s) or ordinary Share(s) ordinary share(s) with nominal value
of US$0.04 each in the share capital of our Company Shareholder(s)
holder(s) of Share(s) Stability Agreement the Agreement of
Guarantees and Measures to Promote Investment (Contrato de Garantas
y Medidas de Promocin a la Inversin) entered into on March 9, 2009
between Chinalc