HONG KONG, Dec 14, 2023 - (ACN Newswire) - Persistence Resources Group Ltd. ("Persistence Resources" or the "Group"), the third largest gold miner(1) in Shandong Province, China, has announced the details of the proposed listing of its shares on the Main Board of The Stock Exchange of Hong Kong Limited ("HKEX") under the stock code 02489.

Offering Details

The Group plans to offer a total of 500,000,000 shares (subject to the over-allotment option), of which 450,000,000 are international offer shares (subject to reallocation and the over-allotment option) and 50,000,000 are Hong Kong offer shares (subject to reallocation). The indicative offer price per offer share ranges from HK$0.55 to HK$0.75. After deducting the underwriting fees and other estimated expenses relating to the global offering, and assuming that the over-allotment option is not exercised and the offer price is set at HK$0.65 per share (being the mid-point of the indicative offer price range), the aggregate net proceeds from the global offering are estimated to be HK$265.0 million.

The Hong Kong public offering will commence at 9:00 a.m. on 14 December 2023 (Thursday) and end at noon on 19 December 2023 (Tuesday). The final offer price and allotment results will be announced on 21 December 2023 (Thursday). Trading in the shares of Persistence Resources is expected to commence on the Main Board of the HKEX on 22 December 2023 (Friday) under the stock code 02489. The shares will be traded in board lots of 5,000 shares each.

Innovax Capital Limited is the Sole Sponsor, and Innovax Securities Limited is the Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager of the listing.

Investment Highlights

Open-pit mine   Production cost advantage

The Group owns two gold mines in the Muping-Rushan gold metallogenic belt in Shandong Province, a major gold producing province. One of the mines is Songjiagou Open-Pit Mine, with a permitted annual mine production volume of 900.0 kt and a life of mine (LoM) of approximately 8.5 years; and the other is Songjiagou Underground Mine, with a permitted annual mine production volume of 90.0 kt and a LoM of approximately 6.0 years.

According to the SRK Report, the level of capital required and the cost structure for operating an underground mine is different from that of an open-pit mine. This is because the former requires the construction of underground mining infrastructure and the procurement of equipment to conduct underground excavation activities, as well as other structural and fixed costs. Therefore, the production cost of open-pit mines is usually lower than that of underground mines. According to a report by Frost & Sullivan, approximately 95% of all gold mines in China involve underground mining and the total production cost of gold mining in China was approximately RMB298.0 per gram in 2022.

Most of the Group's gold is produced at Songjiagou Open-Pit Mine, which helps to keep the production cost below the industry average. The Group's average production cost last year was approximately RMB186.3 per gram.

Excellent geographical location  Sound infrastructure

Songjiagou Open-Pit Mine and Songjiagou Underground Mine are in close proximity to each other, approximately 400 meters apart, and only four kilometers away from the Group's ore processing plant, allowing the Group to centralize its business management. The plant covers an area of approximately 0.9 hectares and has an annual ore processing capacity of approximately 2,000 kt. It is only two km away from a tailings dam and around 50 km from the port of Yantai, making it very conveniently located.

The tailings dam was designed as a valley type with a total elevation of +160 meters above sea level and a total storage capacity of approximately 42.2 million m3 and an effective storage capacity of approximately 30.0 million m3. As of 30 June 2023, the existing production capacity can support 10 years of production.

Experienced management team   Elite technical team

Persistence Resources is led by Dr. SHAO Xuxin, its Chairman, Executive Director and Chief Executive Officer. The senior management team has an average of more than 30 years of experience in mining operations and management. The Group also has a strong technical team that has successfully developed new mines and transformed them into actual mining and gold producing assets, enabling Persistence Resources to become the third largest gold mining company in Shandong Province in 2022.

Dr. Shao holds a Ph.D. in mineral processing and has extensive experience in ore processing, mining-related finance and investment management. The Group's technical team is led by Mr. Huang Yong, the 2006 recipient of the China Nonferrous Metals Industry Science and Technology Award, who is a qualified mineral resource/reserve appraiser accredited by the Ministry of Land and Resources of the PRC, with more than 40 years of experience in mine design and mining consultancy. The technical team also includes 10 mining operations engineers and geologists with an average of more than 15 years of mining operations and management experience, who are able to effectively implement gold grade control and production management and improve operational efficiency.

Future Growth Strategies

Acquire surrounding gold mines to increase market share

The Group plans to expand its mineral resources and increase the gold concentrate processing capacity of its ore processing plant by acquiring high-quality gold mining assets. The criteria for acquisition targets include mines located in Shandong Province with potential gold resources of at least 10 tonnes at a depth of less than 1,000 meters, a LoM of more than five years and a payback period of less than 10 years.

The Group has been identified as one of the key target companies for listing by the Yantai People's Government, and the Group's subsidiary, Yantai Zhongjia Mining Co., Ltd., has been approved by the Yantai Municipal Government as one of the four consolidated gold mining companies to acquire gold mining assets in the Muping District of the city. The Group believes that the acquisition of mining assets in Muping District is in line with the policy direction of the local government and that the integration plan will have a positive impact on the Group's development plan.

According to the Frost & Sullivan report, at least 40 gold mines have been identified in Shandong Province, including 14 underground gold mines in the Muping District's Gold Mine Resource Integration Plan, which meet certain of the aforementioned acquisition criteria. At present, the Group has shortlisted three underground gold mines in Muping District that meet the acquisition criteria and is ready to select a suitable gold mine by 31 January 2024. The Group is optimistic about signing a formal agreement with the targeted gold mine by 31 March 2024.

Promote mine optimization plan and build additional mining infrastructure

The Group is actively implementing the mine optimization plan, which includes expanding the mining surface area around 150 meters south of the existing boundary of Songjiagou Open-Pit Mine so as to increase the pit opening area from 0.34 square kilometers to 0.46 square meters and to deepen the depth of the pit to –171 meters above sea level. For this purpose, the Group will construct new benches and plans to construct a water storage pool and drainage system to dewater groundwater, set up substations and topsoil storage yards, and acquire three excavators for the new mining area.

Additional exploration at existing mine area to increase gold reserves

According to the SRK report, the Songjiagou Open-Pit Mine area has potential for exploration and upgrading of the infill mineral resource. The Group plans to identify additional mineral resources in the unmined areas adjacent to and below the current pit opening area covered by the mining license of its Songjiagou Open-Pit Mine by conducting further exploration work, which includes 26 drilling surveys in three phases at various depths ranging from 0 to 550 meters with a total depth of over 6,500 meters, so as to increase its gold mineral resources and to increase the LoM of its Songjiagou Open-Pit Mine.

Use of Proceeds

Based on the offer price of HK$0.65 per offer share (being the mid-point of the indicative offer price range of HK$0.55 to HK$0.75), the Group estimates that the net proceeds from the global offering (after deducting the underwriting fees and other estimated expenses relating to the global offering) will be approximately HK$265.0 million before the over-allotment option is exercised.

Use / Percentage

Selective acquisition of gold mining assets: 55.0%

Further construction of mining infrastructure: 20.4%

Repayment of existing bank loans guarantees: 12.6%

Working capital: 10.0%

Additional exploration activities to upgrade gold reserves: 2.0%

Fully electronic application process

Persistence Resources Group Ltd has adopted a fully electronic application process for the Hong Kong public offering. No printed copies of this prospectus or any application forms will be made available to the public. The prospectus has been published on the Stock Exchange website at www.hkexnews.hk under "HKEXnews (New Listings) New Listing Information" and the Group's website at www.persistenceresource.com.

(1) Source: Frost & Sullivan Report, based on mine production volume in 2022

Persistence Resources Group Ltd

The Group is a gold exploration, mining and processing company established in 2005. It owns two gold mines in Yantai City, Shandong Province, China, mining infrastructure such as mineral processing plants and a tailings dam. It sells gold bullion made from gold concentrates that it processes in-house. According to a Frost & Sullivan report, the Group was the third largest gold mining company in Shandong Province in 2022 in terms of mine production volume, with a market share of 2.6%.

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