Securities code: 601899 securities abbreviation: Zijin Mining Group Company Limited(601899) No.: pro 2022-004 Zijin Mining Group Company Limited(601899)
Announcement on hedging business in 2022
The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.
Zijin Mining Group Company Limited(601899) (hereinafter referred to as “the company”) held the first extraordinary meeting of the seventh board of directors in 2022 on January 14, 2022, deliberated and adopted the proposal on authorization of commodity and foreign exchange derivatives hedging business in 2022, and agreed that the company and its subsidiaries should carry out products, raw materials and foreign exchange hedging business related to production and operation. Relevant matters are hereby announced as follows:
1、 Necessity of hedging
In order to reduce the impact of commodity market price fluctuation on the company’s production and operation and prevent interest rate and exchange rate risk, the company uses the hedging function of financial instruments to carry out hedging business for products, raw materials and foreign exchange risk exposure related to production and operation business, improve the company’s risk prevention ability and ensure stable operation.
2、 Basic information of hedging
(I) transaction type
1. Commodity hedging business varieties include: gold, copper, zinc, silver and iron ore.
2. Foreign exchange hedging business includes but is not limited to foreign exchange forward, swap, option, currency swap, interest rate swap, etc.
(II) hedging scale
1. Smelting and processing enterprises lock in profits through hedging, and the unhedged part implements exposure limit management. The exposure shall not exceed a certain proportion of the total price generated in the whole system of the enterprise, including 25% for copper and zinc and 20% for gold and silver. The specific exposure quantity shall be determined by the company’s financial committee.
2. According to the annual planned output of mineral products, the maximum hedging position of copper and zinc mineral products is 10% of the annual planned output; The maximum hedging position of gold, silver and iron ore is 15% of the annual planned output (Norton gold field, Australia, according to the original authorization).
3. If the company’s non bookkeeping functional currency financing and non bookkeeping functional currency assets generate exchange gains and losses due to the fluctuation of interest rate and exchange rate and affect the current profit, according to the risk exposure scale of the company’s foreign currency assets and liabilities, the position amount of foreign exchange derivatives transaction shall not exceed us $1 billion or equivalent foreign currency.
(III) source of funds: the company’s own funds, not involving raised funds.
(IV) implementation subject: according to the business implementation, the implementation subject is the company and its subsidiaries.
(V) authorization period: valid within 12 months from the date of deliberation and approval by the board of directors.
3、 Hedging risk analysis
The company does not conduct product hedging business for the purpose of speculation, mainly to effectively avoid the adverse impact of price fluctuations on the company, but there will be certain risks, mainly as follows:
(I) market risk: when the company carries out relevant hedging business, it will be affected by many factors such as international and Chinese economic policies and economic situation, exchange rate and interest rate fluctuations, such as large changes in raw material and product prices, exchange rate and interest rate, which may cause losses in futures transactions.
(II) capital risk: when the company fails to make up the margin in time, it may be forced to close its position and suffer losses.
(III) internal control risk: hedging business is highly professional and complex, which may cause risks due to imperfect internal control mechanism.
(IV) technical risk: due to uncontrollable or unpredictable system, network and communication failures, the trading system operates abnormally, resulting in problems such as delay, interruption or data error of trading instructions, resulting in corresponding risks.
4、 Risk control measures
(I) the company has established a relatively perfect hedging system and process, matched the hedging business with production and operation, adhered to the basic principle of “only hedging, not speculation”, and strictly carried out hedging transactions. The corporate finance committee shall make decisions on hedging transactions within the scope authorized by the board of directors.
(II) the company and its subsidiaries have formulated the management measures for commodity hedging, comprehensive risk management measures, fund management measures, detailed rules for the implementation of commodity futures hedging and other systems, which specify the risk control, approval procedures and follow-up management of hedging business, so as to effectively prevent the risk of trading business. At the same time, strengthen the professional knowledge training of relevant personnel and improve the professional quality of employees.
(III) the company strictly controls the scale of hedging, reasonably plans and uses the margin, and formulates and implements a strict stop loss mechanism.
(IV) the company will closely track the changes of the market, pay attention to the price trend, timely adjust the hedging scheme, and reduce the transaction risk as much as possible in combination with spot sales.
(V) in the process of business operation, strictly abide by the provisions of relevant national laws and regulations, prevent legal risks, and regularly supervise and inspect the standardization of hedging business and the effectiveness of internal control mechanism.
5、 Accounting policies and accounting principles
According to the relevant provisions and guidelines of the Ministry of finance, such as accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments, accounting standards for Business Enterprises No. 24 – hedge accounting, accounting standards for Business Enterprises No. 37 – presentation of financial instruments, accounting standards for Business Enterprises No. 39 – fair value measurement, the company will conduct corresponding accounting treatment for the hedging business to be carried out, Reflected in relevant items of the balance sheet and income statement.
6、 Review procedures for implementation
(I) deliberations of the board of directors
On January 14, 2022, the company held the first extraordinary meeting of the seventh board of directors in 2022, and considered and adopted the proposal on authorization of commodity and foreign exchange derivatives hedging business in 2022. This proposal is within the scope of the deliberation authority of the board of directors and does not need to be submitted to the general meeting of shareholders for deliberation.
(II) opinions of independent directors
The independent directors believe that it is necessary and feasible for the company to carry out hedging business related to production and operation on the premise of ensuring normal production and operation, in order to make full use of the hedging function of the futures market and effectively avoid the impact of price fluctuations on the company’s performance; The relevant approval procedures for the company to carry out hedging business comply with relevant national laws, regulations and the articles of association. The company has formulated relevant systems and defined internal control procedures such as approval process, risk prevention and control and management, which plays a guarantee role in the company’s control of hedging risk. The company’s hedging business will not harm the interests of the company and all shareholders. We unanimously agree to carry out the business.
Zijin Mining Group Company Limited(601899)
Board of directors
January 17, 2002
