Securities code: 000546 securities abbreviation: Jinyuan Ep Co.Ltd(000546) Announcement No.: 2022-020 Jinyuan Ep Co.Ltd(000546)
Announcement on carrying out option hedging business by subsidiaries
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Jinyuan Ep Co.Ltd(000546) (hereinafter referred to as “the company”) convened the third meeting of the 10th board of directors and the second meeting of the 10th board of supervisors on April 16, 2021, deliberated and adopted the proposal on hedging business of subsidiaries in 2021, and agreed that the company invested in commodity futures contracts with its own funds of no more than 300 million yuan.
In order to make full use of commodity option hedging tools to further reduce the price fluctuation risk of copper, gold, silver, palladium, platinum, tin, nickel, lead and zinc, the company held the 11th meeting of the 10th board of directors and the 9th meeting of the 10th board of supervisors on January 21, 2022, and deliberated and adopted the proposal on carrying out option hedging business by subsidiaries, The relevant information is hereby announced as follows:
1、 Purpose of hedging
Copper, gold, silver, palladium, platinum, tin, nickel, lead and zinc are the main inventory products and main raw materials of the company’s subsidiaries Jiangxi xinjinye Industrial Co., Ltd. and Jiangxi Huiying Environmental Protection Technology Co., Ltd., and their prices fluctuate greatly, which has a great impact on the production and operation of the company. In order to reduce the adverse impact of commodity inventory and raw material price fluctuation on the company’s production and operation, the company plans to carry out option hedging business in 2022 to effectively avoid the risk of sharp price fluctuation.
2、 Hedged options
The company’s option hedging business is limited to the futures contracts listed and traded in domestic futures exchanges such as copper, gold, silver, palladium, platinum, tin, nickel, lead and zinc related to the raw materials required for the company’s production and operation.
3、 Amount and period of option hedging
According to the commodity inventory and raw material demand of the company’s actual production and operation, and adhering to the principle of prudence, it is expected that the margin required for option hedging in 2022 will not exceed RMB 50 million. The funds within the above limit can be used on a rolling basis. The funds for option hedging business come from the company’s own funds accumulated in the process of production and operation.
The board of directors of the company authorizes the futures working group of the company to organize the implementation of option hedging business in accordance with the relevant provisions of Jinyuan Ep Co.Ltd(000546) hedging business management system.
4、 The option hedging business carried out by the company meets the relevant conditions for the application of hedging accounting methods specified in the accounting standards for business enterprises.
5、 Feasibility analysis of hedging business
The company carries out the option hedging business of related metals for the purpose of avoiding the risk caused by the price fluctuation of commodity inventory and raw materials in production and operation, and does not carry out speculation and arbitrage transactions. In the actual operation process, as the company’s main commodity inventory and raw materials, the price of related metals fluctuates greatly due to the influence of supply and demand. In order to avoid the impact of price fluctuation on the company’s production and operation, the company plans to hedge in the futures market according to the principle of the same spot variety, close month, opposite direction and equal quantity, so as to lock in the cost of raw materials, Ensure the stability and sustainability of the company’s business performance.
The company has established a relatively perfect internal control and risk control system for commodity hedging business and has its own funds matching the transaction guarantee of the proposed hedging business. The company will strictly comply with the requirements of the guidelines for self discipline supervision of listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board and the company’s hedging business management system, Implement risk prevention measures and operate prudently.
Therefore, it is feasible for the company to carry out option hedging business such as copper, gold, silver, palladium, platinum, tin, nickel, lead and zinc, which is beneficial to the production and operation of the company.
6、 Risk analysis and risk control measures of hedging
The company’s option hedging business follows the principle of hedging by locking the purchase price of raw materials and the sales price of products. It does not engage in speculative and arbitrage transactions, but there will be certain risks at the same time. The company has carefully formulated relevant risk control measures:
1. Market risks and Countermeasures
Due to certain systemic risks in the financial derivatives market, once the price forecast deviates during hedging, the effect of hedging business may be affected.
Risk control measures: the company strictly implements the established hedging business management system and forms a reasonable judgment on the price trend through perfect internal control decision-making procedures; The company matches the hedging business with the company’s production and operation, and strictly controls the hedging position; The company’s transaction team operates in strict accordance with the approved hedging scheme, which is reviewed and supervised by the internal control department to ensure that the transaction risk is effectively controlled. 2. Capital risk and Countermeasures
The trading margin system and the daily settlement system may bring certain capital liquidity risks to the company, and the company may face or face the risk of being forced to close its position due to failure to make up the trading margin in time, resulting in actual losses. Risk control measures: the company will reasonably allocate funds for hedging business, strictly control the capital scale of hedging, and reasonably plan and use margin.
3. Credit risk and Countermeasures
In case of large-scale fluctuation of transaction price unfavorable to the counterparty, the counterparty may violate the relevant provisions of the contract, cancel the contract and cause losses to the company.
Risk control measures: the company will establish a customer’s credit management system, review the credit of the counterparty according to the relevant provisions and procedures of the company’s contract management measures before the transaction, and determine that the counterparty is capable of performing relevant contracts.
4. Technical risks and Countermeasures
Due to the abnormal operation of the trading system caused by uncontrollable or indispensable system, network and communication failure, the trading order may be delayed, interrupted or data error, which may cause losses to the company.
Risk control measures: the company will set up qualified trading, communication and information service facilities and systems to ensure the normal operation of the trading system and the normal development of trading work.
7、 Independent opinions expressed by independent directors
The company carries out hedging business on the premise of ensuring normal production and operation, and takes option hedging business as an effective means to stabilize product price fluctuations, which is conducive to locking in the company’s production costs, controlling operating risks, and improving the company’s ability to resist market fluctuations and stabilize price shocks. The specific content of the company’s hedging business meets the actual production and operation needs of the company. By strengthening internal control, implementing risk prevention measures and improving the operation and management level, it is conducive to the operation and development of the company, and there is no situation that damages the interests of the company and shareholders, especially small and medium-sized shareholders. The procedures for convening, convening and making resolutions of the board of directors of the company comply with the provisions of relevant laws, regulations and the articles of association.
We unanimously agree to the proposal on Jinyuan Ep Co.Ltd(000546) carrying out option hedging business by subsidiaries.
8、 Opinions of the sponsor
After verification, the recommendation institution believes that the company’s option hedging business meets the actual business needs of the company and can reduce the impact of the price fluctuation of inventory commodities and raw materials on the company’s normal production and operation to a certain extent; The company has formulated the hedging business management system according to relevant regulations and actual conditions. The relevant business management system is relatively complete and has corresponding risk control measures; The company’s option hedging business has been deliberated and adopted at the 11th meeting of the 10th board of directors and the 9th meeting of the 10th board of supervisors, and the independent directors have expressed their explicit consent, which is in line with the stock listing rules of Shenzhen Stock Exchange The Shenzhen Stock Exchange self regulatory guidelines for listed companies No. 1 – standardized operation of listed companies on the main board and other relevant laws and regulations. To sum up: the recommendation institution has no objection to Jinyuan Ep Co.Ltd(000546) carrying out option hedging business.
9、 Documents for future reference
1. The 11th meeting of the 10th board of directors of the company;
2. Independent directors’ independent opinions on relevant matters of the 11th meeting of the 10th board of directors;
3. Southwest Securities Co.Ltd(600369) verification opinions on Jinyuan Ep Co.Ltd(000546) carrying out option hedging business.
It is hereby announced.
Jinyuan Ep Co.Ltd(000546) board of directors January 22, 2022
