China Zirconium Limited
TSX : CZL

China Zirconium Limited

August 26, 2009 09:13 ET

China Zirconium Limited: Placing and Subscription Agreement and Resumption of Trading

TORONTO, ONTARIO--(Marketwire - Aug. 26, 2009) - China Zirconium Limited (the "Company") (TSX:CZL)(HKEX:0395) -

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of China Zirconium Limited.

PLACING AND SUBSCRIPTION AGREEMENT

The Board is pleased to announce that on 25 August 2009, the Company has entered into a Placing and Subscription Agreement with the Placing Agent and the Subscriber. Pursuant to the Placing and Subscription Agreement dated 25 August 2009, the Subscriber agreed to place, through the Placing Agent 9,310,000 Shares, on a best efforts basis, at a price of HK$3.48 per Placing Share. Pursuant to the Placing and Subscription Agreement, the Subscriber conditionally agreed to subscribe for an aggregate of 9,310,000 Subscription Shares at a price of HK$3.48 per Subscription Share.

The Placing Shares will be placed to not less than 6 independent professional, institutional and/or individual investors.

The Placing Price (or the Subscription Price) of HK$3.48 represents:

(i) a discount of approximately 16.35% to the closing price of HK$4.16 per Share as quoted on the Stock Exchange on the Last Trading Day; and

(ii) a discount of approximately 19.37% to the average closing price of HK$4.32 per Share as quoted on the Stock Exchange from 18 August 2009 to the Last Trading Day, both dates inclusive, being the last five consecutive trading days prior to the date of the Placing and Subscription Agreement.

The Placing Shares (or the Subscription Shares) represent (i) approximately 13.00% of the existing issued share capital of the Company of 71,616,994 Shares as at the date of this announcement and (ii) approximately 11.50% of the issued share capital of the Company of 80,926,994 Shares as enlarged by the Subscription.

The Subscription is conditional upon, among other things, (i) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Subscription Shares; (ii) successful completion of the Placing; (iii) the Executive granting a waiver to the Subscriber and parties acting in concert with him from their obligation, as a result of completion of the Subscription, to make a general offer for all of the issued Shares other than those already owned by them under Note 6 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers; and (iv) the Company obtaining all consents and approvals from the Toronto Stock Exchange and other relevant authorities in respect of the transaction contemplated in the Placing and Subscription Agreement.

The net proceeds of approximately HK$32 million from the Subscription is intended to be used to finance potential investment project which the Company is currently in the process of identifying the suitable target.

Completion of the Subscription is subject to the satisfaction of the conditions precedent in the Placing and Subscription Agreement.

As the Placing and Subscription may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange has been suspended from 9:30 a.m. (Hong Kong Time) on 25 August 2009 pending the release of this announcement. Application has been made to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange from 9:30 a.m. (Hong Kong Time) on 27 August 2009.

At the request of the Company, trading in the Shares on the Toronto Stock Exchange has been suspended from 9:30 a.m. (Toronto Time) on 25 August 2009. An application will be made to the Toronto Stock Exchange for the resumption of trading in the Shares on the Toronto Stock Exchange from 9:30a.m. (Toronto Time) on 26 August 2009.

THE PLACING AND SUBSCRIPTION AGREEMENT

Date

25 August 2009

Parties involved

The Subscriber, the Company and the Placing Agent

THE PLACING

Parties involved

The Subscriber and the Placing Agent

Placing Agent

The Placing Agent has agreed to place 9,310,000 Shares, on a best efforts basis, to the Placees and will receive a placing commission of 1.25% of the aggregate amount equal to the Placing Price multiplied by the Placing Shares successfully placed by the Placing Agent, which was arrived at after arm's length negotiations between the Company and the Placing Agent. The Placing Agent and its ultimate beneficial owners are not connected persons (as defined in the Listing Rules) of the Company and its connected persons (as defined in the Listing Rules).

Placees

The Placing Agent will place the Placing Shares, on a best effort basis, to not fewer than six Placees who and whose ultimate beneficial owners will be third parties independent of and not acting in concert with the Subscriber or his concert parties, and will not be connected persons (as defined in the Listing Rules) of the Company and its connected persons (as defined in the Listing Rules).

Placing Price

The Placing Price (or the Subscription Price) of HK$3.48 represents:

(i) a discount of approximately 16.35% to the closing price of HK$4.16 per Share as quoted on the Stock Exchange on the Last Trading Day; and

(ii) a discount of approximately 19.37% to the average closing price of HK$4.32 per Share as quoted on the Stock Exchange from 18 August 2009 to the Last Trading Day, both dates inclusive, being the last five trading days immediately prior to the date of the Placing and Subscription Agreement.

The Placing Price (and Subscription Price) was determined with reference to the prevailing market price of the Shares and was negotiated on an arm's length basis between the Company, the Subscriber and the Placing Agent. The Directors consider that the terms of the Placing (including the placing commission) and the Subscription are fair and reasonable based on the current market conditions and in the interests of the Company and the Shareholders as a whole.

Number of Placing Shares

The 9,310,000 Placing Shares (or Subscription Shares) represent (i) approximately 13.00 % of the existing issued share capital of the Company of 71,616,994 Shares as at the date of this announcement and (ii) approximately 11.50% of the issued share capital of the Company of 80,926,994 Shares as enlarged by the Subscription.

Ranking of Placing Shares

The Placing Shares rank pari passu among themselves and with Shares in issue as at the date of this announcement.

Conditions of the Placing

The Placing is unconditional.

Completion

The Placing is expected to be completed on or before the second Business Day after the date of this announcement or such other date as the Subscriber and the Placing Agent shall agree in writing.

THE SUBSCRIPTION

Parties involved

The Company and the Subscriber

The Subscription Price

The Subscription Price is HK$3.48 per Subscription Share. The Subscription Price is the same as the Placing Price and was determined after arm's length negotiation between the Company and the Subscriber with reference to the Placing Price of the Placing Shares.

The Subscription Shares

The Subscription Shares will be issued under the General Mandate to allot, issue and deal with Shares granted to the Directors by resolution of the Shareholders passed at the AGM, subject to the limit up to 20% of the then issued share capital of the Company as at the date of the AGM. Under the General Mandate, the Company is authorized to issue up to 14,323,398 Shares. Up to the date of this announcement, no Share has been issued under the General Mandate. Following the completion of the Subscription, a total number of 9,310,000 Shares will be allotted and issued, leaving a balance of 5,013,398 Shares to be allotted and issued under the General Mandate.

Number of Subscription Shares

The number of Subscription Shares is equivalent to the number of Placing Shares.

Ranking of Subscription Shares

The Subscription Shares, when issued and fully paid, will rank pari passu among themselves and with Shares in issue at the time of issue and allotment of the Subscription Shares.

Conditions of the Top-up Subscription

The Subscription is conditional upon:

(i) the Listing Committee of the Stock Exchange granting approval for the listing of, and permission to deal in, the Subscription Shares;

(ii) the successful completion of the Placing;

(iii) the Executive granting a waiver to the Subscriber and parties acting in concert with him from their obligation, as a result of completion of the Subscription, to make a general offer for all of the issued Shares other than those already owned by them under Note 6 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers; and

(iv) the Company obtaining all consents and approvals from the Toronto Stock Exchange and other relevant authorities in respect of the transactions contemplated under the Placing and Subscription Agreement.

Completion of the Subscription will not take place if any of the above conditions are not fulfilled.

Completion

Subject to fulfillment of the above conditions, completion of the Subscription will take place on or before the third Business Day after the date when all the conditions set out above are satisfied or such later date as the Company and the Subscriber may agree in writing.

The Subscription constitutes a connected transaction under the Listing Rules but it falls within the exemption under Rule 14A.31(3)(d) of the Listing Rules if the Subscription is completed within 14 days from the date of the Placing and Subscription Agreement (i.e. 8 September 2009). In the event that the Subscription is not completed within 14 days from the date of the Placing and Subscription Agreement, the Subscription will not fall within the exemption under Rule 14A.31(3)(d) of the Listing Rules and shall be subject to the approval of independence shareholders of the Company and the Company will comply with the relevant connected transaction requirements of Chapter 14A of the Listing Rules.

In the event that the conditions of the Placing and Subscription Agreement are not fulfilled by 30 September 2009, or such later date as may be agreed between the Company, the Subscriber and the Placing Agent, all rights, obligations and liabilities of the Company, the Subscriber and the Placing Agent in relation to the Subscription shall cease and determine.

REASONS FOR THE PLACING AND SUBSCRIPTION

The gross proceeds from the Subscription will be approximately HK$32.4 million. The net proceeds of approximately HK$32 million from the Subscription is intended to be used to finance potential investment project which the Company is currently in the process of identifying the suitable target.

The Directors had considered various ways of raising funds and consider that the Placing and Subscription represents an opportunity to raise capital for the Company while broadening the Shareholder base and capital base of the Company. Accordingly, the Directors consider the Placing and Subscription are in the interests of the Company and the Shareholders as a whole.

Completion of the Subscription is subject to the satisfaction of the conditions precedent in the Placing and Subscription Agreement.

As the Placing and Subscription may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

The Company has not conducted any fund raising activities in the past twelve months before the date of this announcement.



EFFECTS ON SHAREHOLDING STRUCTURE

Immediately
Immediately after
after the the completion
As at the date of Placing but before of the Placing
this announcement the Subscription and Subscription
------------------- -------------------- -------------------
Number Number Number
of Shares % of Shares % of Shares %

The Subscriber 28,787,094 40.20 19, 477,094 27.20 28,787,094 35.57

CCB
International 9,300,000 12.99 9,300,000 12.99 9,300,000 11.49
(Holdings)
Limited

Placees (Note 1) 0 0 9,310,000 13.00 9,310,000 11.50

Other public
Shareholders 33,529,900 46.81 33,529,900 46.81 33,529,900 41.44
------------------- -------------------- -------------------

Total 71,616,994 100.00 71,616,994 100.00 80,926,994 100.00
------------------- -------------------- -------------------
------------------- -------------------- -------------------


The Subscriber and parties acting in concert with him together currently hold 28,787,094 Shares, representing approximately 40.20% of the issued share capital of the Company. Upon completion of the Placing (but before completion of the Subscription), the aggregate shareholding of the Subscriber and parties acting in concert with him in the Company will be reduced to approximately 27.20% of the issued share capital of the Company. Upon completion of the Subscription, the aggregate shareholding of the Subscriber and parties acting in concert with him will be restored to approximately 35.57% of the enlarged issued share capital of the Company. An application has been made by the Subscriber to the Executive for a waiver from the obligation to make a general offer to the Shareholders under Note 6 on dispensations from Rule 26 of the Hong Kong Codes on Takeovers and Mergers. Completion of the Subscription will not take place if the waiver cannot be obtained.

Note :

1) It is expected that the Placees will be third parties independent of and not acting in concert with the Subscriber or his concert parties, and will not be connected persons (as defined in the Listing Rules) of the Company and its connected persons (as defined in the Listing Rules).

GENERAL

The Group is principally engaged in the research, development, manufacture and sale of zirconium chemicals and other businesses related to zirconium.

As at the date of this announcement, the existing authorised share capital of the Company consists of 100,000,000 Shares out of which 71,616,994 Shares are issued and fully paid up.

Application will be made by the Company to the Listing Committee of the Stock Exchange for the grant of the listing of, and permission to deal in, the Subscription Shares.

RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange has been suspended from 9:30 a.m. (Hong Kong Time) on 25 August 2009 pending the release of this announcement. Application has been made to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange from 9:30 a.m. (Hong Kong Time) on 27 August 2009.

At the request of the Company, trading in the Shares on the Toronto Stock Exchange has been suspended from 9:30 a.m. (Toronto Time) on 25 August 2009. An application will be made to the Toronto Stock Exchange for the resumption of trading in the Shares on the Toronto Stock Exchange from 9:30 a.m. (Toronto Time) on 26 August 2009.

TERMS AND DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following meanings when used herein:

"AGM" the annual general meeting of the Company held on 15 May 2009

"associates" has the meaning given to that term in the Listing Rules

"Board" the board of Directors

"Business Day" means any day (excluding Saturday) on which banks are generally open for business in Hong Kong other than (i) a Saturday or (ii) a "general holiday" as defined in Section 2 of the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong), or one of the days specified from time to time in the Schedule to that Ordinance as being "general holidays" under Section 3 thereof or (iii) a day on which a black rainstorm warning or tropical cyclone warning signal number 8 or above is hoisted in Hong Kong at any time between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon

"Company" China Zirconium Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are dual listed on the Stock Exchange (stock code: 0395) and the Toronto Stock Exchange (trading symbol: CZL)

"connected person(s)" has the meaning given to that term in the Listing Rules

"Director(s)" director(s) of the Company

"Executive" the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director

"General Mandate" the general mandate granted to the Directors by the Shareholders at the AGM, among other things, to allot, issue and deal with up to 20% of the then issued share capital of the Company as at the date of the AGM

"Group" the Company and its subsidiaries

"HK$" Hong Kong dollars, the lawful currency of Hong Kong

"Hong Kong" Hong Kong Special Administrative Region of the PRC

"Last Trading Day" 24 August 2009, being the last full trading day for the Shares before the date of this announcement

"Listing Rules" Rules Governing the Listing of the Securities on the Stock Exchange of Hong Kong Limited

"Placee(s)" any individual(s), institutional or other professional investor(s) or any of their respective subsidiaries or associates procured by the Placing Agent to acquire any of the Placing Shares pursuant to the Placing Agent's obligations under the Placing and Subscription Agreement

"Placing" the placing of 9,310,000 existing Shares legally and beneficially owned by the Subscriber pursuant to the terms of the Placing and Subscription Agreement

"Placing Agent" China Merchants Securities (HK) Co., Limited, a licensed corporation to carry on type 1 (dealing in securities), type 2 (dealing in futures contracts), type 4 (advising on securities), type 6 (advising on corporate futures) and type 9 (asset management) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

"Placing and Subscription Agreement" the placing and subscription agreement dated 25 August 2009 entered into between the Company, the Subscriber and the Placing Agent in relation to the Placing and the Subscription

"Placing Price" HK$3.48 per Placing Share, exclusive of Hong Kong stamp duty, Stock Exchange trading fees and SFC transaction levy

"Placing Shares" 9,310,000 existing Shares legally and beneficially owned by the Subscriber and to be placed pursuant to the Placing and Subscription Agreement

"PRC" the People's Republic of China, which for the purpose of this announcement shall exclude Hong Kong, Taiwan and the Macau Special Administrative Region of the PRC

"Share(s)" ordinary share(s) of HK$1.00 in the share capital of the Company

"Shareholder(s)" holder(s) of the Share(s)

"SFC" Securities and Futures Commission of Hong Kong

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"Subscriber" Mr. Yang Xin Min, being the legal and beneficial owner of 28,787,094 Shares

"Subscription" The subscription of 9,310,000 Subscription Shares by the Subscriber pursuant to the Placing and Subscription Agreement

"Subscription Price" HK$3.48 per Subscription Price

"Subscription Shares" 9,310,000 new Shares to be subscribed for by the Subscriber pursuant to the Placing and Subscription Agreement

"%" per cent



By Order of the Board
CHINA ZIRCONIUM LIMITED
Yang Xin Min
Chairman

Hong Kong, 26 August 2009


As at the date of this announcement, the Board comprises Mr. Yang Xin Min, Ms.Huang Yue Qin, Mr. Zhou Quan and Mr. Li Fu Ping as executive directors, Mr.Cheng Faat Ting Gary, Mr. Carl F. Steiss and Mr. Victor Tong as independent non-executive directors.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

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