Western Gold: Plans to Spend 1.655 Billion Yuan to Acquire Gold Mine from Controlling Shareholder

Western Gold (601069.SH) plans to invest 1.655 billion yuan to acquire 100% equity in Xinjiang Meisheng Mining Co., Ltd. (hereinafter referred to as "Xinjiang Meisheng"), a subsidiary of its controlling shareholder. Upon completion of the transaction, the company will increase its gold ore resources in mines by nearly 2.5 times, and the mine is expected to commence production in the second half of this year.

Western Gold issued an announcement this evening, stating that the company and its controlling shareholder, Xinjiang Nonferrous Metal Industry (Group) Co., Ltd. (hereinafter referred to as "Xinjiang Nonferrous Metal"), had signed the "Cash Purchase of Assets Agreement" on May 7. Today, the two parties signed the "Supplemental Agreement (I) to the Cash Purchase of Assets Agreement" to acquire 100% equity in Xinjiang Meisheng held by Xinjiang Nonferrous Metal using its own funds and loans, with a transaction consideration of approximately 1.655 billion yuan, representing a premium of 1,421.66% compared to the book value.

The company stated that Xinjiang Meisheng is currently expected to commence production in the second half of 2025. To fulfill the commitments made by Xinjiang Nonferrous Metal earlier, properly address potential horizontal competition issues, and given Western Gold's optimistic outlook on the development prospects of the mine project, both parties agreed that Western Gold would acquire 100% equity in Xinjiang Meisheng held by Xinjiang Nonferrous Metal in cash.

Financial data shows that Xinjiang Meisheng achieved operating revenues of 276,700 yuan and 0 yuan in 2024 (audited) and Q1 2025 (unaudited), respectively, with net losses of 35.943 million yuan and 14.1621 million yuan.

The announcement revealed that after Xinjiang Nonferrous Metal acquired 100% equity in Xinjiang Meisheng in 2021, Xinjiang Meisheng obtained ownership of the Katebaasu Gold-Copper Polymetallic Mine Project in Xinyuan County. Since the completion of the acquisition by Xinjiang Nonferrous Metal, Xinjiang Meisheng has not engaged in production or business activities, and thus has not generated any operating revenue from such activities.

In terms of asset valuation, the asset-based approach was adopted for this transaction. As of December 31, 2024, the book value of Xinjiang Meisheng's net assets was 109 million yuan, with an assessed value of 1.655 billion yuan, resulting in an appreciation of 1.546 billion yuan. The appreciation primarily originated from intangible assets, with a book value of 1.397 billion yuan and an assessed value of 2.946 billion yuan, representing an appreciation rate of 110.89%.

Based on the asset valuation report for this transaction, the book value of the mining rights included in the valuation scope and recorded as intangible assets was 1.165 billion yuan, involving a total of two mining rights, including the mining right for the Xinjiang Meisheng Katebaasu Gold-Copper Mine and the exploration right for the Xinjiang Xinyuan County Katebaasu Gold-Copper Polymetallic Mine.

In terms of ore reserves, the Xinjiang Meisheng Katebaasu Gold-Copper Mine has proven total ore reserves of 25.67 million mt (including 78.7 mt of gold resources). Upon completion and reaching full production, the project will achieve a production scale of 4,000 mt/day, with an annual output of 1.2 million mt of ore and approximately 3.3 mt of gold metal.

In addition to gold resources, there are 48,800 mt of copper metal content, 125,544.92 kg of associated silver, and 1.6624 million mt of associated sulfur element.

As of the end of 2024, the resource volume of captive mines of Westgold Resources Co., Ltd. was approximately 32 mt, with reserves of about 12 mt, and annual gold production from mines was approximately 1 mt.