Shandong Gold Mining Co., Ltd. (SD GOLD) has proposed a new Comprehensive Service Framework Agreement with its controlling shareholder, Shandong Gold Group Co. (SDG Group Co.), covering procurement, sales, trademark licensing, property leasing and equity entrustment for the period 1 January 2027 to 31 December 2029. The agreement will take effect only after approval at an upcoming extraordinary general meeting (EGM).
Key Transaction Categories and Proposed Annual Caps (RMB): 1. Procurement of supplies, products and services from SDG Group: 3.27 billion (2027), 3.58 billion (2028), 4.30 billion (2029). 2. Sales of supplies, products and services to SDG Group: 2.00 billion, 2.38 billion, 2.87 billion. 3. Trademark licensing and property leasing from SDG Group: 111.13 million, 107.59 million, 107.07 million. 4. Property leasing to SDG Group: 2.00 million, 3.00 million, 4.00 million. 5. Equity entrustment services to SDG Group: 5.00 million each year.
Historical Transaction Volumes • Procurement from SDG Group reached 2.58 billion in 2024, 3.44 billion in 2025 and 2.10 billion for the nine months to 30 September 2026, against annual caps of 3.42 billion, 3.93 billion and 4.17 billion, respectively. • Sales to SDG Group totalled 1.59 billion in 2024, 1.66 billion in 2025 and 1.18 billion for the nine-month 2026 period, versus caps of 1.90 billion, 2.40 billion and 1.89 billion. • Trademark licensing and property leasing from SDG Group amounted to 27.30 million (2024), 81.95 million (2025) and 29.02 million (9M 2026), below respective caps of 61.67 million, 85.62 million and 104.82 million.
Pricing Mechanism Transactions will be priced in the following order: 1. Government pricing or guidance, where applicable (e.g., electricity tariffs set by Shandong authorities). 2. Tender price when bidding is legally required. 3. Market price referenced to at least two independent quotations or published benchmarks (e.g., Shanghai Gold Exchange, Shanghai Metals Market). 4. Appraised value for property leases. 5. Agreed price based on arm’s-length negotiation, used notably for trademark licensing (fixed at approximately RMB 2.75 million per year) and equity entrustment services.
Rationale The Board cited operational continuity, cost efficiency, established supply chains and risk control as primary reasons for continuing the relationship. The arrangement also maintains SD GOLD’s ability to use existing trademarks and manage certain SDG Group subsidiaries under equity entrustment, preserving pre-emptive acquisition rights.
Governance and Internal Controls • Dedicated departments will verify compliance with pricing policies and monitor utilisation against caps. • The finance department will track aggregate transaction values and trigger re-compliance procedures if caps risk being exceeded. • Internal audit will conduct annual reviews, and the external auditor and independent non-executive directors will perform yearly assessments. • Director Tang Qi, holding a senior position at SDG Group Co., abstained from Board voting on the proposal.
Regulatory Implications Under Hong Kong Listing Rules, the procurement, sales and inbound leasing/licensing transactions (0.1% < percentage ratios < 5%) require announcement, annual review and reporting but not independent shareholder approval. Outbound leasing and equity entrustment (ratios < 0.1%) qualify as de minimis. However, Shanghai Stock Exchange rules mandate shareholder approval; therefore, SD GOLD will seek approval at the EGM, with SDG Group Co. and its associates abstaining from voting.
If approved, the agreement will provide SD GOLD with defined transaction limits and transparent pricing for its interactions with SDG Group Co. through 2029.
Comments