Yunnan Copper intends to conduct $3.453 billion in foreign exchange hedging transactions to manage exchange rate fluctuation risks

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【Financial News】Yunnan Copper Industry Co., Ltd. (Stock Code: 000878, hereinafter referred to as “the Company”) announced on March 27 that to prevent exchange rate risk, the Company and its controlling subsidiaries plan to carry out currency futures and derivatives hedging business with a total limit of no more than $3.453 billion. The matter has been reviewed by the Company’s board of directors and still requires approval from the shareholders’ meeting.

The announcement shows that the company’s main reason for this business is the large foreign exchange demand generated by importing copper concentrates. It is introduced that part of the copper concentrates needed for the company’s production and operation are imported. To reduce the impact of exchange rate fluctuations on operating performance and maintain stable operations, the company plans to conduct hedging through forward exchange contracts, currency swaps, and other methods.

The company emphasizes that this hedging business is strictly based on real business operations and does not involve any form of speculation trading. The business will follow the principles of “strict control, hedging, risk controllability, and compliance with laws and regulations.” The contract duration will not exceed the original contract period, and the trading amount will be controlled within the total foreign exchange risk exposure.

To address potential risks, the company has established multiple risk control measures, including selecting liquid derivative products, closely monitoring foreign exchange market dynamics, prudently choosing trading counterparts, establishing strict internal approval processes, and implementing job separation systems. The company states that it will dynamically control the scale of the business based on changes in foreign exchange risk exposure to ensure risks are manageable.

CITIC Securities, an independent financial advisor, issued an opinion stating that the company’s conduct of this business aligns with actual operational needs and helps reduce the impact of exchange rate fluctuations on the company’s operations. Under the premise of effectively implementing risk control measures, there is no situation that harms the interests of the company and all shareholders.

Financial data shows that Yunnan Copper Industry has maintained a high proportion of import business in recent years, resulting in significant foreign exchange risk exposure. This foreign exchange hedging will help the company lock in foreign exchange costs, enhance financial stability, and support the sustained and stable development of the company’s main business.

According to the announcement, this matter can only be implemented after approval by the company’s shareholders’ meeting. The company will account for the hedging business in accordance with relevant provisions of the “Enterprise Accounting Standards” and will fulfill information disclosure obligations in a timely manner.

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