On March 8, Flat Glass Group Co.Ltd(601865) ( Flat Glass Group Co.Ltd(601865) , SH) replied to the announcement by disclosing the inquiry letter on matters related to the acquisition of assets. On February 15, the company received the inquiry letter on matters related to Flat Glass Group Co.Ltd(601865) acquisition of assets issued by Shanghai Stock Exchange, requiring Flat Glass Group Co.Ltd(601865) and relevant intermediaries to reply on whether there are problems such as avoiding major asset restructuring, handling progress of changes in the production scale of mining rights of the subject company, expected processing time and whether there are substantive obstacles.
On February 22 and March 1, Flat Glass Group Co.Ltd(601865) successively announced the delayed reply, which was due to “in view of the need to further supplement and improve some matters involved in the inquiry letter, and the need for relevant intermediaries to issue opinions.” Until August 8, Flat Glass Group Co.Ltd(601865) finally disclosed the reply.
In the reply letter, Flat Glass Group Co.Ltd(601865) said that there was no situation to avoid major asset restructuring, and there was no substantive obstacle to the change of the production scale of the mining right of the subject company.
subject company’s assets increased significantly
On February 14, Flat Glass Group Co.Ltd(601865) announced that it planned to acquire 100% equity of Sanli Mining Co., Ltd. (hereinafter referred to as Sanli mining) and 100% equity of Anhui Dahua Oriental Mining Co., Ltd. (hereinafter referred to as Dahua mining), with a total transaction price of about 3.344 billion yuan. The acquisition is a debt undertaking acquisition, with the equity value of the target company of 2.805 billion yuan and the debt undertaking price of 538 million yuan.
As of December 31, 2021, the appraisal results of the total equity value of the shareholders of the target companies Sanli mining and Dahua mining were RMB 2.073 billion and 743 million respectively, with appreciation rates of 156808% and 111609% respectively. According to the assets appraisal report, the retained resources of Sanli mining and Dahua mining are 32.783 million tons and 16.48 million tons respectively. The annual predicted sales revenue is 673 million yuan and 437 million yuan respectively. The sales price of raw ore excluding tax is 168.14 yuan / ton, and the discount rate is 8.02%.
The target company mainly produces quartzite raw ore. for the calculation basis and rationality of raw ore sales price evaluation parameters, Flat Glass Group Co.Ltd(601865) said that with the strong support and cultivation of strategic emerging industries by the state, the industrial application of quartz has greatly exceeded the scope of traditional application. Especially in the photovoltaic glass industry, affected by the continuous growth of photovoltaic installed capacity and the rapid penetration of double glass modules, the demand of the photovoltaic glass industry maintains a rapid growth trend. There is a large demand for quartz sand as its production raw material, and then the demand for quartz rock raw ore continues to expand.
Due to the shortage of quartzite ore resources and limited output, while the market demand continues to expand due to its wide application fields, resulting in an increase in the supply and demand gap of quartzite raw ore and processed products, so the price shows a rapid growth trend.
From 2017 to 2021, the average tax free prices of quartzite raw ore were 84.07 yuan / ton, 88.50 yuan / ton, 99.12 yuan / ton, 141.59 yuan / ton and 176.99 yuan / ton respectively. The price increases from 2018 to 2021 were 5.26%, 12.00%, 42.86% and 25.00% respectivelyp align=”center” style=”text-align:center;”> Source: reply to inquiry letter
In terms of the price of the target company, in 2020, 2021 and January February 2022, the average sales price (excluding tax) of Sanli mining quartzite mine was 118.61 yuan / ton, 142.50 yuan / ton and 168.79 yuan / ton respectively, and the average sales price increased by 20.14% and 18.45% from January to February 2021 and 2022 respectively.
Dahua mining has been mining and selling raw quartzite ore since 2021. The mining time is from January to June 2021. The average sales price of the mined stone is 106.46 yuan / ton (excluding tax), and the sales price range is 60.28 yuan / ton ~ 140.75 yuan / ton (excluding tax).
Flat Glass Group Co.Ltd(601865) believes that due to the early mining stage of Dahua mining in 2021, there are many impurities such as skin and soil in the ore and the quality is relatively low, resulting in relatively low pricing in the early stage. In the later stage, with the improvement of the quality of the mined ore, the price will show an upward trend. Therefore, the listed company believes that the predicted raw ore sales price in the future is 168.14 yuan / ton.
can the production scale of mining right be changed smoothly
It can be seen that the average price of quartzite ore from January to February 2022 is almost the same as the company’s predicted raw ore sales price in the future, and the price of quartzite ore increases year by year. However, in the asset appraisal report, the annual sales revenue of Sanli mining and Dahua mining is predicted to be 673 million yuan and 437 million yuan respectively. To achieve the above prediction, the output of Sanli mining and Dahua mining needs to reach 4 million tons / year and 2.6 million tons / year respectively, and all of them are sold.
The announcement shows that the approved production scale of Sanli mining and Dahua mining is 1.9 million tons / year and 500000 tons / year. The premise of the assets appraisal report is that the relevant procedures based on the expansion of production capacity can be handled at the same time of production in 2022.
Flat Glass Group Co.Ltd(601865) said in the reply to the inquiry letter that the current development and utilization plan of mineral resources for the change of production scale of Dahua mining has been reviewed and approved by the expert group, According to Chuzhou economic and Information Bureau’s chujingxin [2021] No. 27 “letter on the filing of the project of technical transformation and expansion of 2.6 million tons of open-pit mining with an annual output of No. 15 section of glass quartzite mine in Lingshan mulishan mining area, Fengyang County, Anhui Dahua Oriental Mining Co., Ltd.:” after research, the filing of the project is agreed “. The mining license for the new production scale of the mining right is expected to be completed in March 2022.
The mineral resources development and utilization plan of Sanli mining has been prepared, but it has not yet passed the review organized by the competent department. The procedures for capacity expansion and change of relevant emergency management, environmental protection and other departments are being handled. The mining license for the new production scale of the mining right is expected to be completed in 2022.
Flat Glass Group Co.Ltd(601865) believes that according to the instructions issued by Fengyang County Bureau of economy and information technology on the expansion of production of Dahua mining and Sanli mining respectively, there are no substantive obstacles to the change of production scale of mining rights of Dahua mining and Sanli mining.
It is worth noting that if the relevant procedures for the expansion of Sanli mining capacity have not been successfully implemented, the old mining license can only be extended, and the amount affecting the evaluation of mining right and equity value is 521 million yuan.
In this regard, the counterparty fengsha group issued a commitment: “if the production expansion procedures of Sanli mining fail to pass the review organized by the competent department and the production expansion cannot be implemented smoothly, the company agrees to pay 521 million yuan of the transaction price to the company after Sanli mining completes the production expansion procedures of mining right production scale from 1.9 million tons to 4 million tons.”
