Nearly a month later, Western Region Gold Co.Ltd(601069) (601069. SH) disclosed 111 pages of documents and replied to the inquiry of the Shanghai Stock Exchange on its major asset restructuring plan.
On November 22 last year, Western Region Gold Co.Ltd(601069) disclosed the plan for major asset restructuring and planned to purchase 100% equity of three manganese industry related companies by issuing shares. The trading parties are its controlling shareholders Xinjiang nonferrous metals industry (Group) Co., Ltd. (hereinafter referred to as Xinjiang nonferrous metals) and Yang Shengrong.
On December 8, the Shanghai Stock Exchange issued an inquiry letter on the plan. In the inquiry letter, the regulator asked the listed company why the acquisition target was transferred by the controlling shareholder, whether the target assets have sustainable profitability, and whether to acquire assets during the upward period of manganese industry price. After several rounds of delayed replies, yesterday (January 4), Western Region Gold Co.Ltd(601069) disclosed a long document and replied to the above contents in detail.
Western Region Gold Co.Ltd(601069) said in the reply to the inquiry letter that the change of hands by the controlling shareholder in the transaction plan is to lock in potential acquisition opportunities in advance. The main products of the target company are manganese ore and electrolytic manganese. At present, the price center of manganese ore shows a slow upward trend year by year, and the market price of electrolytic manganese is expected to remain relatively high. With the continuous growth of downstream demand of manganese industry, the target company has complete industrial chain capacity and sustainable profitability.
lock in potential acquisition opportunities for listed companies
Western Region Gold Co.Ltd(601069) according to the plan, the three companies the company plans to purchase are Aktau baiyuanfeng Mining Co., Ltd. (hereinafter referred to as baiyuanfeng), Aktau Kebang manganese Manufacturing Co., Ltd. (hereinafter referred to as Kebang manganese) and Xinjiang Mengxin Tianba Mining Investment Co., Ltd. (hereinafter referred to as Mengxin Tianba).
As early as July 2017, Western Region Gold Co.Ltd(601069) announced that it planned to acquire 51% equity of baiyuanfeng and 51% equity of Kebang manganese industry held by Yang Shengrong. The transaction was terminated in January 2018 due to incomplete mining right evaluation, failure to handle ownership certificates and licenses, environmental impact and other reasons. In August 2019, Western Region Gold Co.Ltd(601069) controlling shareholder Xinjiang nonferrous metals acquired 65% equity of baiyuanfeng and Kebang manganese industry.
Now, Western Region Gold Co.Ltd(601069) wants to acquire all the equity of baiyuanfeng and Kebang manganese industry held by it from the controlling shareholder, and the underlying valuation has increased compared with 2019. The valuation of baiyuanfeng and Kebang manganese industry has increased by 265 million yuan and 225 million yuan respectively. The Shanghai stock exchange requires listed companies to focus on the reasons and rationality of the controlling shareholder’s resale to the listed company after obtaining the control right of the subject matter, whether the transaction price is fair and whether there is benefit transfer.
In this regard, Western Region Gold Co.Ltd(601069) said that the target assets have good development prospects because they master the relatively high-quality manganese ore resources and downstream supporting production capacity in Xinjiang. However, due to the immature target conditions and high acquisition risk, they were transferred to Xinjiang nonferrous metals to complete the acquisition, lock potential acquisition opportunities for listed companies and help listed companies realize high-quality asset integration and industrial adjustment, Reasonable.
However, from the perspective of financial performance, the net profit of Kebang manganese industry fluctuated greatly in recent two years, the net profit of baiyuanfeng declined, and Mengxin Tianba continued to lose money during the reporting period. The Shanghai Stock Exchange asked listed companies whether the profitability of the underlying assets met the requirements of major asset restructuring.
In the first three quarters of 2019, 2020 and 2021, the net profits of baiyuanfeng were 126 million yuan, 102 million yuan and 95 million yuan respectively, the net profits of Kebang manganese industry were 12 million yuan, – 59 million yuan and 228 million yuan respectively, and the net profits of Mengxin Tianba were – 1091600 yuan, – 246300 yuan and – 1011400 yuan respectively.
Western Region Gold Co.Ltd(601069) replied that the large fluctuation in the performance of Kebang manganese industry was caused by the decline in the sales volume and sales price of the company’s electrolytic manganese products due to the epidemic control in 2020. The industry recovered in 2021, and the sales volume and price of electrolytic manganese increased simultaneously; Baiyuanfeng has stable performance, holds high-quality manganese ore resources and has strong profitability; The continuous loss of Mengxin Tianba is mainly due to the fact that the company is still in the stage of exploration operation, mineral certificate handling and mining area construction in the reporting period, and has not actually mined and sold manganese ore products. It is expected that the company will be able to form a good profit with the completion of mine construction and put into production.
the target company has strong sustainable profitability
The plan disclosed that Western Region Gold Co.Ltd(601069) acquired three companies to realize the dual main business of “gold + manganese ore” mining and smelting. Western Region Gold Co.Ltd(601069) focuses on gold mining and smelting. The company’s mineral gold output ranks among the top ten mineral gold enterprises in China. In 2020, 98.34% of the company’s revenue came from gold.
In order to promote the dual main business strategy, Western Region Gold Co.Ltd(601069) the three companies to be acquired are located in the manganese industry chain, or have high-quality manganese ore resources or corresponding deep and fine processing capacity of manganese products. According to Western Region Gold Co.Ltd(601069) , the average grade of manganese ore in China is about 22%, while the average grade of mining rights held by baiyuanfeng is more than 34%; Mengxin Tianba holds the mining right of malkan earth manganese mine, with a reserved resource of 5.95 million tons and an average grade of mn25 75%。
Kebang manganese industry is a downstream enterprise of baiyuanfeng and mengxintianba. Through intensive processing of manganese ore, it produces high-purity electrolytic metal manganese. During the reporting period, five production lines have been put into Kebang manganese industry electrolytic metal manganese production project, with an annual capacity of about 62500 tons and an actual output of more than 30000 tons / year. The price of electrolytic manganese continued to rise in 2021 and is now at an all-time high. It once hit about 44000 yuan / ton in November 2021.
Image source: Western Region Gold Co.Ltd(601069) screenshot of reply announcement
In this regard, the Shanghai Stock Exchange asked whether the company acquired assets during the upward period of manganese industry price, whether there is risk of fluctuation or decline in future price, and whether the underlying assets have sustainable profitability.
Western Region Gold Co.Ltd(601069) believes that from the perspective of long-term average price, the price center of manganese ore shows a slow upward trend year by year. In the short term, the market price of electrolytic manganese is expected to fall with the gradual decline of external factors such as epidemic situation and power restriction, the gradual improvement of industry supply and demand. However, in the long run, with the withdrawal of backward production capacity and the overall stability of downstream market demand, it is expected to remain at a relatively high level.
From the perspective of the prospect of the manganese industry, Western Region Gold Co.Ltd(601069) believes that, on the one hand, the iron and steel industry is the main downstream application field of the manganese industry, and the market demand has remained stable in recent years. At the same time, with the rise of new energy industry, it is expected to explore potential market increment in new application fields; On the other hand, the regulatory environment of mines and electrolytic manganese is becoming stricter. Electrolytic metal manganese production equipment and enterprises with high energy consumption and low production efficiency are being limited by national policies. With the continuous expansion of industry demand and the improvement of competition pattern, the target company has mastered high-quality ore resources, has complete industrial chain ability and strong sustainable profitability.
(Daily Economic News)
