Securities code: Sichuan Yahua Industrial Group Co.Ltd(002497) securities abbreviation: Sichuan Yahua Industrial Group Co.Ltd(002497) Announcement No.: 202232 Sichuan Yahua Industrial Group Co.Ltd(002497)
Announcement on subscribing for the equity of Canada super lithium company and involving mining right investment
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Important content tips:
1. Yahua international, a wholly-owned subsidiary of the company, invested $5 million to subscribe for 21276596 shares of super lithium Canada, accounting for about 13.23% of the total share capital of super lithium as of the date of this announcement.
2. Yahua international, a wholly-owned subsidiary of the company, invested in cash to acquire 60% equity of the wholly-owned subsidiary of Canada super lithium company.
3. This equity subscription and mining right investment are within the approval authority of the board of directors and do not need to be submitted to the general meeting of shareholders for deliberation.
4. This equity subscription and mining right investment of the company do not constitute related party transactions, nor do they constitute major asset restructuring stipulated in the administrative measures for major asset restructuring of listed companies.
1、 Overview of foreign investment
On April 17, 2022, Yahua International Investment Development Co., Ltd. (hereinafter referred to as “Yahua international”), a wholly-owned subsidiary of Sichuan Yahua Industrial Group Co.Ltd(002497) (hereinafter referred to as ” Sichuan Yahua Industrial Group Co.Ltd(002497) ” or “the company”), and ultra lithium Inc. (English Name: Ultra lithium Inc., hereinafter referred to as “ultra lithium company”) of Canada signed an equity subscription agreement, with a proposed capital contribution of $5 million, Subscribe 21276596 units of super lithium company at the price of C $0.235 per share (the final subscription quantity and unit price shall be subject to the approval of the multiple stock exchange), accounting for 13.23% of the total share capital of super lithium company as of the date of this announcement. At the same time, Yahua international invested in cash to acquire 60% of the equity of the wholly-owned subsidiary of super lithium company, and controlled its Fugen lake hard rock spodumene lithium mine project and Georgia lake hard rock spodumene lithium mine project. On the same day, the two sides signed the sales and joint venture agreement.
The 12th meeting of the 5th board of directors of the company deliberated and approved the proposal on subscribing the equity of Canada super lithium company and investing in mining rights, and agreed to the share subscription and mining right investment. In accordance with the provisions of relevant systems such as self regulatory guidelines for listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board, the articles of association and the measures for the administration of foreign investment, this equity subscription and mining right investment are within the scope of the approval power of the board of directors and do not need to be submitted to the general meeting of shareholders of the company for deliberation.
This equity subscription and mining right investment do not constitute related party transactions, nor do they constitute major asset restructuring as stipulated in the administrative measures for major asset restructuring of listed companies.
2、 Basic information of counterparty
(I) super lithium Canada
1. Company name: Ultra lithium Inc
2. Place of registration: Canada
3. Date of establishment: November 2, 2004
4. Company address: 35001055 Dunsmuir Street Vancouver BC Canada v7x1h7
Super lithium Canada is an exploration and development company listed on the growth enterprise market of Toronto Stock Exchange, Canada. The company’s stock code is tsxv: ult, focusing on the exploration and development of lithium, gold and copper resources. Super lithium owns brine lithium mines in Argentina, hard rock spodumene lithium mines in Lake Georgia and lake Fugen in Northern Ontario, Canada, and copper and gold mining and exploration rights in many regions of Argentina.
(II) mining right of hard rock spodumene lithium ore involved
The Fugen lake hard rock spodumene lithium project and the Georgia lake hard rock spodumene lithium project are located in Ontario, Canada, with a total mining right area of 26.72 square kilometers. The mining area has good infrastructure support, convenient transportation, complete hydropower and other infrastructure, and the nearby expressway can directly reach the port, about 145 kilometers. According to the surface outcrop area, the estimated resource of Fugen Lake project is 6.4 million tons, and the average grade of lithium oxide is 2.2%. It is preliminarily estimated that the equivalent of lithium oxide is about 140000 tons; According to the surface outcrop area, the estimated resource of the Georgia Lake project mine is 5.4 million tons, and the average grade of lithium oxide is 1.2%. It is preliminarily estimated that the equivalent of lithium oxide is about 65000 tons. The geological and metallogenic background of the Canadian lithium project is similar to that of the methylka project. It is located in the distribution area of lithium bearing granite pegmatite veins in the contact zone between granite and surrounding rock. According to the judgment of the core members of the senior expert group for exploration of methylka and X03 veins in China, the lithium project has the potential of high probability exploration and discovery of super large spodumene reserves. According to the preliminary results, a lithium concentrate mining and dressing plant with 6% lithium oxide of 200000 tons / year will be designed and built in the first phase, and the continuous operation time will not be less than 10 years. In the later stage, according to the further detailed exploration, the capacity of the second phase will be expanded to 400000 tons.
Laguna Salt Lake project in Catamarca Province, Argentina consists of three mining licenses, with a mining right area of 117 square kilometers and a lithium ion grade of up to 1270mg / L.
(II) main financial indicators
The company’s net assets and liabilities as of January 2020 were about C $3.14 million (about C $3.14 million), and its total assets and liabilities were about C $3.13 million. As of January 31, 2022 (Unaudited), the total assets of super lithium company are about $6.16 million, liabilities are about $280000, net assets are about $5.88 million, operating revenue is 0 and net profit is – 150000.
3、 Main contents of the equity subscription agreement and the sale and joint venture agreement
(I) main contents of the equity subscription agreement
Yahua international subscribes 21276596 units of super lithium company at C $0.235 per share, totaling C $5 million. Each unit includes one common share and half of the warrants that can be transferred into common shares, that is, 21276596 common shares and 10638298 warrants. Yahua international may convert the warrants into ordinary shares at the exercise price of C $0.3 per share within one year from the delivery date.
(II) main contents of the sales and joint venture agreement
1. Purchase of equity
Yahua international acquired 60% of the equity of the wholly-owned subsidiary of ultra lithium company in cash, and the wholly-owned subsidiary of ultra lithium company became a joint venture between Yahua international and ultra lithium company.
Ultra lithium will continue to seek acquisition opportunities for high-quality hard rock lithium resources for the joint venture, lithium bearing pegmatite resources with an average grade of lithium oxide (Li2O) of 1.0-1.2% or higher, and continue to specifically explore, discover and acquire more Canadian lithium resources for the joint venture.
2. Corporate governance
The board of directors of the joint venture will have five members, three of whom will be nominated by Yahua international and two by ultra lithium. The senior management of the joint venture will be nominated and appointed by the board of directors. The parties shall operate and manage the joint venture in accordance with the terms of the shareholders’ agreement on the joint venture.
3. No dilution
Both parties to the joint venture shall retain their equity in the joint venture and prohibit dilution before commercial production. 4. Expenses of both parties
Both parties will bear the relevant expenses of this transaction.
5. Arbitration
Any dispute, controversy, difference or claim arising out of or in connection with this agreement, including the existence, validity, interpretation, performance, breach or termination of this agreement, or any non contractual dispute arising out of or in connection with this agreement, shall be submitted to an institution administered by the Hong Kong International Arbitration Centre (“HKIAC”) for arbitration, It shall be finally settled in accordance with the arbitration rules of the Hong Kong International Arbitration Center in force at the time of submission of the notice of arbitration.
4、 Fairness of consideration of this transaction
1. The total consideration for the company’s subscription of 13.23% equity of ultra lithium company is $5 million. The transaction price is priced according to the relevant regulations of the multi stock exchange, i.e. CAD 0.235/share (the final price is subject to the price approved by the multi stock exchange).
2. As the Fugen lake lithium project and Georgia lake lithium project of super lithium company are currently in the exploration stage, the transaction pricing of the company’s acquisition of a wholly-owned subsidiary of super lithium company comprehensively considers a variety of factors and is determined by both parties after negotiation, which is in line with the international M & a transaction practice and will not damage the interests of both parties.
5、 Purpose of this investment, impact on the company and existing risks
(I) investment purpose and impact on the company
This subscription for the equity of Canada super lithium company and the investment in the mining right of spodumene ore is the company’s further layout in the upstream resource end of lithium industry. It will invest and promote the exploration, development, construction and operation of Fugen lake lithium mine project and Georgia lake lithium mine project as soon as possible, which is conducive to the future upstream lithium resources of Fengfu company, improve the independent and controllable ability of lithium mine, and further improve the profitability and comprehensive competitive strength of the company, In line with the company’s lithium industry strategic development plan. This equity subscription and mining right investment will have a positive impact on the company’s future financial situation and operating results.
(II) existing risks
1. At present, it is necessary to carry out preliminary exploration for the Fugen lake lithium mine project and the Georgia lake lithium mine project, and there may be a risk that the actual total resources, reserves and actual recoverable reserves are inconsistent with the expectations.
2. Affected by the international political, economic environment, industrial policies and cycles, the price fluctuation of lithium products will affect the economic benefits of Fugen lake lithium project and Georgia lake lithium project.
3. If Canada’s policies on mineral Qualification Access, environmental protection approval, safe production and taxation change, it will affect the future production, operation and profitability of Fugen lake lithium project and Georgia lake lithium project.
4. The equity subscription is subject to the final approval of Toronto Stock Exchange of Canada, and the subscription unit price and quantity may be subject to adjustment risk.
The company will timely perform the obligation of information disclosure in strict accordance with the provisions and requirements of relevant laws and regulations and the follow-up progress of the matter. Please make careful decisions and pay attention to investment risks.
6、 Documents for future reference 1. Resolution of the 12th meeting of the 5th board of directors 2. Resolution of the 11th meeting of the 5th board of supervisors 3. Independent opinions of independent directors on subscribing for the equity of Canada super lithium company and involving mining right investment 4. Equity subscription agreement 5. Purchase and sale and joint venture agreement are hereby announced.
Sichuan Yahua Industrial Group Co.Ltd(002497) board of directors April 17, 2022
