Zhejiang Huayu Cobalt Industry terminates Foreign Investment

SMM8, 16 July: in order to promote the strategy of resource development in Africa and strengthen the distribution of upstream resources, on December 15, 2017, the eighth meeting of the fourth session of the Board of Directors of Zhejiang Huayu Cobalt Industry Co., Ltd considered and adopted the "Bill on Foreign Investment of wholly-owned subsidiaries abroad." It is agreed that Huayu International Mining (Hong Kong) Co., Ltd., an overseas wholly owned subsidiary of the Company, will sign a "Cooperation Agreement" with Summit Reward Investment Limited, Triprosper Investment Limited (hereinafter referred to as "Sansheng Company") and Lucky Resources Holdings Company Limited to acquire Lucky Resources25500 shares held by Summit Reward for US $66.3 million, accounting for 51 per cent of the total share capital of Lucky Resources.

Lucky Resources owns 100 per cent of NEW MINERALS INVESTMENT SARL (, hereinafter referred to as "NMI", registered in the Democratic Republic of the Congo, and NMI holds DRC Mining Certificate No. 13235 by lease (which requires further exploration).

On February 9, 2018, Huayu International Mining paid Summit Reward $5 million of the first equity transfer under the Cooperation Agreement, and on April 21, 2018, Huayu International Mining paid Summit Reward the remaining $494.50 of the first equity transfer under the Cooperation Agreement. So far, Huayu International Mining has paid a total of US $9.945 million in equity transfers, the rest of which has not yet been paid.

After the signing of the Cooperation Agreement, the market environment has changed greatly, the price of cobalt products has dropped sharply, and the profitability has dropped sharply. At the same time, considering that in addition to the remaining 85% of the equity transfer of about US $56.355 million still needs to be paid, the follow-up development still needs to invest a large amount of capital, and the development cycle of the mine project is relatively long. Combined with the company's pre-target financial situation, in order to further improve the efficiency of the use of funds and focus on improving operating efficiency, Huayu Cobalt Industry intends to terminate the cooperation. The other side of the transaction is a long-term partner of the company, and the cooperative relationship is good. After friendly negotiation with the other side of the transaction, the two sides agreed to terminate this foreign investment cooperation. On August 15, 2019, the Company held the 26th meeting of the fourth session of the Board of Directors and adopted the "Bill on the termination of Foreign Investment by wholly-owned subsidiaries abroad". Huayu International Mining signed the termination Agreement with Summit Reward, Sansheng and Lucky Resources.

In 2018, Huayu Cobalt Industry produced 24354 tons of cobalt products (including 375tons of commissioned processing and 1726 tons of commissioned processing), and the production scale of cobalt products continued to lead the world. A total of 21788 tons of cobalt products were sold, an increase of 5.45 percent over the previous year, and the leading position in the global cobalt industry has been further consolidated.

In 2018, Huayu Cobalt realized operating income of 14, 450762951.95 yuan, an increase of 49.7 percent over the previous year, a net profit of 1524665501.53 yuan, down 19.14 percent from the previous year, and a net profit of 1528098517.04 yuan, down 19.38 percent from the previous year. The company achieved a net profit of 1.912 billion in the first three quarters, but in the fourth quarter, due to the rapid decline in the price of domestic cobalt products, the company needed a certain period from the purchase of raw materials to the shipment of finished products. The decline in prices led to the loss of raw materials and unsold products, but also weakened the profitability of cobalt products.

After the termination of the Cooperation Agreement, Huayu International Mining shall transfer 51% of the shares of Huayu International Mining to Summit Reward or its designated third party free of charge, and Huayu International Mining referrals will withdraw from the board and management of Lucky Resources and NMI. Huayu International Mining will assist Summit Reward in going through the above procedures for equity transfer and change of directors and management. The cost of the above change shall be borne by Summit Reward or its designated third party.

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