Xinhua Jin (600735): Why Did The Mine Of Qingdao Sen Hui Fail For A Long Time?

On February 14th, 600735.SH released a notice on the Shanghai stock exchange's reply to the related questions about the acquisition of related assets.

Announcement revealed that after the completion of this transaction, Qingdao Sen Hui will become a listed company holding subsidiary. There is competition between Hai Zheng graphite, graphite technology company and Qingdao Sen Hui, which is controlled by Xinhua Group, the controlling shareholder of the company. Ask the company to add to the disclosure: (1) whether the transaction violates the relevant commitments made by the controlling shareholders and actual controllers of the listed companies to avoid competition in the industry; (2) the transactions and capital transactions between the company and the listed companies in Qingdao, which are controlled by the company's actual controllers.

Reply: in view of the fact that Hai Zheng graphite and graphite technology company has not yet carried out the actual business operation, and in order to avoid future potential competition in the same industry, the trading partners and their controlling shareholders have made arrangements and commitments to avoid competition in the same industry. Therefore, the transaction is not in violation of the relevant commitments made by the controlling shareholders and the actual controllers of the listed companies to avoid competition. After enquiry, since the establishment of Hai Zheng graphite and graphite technology company, there has not been any transaction with Qingdao Sen Hui and listed companies. Up to now, the amount and balance of capital exchanges between Hai Zheng graphite and graphite technology company and Qingdao Sen Hui and listed companies are all zero.

2. announcement disclosed that Qingdao Sen Hui has been in the state of ceasing mining since the acquisition of mining rights from Qingdao high and rich graphite Co., Ltd. in April of 2009. In March of 2015, new material company failed to start production after Qingdao gained 50% stake in sinhui. The company needs to replenish the main reason why Qingdao Sen Hui has not been able to mine for a long time since its acquisition of mining rights in April, 2009, and whether it has the mining conditions at present. After the acquisition, the company still needs to invest in the amount of money before its actual exploitation, and whether there is still the risk of long-term mining.

Company reply: about the main reason why Qingdao Sen Hui has not been able to mine for a long time since its mining right in April 2009, is there any mining condition at present? In April 2009, Qingdao Sen Hui acquired mining rights from high and rich acquisitions. Since then, Qingdao Sen Hui has rebuilt and expanded the original flotation workshop and installed and adjusted the mining and mineral processing equipment. Because the market demand of graphite products was limited at that time, according to the approved production scale of 52 thousand tons / year, the input-output ratio of mining was not high, so Qingdao Sen Hui had not been mining the mine. In April 2015, when the new material company became the controlling shareholder of Qingdao Sen Hui, it had made a short start preparation work. But in November 2015, Qingdao's safety production license expired and could not continue to produce. In 2016, according to the decision of new material company and Qingdao Sen Hui, Qingdao Sen Hui carried out the capacity expansion and transformation and passed the check and acceptance. The mining scale increased from 52 thousand tons per year to 200 thousand tons / year. In December 22, 2016, the mining license issued by the Shandong Bureau of land and resources was obtained, with an area of 0.1193 square kilometers and a production scale of 200 thousand tons / year. The effective period is from December 12, 2016 to December 12, 2021. Since then, Qingdao Sen Hui has continuously improved its safety production standards in accordance with the requirements of the safety supervision department, and is committed to handling the new "safety production permit". Until November 18, 2019, Qingdao's foreign exchange department had obtained the "safety production permit" issued by the safety supervision department. Up to now, Qingdao Sen Hui has obtained the "mining license" issued by the land and resources management department and the "safety production permit" issued by the safety supervision department. It has also passed the EIA check and acceptance and obtained the "water intake permit", which already has the basic conditions for mining.

The main business of listed companies is the export business of hair products and textiles. Although the company has many years of operation and has stable customer resources and channel advantages, the competition in the international trade industry is fierce. Under the policy of developing the real economy vigorously, the international trade development and follow-up financing are facing many difficulties. In 2019, the Sino US trade frictions escalated many times. Although it had little practical impact on the main products and textile export business of the company, it determined the company's determination to carry out business transformation. In particular, the impact of the new coronavirus outbreak in the near future has been affected by the confidence of foreign customers and the scale of the company's export business this year. The transformation of the business of listed companies is imperative. The company believes that in order to achieve diversified development of the company's business, especially in order to reduce the impact of international trade environment and unexpected factors on the existing export business of the company, it is a good strategic time to enter the field of new graphite materials.