Dongli Technology intends to issue shares to acquire 100% of the shares of Xingzhong Titanium Industry

On December 22, Dongli Technology announced to issue shares to acquire 100% of the shares of Xingzhong Titanium Industry.

Xingzhong Titanium Industry was founded in 2003, is one of the earliest into the deep processing of vanadium titanium magnetite resources in Panxi area, with the production capacity of traditional rutile titanium dioxide, high purity electronic titanium dioxide, chemical fiber titanium dioxide, and nitrate removal titanium white, with an annual output of more than 40,000 tons of titanium dioxide, and about 150,000 tons of ferrous sulfate byproduct. In the field of denitrification titanium dioxide, in addition to the production of conventional products, has been successfully produced high specific surface area and low sulfur content products. After years of product development and technical transformation, Xingzhong Titanium Industry product quality improvement and promotion.

Dongli Technology was founded in 2007 and listed in the National SME Share Transfer System on December 28, 2015. Its main business is the comprehensive utilization of industrial resources. The company through the sulfuric acid process of titanium dioxide production enterprises byproduct ferrous sulfate (green alum), lead, zinc and copper non-ferrous metal mining enterprises byproduct sulfur tailings and sulfur slag mixed and mixed firing, so that green alum, sulfur sand, sulfur slag into sulfuric acid, iron into red slag (iron oxide powder), The output of sulfuric acid, red slag (iron oxide powder), steam supply titanium dioxide enterprises, iron and steel enterprises and other industrial enterprises. At present, the self-owned and managed operating devices of Dongli Technology comprehensively utilize about 800,000 tons of green alum, sulfur fine sand and sulfur slag annually, producing about 800,000 tons of sulfuric acid, iron powder and steam nearly 700,000 tons.

Dongli Technology, Xingzhong Titanium Industry and its subsidiary Xingzhong Mining are in different links of the industrial chain of comprehensive utilization of vanadium titanium-magnetite resources in Panzhihua, which are upstream and downstream of each other. Their business is deeply embedded in the industrial system of Panzhihua, providing important raw materials and elements for local industrial development, and is an important part of the industrial chain of comprehensive utilization of vanadium titanium-magnetite resources in Panzhihua.

According to the financial data of Dongli Technology and Xingzhong Titanium Industry, in 2020 and 2021, the amount of sulfuric acid and steam supplied by Dongli Technology to Xingzhong Titanium Industry is 29.48 million yuan and 38.08 million yuan respectively, accounting for 8.23% and 9.79% of the current operating income respectively. In 2021, Xingzhong Titanium Industry will supply green alum and desalting water to Dongli Technology for 102 yuan, accounting for 0.26% of the current operating revenue.

In 2021, the operating revenue of Dongli Technology was 389.1 million yuan and the net profit was 67.55 million yuan. Xingzhong Titanium's unaudited consolidated operating income in 2021 totaled 895.3 million yuan, of which the operating income from the sale of titanium dioxide products was 675.5 million yuan, and the unaudited consolidated net profit was 72.13 million yuan. Through this major asset reorganization, Dongli technology revenue scale and profitability will be further enhanced. In 2021, the asset-liability ratio of Dongli Technology is 33.58%, while the unaudited asset-liability ratio of Xingzhong Titanium Industry is 79.21%. This reorganization will increase the amount of liabilities of Dongli Technology, resulting in an increase in the asset-liability ratio of Dongli Technology.

Dongli technology said that after the transaction, it is expected that the company's main raw materials are titanium concentrate, sulfur sand, sulfuric acid, energy consumption, etc., auxiliary materials mainly include iron powder, liquid alkali/tablet alkali, potassium hydroxide, etc.; The production mode of the company will not change significantly. It still mainly adopts the typical production mode of chemical enterprises and organizes production in a large-scale continuous way according to the production plan and the actual production and marketing situation. The sales mode of Dongli Technology is still direct selling. Users sign purchase and sales contracts with Dongli Technology by batch according to their purchasing needs. Dongli Technology's main customers will increase the production of paint industry, trade enterprises, etc.

Dongli also said its deal with Xingzhong Titanium would help both companies:

1. Building a circular economy industrial chain, promoting energy conservation, emission reduction, and the economical, intensive and efficient use of resources

2. Bring synergies into play and enhance sustainable operation capacity

3. Expand business scale and enhance market competitiveness

4. Reduce affiliated transactions and improve standardized operation level

It is reported that the specific price of the transaction will be determined in the Asset Purchase Agreement after final negotiations between the two parties based on the audit and evaluation report issued by an institution that conforms to the Securities Law, with September 30 as the benchmark date. Rao Hua, the actual controlling owner of Xingzhong Titanium Industry, is also the controlling shareholder and actual controller of Huawei Dongli Technology.