Qiao Xing Universal Resources Inc announced that its wholly owned subsidiary Chifeng Zhongtai Mining Company Limited has signed a letter of intent with Chifeng Xingu Mining Company Limited to acquire the 100% equity interest in Balinzuo Banner Xinyuan Mining Company Limited for a purchase price not to exceed USD 107 million in cash to be paid in several installments.
As a wholly owned subsidiary of Chifeng Xingu, Xinyuan Mining owns a relatively large scale lead zinc mine in Balinzuo Banner, in the Inner Mongolia Autonomous Region of the People's Republic of China.
Based on the preliminary due diligence and domestic geological exploration materials, Xinyuan Mining owns the mining license of the Xinyuan Lead zinc Mine covering 3.3233 square kilometers. The reserves of lead zinc metal and copper metal which are subject to verification are estimated to be 825,000 tonnes and 109,000 tonnes, respectively with average grade at 7.60% for lead zinc and 1.01% for copper. The Mine has current production capacity for processing 500 tonnes of ores per day and is now at the stage of trial operation. The final products of the Mine are lead zinc concentrate and copper concentrate being supplied to smelters in Chifeng and surrounding areas in China. In addition to its well developed infrastructure, including water and power supplies as well as transportation, Xinyuan Mining has obtained all relevant permits for normal business operation. Xinyuan Mining also boasts an experienced technical and management team with years of mining expertise.
Based on preliminary discussions, Chifeng Zhongtai plans to acquire the Mining Company for cash with final terms of the acquisition subject to due diligence. The Company plans to engage one of the world's top class mining consulting firms to verify the reserves of the Mine. In addition, the completion of the acquisition is also subject to, among other conditions, the following conditions, negotiation of a equity purchase agreement satisfactory to both parties, approval by the Board of Directors of Qiao Xing Universal Resources Inc, satisfactory completion of all due diligence efforts and investigations by the Company and Chifeng Zhongtai, receipt of all necessary regulatory and governmental approvals; verification of the reserve and grade information regarding the Mine, receipt of appropriate legal opinions; and other customary closing conditions. There can be no assurance that a definitive equity purchase agreement will be completed or executed or that the sale of Xinyuan Mining will be completed.
Mr Wu Ruilin chairman of XING said that "China's strategically important resources, copper, lead and zinc are widely used in the automobile, construction and machinery industries. In the medium and long term, we are optimistic about a solid recovery in the global economy and the continuous growth of the Chinese economy and therefore believe that these resources will meet growing demand for many years. With commodity prices at relatively low levels for now, we are trying to capture this market opportunity to buy some large scale and high quality mines to rapidly grow our business scale. The Xinyuan Lead-zinc Mine is an intriguing asset for us because of its potential large scale, high grade, and benefits from good mining conditions. Once the acquisition is closed, the Mine is expected to enhance the Company's foothold in China's resources industry, and create shareholder value as well."
He said that at the same time, we are actively discussing with some advisory firms how to sort out our relationship with Qiao Xing Mobile Communications Company Limited and how to deal with its mobile phone business. Currently, we are evaluating several options and are trying our best to make the final decision as soon as possible.
