On the evening of October 22, Nanchang Mineral Systems Co.,Ltd. (001360) announced it plans to pay US$12.75 million in cash to acquire a combined 51% stake from shareholders of an Indonesian target company, moving into overseas gold mining. The proposal was approved at the board meeting held on October 21 with 7 votes in favor and 1 against.
The reason for opposition from Vice Chairman Gong Youliang of Nanchang Mineral Systems is that the company had not previously carried out exploration and verification work on the target company's gold mine project, making the project risk relatively high. Notably, the company's share price hit a one-line limit up against the market trend today.
Acquisition Enters Overseas Gold Mining
The announcement shows that the target company is Indonesia's PT.BINA DAYA LAHAN PERTIWI (abbreviated as BDLP), and the transaction target is a combined 51% equity interest in the target company held by BDLP shareholders Group Win Limited, Major Invest Limited, Pierre Dermawan and Rudy Soeparman. BDLP's core asset is the Holubarang gold mine project located in Buol Regency, Central Sulawesi Province, Indonesia, holding a metal mineral production and operation mining permit valid until December 29, 2034, covering an area of 38.36 square kilometers.
According to the reconnaissance geological report provided by the target company, Ore Body No. III in the north has an estimated ore volume of about 1.14 million tonnes, gold metal content of about 7.4 tonnes, with an average grade of 6.49 grams per tonne, and also contains associated silver, lead, zinc and other polymetals. After the transaction is completed, Nanchang Mineral Systems will lead mine construction and mining and processing production, and subsequently advance deep exploration and Phase II expansion.
In terms of valuation, the transaction price is based on a 100% equity valuation of the target company of US$25 million, which references the actual cost of about US$25 million already invested by the target company's original shareholders in the mine project. After negotiation, the two parties agreed that the 51% equity interest in the target company corresponds to a transaction price of US$12.75 million.
Vice Chairman Gong Youliang Casts Opposing Vote
Nanchang Mineral Systems is mainly engaged in the research and development, production, sales and after-market services of crushing and screening equipment related to sand and gravel aggregates and metal mines. Gong Youliang, who cast the opposing vote, is a veteran figure at Nanchang Mineral Systems. Born in 1968, he entered Nanchang Mining Machinery Factory in 1990, where he successively served as deputy head of the technical section, chief dispatcher of the production section, and factory director; starting in 2003, he served as a director and president of the company for more than 20 years; after the September 2024 reshuffle, he became vice chairman and executive vice president. He is the second-largest individual shareholder after Chairman Li Shunshan, directly holding 11.38% of Nanchang Mineral Systems' equity.
In terms of past experience, Gong Youliang has long led the company's overseas business expansion. Since establishing its first overseas subsidiary in South Africa in 2016, Nanchang Mineral Systems has established a presence in Zambia, Zimbabwe, Malaysia, Australia, Singapore and other places, and has set up an R&D center in Sweden. Just a few days before this board meeting, he also received a visit from the China Mining Association to specifically exchange views on overseas business expansion. A senior executive who actively promotes going global nevertheless cast an opposing vote on this specific overseas acquisition, and the implication is self-evident: what he opposed was not the going-global strategy itself, but rushing into action without sufficient due diligence and without verified exploration.
Not Yet Explored or Verified
Nanchang Mineral Systems admitted in the announcement that the company has not yet conducted exploration verification and asset valuation work on the target company's gold mine project, and that in the future exploration and verification process there may be a risk that the resource and reserve data provided by the target company differ significantly from the actual recoverable reserves, leading to the project being unable to proceed. The company stated that this outbound investment aims to expand overseas markets and carry out investment and operation management of mineral resource projects, in line with the company's long-term development strategy. It is expected to open up new growth paths for the company and help enhance its overall competitiveness and risk resistance.
In response to Gong Youliang's objection, the company explained that the agreement stipulates that due diligence will be completed within three months after signing, and the period may be extended through negotiation. The investment funds will be paid in three installments: the first 15% down payment is conditional on ODI filing, signing of the EPC-O contract, pledge registration and commencement of production; the second 35% is conditional on equity transfer, ESDM filing and issuance of a legal opinion, ensuring acquisition of the 51% equity interest; the final 50% is conditional on 12 full months of production and obtaining major permits. The above payment arrangement ensures that equity, control and confirmed production capacity are obtained before most of the payment is made. After signing, geological exploration will be carried out to verify the gold mine resource volume and implement a mining rights valuation. If there are major falsehoods, omissions or misleading information in the resource and reserve materials, the company may require the transferor to repurchase the equity, or jointly and severally return the amounts already paid and compensate for losses. On October 22, Nanchang Mineral Systems' share price hit a one-line limit up against the market trend.
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