The coal resources invested in the Chery Ordos project "shrunk" and the total purchase price of Huaibei Mining fell by 750 million

Per reporter: Zeng Jian Per editor: Chen Junjie

In 2010, the news that Chery will invest 20 billion yuan to build a factory in Ordos, Inner Mongolia caused a huge sensation. According to the plan, the project was the largest off-site investment project of the whole vehicle in China at that time. What is even more interesting about this news is that Chery will be allocated a considerable amount of coal resources through this investment. For a time, the news of "Chery Circle Coal" was boiling on the Internet.

For 11 years, Chery's coal project has been unknown. The "Daily Economic News" reporter noted that an announcement by huaibei mining (600985, SH), an A-share listed company, brought Chery's coal project back into the public eye, but revealed the information that Chery's coal resources were "shrunk". However, Chery is still expected to recover huge amounts of money by selling the coal resources, and its original act of exchanging investment for resources can be called a god's work.

According to the announcement of Huaibei Mining on December 11, huai mining investment and Chery Holdings, a wholly-owned subsidiary of the company, have conducted several rounds of negotiations on the equity price of Ordos Chengda Mining Co., Ltd. (hereinafter referred to as Chengda Mining), in view of the fact that Tao kutu wellfield is a scarce large-scale integrated coalfield and its coal quality is better and has a higher market value, which can enhance the development potential of the company's main coal business, the two parties finally determined that the purchase price of 51% of the equity of Chengda Mining was changed to 2.787 billion yuan.

Earlier, Huaikuang Investment, Chery Automobile, Chery Holdings and Wuhu Ruichuang signed a package of agreements such as the Coal Resources Cooperative Development Agreement, the Chengda Mining Equity Transfer Agreement and the Supplementary Agreement from 2010 to 2013. According to these agreements, Chery (including Chery Automobile, Chery Holdings and Wuhu Ruichuang) will allocate 1.667 billion tons of coal resources available for its investment in Ordos to Chengda Mining, and Huai Mine Will invest in acquiring 51% of the equity of Chengda Mining for a purchase price of RMB3.541 billion. After the completion of the acquisition, Huai Mining Investment and Chery Holdings held 51% and 49% of the equity of Chengda Mining respectively. Huaibei Mining said that Huaibei Mining Investment has paid a total of 1.408 billion yuan to Chery for the purchase price of equity, and the remaining price has not yet been paid.

Why did the acquisition amount decrease by $754 million from $3,541 million to $2,787 million?

In this regard, Huaibei Mining said that first, the amount of coal resources currently allocated by Chery has undergone major changes compared with the amount of resources agreed in the original agreement. Second, some of the resources allocated by Chengda Mining to The Tao kutu Wellfield Resources allocated by the Inner Mongolia Autonomous Region to the wholly state-owned enterprises in Ordos City or its wholly-owned subsidiaries (hereinafter referred to as the State-owned Enterprises of Eshi City); after the State-owned Enterprises of E's City take a stake in Chengda Mining, they will dilute the equity of Chengda Mining held by Huai Mine Investment and Chery Holdings, so that Huai Mine Investment will no longer have a controlling position.

At the beginning, Chery built a factory in Ordos and obtained local coal resources to explode on the Internet. It has been reported that the total investment of Chery Ordos project is 20 billion yuan. According to the local policy at that time, projects with an investment amount of more than 4 billion yuan could allocate resources according to the relevant proportions. Chery's investment of up to 20 billion yuan will obviously also be "very fruitful". Anhui News Network reported in September 2010 that Huaibei Mining and Chery signed a strategic cooperation agreement to cooperate in the development of 1.66 billion tons of coal resources with geological reserves of 1.66 billion tons in the Nalinhe Mining Area of Ordos City.

In November 2018, the Land and Resources Department of the Inner Mongolia Autonomous Region (now the Department of Natural Resources of the Inner Mongolia Autonomous Region) signed a contract with Chengda Mining for the transfer of prospecting rights, and Chengda Mining was awarded the right to explore the wellfield of Tao kutu. In 2019, Chengda Mining was awarded the Mineral Resources Exploration License. The resources of Tao kutu wellfield are 1.4468 billion tons, of which Chery fang has been allocated 1.063 billion tons of coal resources, and the remaining 383.8 million tons are allocated to state-owned enterprises in Hubei City.

In 2020, the Inner Mongolia Autonomous Region carried out special rectification in the field of coal resources, and re-approved the amount of coal resources allocated by Chery to 952.15 million tons. At the same time, the Ordos Municipal Government and Chery Holdings signed an agreement, agreeing that chery Holdings will invest an additional 2.25 billion yuan in Ordos City by the end of 2022, and can be allocated to reserve 110.85 million tons of Tao kutu well field resources. If the investment of 2.25 billion yuan is not in place, this part of the resources will be recovered by the government and allocated to state-owned enterprises in Hubei.

According to the announcement of Huaibei Mining, according to the construction needs of the Tao Kutu project, Huai mining investment, Chery Holdings and Eshi state-owned enterprises determined to hold the equity of Chengda Mining according to their respective resources, with the shareholding ratio of 37.47%, 36% and 26.53%. If Chery Holdings fails to allocate 110.85 million tons of coal resources, its shareholding will be reduced accordingly. Chery Holdings promised that after the state-owned enterprises in Eshi City took a stake in Chengda Mining, Chery Holdings and Huai mine investment would act in unison to assist Huai Mining Investment in exercising control over Chengda Mining. At the same time, Huai Mining Investment will actively promote the transfer of the remaining equity of Chengda Mining held by Chery Holdings to ensure the company's controlling position in Chengda Mining.

For the coal resources held by Chengda Mining, Huaibei Mining can be said to be quite optimistic. The company said that the coal resources of Tao Kutu well field are high-quality thermal coal, with a calorific value of more than 6,000 kcal, and from the perspective of the coal market situation in recent years, it is expected to have good economic benefits after the formal production, which is conducive to improving the company's profitability.

The "Daily Economic News" reporter noted that in December last year, the Ordos Municipal Government issued the "Supervision Measures for the Special Rectification of Illegal And IrregularIties in the Coal Resources Field in Ordos City", indicating that it is necessary to further strengthen the supervision and management of the special rectification of illegal and illegal problems in the field of coal resources. It mentions: "Before the reserved resource transformation project is completed and put into operation, the main body retaining the resources shall not be transferred or capitalized for operation", "If it is found that the project construction has not completed the corresponding investment ratio according to the time schedule, it is ordered to stop the enterprise from handling the relevant procedures of the coal mine, and the coal mine to stop construction and production." ”

At the end of April this year, the Ordos Municipal Government Office issued the "Notice on Strengthening the Supervision of Reserved Coal Resource Projects", and Ordos signed a project completion agreement with 12 enterprises retaining coal resources within a time limit, and continued to retain the coal resources allocated by the People's Government of the Inner Mongolia Autonomous Region in the special rectification of violations of laws and regulations in the field of coal resources. "Ordos Chery Investment Co., Ltd. 200,000 passenger car project, auto parts manufacturing project, development project" is among them.

The above-mentioned notice requires that the Ordos Municipal Bureau of Natural Resources is responsible for supervising the mining rights of the above 12 reserved resource projects; the Municipal Bureau of Industry and Information Technology, the Municipal Development and Reform Commission, etc. shall go to the site from time to time to inspect the projects supervised by the department, dispatch the progress of the construction of the reserved resource projects every month, and form a work report on a monthly basis. At the same time, the Energy Bureau of the Inner Mongolia Autonomous Region requires Ordos to calculate in detail the energy consumption of the coal resources project to ensure that the city's "14th Five-Year Plan" energy consumption dual control target task is completed.

For Chery, although the allocated coal resources have "shrunk", at least 952.15 million tons of coal resources have been allocated, which still ensures that it has a good harvest. At the same time, Chery's auto projects in Ordos seem to be developing well. "Ordos Release" released in mid-November announced: "Chery Automobile Ordos Branch production of passenger cars increased by 177.95% year-on-year."

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