Business Context and Reporting Period
This Form 6-K filing by Tantech Holdings Ltd. covers the month of December 2019. The report details a strategic investment agreement entered into on November 29, 2019, and a supplementary agreement signed on December 17, 2019. The primary objective is to acquire an 18% equity interest in Fuquan Chengwang Mining Co., Ltd., a basalt mining company, to prevent the dilution of the Registrant's ownership in a related group of mining companies.
Key Financial Metrics
The filing does not provide consolidated revenue, profit, cash flow, margins, or general debt and liquidity metrics for the reporting period. Specific financial figures related to the transaction are as follows:
- Investment Consideration: RMB 46.323 million (approximately $6.48 million).
- Valuation Basis: The consideration represents 18% of the RMB 257.354 billion value of the mining right under a permit being renewed by Fuquan Chengwang.
- Asset Scope: The mining permit covers a 0.2607-square-kilometer basalt quarry in Fuquan City, Guizhou Province, China.
Material Changes and Transaction Details
The material change reported is the execution of the Investment and Supplementary Agreements to acquire the stake in Fuquan Chengwang. Key terms include:
- Payment Terms: Consideration is due within 30 days after Fuquan Chengwang completes the recording process for the share ownership transfer.
- Permit Renewal Condition: Fuquan Chengwang's mining permit expired on May 20, 2019, and is currently being renewed. If the permit is not received by June 30, 2020, the seller (Jingning Zhonggang) must return all consideration plus interest calculated at the People's Bank of China loan rate within 30 days.
- Valuation Adjustment: If the audited value of Fuquan Chengwang is lower than RMB 257.354 billion, the seller must refund the overpaid amount in cash, shares, or other assets.
- Guarantees: Lishui Zhonggang Mining Co., Ltd. is jointly and severally liable for Jingning Zhonggang's obligations under the agreements.
Outlook, Risks, and Contingencies
Management commentary indicates the transaction is defensive, aimed at maintaining the Registrant's 18% indirect stake in the broader mining group structure involving Libo Haokun Stone Co., Ltd. Significant risks and contingencies include:
- Regulatory Risk: The investment is contingent on the successful renewal of the mining permit by June 30, 2020. Failure to renew triggers a full refund mechanism.
- Valuation Risk: The final value of the investment is subject to audit verification against the RMB 257.354 billion benchmark.
- Counterparty Risk: While Lishui Zhonggang provides joint and several liability, the primary obligation rests with Jingning Zhonggang.
Investor Verification Checklist
- Verify the status of the mining permit renewal for Fuquan Chengwang and the likelihood of approval by June 30, 2020.
- Confirm the completion of the share ownership recording process with the local industrial and commerce administration to trigger payment obligations.
- Review the audited financial statements of Fuquan Chengwang to validate the RMB 257.354 billion valuation benchmark.
- Assess the financial health of Jingning Zhonggang and Lishui Zhonggang to ensure they can meet refund obligations if the permit is not renewed.