Mr. Philip Lo reports
CHINA KELI SIGNS SHARE EXCHANGE AGREEMENT WITH PT HYDROTECH METAL INDONESIA
Pursuant to its previously announced letter of intent, China Keli Electric Company Ltd. has entered into a share exchange agreement dated Oct. 13, 2021, with PT Hydrotech Metal Indonesia (HMI), an emerging technology company domiciled in the Republic of Indonesia, and PT Trinitan Green Energy Metals and PT Trinitan Resourcetama Indonesia (Resourcetama, and together with Green Energy, the vendors), the registered and beneficial holders of all of the issued and outstanding shares in the capital of HMI, to acquire substantially all the issued and outstanding shares of HMI.
Pursuant to the share exchange agreement, the vendors will transfer 63,964,999 shares in the capital of HMI to the company, and the company will issue 70 million common shares in the capital of the company at a deemed price of 60 cents per share, payable pro rata to the vendors based on the number of transferred shares transferred by them. Green Energy currently holds 57,964,375 shares of HMI, while Resourcetama currently holds 6,000,625 shares of HMI. To comply with Indonesian laws, Resourcetama will retain one share of HMI posttransaction.
The transaction is an arm's-length transaction for the company. On completion of the transaction, China Keli will acquire HMI's business and assets, and the vendors will become the shareholders of China Keli. The company, as it will exist after the completion of the transaction, is referred to herein as the resulting issuer, and the common shares in the capital of the resulting issuer shall be referred to as resulting issuer shares.
China Keli will also issue 50 million common share purchase warrants exercisable for up to 50 million resulting issuer shares to the vendors. Each performance warrant will be exercisable into one resulting issuer share, at a price of 0.1 cent per share, and will vest and become exercisable subject to the following terms:
- HMI or the resulting issuer shall enter into a firm and binding contract and/or a licence (a revenue agreement) approved by the independent directors of the resulting issuer for the use of its STAL technology, which will result in advance royalty, sales royalty and/or any other type of revenue for the usage of such Step Temperature Acid Leach (STAL) technology, from one or more financially capable counterparties that in total will construct and develop up to four STAL lines (smelters) representing 7,200 tonnes per annum of nickel (Ni) equivalent capacity (each smelter being 1,800 tonnes per annum of nickel (Ni) equivalent capacity).
- Each smelter committed by the counterparty in the revenue agreement shall result in the vesting of (a) 6.25 million performance warrants upon the execution of the revenue agreement, and (b) an additional 6.25 million performance warrants upon proof of project funding satisfactory to the independent directors of the resulting issuer and commencement of construction of such smelter.
- The maximum time limit for HMI or the resulting issuer to meet these criteria and effect the vesting of the performance warrants is a date no later than four years from the listing of the resulting issuer on the Canadian Securities Exchange (as defined below).
Finally, once vested, the performance warrants shall only be exercisable to the extent the resulting issuer remains in compliance with the public distribution policies of the exchange, and in any event on or prior to Dec. 31, 2027.
Subject to regulatory approval, a finder's fee of $1.47-million shall be payable in common shares of the resulting issuer at a deemed price of 60 cents per share to Real Capital Ltd. on completion of the transaction.
Adviser performance warrants
In addition, at the closing of the transaction, Real Capital will be appointed as an adviser to a revenue agreement, and the resulting issuer will issue to Real Capital 12.5 million common share purchase warrants exercisable for up to 12.5 million resulting issuer shares. Each adviser performance warrant will be exercisable into one resulting issuer share, at a price of 0.1 cent per share, and will vest and become exercisable (x) as to 6.25 million adviser performance warrants upon the execution of a revenue agreement with a counterparty for one smelter approved by the independent directors of the resulting issuer, and (y) as to the remaining 6.25 million adviser performance warrants upon proof of funding satisfactory to the independent directors of the resulting issuer and commencement of construction of the smelter.
The maximum time limit for Real Capital and the company or the resulting issuer to meet these criteria and effect the vesting of the adviser performance warrants is a date no later than four years from the listing of the resulting issuer on the CSE. Finally, once vested, the adviser performance warrants shall only be exercisable to the extent the resulting issuer remains in compliance with the public distribution policies of the CSE, and in any event on or prior to Dec. 31, 2027.
The vendors and Real Capital have agreed that they are engaged in separate efforts to secure a revenue agreement from a counterparty, and will co-operate so as to avoid duplication of effort in approaching and negotiating with targeted counterparties. In the event both the vendors and Real Capital are successful in securing revenue agreements from counterparties, a maximum of 62.5 million resulting issuer shares will be issuable from the exercise of the performance warrants and adviser performance warrants.
It is a condition of closing of the transaction that the resulting issuer obtains a listing of the resulting issuer shares on the Canadian Securities Exchange (CSE). In connection with the transaction, the company intends to voluntarily delist its common shares from the NEX board of the TSX Venture Exchange (NEX). As a result, it is anticipated that the transaction will be governed by the policies of the CSE. While it is anticipated that the resulting issuer will qualify for listing, the CSE has not reviewed the transaction and there is no certainty that an application will be approved. The proposed delisting of the common shares of the company from the NEX is subject to the approval of a majority of the minority shareholders of the company.
It is also a condition of closing of the transaction that the company complete a non-brokered private placement which will close concurrently with the transaction. Pursuant to the concurrent offering, the company will issue a minimum of five million and a maximum of 8,333,333 common shares in the capital of the company at a price of 60 cents per share, for aggregate gross proceeds of a minimum of $3-million and a maximum of $5-million to be used for working capital and general corporate purposes of the resulting issuer.
The company expects to pay a finder's fee equal to 7 per cent of the subscription proceeds arising from subscribers introduced to the company by Real Capital and other finders engaged for the concurrent offering. The finder's fee may be payable in cash or common shares of the resulting issuer at a deemed issue price of 60 cents per share. Warrants exercisable for up to 7 per cent of the shares issued in pursuant to the concurrent offering may also be issued to Real Capital and other finders engaged in respect of the concurrent offering.
A number of options to purchase common shares of the resulting issuer at an exercise price of 60 cents per share will be granted to the directors, officers, employees and/or consultants of the resulting issuer.
Pro forma capitalization of the resulting issuer
China Keli currently has 12,110,026 common shares outstanding. Assuming a minimum raise from the concurrent offering and payment of the transaction fee, upon completion of the transaction, the resulting issuer will have 89,560,026 common shares outstanding, and the vendors will hold 78.16 per cent of issued and outstanding shares of the resulting issuer (63,434,000 shares held by Green Energy and 6,566,000 shares held by Resourcetama).
Assuming the full exercise of the performance warrants in addition to a minimum raise from the concurrent offering, and subject to the exercise of adviser performance warrants and other convertible securities, the resulting issuer will have 139,560,026 shares issued and outstanding, and the vendors will hold 85.98 per cent of the issued and outstanding shares of the resulting issuer (108,744,000 shares held by Green Energy and 11,256,000 shares held by Resourcetama).
At or following the completion of the transaction, and subject to receipt of all required approvals, the company intends to change its name to Hydrotech Energy Metals Ltd.
It is anticipated that posttransaction, Richard Tandiono will serve as a director and chairman of the board, and Widodo Sucipto will serve as a director and chief executive officer. A brief description of the professional background and experience of Mr. Tandiono and Mr. Sucipto are set forth below:
Richard Tandiono, chairman and director
Mr. Tandiono is 41 years old and is currently a senior member of the Trinitan Group. He also serves on the board of directors of listed company, PT Nipress Tbk, and was formerly a senior executive with PT Trinitan Metals and Minerals Tbk. He holds a bachelor of industrial engineering (industrial and system engineering). He graduated cum laude from the University of Southern California, Los Angeles (USC), in 2002 and also graduated cum laude with a master of science degree in science industrial management from USC in 2004. He has in-depth knowledge of minerals, mineral mining and refining.
Widodo Sucipto, president, chief executive officer and director
Mr. Sucipto is 66 years old and started his career as technical division head at PT Nordmende Electronics. He then spent 35 years as the head of engineering at PT Nipress Tbk, an Indonesian producer of automotive and industrial batteries. Since 2013, he has been with PT Trinitan Metals and Minerals Tbk and is currently its president and director. He joined HMI since its inception to lead its domestic and international growth. He possesses knowledge in and has vast connections within the electronics, battery, mining and renewable energy industries.
Philip Lo, who is currently serving as chief executive officer and chief financial officer of the company, will remain as CFO of the resulting issuer.
It is also expected that two other directors will be elected or appointed on or prior to the closing of the transaction, and certain of the incumbent directors will resign or not stand for re-election.
The share exchange agreement may be terminated upon the occurrence of a number of events, including if the transaction is not completed by April 12, 2022.
About China Keli
China Keli is currently without an active business, and is listed on the NEX board of the TSX Venture Exchange.
HMI is an emerging technology company domiciled in the Republic of Indonesia, and a subsidiary of the Trinitan group of companies. HMI's proprietary STAL technology enables flexible and scalable processing of nickel for nickel miners and smelters in an innovative, highly efficient and environmentally friendly manner. It operates at normal and safer atmospheric pressure and eliminates the need for expensive high-pressure autoclaves and associated infrastructure. Therefore, it has significantly lower capital intensity and lower operating costs than other current technologies while offering a net-zero waste solution compared with the current controversial smelter waste disposal methods of tailings dams, deep sea tailing and dry stack tailing.
Developed over 14 years of research and development, HMI's STAL technology is a Class 1 nickel extraction technological breakthrough that will produce mixed hydroxide precipitate (MHP) nickel which is used in the growing nickel-based battery electric vehicle market, and which is facing an increasingly growing supply deficit. Indonesia has the largest supply of nickel laterite deposits in the world. STAL technology allows nickel mining and smelting operations to start small and expand easily due to its modular design and is ideally suited for Indonesia's largely small-scale miners and low-grade laterite ore. A miner or smelter can install STAL modules near nickel mining operations with reduced capex and expand quickly by adding additional modules to accommodate growing nickel production. The STAL technology can easily be applied at nickel mines and smelters in other parts of the world. HMI is also developing a Green PLUS certification program to ensure ESG compliance of all HMI's nickel products throughout its value chain of activities.
HMI was incorporated under the laws of Indonesia on Aug. 5, 2020, and acquired the STAL technology from PT Trinitan Metals and Minerals Tbk.
The Trinitan group of companies is a global and socially conscious family-owned operation that spans across multiple public and private entities that are involved in the metals and minerals, energy storage, and solar and renewable energy segments in Indonesia, and around the world.
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