2019 Second Quarterly Corporate Newsletter

Group’s Coal Mining Business Enhanced by Acquisition of Coal Mine in China

The industry has braced for a coal price downturn

since the end of 2018. Nevertheless, with great chal-

lenges come great opportunities for those who are

prepared. Subsequent to FY2019, as part of its di-

versification strategy, the Group acquired a coal

mine located in Shaanxi Province of China at a

consideration of Renminbi 243 million (equivalent

to approximately HK$283 million). This marked the

first foray of the Group to owning coal assets in

China, which is the world’s largest coal consump-

tion market.

The acquired coal mine was composed of two

mines: An Li Mine and Shi Jia Po Mine. In Novem-

ber 2018, the local government decided to merge

these two strategically located neighboring mines

with an aim to consolidate its coal resources and

align with the Central Government’s mandate. After

deliberation and three months of negotiation,

Agritrade Resources entered into a Sales and Pur-

chase Agreement in March 2019 to acquire both

mines.

The coal mine reserve is preliminarily estimated at

approximately 19 million tonnes and coal produc-

tion is expected to commence in the next few

months. The mine will utilize the same longwall

underground mining technique as used in Merge

Mine, a mining technique which the Group has

many years of extensive experience in operating

successfully and efficiently. The expected coal

quality is low volatile matter, medium-ash and

high-sulphur content with medium-high calorific

value of approximately 4,800–5,400 kcal/kg. The

coal mine has several strong strategic advantages

by being located in the Shaanxi region. Not only

will it benefit from a low cost of production

which is unique to the region, but also benefiting

from a stable coal demand and domestic pricing

due to its remote location from nearby shipping

ports.

The Group expects this new investment to bring

promising returns to its mining business segment

upon the mines commencing operations in

FY2020.

In March 2019, the Group completed the acquisi-

tion of the entire interest in SKS Power Genera-

tion (Chhattisgarh) Limited at a consideration of

INR21.7 billion (equivalent to approximately

HK$2,485.4 million).

This marked the Group’s first footprint in India

and substantially expanded its customer base,

both of which are crucial to the Group’s energy

business strategies. Furthermore, this acquisition

also underpinned the Group’s success in map-

ping out vertical integration into thermal power

generation business, this case in particular,

through strategic mergers and ac-

quisitions.

Locating in the State of Chhattis-

garh in India, the plant is a coal-

fired thermal power plant with an

approved capacity of 1200-

megawatt, of which 600-megawatt

is fully completed and operational

with secured medium-term and long

-term power purchase agreements

sealed with local customers and/or

governmental bodies.

Energy Business Expanded by Acquisition of Thermal Power Plant in India

Headlines

An Li Mine

Shi Jia Po Mine

Shi Jia Po Mine

Agritrade Resources Limited 2019 Second Quarterly Corporate Newsletter

FY2019 Results Announced

Results at a Glance

Mr. Ng Xinwei, Chief Executive Officer

said, “The past FY2019 has put our resili-

ence and responsiveness to the test but we

stood firm in the market downturn. And

our goal of becoming one of the leading

vertically integrated energy solutions

providers has never been clearer and more

practicable. In FY2019, we were able to

add two strategic assets to our portfolio,

namely one mine in Shaanxi, China and a

thermal power plant in Chhattisgarh, In-

dia.

Looking forward, we will dive deep into

our existing businesses, and, as well,

keeping an eye on the possible merger and

acquisitions that are in line with our cor-

porate mission and growth strategy. This

is not only to fulfill our own goal, but also

in the hope to create a better return for our

shareholders.”

Room 1705, 17th Floor, Harcourt House, 39 Gloucester Road, Wanchai, Hong Kong

+852 3106 0668 www.agritraderesources.com

“True validation of our resilience and responsiveness.”

◇ Shaanxi, a key development area

for its natural resources, has one of China’s largest coal reserves and a sizeable coal industry

◇ Estimated coal reserve is approxi-

mately 380 billion tonnes, ranking 4th in China; whereas the cumu-lative proven reserve has amount-ed to approximately 170 billion tonnes, ranking 3rd in China

◇ Total coal bearing area covers

around 57,000 square kilometres, representing approximately 27.7% of China’s surface area

◇ The coal resources are widely

distributed across the whole prov-ince. They are also characterized by low ash, low sulphur and high calorific value, which make high-quality thermal coal

◇ As shown by the above map,

Shaanxi Province is the gateway to northwest China and a trans-portation hub that connects Chi-na’s eastern and central regions, as well as the northwest and southwest

Shaanxi Coal 101

Revenue came in at

HK$1,904,726,000

Profit attributable to owners of the

company was HK$1,068,077,000, up

151.64%

Basic earnings per share was

HK16.6 (2018: HK6.7) cents

Annual coal production remained

stable at 5.7 million tonnes

Coal mining business was strength-

ened by the addition of a China coal

mine

The Group’s business has vertically

expanded into coal thermal power

generation given the completion of

acquisition of an India power plant

The Group has successfully stream-

lined the shipping business segment

SKS Power Generation (Chhattisgarh) Limited,

the thermal power plant in India