SINGAPORE (Mar 6): Huan Hsin Holdings is morphing from a manufacturer of electronics and electrical components into a vanadium mining company.

Huan Hsin is acquiring a 99.99% stake in Huangshan Zhongtian Weiliang Mining Co for $1.06 billion from Jade Merit Developments. Of this amount, $60 million will be paid in cash. The remaining $1 billion will be paid by an allotment of consideration shares at 3.3 cents each.

Shares in Huan Hsin Holdings last traded at 2.6 cents each on Friday before trading was halted on Monday for the announcement.

In a filing on Monday night, Huan Hsin says the deal will give the company a new lease of life and support its application to the Singapore Exchange for its removal from the watch list.

Vanadium is a rare earth metal used extensively in the motors of electric cars.

Huangshan Mining Co, a China-incorporated investment holding company, holds the entire interest in a vanadium mine located in Huangshan in China, along with a mining licence to mine vanadium ore of up to 115,000 tonnes per year from the Guocun Vanadium Mine, one of the largest sedimentary vanadium deposit in China.

On completion of the deal, Jade Merit, will own about 87.02% of the firm's enlarged share capital, resulting in the reverse takeover of Huan Hsin. Under Singapore's takeover code, it will be required to make a general offer for the remaining shares it does not already own.

The vendor, Jade Merit, is a British Virgin Islands-incorporated investment holding company. Its sole shareholder is Singaporean Yip Zhao Lin, the managing director of Sum V Energy, formerly known as China Minerals Group.

In conjunction with the acquisition, Huan Hsin is proposing to consolidate every 20 shares of the company into one share to allow the group to meet SGX's listing requirement of having a minimum issue price of 50 cents. Accordingly, 30.3 billion shares, or 1.5 billion consolidated shares at 66 cents each, will be issued as consideration shares.

To fund the acquisition, Huan Hsin has also entered into a proposed subscription agreement with Oriental Straits Investment to issue 3.6 billion shares for $80 million in two tranches. The long stop date for the proposed subscription is June 30 this year.

In addition, Huan Hsin will be granting Oriental Straits Investment and China Capital Impetus Investments an option to each subscribe for up to 455 million shares at 2.2 cents each for up to $10 million. Assuming that each option holder fully exercises its option, the company would raise $20 million.

Huan Hsin was placed on the SGX watch list on March 5, 2014 after recording pre-tax losses for three straight financial years. It was required to meet the listing requirements within two years from that date, or risk being suspended or delisted from the Singapore bourse.

On May 3, 2017, SGX granted Huan Hsin a further extension to March 4 2018 to meet the requirements for its removal from the watch list. This deadline has now been extended to March 4 2019 following the reverse takeover, and its proposed subscription of shares.

For FY17, the group incurred a net loss of $20.6 million, compared to a net profit of $9.8 million last year, as revenue plunged 54% to $24.4 million for the full year ended Dec 31.

The substantial decline in revenue was in line with the group's on-going plan to shut down some of its loss-making plants.

As at 1.15pm, shares in Huan Hsin are trading 0.7 cent or 27% lower at 1.9 cents.