AGREEMENT ON ESTABLISHMENT
OF A SINO FOREIGN EQUITY JOINT VENTURE
CHINA-CANADA LIUMAO GRAPHITE PRODUCTS CO. LTD.
September 9, 1997
I hereby certify the within document to be a true and accurate
translation copy of the original Agreement dated September 9,
1997 in Chinese, this 16th day of September, 1997.
//ss Xxxxxx Xxx
Xxxxxx Xxx
Agreement on the establishment of a joint venture
Based on the Agreement on Intent signed by Xxxxxx Xxxxxxxx Mine
of Jixi (hereinafter called "Party A") and Xx-Xxxx Resources,
Inc. (hereinafter called "Party B") in Jixi of Heilongjian on
June 4, 1997, the parties conducted further consultations and
discussions from September 6 to September 9, 1997 on the
establishment of any equity joint venture in relation to the
Liumao Graphite Mine of Jixi, Heilongjiang, China. The parties
have entered into this Agreement based on the following terms and
conditions.
1. The Parties have agreed to establish an equity joint venture
covering the graphite mine in Liumao, Jixi of Heilongjian,
China. The joint venture company shall be a limited
liability company, and shall be registered in Jixi,
Heilongjian of China as a sino-foreign equity joint venture
with independent accounting and legal person status. The
name of the joint venture is temporarily set as "China-
Canada Liumao Graphite Products Co. Ltd.".
2. The scope and size of production and business of joint
venture:
1) high purity graphite, annual output 1,000 tons;
(carbon content 99.9% up to 99.995%)
2) expandable graphite, annual output 5,000 tons;
3) graphite paper, annual output 4,000 tons;
3. Investment in the joint venture:
Investment in the joint venture shall be divided into three
parts:
Part 1. For the 1,000 ton/year high purity graphite project,
the total investment is estimated at RMB33,200,000,
among which 22,200,000 Yan is as fixed assets and
11,000,000 Yan as working capital.
Part 2. For the 5,000 ton/year expandable graphite project,
the total investment is estimated at RMB25,000,000,
among which 20,000,000 Yan is for fixed assets and
5,000,000 Yan for working capital.
Part 3. For the 4,000 ton/year graphite paper project, the
total investment is estimated at RMB20,000,000
(subject to the completion of feasibility study
report and project budgeting). Both parties shall
be allowed to obtain financing for Part 3 in the
name of the joint venture and through coordination.
The total investment amount for each of the three parts mentioned
above shall be subject to a investment amounts determined through
examination of the feasibility study report conducted by both
parties and experts, organized by the government department with
the authority to approve.
1. Investment Scope and Investment Ratio of Parties:
1) Investment Scope:
Party A: power supply, water supply, transportation,
communication and portion of working capital.
Party B: equipment, working capital for constructions
and others.
2) Investment Ratio and Mode:
Party A: responsible for 20% of the investment amounts
in the form of the existing installation,
equipment and materials.
Party B: responsible for 80% of the investment amount
in the form of cash investment.
2. Organization and Management of the Equity Joint Venture:
The joint venture shall form a Board of Directors to be
appointed by both parties and the Board of Directors shall
compose of Chairman, Vice-Chairman and several directors, all
under the laws of PRC governing sino-foreign equity joint
ventures. The Board of Directors shall appoint a General
Manager and a Vice General Manager to be responsible for the
day-to-day work, production and operations of the joint
venture. The management structure of the joint venture shall
be established in accordance with the needs.
3. Supply of Raw Materials to the Joint Venture:
1) Party A shall supply the raw material for high purity
graphite to the joint venture in accordance with the
market price. The quantities of such supply shall be
no less than 1,500 tons per year with carbon content at
90% or above.
2) Party A shall supply raw material for expandable
graphite to the joint venture according to the market
price with an annual supply no less than 5,000 tons.
3) The joint venture shall produce and supply raw
materials for graphite paper.
4. Sale of Products:
1) The joint venture shall sell high purity graphite to
domestic and international market directly.
2) Expandable graphite as raw materials for graphite
paper, shall be settled internally within the joint
venture.
3) The joint venture shall be responsible for the sales of
graphite paper and all graphite paper shall be sold in
the international market.
5. Transfer of Interest:
Either party may transfer the whole or part of its interest
in this Agreement to any third party.
6. Schedule for the Establish of the Joint Venture:
1) Party A and Party B shall each complete a feasibility
study report on high purity graphite and expandable
graphite, and will jointly submit a feasibility study
report based on Party A's report to the government
department for approval and acceptance by the end of
October, 1997. The parties shall complete feasibility
study report on graphite paper by the end of December,
1997. Party B shall supply Party A by the end of
November, 1997 the production program and the market
price in relation to graphite paper.
2) By the end of November, 1997, the parties shall sign
the Agreement to Establish an Equity Joint Venture in
Jixi, Heilongjiang, conduct the first Directors'
meeting and adopt the Articles of Association. Party A
shall, for this purpose, complete the drafting of the
Agreement and Articles of Association to be delivered
to Party B for comments and revisions and then to be
submitted to the Board of Directors.
3) By the end of January, 1998, the joint venture shall
commence the registration procedure of China. At the
same time, the parties shall send people to the country
that will supply the equipment and sign the purchase
agreement for equipment.
4) By the end of March, 1998, the design for the high
purity graphite project shall be completed and the
construction shall commence in April.
5) By the end of April, 1998, the design for expandable
graphite project shall be completed and the
construction shall commence in May.
6) By the end of June, 1998, the design for the graphite
paper project shall have been completed and the
construction shall commence in July.
7. The cost for the approval and acceptance of the project,
completion of the feasibility study report and the review
and examination of the feasibility study report shall be
250,000 Yan. The cost shall be deemed the cost of the joint
venture.
8. The parties agree to continue consultation and discussions
on matter not covered in this Agreement.
9. This Agreement shall expire December 31, 1997.
10. This Agreement shall be submitted to Heilongjiang Provincial
Foreign Investment Administration Bureau for filing.
Party A: Xxxx Xxxxxx Graphite Mine Party B: Xx-Xxxx
Resources, Inc.
Representative: Xx, Xxxx Representative: Xxxxx
Xxxxxxx
Dated: September 9, 1997
[Letterhead of Heilongjiang Foreign Investment Administration
Bureau]
Canadian Xx-Xxxx Resources, Inc.
Liumao Graphite Mine, of Jixi, Heilongjiang and Xx-Xxxx
Resources, Inc. have reached an Agreement of Intent to establish
an equity joint venture to jointly develop high purity graphite
(annual output 1,000 tons), expandable graphite (annual output
5,000 tons) and graphite papers (annual output 4,000 tons), and
for this purpose, signed a formal agreement on September 9, 1997
in Harbin City. The said Agreement has been formally submitted
to our bureau for filing records.
Heilongjiang Provincial Foreign Investment Administration Bureau.
Date: September 12, 1997 (Seal)
