Zhejiang Zhongke Magnetic Industry Co.,Ltd.: Announcement on Capacity Expansion Planning of the Company and Signing of Investment Agreement with Dongyang High speed Railway New Town Management Committee

Zhejiang Zhongke Magnetic Industry Co., Ltd.: Announcement on Capacity Expansion Planning of the Company and Signing of Investment Agreement with Dongyang High-speed Railway New Town Management Committee

Securities Code: 301141 Securities Abbreviation: Zhongke Magnetic Industry Announcement No.: 2023-013

Zhejiang Zhongke Magnetic Industry Co., Ltd

Announcement on Capacity Expansion Planning of the Company and Signing of Investment Agreement with Dongyang High-speed Railway New Town Management Committee

Special tips:
1. The implementation of this investment project still needs pre-approval procedures such as project approval and filing by the government department, environmental assessment approval, and Construction permit. If the implementation conditions such as national or local policy adjustment and project approval change, the implementation of the project may be changed, delayed, suspended, or terminated.

2. This investment involves risks such as market environment and operational management. Due to the need for a certain period of construction and implementation of the project, it is expected that it will not have a significant impact on the company's performance in the short term.

3. After the project is completed and fully put into operation, there is still uncertainty regarding the actual completion status and completion time due to factors such as national policies, laws and regulations, industry macro environment, market development, business management, production capacity, and utilization; The project investment amount and other numerical values disclosed in this project are planned or estimated, and there is uncertainty, which does not represent the company's prediction of future performance or constitutes a performance commitment to shareholders. The company solemnly reminds investors to invest rationally and pays attention to investment risks.

4. The investment funds for this project come from a portion of the company's initial public offering raised funds, self-owned funds, and other self-raised funds. The investment scale is relatively large, and there is uncertainty about whether the funds can be delivered on time. The smoothness of the fundraising and financing channels during the investment and construction process may put the company under certain financial pressure and risks, There is a risk that funding cannot be raised in a timely manner during the project construction process, resulting in the project being unable to be implemented or the implementation progress falling short of expectations.

5. This project intends to continue to adopt advanced and mature design solutions and strengthen technological innovation, talent introduction, and incentive mechanism construction. At the same time, the company will strengthen cost and quality control, timely increase market expansion, continuously optimize order scheduling plans, strengthen product scheduling communication with customers, and actively resolve various market risks.

(1)Overview of Foreign Investment

1. Zhejiang Zhongke Magnetic Industry Co., Ltd. (hereinafter referred to as "Zhongke Magnetic Industry" and "the Company") and Dongyang High-speed Railway New Town Management Committee (hereinafter referred to as "High-speed Railway New Town Management Committee") signed the Investment Cooperation Agreement on the Project of Annual Output of 6000 Tons of High-performance Nd-Fe-B, 20000 Tons of Energy saving Motor Magnetic Tile and 1500 Tons of Bonded Magnet in Dongyang City, Zhejiang Province (hereinafter referred to as "the Investment Agreement"), It is planned to build a project with an annual output of 6000 tons of high-performance Nd-Fe-B, 20000 tons of energy-saving motor magnetic tile and 1500 tons of bonded magnet in Wuyi Science and Technology Innovation Valley of Dongyang High-speed Railway New Town, with a total investment of no less than 2 billion yuan. To ensure the investment, construction, and operation management of the project, the company will arrange a professional project team to implement the investment, construction, and operation of the project.

2. The company held the eighth meeting of the second board of directors on July 4, 2023, and passed the Proposal on Capacity Expansion Planning of the Company and Signing Investment Agreement with Dongyang High-speed Railway New Town Management Committee with 9 affirmative votes, 0 negative votes, and 0 abstention votes. In accordance with the ChiNext Growth Enterprise Market Listing Rules, the Shenzhen Stock Exchange Self regulatory Guidelines for Listed Companies No. 2- Regulated Operation of Listed Companies on the Growth Enterprise Market, the Articles of Association, and other relevant provisions, this matter, after being submitted to the Board of Directors for deliberation and approval, needs to be submitted to the shareholders' meeting for deliberation and approval.

3. This event does not constitute a Related party transaction, nor does it constitute a major asset restructuring as stipulated in the Measures for the Administration of Major Asset Restructuring of Listed Companies. The implementation of this investment project still requires pre-approval procedures such as project approval and filing by the government department, environmental assessment approval, and Construction permit.

(2)Introduction to counterparties

Name: Dongyang High-speed Railway New Town Management Committee

Unit nature: Administrative institution

Address: West of O2O Rosewood Base, Meijia, Dongyang, Jinhua, Zhejiang

Related relationship: There is no relationship between the High-Speed Rail New City Management Committee and the company or its top ten shareholders in terms of property rights, business, assets, debt, personnel, etc., nor is there any other relationship that may or has caused the listed company to tilt its interests.

Whether it is a Defaulted execute: after inquiry, the High-Speed Rail New Town Management Committee is not a Defaulted execute.

(3)Overview of Capacity Expansion Planning

（1） Analysis of the necessity of capacity expansion planning Under the background of carbon peaking and carbon neutrality, China's energy structure will continue to be optimized. Permanent magnet materials have outstanding advantages in reducing carbon emissions and will be more widely used in Low-carbon economy fields such as energy-saving household appliances, new energy vehicles, wind power generation, etc. In addition to the comprehensive promotion and popularization of efficient energy-saving motors and robots, rare earth permanent magnet materials will have a broader market demand.

The company is a comprehensive manufacturer of permanent magnet materials, dedicated to the research and development, production, and sales of permanent magnet materials. Based on the overall development strategic plan for the future, the management of the company has carefully researched and discussed, and decided to accelerate the completion of the layout in sectors such as mobile communication, artificial intelligence, virtual reality, cloud services, wireless charging, and robotics. Therefore, this expansion plan is necessary.

 

（2） The specific situation of the expansion plan is based on the national new energy development strategy, industry development trends, and the company's strategic development positioning, combined with the company's upstream resource guarantee and downstream sales channel expansion. The company plans to carry out expansion construction on the basis of the existing permanent magnet comprehensive production capacity, and gradually complete the expansion plan in stages:

 

1. The original fundraising project "Annual Production of 6000 tons of high-performance motor magnetic tiles and Annual Production of 1000 tons of high-performance neodymium iron boron magnetic steel technical renovation project" will be adjusted to the first phase of this expansion plan, which is "Annual Production of 20000 tons of energy-saving motor magnetic tiles (including the 10000 tons of production capacity formed by the relocation of the existing energy-saving motor magnetic tile production line) and 2000 tons of high-performance neodymium iron boron construction project". The company will follow the corresponding approval procedures for changes to the original fundraising project in the future.

 

2. The remaining content of this expansion plan (annual production of 4000 tons of high-performance neodymium iron boron and 1500 tons of bonded magnets) will be implemented in stages based on actual progress.

 

3. After the completion of this expansion plan, the comprehensive design production capacity of the company's permanent magnet materials will reach 29500 tons.

 

The construction land of the new project site is about 175 mu (subject to the red line map of land transfer), and the site is located in Wuyi Science and Technology Innovation Valley of Dongyang High speed Railway New City.

 

(4)Main contents of the Investment Agreement

 

（1） Both parties to the agreement

 

Party A: Dongyang High speed Railway New Town Management Committee

 

Party B: Zhejiang Zhongke Magnetic Industry Co., Ltd

 

（2） Investment Plan

 

To expand the production scale and capacity of the permanent magnet industry, and integrate the existing land resources in the factory area. Under the overall capacity planning, the company plans to build "two future (green) factories of high-performance Nd-Fe-B magnetic steel and energy-saving motor magnetic tile" (hereinafter referred to as "green factory") in Wuyi Science and Technology Innovation Valley of Dongyang High speed Railway New City to carry out "the construction project of energy-saving motor magnetic tile and high-performance Nd-Fe-B magnetic steel with an annual output of 20000 tons", And carry out the "1500 ton annual production of bonded magnetic construction project" at the company's production base located at No. 28 Changsheng Road, Hengdian Town, with a total investment of no less than 2 billion yuan.

（3） Land transfer

 

1. Land for production line project: The construction land for the new project site is approximately 175 acres (based on the red line map of land transfer). 2. After the signing of this agreement, the project land will be legally acquired by Zhongke Magnetic Industry in accordance with the public transfer process in the High Speed Rail New City Management Committee, and will be classified as industrial land.

 

（4） Liability for breach of contract and dispute resolution

 

The agreement stipulates the breach of contract and liability of both parties.

 

If any disputes arise between Party A and Party B during the performance of this agreement, they shall first be resolved through negotiation. If the negotiation fails, they may file a lawsuit with the people's court in the place where this agreement is signed. If either party violates this agreement and causes any fees, expenses, liabilities or losses to the other party who is in compliance with the agreement, the defaulting party shall compensate the other party for such fees, expenses, liabilities or losses, in order to protect the other party from damages.

 Other

 

This agreement shall come into effect after being signed and stamped by the legal representatives or authorized representatives of both parties, and approved by the authorized decision-making bodies of both parties.

 

(5)Impact on the company and existing risks

 

（1） The impact on the company's current expansion plan for the permanent magnet industry is in line with the company's strategic development goals for the permanent magnet industry. It is an important measure for the company to expand and strengthen its permanent magnet business during the strategic opportunity period, and an important means to meet the needs of downstream core customers, continuously expand the market scale of the permanent magnet business, and enhance its industry influence, This has laid a solid foundation for the company to become a leading global provider of permanent magnet material application solutions in the field of next-generation consumer electronics and energy-saving home appliances. The company will fully utilize the advantages of local policy environment, resource allocation, industrial clusters, etc. to improve the manufacturing process and production capacity of permanent magnet material products, provide higher quality permanent magnet material products to global customers, achieve sustained growth in business performance, and create good economic benefits for the local area. This investment will not have a significant impact on the company's financial condition and operating results in the short term, and there will be no harm to the interests of the company and shareholders, especially small and medium-sized shareholders. The signing of this investment agreement will not affect the company's business independence.

 (2)Existing risks

 

1. The implementation of this investment project still needs the pre approval procedures such as project approval and filing by the government department, environmental assessment approval and Construction permit. If the implementation conditions such as national or local policy adjustment and project approval change, the implementation of the project may be subject to the risk of change, delay, suspension or termination.

 

2. This investment involves risks such as market environment and operational management. Due to the need for a certain period of construction and implementation of the project, it is expected that it will not have a significant impact on the company's performance in the short term.

 

3. After the project is completed and fully put into operation, there is still uncertainty regarding the actual completion status and completion time due to factors such as national policies, laws and regulations, industry macro environment, market development, business management, production capacity, and utilization; The project investment amount and other numerical values disclosed in this project are planned or estimated, and there is uncertainty, which does not represent the company's prediction of future performance or constitute a performance commitment to shareholders. The company solemnly reminds investors to invest rationally and pays attention to investment risks.

 

4. The source of investment funds for this project is part of the raised funds, self owned funds, and self raised funds raised by the company's initial public offering. The investment scale is relatively large, and there is uncertainty about whether the funds can be delivered on time. The financing and smoothness of financing channels during the investment and construction process may cause the company to bear certain financial pressure and risks, There is a risk that funding cannot be raised in a timely manner during the project construction process, resulting in the project being unable to be implemented or the implementation progress falling short of expectations.

 

6. This project intends to continue to adopt advanced and mature design solutions, strengthen technological innovation, talent introduction, and incentive mechanism construction. At the same time, the company will strengthen cost and quality control, timely increase market expansion, continuously optimize order scheduling plans, strengthen product scheduling communication with customers, and actively resolve various market risks.

(6)Other

 

The company will strictly comply with the provisions and requirements of relevant laws and regulations, and timely fulfill its information disclosure obligations based on the subsequent progress of the project. Investors are kindly advised to make cautious decisions and pay attention to investment risks.

 

(7)Documents for reference

 

1. Resolutions of the 8th meeting of the 2nd Board of Directors;

 

2. Resolutions of the 8th meeting of the 2nd Board of Supervisors;

 

3. The Investment Cooperation Agreement on 6000 tons of high-performance Nd-Fe-B, 20000 tons of energy-saving motor magnetic tile and 1500 tons of bonded magnetic project signed with the Dongyang High speed Railway New Town Management Committee.

 

Hereby announced.

 

Board of Directors of Zhejiang Zhongke Magnetic Industry Co., Ltd

 

July 4th, 2023