Dinglong Culture to invest RMB 540 million in mining company 01-16-2020

Dinglong Culture is a film and television industry based in Guangzhou. Dinglong Culture was previously a toy company, and recently this company has gained attention from the Regulatory Agency of Guangdong because of its plan to extend its business to the mining industry. 

According to the company’s plan, Dinglong Culture will invest USD 76.86 million (RMB 540 million) in Zhongtai Technology and ultimately will acquire 51% shares of Zhongtai Technology. This plan is the first foreign investment plan laid out by the company since Mr. Long Xueqin became the primary shareholder of Dinglong Culture last year. However, Zhongtai Technology has still not generated any revenue after the plan; in fact, the net profit during the first three quarters in 2018 and 2019 in Zhongtai Technology was RMB -3.01 million and RMB -2.77 million, respectively. Despite the fact that the company’s earnings are decreasing, Zhongtai Technology is still evaluated at RMB 1.06 billion. Dinglong Culture also promises that the cumulative profit of Zhongtai Technology will reach RMB 1.5 billion between 2020 and 2024.

Zhongtai Technology a Young Titanium Mining Company

Zhongtai Technology was founded in May 2017, with 98% of shares owned by Zhongtai Resources and 2% of shares owned by Shanghai Chaonian Technology Research Center. Zhongtai Resources and Shanghai Chaonian Technology Research Center will only hold 48.02% and 0.98% respectively, after Dinglong culture increases its investment in Zhongtai Technology.

Recently, Zhongtai Technology has acquired 68% of shares in Kunming Wuxin Huali Mining Co., Ltd and owns the mining right of ilmenite ore in Qingshuitang, Kunming.  Zhongtai Technology also holds 98% of shares in Maitreya Zhongtai Technology Co., Ltd and 88% of shares in Yunnan Wanyou Mining Co., Ltd, with the mining right of ilmenite in Panzhiyi located in Maitreya City, Yunnan Province and the mining right of Ilmenite ore and lead zinc ore in Xiaoma street located in Luquan County, Yunnan Province. Ilmenite is an oxide of titanium and iron from which elemental titanium can be extracted.

Dinglong Culture and Zhongtai Technology Both Struggle to Earn Profits

The Shenzhen Stock Exchange has raised questions about Dinglong Culture’s acquisition of Zhongtai Technology and has required Dinglong Culture to explain whether the acquisition of Zhongtai Technology will help the company’s business development in the film and television industry, and whether the acquisition will cause any loss for the listed company and for investors. Dinglong Culture launched a series of mergers and acquisitions before its investment in Zhongtai Technology. In 2018, Dinglong Culture had a deficit of RMB 127.7 million, and during the first three quarters of 2019, the company still had a deficit of RMB 46.6 million. Some investors question whether Dinglong Culture’s investment of RMB 540 million will simply exacerbate Dinglong Culture’s financial losses.

Furthermore, a reporter from Changjiang Daily noticed that Zhongtai Technology has not yet generated any revenue, and the company is still in a phase of reckless spending. The financial data of Zhongtai Technology shows that the company earned zero income during 2018 and the first nine months of 2019, with net profits of RMB -5.7 million and RMB – 3.05 million. The net profits attributed to the parent company were RMB -3.01 million and RMB -2.77 million in 2018 and the first nine months of 2019. The net cash flow from operating activities was RMB -32.3 in 2018 and RMB -9.01 million in the first nine months of 2019. By the end of third quarter in 2019, the total assets of Zhongtai Technology amount to RMB 15.5 million, with RMB 12.3 million of debt. 

For more information on China’s titanium market, please check our Titanium Dioxide China Monthly Report.

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