China Keli Signs Letter of Intent with PT Hydrotech Metal Indonesia

Vancouver, British Columbia--(Newsfile Corp. - August 24, 2021) - China Keli Electric Company Ltd. (NEX: ZKL.H) (the "Company" or "China Keli") is pleased to announce it has entered into a letter of intent ("LOI") on Sunday evening, August 22, 2021 (Vancouver time) to acquire all the issued and outstanding securities of PT Hydrotech Metal Indonesia ("HMI", and the acquisition, the "Transaction").

China Keli is currently without an active business. HMI is an emerging technology company domiciled in the Republic of Indonesia, and a subsidiary of the Trinitan group of companies. HMI's proprietary "Step Temperature Acid Leach" ("STAL") Technology enables flexible and scalable processing of nickel for nickel miners and smelters in an innovative, highly efficient, and environmentally friendly manner. It operates at normal and safer atmospheric pressure, and eliminates the need for expensive high-pressure autoclaves and associated infrastructure. Therefore, it has significantly lower capital intensity and lower operating costs than other current technologies while offering a net zero waste solution compared to the current controversial smelter waste disposal methods of tailings dams, deep sea tailing and dry stack tailing.

Developed over 14 years of research and development, HMI's STAL Technology is a Class 1 Nickel extraction technological breakthrough that will produce Mixed Hydroxide Precipitate ("MHP") nickel which is used in the growing nickel-based battery electric vehicle market, and which is facing an increasingly growing supply deficit. Indonesia has the largest supply of nickel laterite deposits in the world. STAL Technology allows nickel mining and smelting operations to start small and expand easily due to its modular design and is ideally suited for Indonesia's largely small-scale miners and low-grade laterite ore. A miner or smelter can install STAL modules near nickel mining operations with reduced capex and expand quickly by adding additional modules to accommodate growing nickel production. The STAL Technology can easily be applied at nickel mines and smelters in other parts of the world. HMI is also developing a Green PLUS certification program to ensure ESG compliance of all HMI's nickel products throughout its value chain of activities.

HMI's STAL Technology has been validated by three independent parties:

  1. the Indonesian government's Agency for the Assessment and Application of Technology (BPPT) technology audit;
  2. the Indonesian Ministry of Energy and Mineral Resources (ESDM) in collaboration with a top Indonesian University, for technology research and assessment; and
  3. a top Japanese international EPC (Engineering, Procurement and Construction) company as concluded in its feasibility report.

HMI was incorporated under the laws of Indonesia on August 5, 2020. Prior to incorporation, HMI's business was carried on by other Trinitan group companies. HMI has engaged MNP LLP as its auditor and is in the process of preparing carve-out financial statements. As at the year ended December 31, 2020, HMI had no revenue, net loss of $153,236.60, total assets of $5,241,173.30, and total long-term liabilities of zero. As at the latest quarter ended June 30, 2021, HMI had no revenue, net loss of $122,803.40, total assets of $5,038,878.82, and total long-term liabilities of zero. This financial information has been provided by HMI, is unaudited, and is subject to further adjustment as HMI finalizes its financial statements.

The Company has agreed to repay HMI's shareholders $200,000 of advances to HMI. On completion of the Transaction, it is expected that HMI will have no long term liabilities, and the financial results of HMI will be consolidated into the Resulting Issuer's (as defined below) financial statements going forward.

The Trinitan group of companies is a global and socially conscious family-owned operation that spans across multiple public and private entities that are involved in the metals and minerals, energy storage and solar and renewable energy segments in Indonesia and around the world.

The Transaction is an arm's length transaction for the Company. On completion of the Transaction, China Keli will acquire HMI's business and assets, and the owners of HMI will become the shareholders of China Keli. The Company, as it will exist after the completion of the Transaction, is referred to herein as the "Resulting Issuer".

Transaction Summary

Pursuant to the LOI, the existing shareholders of HMI (the "HMI Shareholders") will receive 70,000,000 common shares in the capital of the China Keli (the "Payment Shares") at a deemed price of $0.60 per share in exchange for all the securities they hold in HMI. The Transaction will result in HMI becoming a wholly owned subsidiary of China Keli.

In addition to the Payment Shares, China Keli will issue 50,000,000 common share purchase warrants (each a "Performance Warrant") exercisable for up to 50,000,000 common shares to the HMI Shareholders. Each Performance Warrant will be exercisable into one common share of the Resulting Issuer, at a price of $0.001, and will vest and become exercisable on the following terms:

  1. HMI or the Resulting Issuer shall enter into a firm and binding contract and/or license (a "Revenue Agreement") approved by the independent directors of the Resulting Issuer for the use of its STAL Technology, which will result in advance royalty, sales royalty and/or any other type of revenue for the usage of such STAL Technology, from a financially capable counterparty (the "Counterparty") that will construct and develop up to four (4) STAL lines ("Smelters") representing 7,200 tonnes per annum of Nickel (Ni) equivalent capacity (each Smelter being 1,800 tonnes per annum of Nickel (Ni) equivalent capacity).
  2. Each Smelter committed by the Counterparty in the Revenue Agreement shall result in the vesting of (a) 6,250,000 Performance Warrants upon the execution of the Revenue Agreement, and (b) an additional 6,250,000 Performance Warrants upon proof of project funding satisfactory to the independent directors of the Resulting Issuer and commencement of construction of such Smelter. Accordingly, the 50,000,000 Performance Warrants shall fully vest and become exercisable upon the commencement of the construction of all four (4) Smelters.
  3. The maximum time limit for HMI or the Resulting Issuer to meet these criteria and effect the vesting of the Performance Warrants is a date no later than four years from the listing of the Resulting Issuer on the CSE (as defined below).

Finally, once vested, the Performance Warrants shall only be exercisable to the extent the Resulting Issuer remains in compliance with the public distribution policies of the Exchange, and in any event on or prior to December 31, 2027.

Subject to regulatory approval, a finder's fee of $1,470,000 shall be payable in common shares of the Resulting Issuer at a deemed price of $0.60 per share to Real Capital Limited ("Real Capital") on completion of the Transaction.

China Keli currently has 12,110,026 common shares outstanding. Assuming a minimum raise from the Concurrent Offering (as defined below), upon completion of the Transaction, the Resulting Issuer will have 89,560,026 common shares outstanding, and the HMI Shareholders will hold 78.16% of issued and outstanding shares of the Resulting Issuer. Assuming the full exercise of the Performance Warrants in addition to a minimum raise from the Concurrent Offering, the HMI Shareholders will hold 85.98% of the issued and outstanding shares of the Resulting Issuer.

Concurrent Offering

The Company intends to complete a non-brokered private placement ("Concurrent Offering") which will close concurrently with the Transaction. Pursuant to the Concurrent Offering, the Company will issue a minimum of 5,000,000 and a maximum of 8,333,333 common shares in the capital of the Company at a price of $0.60 per share, for aggregate gross proceeds of a minimum of $3,000,000 and a maximum of $5,000,000 to be used for working capital and general corporate purposes of the Resulting Issuer.

The Company expects to pay a finder's fee equal to 7% of the subscription proceeds arising from subscribers introduced to the Company by Real Capital and other finders engaged for the Concurrent Offering. The finder's fee may be payable in cash or common shares of the Resulting Issuer at a deemed issue price of $0.60 per share. Warrants may also be payable to the finders at a rate to be determined.

Directors and Officers

At or following the completion of the Transaction, and subject to receipt of all required approvals, the Company intends to change its name to "Hydrotech Energy Metals Limited", and to reconstitute the directors and officers of the Resulting Issuer. It is expected that the Resulting Issuer will have six (6) directors, of which two (2) directors shall be independent.

Options

A number of options to purchase common shares of the Resulting Issuer at an exercise price of $0.60 per share will be granted to the directors, officers, employees and/or consultants of the Resulting Issuer.

CSE Listing

It is a condition of closing of the Transaction that the Resulting Issuer obtains a listing of its common shares on the Canadian Securities Exchange ("CSE"). In connection with the Transaction, the Company intends to voluntarily delist its common shares from the NEX Board of the TSX Venture Exchange, and apply for a listing of the common shares of the Resulting Issuer on the CSE. As a result, it is anticipated that the Transaction will be governed by the policies of the CSE. While it is anticipated that the Resulting Issuer will qualify for listing, the CSE has not reviewed the Transaction and there is no certainty that the application will be approved.

Definitive Agreement

The final form of the Transaction is subject to the terms of a definitive agreement to be entered into among the parties (the "Definitive Agreement"). Completion of the Transaction will be subject to, among other things, satisfactory due diligence, the execution of a Definitive Agreement, the approval of the CSE, and with respect to the voluntary delisting from the NEX, the approval of the NEX Board of the TSX Venture Exchange and the satisfaction of the NEX delisting requirements, any necessary shareholder and third-party approvals, and other customary closing conditions for a transaction of this nature.

The LOI will terminate if the Definitive Agreement is not executed by December 31, 2021.

Forward Looking Statements

This release includes forward-looking information within the meaning of Canadian securities laws regarding the Company and HMI and their respective businesses, which may include, but are not limited to, statements with respect to the completion of the Transaction, the terms on which the Transaction is intended to be completed, the ability to obtain regulatory and shareholder approvals, the proposed name change and board composition of the Resulting Issuer, and other factors.

Often but not always, forward-looking information can be identified by the use of words such as "expect", "intends", "anticipated", "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would" or "will" be taken, occur or be achieved. Such statements are based on the current expectations and views of future events of the management of each entity, and are based on assumptions and subject to risks and uncertainties. Although the management of each entity believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect. The forward-looking events and circumstances discussed in this release, including completion of the Transaction (and the proposed terms upon which the Transaction is proposed to be completed), may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the companies, including risks regarding technology industry, market conditions, economic factors, management's ability to manage and to operate the business of the Resulting Issuer and the equity markets generally. Although the Company and HMI have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Accordingly, readers should not place undue reliance on any forward-looking statements or information. No forward-looking statement can be guaranteed.

Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and neither the Company nor HMI undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

For further information, please contact:

CHINA KELI ELECTRIC COMPANY LTD.

Philip Lo, Chief Executive Officer
Tel. No.: (852) 5138 1632
Email: philip3336@126.com

Investors are cautioned that, except as disclosed in the management information circular or listing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this news release. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/94303

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