Multiple prerequisites not met; Napep mining machine urgently terminates cross-border equity subscription; investment plan for South American mines exceeding $140 million simultaneously canceled.

On February 3rd, Neapu Mining Machinery (SZ300818, stock price 49.22 RMB, market value 8.307 billion RMB) urgently halted a cross-border merger and acquisition deal.

The company’s announcement that evening stated that Neapu Mining Machinery would terminate its subscription for shares in Veritas Resources AG of Switzerland (hereinafter referred to as Veritas Resources), and simultaneously waive its subsequent investment in the Alacran copper-gold-silver mine project in Colombia.

This means that the previously planned major overseas expansion, with a total investment of up to $146 million, was officially declared a “failure” after nearly nine months of planning.

A reporter from Daily Economic News noted that the reasons behind the termination of this investment are complex. From the environmental impact assessment (EIA) report that the Colombian National Environmental Licensing Authority (ANLA) delayed approving, to the sudden change in terms proposed by the counterparty, and the rising geopolitical risks in the region, multiple uncertainties accumulated, ultimately leading Neapu Mining Machinery’s management to decide to “walk away.”

Setback to Industry Chain Extension Ambitions

In May 2025, Neapu Mining Machinery announced its plan to subscribe to newly issued shares of Veritas Resources through its wholly owned subsidiary, Neapu Global Resources Investment Limited in Singapore, with cash.

According to the subscription agreement at the time, Neapu planned to invest $45 million, with a potential obligation of up to $6.3 million, and upon completion of the subscription, the company would hold a 22.5% stake in Veritas Resources.

Veritas Resources is not an ordinary “shell company”; its controlling shareholder is Jin Chengxin, a well-known domestic mining service provider.

It is worth noting that Veritas Resources’ core asset is the San Matias project in Colombia, especially the Alacran copper-gold-silver mine for which feasibility studies have been completed.

The announcement at that time indicated that Veritas Resources held a 50% stake in CMH Colombia S.A.S. (hereinafter referred to as CMH), with the remaining 50% owned by Cordoba Mining through its wholly owned subsidiary. CMH, through its subsidiaries, owned interests in multiple deposits, including the Alacran copper-gold-silver mine in the San Matias project.

For Neapu Mining Machinery, this was a critical step in shifting from “selling shovels” to “owning mines.” As a listed company specializing in mining rubber wear-resistant parts, Neapu hoped to extend its industry chain and develop a “second growth curve” through this investment.

According to the May 2025 announcement, after Veritas Resources’ capital increase, it would acquire all of Cordoba Mining’s mineral resources in Colombia, mainly its 50% stake in CMH.

It is noteworthy that the resource endowment of this mine was once highly attractive. Evaluation data showed that the Alacran copper-gold-silver deposit had approximately 98.27 million tons of ore resources, with an estimated post-tax net present value (NPV) of $360 million, an internal rate of return (IRR) of 23.8%, an investment payback period of about 3 years, and an annual average ore extraction of approximately 6.1 million tons after completion.

However, this promising blueprint ultimately was not realized.

Environmental Approval Delays and Payment Term Changes as Obstacles

Any cross-border M&A involves significant risks, and successful implementation requires overcoming numerous hurdles.

The reason for termination disclosed in Neapu Mining Machinery’s announcement first pointed to the most critical compliance document in mining development—the Environmental Impact Assessment (EIA).

According to the original agreement, obtaining EIA approval was a prerequisite for share transfer. However, as of the announcement on February 3rd, the environmental impact assessment for the Alacran deposit had not yet been approved by ANLA, meaning the capital increase in Switzerland’s Veritas Resources had not been completed, nor had the share transfer of CMH been finalized.

In the context of delayed approval, the counterparty Cordoba Mining proposed changes to the terms, further increasing uncertainty.

A recent communication from Veritas Resources showed that Cordoba Mining requested an exemption for the share transfer agreement of CMH, requiring the EIA approval for the Alacran deposit as a condition for the share transfer.

This means that if Neapu Mining Machinery proceeds with the investment, it would have to put forward funds before the project’s construction status is clear, transferring significant compliance risks to the investor.

Additionally, due to fluctuations in metal prices, Cordoba Mining also proposed more aggressive payment requirements. The original “contingent consideration” linked to LME copper prices after commercialization was requested to be changed to a one-time fixed copper price compensation of $28 million. The payment schedule was also significantly accelerated, requiring $88 million at the time of transfer, $12 million one month after, and the remaining $28 million within six months of transfer.

“The significant change in the payment terms increases the future operational risks of this project,” Neapu Mining Machinery stated in its February 3rd evening announcement.

Beyond project-level uncertainties, the macro environment’s complexity cannot be ignored. The announcement pointed out that since April 2025, significant geopolitical changes have occurred globally, and the political, economic, policy, and legal risks in Colombia—the resource location country—have increased.

The most critical concern is the company’s financial security. Neapu calculated that the total investment for this equity acquisition would be approximately $51.3 million, plus about $94.59 million for future proportional mine construction, totaling $146 million (about RMB 1.02 billion).

As of September 30, 2025, Neapu Mining Machinery’s equity attributable to parent company owners was RMB 1.811 billion. This means the total investment in the project would account for roughly 56% of the company’s net assets. Neapu admitted that the company’s risk tolerance is limited, and this investment could significantly impact its future core operations.

It is worth noting that although the capital cooperation has been paused, Neapu Mining Machinery emphasized that the termination of this subscription will not adversely affect its existing cooperation with Jin Chengxin.

(Source: Daily Economic News)