Zhongzheng International (00943) plans to sell 100% of PT Karya Dasar Bumi's equity and transfer sales loans for 1.2 million USD.

ZHONGZHENG INTL (00943) announced that on August 6, 2026, Seller A Fastport Investment Holdings Limited and Seller B Big Advance Holdings Limited (both wholly-owned subsidiaries of the company) entered into a sale agreement with Buyer PT Baraindo Multi Sejahtera. The sellers intend to sell the sales shares (all issued share capital of the selling company PT Karya Dasar Bumi as of the date of the sale agreement) to the buyer; and the sellers intend to facilitate Yi Ke Management (another wholly-owned subsidiary of the company) to sell the sales loans to the buyer (the total outstanding inter-company balances owed to Yi Ke Management by the selling group as of the effective date), for a total cash consideration of USD 1.2 million (approximately HKD 9.49 million). Following the effective date, the selling company will no longer be a subsidiary of the company, and the financial performance, assets, and liabilities of the selling group will no longer be consolidated into the groups financial statements. After the previous contractor suspended mining activities at the PT Bara coal mine in early 2025, the group took proactive measures to resume production and subsequently hired the buyer as the new contractor. At that time, the board was optimistic about implementing a sustainable production plan, considering the buyer's operational experience, broader customer base, and financial strength. However, the regulatory changes in Indonesia in 2026 had a significant adverse impact on this outlook. In early 2026, Minerba required PT Bara to reduce its proposed annual coal production for 2026 from 600,000 tons to 21,500 tons, which came as a complete surprise. The board was aware that the Indonesian authorities had adjusted their policy direction aimed at maintaining coal prices by reducing and consolidating the production capacity of major operators. The authorities subsequently announced in May 2026 that the export business of several strategic natural resources, including coal, would be concentrated among state-owned enterprises designated by the government. After the production quota was reduced, the board continued to seek to understand and assess the relevant policy changes, regulatory requirements, and the impact of such changes and requirements on the operations of the PT Bara coal mine. According to the boards understanding, PT Bara could apply to raise its production quota. The group subsequently submitted an application to raise the annual production quota to 315,000 tons and may apply for further increases in the future if the situation permits. However, given that the PT Bara coal mine is relatively small in scale and the selling group has a background as a foreign enterprise, there remains significant uncertainty regarding PT Bara's ability to successfully increase the quota substantially. Furthermore, there are no guarantees regarding either the time required for the approval process or the likelihood of a successful application. Therefore, the board believes that while an application can be made to seek an increase in the production quota, relying on such applications to maintain operations may not be commercially viable given the uncertainty of the outcome. The significantly reduced production quota rendered the original production and sales plans unfeasible, as it corresponds to less than a months production capacity under the initial plan. At this level, the buyer has indicated that it cannot achieve the economic scale necessary to fulfill contract obligations, as mobilizing equipment and labor to operate for one month followed by prolonged downtime for the rest of the year is commercially unfeasible. On the other hand, if the group were to choose to operate the PT Bara coal mine independently, it would need to bear the costs of infrastructure development and procure the equipment and labor resources currently arranged by the contractor. Without sustained and sustainable production activities, the resulting recurring operational expenses would also be unreasonable. Despite the group's efforts to develop the business over the years, the board believes that the ongoing regulatory and operational risks it faces are becoming increasingly significant, and the business outlook has become very unclear. Given the uncertainties surrounding the recovery of a sizable production quota and the timeline for achieving such a quota, continued operation of the business is not economically viable. Therefore, the board believes that the sale offers the group an opportunity to exit the business and to reallocate its financial and management resources to more promising opportunities. Considering the financial performance and current status of the PT Bara coal mine, the sale also allows the group to recover part of its investment in the coal mining business, which was originally unlikely to be recovered.