Metech International has terminated the joint venture agreement (JVA) with X Diamond Capital (XDC) where it established a joint venture company (JVCo) to manufacture and distribute lab-grown diamonds.
The JVA was entered into by Metech’s wholly-owned subsidiary, Asian Green Tech, on Sept 24, 2021.
On Jan 17, 2023, Asian Green Tech issued a default notice in writing to X Diamond Capital where X Diamond Capital was said to have caused an “event of default”. The “event of default” was said to have “materially and incurably breached” the JVA. Through the same written notice, Asian Green Tech terminated the JVA against X Diamond Capital with immediate effect.
According to Metech, the grounds for the issuance of the default notice and termination of the JVA was due to X Diamond Capital not recognizing Asian Green Tech’s entitlement under the JVA to appoint a third director to the JVCo’s board and to manage and operate the JVCo.
In addition, X Diamond Capital and its appointed directors in the JVCo, Deng Yiming and Yang Hanyu, have “failed to satisfactorily address numerous issues and irregularities” relating to the JVCo. The issues and irregularities refer to the missing diamond seeds and loose diamonds, outstanding loan advances, irregularities with the importation of machines supplied to AET, and the sale of machines to the JVCo.
Finally, X Diamond Capital and its appointed directors were said to refuse to cooperate with Asian Green Tech to ensure the funding of the JVCo’s operations. X Diamond Capital also failed to cooperate to ensure timely payments for the purposes of the JVCo’s operations.
See also: Metech International forms lab-grown diamond joint venture
Under the JVA, Asian Green Tech will be entitled to acquire all of the shares in the JVCo held by X Diamond Capital at the default price of 80% of the JVCo’s net tangible assets (NTA) per share within 30 business days of the notice of default and termination. This is expected to take place on March 2.
“Asian Green Tech is currently assessing the net tangible assets per share of [the JVCo] and will update shareholders in due course on the amount of the purchase price as well as the impact on the group’s financials, if any,” says Metech.
Yang has resigned from his position as director of the JVCo on Jan 13 and Deng was removed by a members’ resolution in writing dated Jan 17.
See also: Metech JV partner disposes shares in JVCo for $4 mil as an interested person transaction
The JVCo now has three directors who have been appointed by Asian Green Tech. Metech, through Asian Green Tech, has assumed control of the JVCo.
“While it is noted in the announcement that under the terms of the JVA, Asian Green Tech was to operate and manage [the JVCo], and X Diamond Capital was to provide technical support to [the JVCo], the board wishes to assure shareholders that the operations of [the JVCo] will not be affected by the termination of the JVA against X Diamond Capital as [the JVCo] will be able to continue with the requisite technical support from its current production team,” adds Metech.
Shares in Metech closed flat at 7 cents on Jan 17.
