Changda International Holdings has entered into a comprehensive agreement for its products and raw material purchases with Sinochem, one of Chinas biggest chemical companies. Under this agreement Sinochem will act as an exporter and reseller of Changdas products and an importer of raw materials for Changda. The following conditions have been agreed upon. Changda commits to expand the production capacity of its pharmaceutical intermediates as soon as possible in order to supply adequate amounts of the product to Sinochem. Both parties agree to grant each other priority in purchases and sales of its products and raw materials. Sinochem grants Changda International USD 900,000 for raw material purchases. Furthermore Sinochem also expresses its intention to issue RMB credit to Changda Chemical for the same purpose. Both parties also agree to explore expansion opportunities as well as the exchange of information & technology.
In the long term both parties agree that Changda International shall become an important production base for Sinochem, both parties also agree to consider joint ventures and potential M&A activities. "In the internationalization, the broadening of our market range and strengthening of our chemical products line, this marks an important development as we have found with Sinochem a true global partner. We are very excited about the prospects of this agreement. In the internationalization, the broadening of our market range and strengthening of our chemical products line, this marks an important development as we have found with Sinochem a true global partner We are very excited about the prospects of this agreement."
In order to improve our performance and competitiveness, we are constructing our Heze fertilizer plant and are preparing to expand our Thiophene product line. We have already invested a total of $4,628,000 into our Heze plant through June 30, 2010. However, an additional $19,072,000 is needed to complete the construction and an additional $11,500,000 will be needed for the normal operation of the plant for the first 12 months of operation after completion of the plant. Upon completion of the offering, we anticipate that we will have sufficient capital to meet our cash requirements for the completion of our Heze fertilizer plant and the expansion of our Thiophene product line.
Mr Zhu added that the Company expects a stabilization and a possible recovery of fertilizer prices in 2010 and that the Company already has undertaken steps to lock a low cost for its raw materials when it prepaid in the excess of 10 million US Dollars of raw materials in December 2009. We feel confident the pre-payment decision can have a positive impact on our 2010 profitability as the markets have recently seen signs of stabilization of fertilizer prices and in light of the recent trends in the energy market with which fertilizers price tend to be correlated.