SCIDEV LTD — Capital/Financing Update 2020

Apr 26, 2020

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Unit 1 8 Turbo Road Kings Park NSW 2148 Australia ABN 25 001 150 849

Email: admin@scidev.com.au Website: www.scidev.com.au ASX code: SDV

Companies Announcements Office Australian Stock Exchange

27 April 2020

SciDev and Nuoer strike strategic joint venture to accelerate global growth initiatives

Highlights

• In a major strengthening of their relationship, SciDev and the Nuoer Group have entered a new joint venture (the new JV) to accelerate global growth initiatives

• The new JV provides an excellent platform for SciDev to actively bid on Chinese Stateowned and run operations based outside of the PRC that are normally off-limits to western companies (in an estimated USD$10B global chemical market).

• The new JV, domiciled and headquartered in China, formally brings together the Nouer Group’s manufacturing and production skills with SciDev’s expert professional services, marketing and sales capacity to jointly engage in developing world-wide business opportunities.

• SciDev will continue to explore its own business development opportunities under the existing Heads of Agreement (HoA) which has been expanded and the Nuoer Group will not influence SciDev’s existing operations nor have representation on SciDev’s Board.

SciDev Limited (ASX:SDV; SciDev , or the Company ) is pleased to advise that it has strengthened its strategic relationship with the Nuoer Group of Companies (the Nuoer Group ) providing the Company with an ability to target a greater pool of global business development opportunities.

SciDev and the Nuoer Group have entered into a new joint venture that combines the Nouer Group’s production and manufacturing skills with SciDev’s expert technical, marketing and sales capacity to jointly engage on world-wide business development opportunities. The Nuoer Group will continue to provide chemical supply to SciDev and SciDev customers on commercial terms outside the new JV under existing arrangements, which have also been expanded.

Strategic Rationale

Since the formation of the initial Heads of Agreement ( HOA ) relationship between SciDev and the Nuoer Group (ref ASX February 2019), the two groups have demonstrated an excellent capacity for cooperation. The Nouer Group has produced chemistry to SciDev specifications which SciDev have delivered as part of a broader solution for its customers. The existing HOA had certain geographic and commercial limitations and the new JV is based on the parties’ recognition that both would be well served by a broader, worldwide joint venture, expanding the pool of opportunities.

Most importantly, the new JV will allow Nouer and SciDev to use their collective strength to actively bid on the growing number of Chinese State-owned operations located outside of the PRC that would normally be off limits to western companies. SciDev’s existing entitlements to market product in the Oceania region remain in place and have been expanded to better fit SciDev’s growth ambitions.

Key Commercial Terms

The new JV takes the form of an incorporated joint venture, through a Chinese domiciled entity called Nuoer SciDev JV Co., Ltd ( NSC ). NSC will be located in Qingdao, close to the main Nuoer Group production facility in Shandong province. This is close to the port that has serviced the Nuoer Group and SciDev well during the recent and ongoing COVID 19 challenges (ref ASX 24 March 2020).

Under the terms of the new JV, the parties will bring core products and skill sets to the joint venture, at agreed costs and attractive terms:

• Nuoer Group – the supply of chemistry, backed by Nuoer’s production facilities and established logistics network.

• SciDev – Expert technical advice, marketing and sales, utilising SciDev’s exceptional staff, technology and relationship base.

The new JV company, NSC, will be owned by SciDev and the Nuoer Group as to 50% each, with profit streams to SciDev from the new JV in accordance with ownership levels. In addition, SciDev will be paid per diem charge out rates for technical personnel which are benchmarked from Canadian engineering industry rates.

SciDev holds voting control over appointment of the Auditors to the new JV. An appointment has not yet been made however it is proposed to appoint one of either EY, PWC, KPMG or Deloitte to be the new JV’s auditor. A strong auditor will ensure seamless accounting integration from the new JV into SciDev’s Australian financial reporting.

In parallel with the new JV, the parties have negotiated two agreements that will be executed in coming weeks, in parallel with the incorporation of NSC:

• Licencing and Distribution Agreement – between the Nuoer Group and NSC, where the Nuoer Group agrees to provide chemistry supply at agreed costs and to licence certain IP and knowhow to the new JV.

• Technical, Marketing and Training Services Agreement – between SciDev and NSC, where SciDev agrees to provide key services in the areas of expert technical consulting, marketing and training to the new JV, at per diem rates.

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The existing, binding 2019 HOA between SciDev and the Nuoer Group both remains in place and has been extended in operation, from a jurisdictional perspective. This means that SciDev’s exclusive marketing rights in Oceania, secured under the binding 2019 HOA, remain in place and operate outside of the new JV. Additionally, the binding 2019 HOA has been extended to cover specific opportunities in North America and Africa.

Funding

The new JV leverages off the two parties’ skill sets and has modest up-front establishment costs. It is expected that these costs will be driven by the size of bids that the new JV looks to approach and that any upfront capital requirements will be accommodated using SciDev’s current cash, facilities and receivables.

The new JV is a logical extension of the relationship between the parties as outlined above and there is no change in the nature of SciDev’s undertakings. No SciDev shares will be issued to consummate the new JV and Nuoer China will not have representation on the SciDev Board.

SciDev Managing Director and Chief Executive Officer, Lewis Utting said:

“The strategic relationship formed between SciDev and Nuoer in 2019 allowed SciDev access to a world class manufacturing partner. That security of supply, coupled with SciDev’s professional services, knowhow and technology has allowed the Company to deliver on our growth ambitions and in parallel support Nuoer in theirs.

It is a pleasure to broaden this relationship with Nuoer and the significance of this cannot be understated. The alignment of SciDev’s professional team with the worlds’ second largest producer of our key chemistry, Nuoer, who produce first class product cost effectively creates a potent competitor on the global scene. On behalf of the whole of the SciDev, I look forward to working more closely with Nuoer in this new venture.”

This release has been approved by the SciDev board.

On behalf of SciDev Limited

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Lewis Utting

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Heath Roberts

Managing Director and Chief Executive Officer

Company Secretary

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For Further Information:

Corporate

Lewis Utting - Managing Director & Chief Executive Officer

Investors

Craig Sainsbury – Market Eye

Heath Roberts - Company Secretary

(+61) 02 9622 5185

craig.sainsbury@marketeye.com.au

0428 550 499

About SciDev

SciDev is a leader in the development and application of services, chemistry and process control for solids-liquid separation. SciDev brings together world-class technology, chemistry, management and manufacturing capabilities to solve pressing operational and environmental issues for the Mining, Water Treatment, Oil & Gas and Construction markets.

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