WA Kaolin Faces Regulatory Hurdle After Offtake Agreement Breach Notice

ASX Flags Breach of Listing Rule 10.1 on Offtake Agreement

WA Kaolin Limited (ASX:WAK) has disclosed that the Australian Securities Exchange has identified its 2026 offtake agreement with Dak Tai Trading Limited (DTT) as a breach of Listing Rule 10.1. This rule mandates shareholder approval for agreements involving disposal of substantial assets to related parties or their associates. DTT is linked to Sean Hu, a former non-executive director who resigned in November 2025 and remains a related party for six months post-resignation.

Following the ASX's indication, WA Kaolin has agreed with DTT to suspend performance under the offtake agreement until shareholder approval is obtained. The company intends to convene a meeting by mid-May 2026 to seek this ratification. Meanwhile, sales to DTT continue on an ad hoc basis under arm's length terms, priced according to prevailing market rates for comparable kaolin products, to avoid material financial prejudice.

Substantial Asset Disposal and Interim Sales Arrangement

The company notes that aggregated sales to DTT in the current calendar year, including those under the ad hoc arrangement, exceed 5% of WA Kaolin's equity interests, thus constituting a disposal of a substantial asset under Listing Rule 10.1. WA Kaolin considers the continuation of sales under the ad hoc terms necessary to maintain its financial position, given that a complete cessation would materially harm the company.

To support shareholder decision-making, WA Kaolin will provide an independent expert’s report assessing whether the offtake agreement is fair and reasonable to shareholders unconnected with Mr Hu and DTT. Existing shareholders holding approximately 31% of shares on issue, alongside partial underwriters of the ongoing rights issue, have indicated their intention to vote in favour of the approval.

Governance and Capital Management Amid Ongoing Recapitalisation

This development occurs amid WA Kaolin's broader efforts to stabilise its financial position, including a recently launched partially underwritten $34.9 million rights offer aimed at reducing debt and funding operational improvements at the Wickepin kaolin project. The rights offer, which has attracted support from major creditors converting debt to equity, remains conditional on shareholder approval and is part of the company's strategy to address ongoing challenges and restore working capital. The shares remain suspended pending recapitalisation, reflecting the company's complex governance and financial environment.

WA Kaolin has committed to dispatching an addendum to the notice of meeting, including the independent expert's report, to shareholders by 24 April 2026. The company is cooperating with the ASX to resolve the breach and secure shareholder ratification at the earliest opportunity.