China Moly gears for 729m yuan expansion
Prudence Ho
Tuesday, March 27, 2007
thestandard.com.hk
Listing candidate China Molybdenum, the largest molybdenum miner in China, plans to invest 729 million yuan (HK$736.7 million) this year to expand its molybdenum downstream processing plants.
In order to lure investors, the Luoyang-based company is expected to pay 30 percent of its profits as shareholder dividends, said a report by UBS, one of the sponsors of the initial public offering.
According to media reports, China Moly's US$600 million (HK$4.68 billion) offer will receive support from major investors, including tycoons Li Ka-shing, Lee Shau-kee and Cheng Yu-tung, as well as Saudi billionaire Prince Alwaleed bin Talal. UBS and Morgan Stanley are handling the deal.
Morgan Stanley said the fair valuation of China Moly should fall between 10 and 15 times price to 2007 earnings, compared with metal producer Hunan Nonferrous Metal Corp's (2626) 15 times.
China Moly's open-pit Sandaozhuang mine is one of the world's largest molybdenum mines with an estimated mine life of 46 years.
Morgan Stanley estimates the company will post a net profit of 2.17 billion yuan this year, a 43 percent increase from last year.
Molybdenum, a transition metal, is used in high-strength alloys and in high-temperature steels. It is also used in oil pipelines, aircraft and missile parts.
Pigments are used in paints, inks, plastics and rubber materials.
UBS forecasts the average price for molybdenum will be US$22.50 per pound this year, from a peak average of US$33.90 in 2005 and US$25.11 in 2006.
Each 1 percent change in price could lead to 2.2 percent change in the firm's 2007 earnings.
The company started producing molybdenum downstream products in the second half of last year following an aggressive capital expansion of 618 million yuan in 2005 and 788 million yuan last year. |
