Companies

China Vanadium plans takeovers

By Helen Yuan (China Daily)
Updated: 2010-08-26 14:19

Shanghai - China Vanadium Titano-Magnetite Mining Co, the largest non-State-owned iron ore producer in Sichuan province, said it will focus on takeovers in the region as local demand for ore may rise 18 million metric tons by 2012.

Sichuan province, which borders Tibet, will add 10 million tons of steel production capacity by 2012, translating into an additional iron ore demand of 18 million tons, Chairman Jiang Zhongping said in an interview.

"Eighteen million tons is small to China, but to Sichuan miners, it's attractive," Jiang said. "The Panxi region, where we are located, have abundant resources for acquisitions. Local expansions are our priority in the next few years."

China's moves to improve infrastructure and employment in its western provinces and rebuild areas damaged in the 2008 earthquake are adding to steel demand in Sichuan. China Vanadium's profit surged 75 percent to 233.6 million yuan ($34 million) in the first half on higher production and prices.

The company may spend 1.3 billion yuan this year on acquisitions and capacity expansion, Kong Chi Mo, chief financial officer of China Vanadium, said during the same interview, declining to give a forecast for the next year.

The company would have at least 600 million yuan in operating cash flow every year, Mo said. It had 300 million yuan in bank loans by the end of June, he said.

Sector outlook

"Iron ore deposits controlled by the company will increase rapidly over the next three years," Luo Rongjin, a Beijing-based analyst of Bank of Communications Co (BoCom) International Holdings Ltd, a unit of BoCom, said in an Aug 24 report. Luo maintained a "buy" on the stock.

The shares fell as much as 3.1 percent on Wednesday in Hong Kong, taking a decline to 19 percent since its debut on Oct 8.

Analysts see gains in the stock for the next 12 months, with a Bloomberg survey of 4 analysts indicating the shares may rise by 53 percent within a year to HK$4.35 (56 US cents).

China Vanadium may increase profit by 53 percent to 503 million yuan this year and another 25 percent to 631 million yuan in 2011, according to a mean estimate of six analysts compiled by Bloomberg.

Ore containing 63.5 percent iron arriving at Chinese major ports has risen 79 percent in the past year to $157 a ton in the week of Aug 20, according to researcher Metal Bulletin, as China, the world's biggest steelmaker, increased production of the alloy by 18 percent in the first seven months to 375 million tons.

Expansion and prices

Related readings:  Steelmakers restock as iron ore buys rise  China iron ore imports up 9% in July

The company may produce up to 1.95 million tons of iron ore concentrates with about 55 percent iron content this year, Jiang said. It is building a 300,000-ton production line to raise its total capacity to 2.6 million tons of concentrate. It's also building a 1.5 million-ton line of pellets to raise capacity to as much as 1.86 million tons.

China Vanadium may also add another 250,000 tons of concentrate capacity next year should it complete the purchase of the Maoling mine in Wenchuan, Sichuan, from its majority shareholder, Jiang said.

China Vanadium sold iron concentrate at 665 yuan a ton on average in the first half, Jiang said. That's a 29 percent gain from a year ago, Bocom's Luo said. Production costs for a ton of concentrates was 266 yuan in the first half, Jiang said.

Bloomberg News