China's largest zinc producer targets US$200m from public offering

PUBLISHED : Saturday, 18 February, 2006, 12:00am
UPDATED : Saturday, 18 February, 2006, 12:00am

Hunan Nonferrous Metals Holding Group, China's largest producer of antimony and zinc, plans to launch an initial public offering next month.

The company will aim to raise US$150 million to US$200 million, sources familiar with the deal said.

The Changsha, Hunan province-based firm - formed in 2004 from the merger of eight enterprises - aims to go through a listing hearing with regulators as early as next week in a deal sponsored by Morgan Stanley and BOCI.

Hunan Nonferrous is an integrated metal mining, smelting and processing firm which makes 10 non-ferrous metals used in a large number of industries.

The listing plan comes as zinc prices, lead and tin are trading at their highest prices in more than 15 years and as demand outstrips supply.

The firm recorded 11.2 billion yuan in assets in 2004, produced 680,000 tonnes of metals and realised turnover of eight billion yuan in 2003, according to its website.

It has eight subsidiaries and one mainland-listed associate firm - 42.28 per cent-controlled Hunan Zhuye Torch Metals which is China's largest and the world's ninth-largest zinc smelter with an annual capacity of 250,000 tonnes.

Hunan Zhuye posted a net profit of 62.79 million yuan in the third quarter of last year, flat from the same period in 2004.

Operating margins fell from 3.59 per cent to 2.91 per cent as the rise in finished product prices failed to catch up with that of raw material costs. Higher power costs and a fall in the export tax rebate from 11 per cent to 8 per cent on May 1 also affected profits.

Hunan Nonferrous' other subsidiary Xikuangshan Shanxing Antimony is the world's largest producer of the metal with 40,000 tonnes of annual capacity with four plants and two mines, its website said.

China is the world's largest reserves holder, producer and exporter of tungsten, tin and antimony, according to a government policy circular released in August last year on the crackdown on disorderly exploitation of resources and the expansion of smelting capacity.

To address the exploitation problem, the government lowered the export tax rebate of tungsten, zinc, tin and antimony from 8 per cent to 5 per cent at the start of the year.

Hunan Nonferrous also has a subsidiary, Hunan Xianglu, which is China's largest fluoride producer, with an annual capacity of 100,000 tonnes.

Another subsidiary Hunan Xizhuyuan Nonferrous claims it has 49.3 per cent of China's tungsten reserves and 63 per cent of its bismuth reserves.