Hunan Nonferrous in tungsten stake talks

PUBLISHED : Wednesday, 26 April, 2006, 12:00am
UPDATED : Wednesday, 26 April, 2006, 12:00am

Deal seeks to boost firm's processing unit as hedge against metal price risk

Hunan Nonferrous Metals' parent company, Hunan Nonferrous Metals Holding Group, is in talks to buy into a loss-making customer in an effort to boost its downstream operations, according to the company's management.

The potential acquisition aims at helping the group smooth long-term profits by hedging upstream metal price risks with downstream processing exposure.

Hunan Nonferrous Metals general manager Li Li told reporters yesterday that the parent firm was in the early stages of discussions on a possible stake acquisition in tungsten alloy maker China Tungsten and Hightech Materials.

China Tungsten said on Friday its largest shareholder Guangzhou Zhongkexin Group was in talks with Hunan Nonferrous Metals Holding to restructure China Tungsten, after its second-largest shareholder's 14.97 per cent stake was frozen after a court hearing.

China Tungsten yesterday said it expected to post a loss of about five million yuan in the first half, compared with a profit of 5.28 million yuan for the same period last year. It posted a net loss of 4.74 million yuan in this year's first quarter.

It said its profit margin was eroded by a 300 per cent jump in tungsten prices last year.

In contrast, Hunan Nonferrous Metals benefited from record-high metal prices.

Yesterday, the firm posted a 23.3 per cent fall in net profit to 426.01 million yuan for last year. Without the 292 million yuan one-off acquisition gain in 2004, last year's profit would have risen 61.97 per cent.

Chairman He Renchun said the company planned to maintain this year's lead, antimony, cement carbide and tungsten outputs at last year's levels.