Xinxin Mining to list as first new H share
Firm secures approval to raise HK$3.9b despite tighter rules on overseas listings
Xinjiang Xinxin Mining, the mainland's second-largest nickel cathode producer, will become the first company to list in Hong Kong as an H share after the government discouraged state-owned firms from launching overseas initial public offerings of less than US$1 billion.
Despite the small scale of its public offering of less than HK$3.9 billion, Xinxin Mining, its sponsor and local authorities managed to convince mainland regulators for a Hong Kong listing instead of in the domestic A-share market, sources said.
Beijing has tightened the approval process for mainland companies to go public in Hong Kong, either through H-share offerings or red-chip listings. As a result, most companies seeking Hong Kong listings this year were red chips and H-share offerings approved before the clampdown.
Even for companies that planned to raise more than US$1 billion, it had become more difficult to get regulatory approval for an overseas listing, sources said.
'There was never a formal document issued [to limit H-share offerings]. But it is known that for companies aiming to raise proceeds amounting to less than US$1 billion, H-share offering plans will not be encouraged,' said Ronald Wan Ten-lap, head of investment banking of Bocom International.
'In the rare cases that companies managed to get approval for their H-share offerings, they were usually not the single-largest company in their sectors and deep lobbying was involved,' Mr Wan said.
Xinxin Mining is selling 600 million new shares, 28.3 per cent of the enlarged capital, at between HK$4.80 and HK$6.50 a share, sources said.
The almost US$500 million offering is in contrast to the previous planned US$350 million after strong pre-marketing demand in the past two weeks and higher valuations in the Hong Kong stock market.
The offering has a greenshoe option, which could add 90 million shares if there is sufficient demand. Bank of China International is the sole sponsor and bookrunner.
Based in resource-rich Fuyun county, north of Xinjiang capital Urumqi, Xinxin Mining is engaged in the mining, processing, smelting and refining of nickel, copper and other nonferrous metals.
It plans to use 63.2 per cent of the net proceeds for acquisition of mining rights and exploration rights to support expansion.
Xinxin Mining, which sold nickel cathode under the Bo Feng trademark, has reported strong growth in recent years thanks to increased production volume and robust selling prices of nickel.
Net profit last year was 443 million yuan, representing growth of 128.5 per cent from a year earlier.
Turnover was 869 million yuan, an increase of 59.5 per cent above 2005.
Net profit is expected to grow 81.7 per cent and reach 807 million yuan this year and another 12.7 per cent to 909 million yuan next year, according to the pre-marketing report sent by the bookrunner.
China Life Insurance (Group), Li Ka Shing Foundation, New World Development and Leslie Lee Alexander, the owner of National Basketball Association team Houston Rockets, have each taken HK$118 million worth of shares.
Fidelity Insurance and Sinotrans (HK) Holdings have each committed HK$78 million.
The retail tranche of the offering will open on Thursday.
The final pricing will be determined on October 4, while trading in the shares is scheduled to begin on October 12.
