SK to pay 203b won for copper stake

PUBLISHED : Tuesday, 01 January, 2008, 12:00am
UPDATED : Tuesday, 01 January, 2008, 12:00am

Beijing has asked South Korea's SK Networks to pay 62 per cent more for its acquisition of a major stake in a state-owned copper company in northern China.

The trading arm of South Korea's third-largest industrial group SK Group would invest 203 billion won (HK$1.69 billion) to acquire a 45 per cent stake in Northern Copper Industrial, which is also called BeiFang TongYe, in Shanxi province, it said in a regulatory filing yesterday.

That compares with an acquisition price of 125.5 billion won for the same stake it announced in February last year.

The filing did not explain why the acquisition price had changed but Reuters quoted an SK spokesman as saying the price had been revised upward after a request from the central government, which cited higher raw materials prices.

'Given the high commodity price and that the government doesn't want to sell state-owned assets cheaply, it is understandable and reasonable for it to demand a higher price,' said Duncan Chan Ka-yeung, an analyst at CCB International Securities.

The mainland - the world's largest copper producer and consumer - accounts for about 20 per cent of the world's copper demand, but its own copper reserves are only enough to feed 25 per cent of its demand.

This year, demand for copper would be clouded by global macroeconomic uncertainties due to the United States subprime crisis but growth in mainland demand was likely to persist, Mr Chan said.

Northern Copper, the mainland's sixth-largest copper development firm, owns a copper mine with two million tonnes of reserves that produce 100,000 tonnes of copper annually.

SK Networks' investment will be used for the development of Northern Copper's existing mine to increase its refinery capacity, the company said in a statement in March last year.

The South Korean company also said in March that it planned to list Northern Copper's shares on the mainland stock exchange some time this year.