Kingstone Mining seeks to raise HK$1.94b in offering

PUBLISHED : Monday, 07 March, 2011, 12:00am
UPDATED : Monday, 07 March, 2011, 12:00am

Loss-making China Kingstone Mining Holdings is tapping Hong Kong's equity market for up to HK$1.94 billion to fund the construction of its marble mine in Zhangjiaba located in Sichuan province.

The mine, which is in its early stages of development, started commercial production in September last year.

Up to 70 per cent of proceeds from the Hong Kong listing will be used to finance the ongoing construction of the mine and its marble slab processing facilities, including procurement of mining and processing equipment and acquisition of land use rights.

It said 20 per cent of the proceeds would be used to set up distribution channels and networks to sell marble products and to develop brands.

Kingstone, which plans to complete the construction of the main production facilities by December 2013, said the net loss for the 11 months ended November 30 last year amounted to 21.2 million yuan (HK$25.07 million), five times more than the loss it made over the same period in 2009.

The Hong Kong stock exchange currently allows resource firms that cannot meet the three-year profit track record requirement to list on the main board if they have 'adequate economically exploitable reserves' backed up by expert opinion.

They must also provide estimates of the time and investment needed to bring their projects into revenue-earning production.

The marble miner would be able to make a profit this year, having started commercial production three months ahead of schedule, according to chairman and chief executive Chen Tao.

Kingstone said the Zhangjiaba mine was the largest beige marble mine in China in terms of marble reserves. The mine, which is estimated to have a mine life of 112 years, will have an annual mining capacity off 150,000 cubic metres of marble blocks in 2014 and an annual processing capacity of 3 million square metres for its marble slabs in 2013.

Chen said she wanted Kingstone, which currently has just one mining project, to become a leader in the industry within five years, and listing in Hong Kong would help the company fund its expansion.

The miner has already received funding from US investment bank Morgan Stanley, which injected US$15 million in August 2010 as a pre-listing investor. Its holdings will be locked up for six months after Kingstone's flotation.

Five cornerstone investors, including mainland real estate developers Evergrande Real Estate Group and CC Land Holdings, have bought a total of US$48 million worth of Kingstone shares. The IPO has been priced at between HK$2.25 to HK$3.35 per share and the target listing date is on March 18.

The Hong Kong bourse does not have many miners that are in the early stages of development. IRC, for one, has underperformed the Hang Seng Index. The loss-making Russian iron ore miner, which went public in October last year has lost 1.88 per cent since its listing.

Going for growth

The miner hopes to become a leader in the industry in five years

Up to this percentage of proceeds from the listing will be used to finance the construction of the mine and facilities: 70%