NWS revives mine spin-off plan
NWS Holdings will revive the proposed spin-off of its mainland iron ore mine, just three months after the Hong Kong stock exchange listing committee rejected its application.
Newton Resources, in which NWS has a 60 per cent stake, owns and operates the iron ore mine in Hebei. It plans to raise as much as US$700 million through selling 1.2 billion shares, according to the term sheet.
The offering may include a preferential offering to New World Development and NWS shareholders, according to a joint statement issued by the two companies. New World holds 40 per cent of NWS. The stock exchange rejected the spin-off of the mine in February and the company did not disclose the exchange's reasons for rejecting the application.
The main asset of Newton Resources is the Yanjiazhuang Mine, which occupies a mining area of about 5.22 square kilometres.
Newton Resources said in its drafted listing prospectus that the Yanjiazhuang Mine had proved and probable reserves of about 260 tonnes, which were converted from the total measured and indicated iron ore resources of about 311.8 tonnes as at December last year.
'We [Newton Resources] use open-pit mining to extract our reserves. Open-pit mining is characterised by shorter timeframes for mine infrastructure construction, lower capital expenditure requirements and a relatively simple iron ore extraction process,' it said.
To increase processing capacity to 10.5 million tonnes per year by November 2012, Newton Resources expects an estimated capital outlay of 897 million yuan (HK$1.08 billion) in a three-phase expansion plan.
So far, Newton Resources has committed about 291 million yuan since it started phase one of the development in the last quarter of 2009.
In addition, the iron ore mine plans to spend about 303 million yuan to bring its gabbro-diabase - a valuable mineral resource commonly used to manufacture high quality interior decorative materials and indoor flooring - to commercial production.
As of December 31 last year, it had invested about 1.7 million yuan.
Newton Resources, which started commercial operations in January, incurred net losses of 2.94 million yuan for the 12 months to December last year, from 2.23 million yuan in 2009.
It said it entered into an agreement in April to sell 30 per cent of its annual iron concentrate production to Shougang Hong Kong at a 3 per cent discount to the market price at the time of supply. It also plans to buy the exploration rights for two iron ore mines - in Guangxi and Shangzhengxi - in Hebei province.
Under the guidance of executive directors and senior management, it has budgeted about 720 million yuan for the acquisition and exploration of these two mines and other mines in Hebei yet to be identified by the firm.
Shares of New World Development rose 2.95 per cent to HK$13.26 and NWS shares increased 1.43 per cent to HK$11.32.