Yunnan miner plans 1.55b yuan in spending

PUBLISHED : Friday, 02 December, 2011, 12:00am
UPDATED : Friday, 02 December, 2011, 12:00am


China Polymetallic Mining said yesterday it plans to spend 1.55 billion yuan (HK$1.89 billion) utnil the end of next year to buy mining rights and to fund development and operating costs.

The Yunnan firm said it would weather depressed equity-market valuations to launch a share offering because of its role as a consolidator of the province's metals-mining sector.

'We are designated by the Yunnan government as a consolidator,' said chief executive Zhu Xiaolin. 'We must be listed to fund acquisitions.'

The metals miner said it would make up the difference between its planned spending and its expected HK$1 billion initial public offering (IPO) with bank loans and operating cash flows.

Hatch, an international industry consultant, ranks the company as Yunnan's largest lead and zinc miner in terms of resources. And Yunnan was second among China's provinces in both lead and zinc reserves last year, and was in third in terms of zinc preprocessed ore and fourth on lead ore, according to China Polymetallic's listing prospectus.

The firm, set up in April 2009, started production at its first mine - called Shizishan - last October. It had a net loss of 245.6 million yuan in this year's first half and has forecast a full-year loss of 246.6 million yuan.

Zhu told a media video conference that Shizishan contained silver as a byproduct, in addition to lead and zinc.

He said the earnings margin (before interest, taxes, depreciation and amortisation) of the mine in 2013 - the first year of full-scale operation - was projected to be 89.5 per cent. This compares with an average 43.8 per cent for seven rivals. The mine's net profit margin is expected to reach 65.8 per cent in 2013, ahead of the 28.2 per cent for its rivals.

The firm plans to raise daily ore-mining capacity from 700 tonnes now to 1,000 tonnes by next year's second-quarter, and 2,000 tonnes by next year's fourth quarter.

By the end of next year, the firm plans to spend up to 741 million yuan to buy two mines, and then 353.2 million yuan to develop them as well as three mines it has either invested in or secured ore-processing rights for.

It will also spend 457.5 million yuan to fund operations.