Iron ore miner IRC confident its investor will complete share purchase
Iron ore miner's shareholder General Nice had bid to raise funds hit by mainland credit crunch
IRC, a Hong Kong-listed iron ore miner in Russia's far east that supplies northeastern China's market, said it expects strategic shareholder General Nice Development to be able to complete its commitment to buy IRC's shares "in the not too distant future".
General Nice had failed to raise enough funds owing to a credit crunch on the mainland at the end of last year.
Jay Hambro, IRC's chairman, told a teleconference yesterday that the firm's management had just held talks in Beijing with General Nice, as well as would-be investor Minmetals Cheerglory, a Hong Kong subsidiary of state-owned metals trading and mining major China Minmetals.
"We sympathise with General Nice's suffering from the liquidity crunch," Hambro said. "We are looking at putting in place in a timely manner a revised funding timetable as quickly as possible … we are confident it will get funding in the not too distant future."
IRC chief financial officer Raymond Woo said General Nice's failure to raise bank loans was due to the wider mainland financial market's liquidity crunch, which had tightened credit.
General Nice, a privately owned mainland firm, agreed in October to exercise a right to buy 863.6 million new IRC shares at 94 HK cents each, for a total of HK$811.8 million. It was able to raise HK$205.2 million, leaving a shortfall of HK$606.6 million.
Together with an earlier share purchase, General Nice has paid just over HK$1 billion so far for a 22 per cent stake in IRC.
Minmetals Cheerglory, which was in a position in November to fulfil its commitment to buy 247.3 million IRC shares at the same price, for a total of HK$232.5 million, will not complete its purchase until General Nice completes its purchase, under Minmetals' share purchase deal.
Woo said the delay in investments from General Nice and Minmetals will not affect the progress of construction on IRC's second iron ore project, which would quadruple IRC's output capacity when completed in this year's second half, since the project is funded by a loan from Industrial and Commercial Bank of China. The new investments will mainly fund the future expansion of the second project.
IRC said yesterday that it produced 1.03 million tonnes of iron ore last year, 5.4 per cent more than its target and 6.5 per cent more than in 2012.
The company's share price jumped 11.8 per cent to 76 HK cents yesterday, after having fallen 12.8 per cent since it announced late last month that General Nice was able to complete only a quarter of its share purchase commitment.
Hambro expects iron ore to "return in the longer term to a higher price environment than today" despite short-term weakness and analysts' forecast for lower prices in the next few years.