China Nonferrous presses ahead with HK$2.4b IPO

China Nonferrous Mining, an overseas unit of state-owned China Nonferrous Metal Mining (Group), is pushing ahead with an initial public offering of shares in Hong Kong today amid plans to raise output of its mainstay blister copper product by 80 per cent in five years.

The company aims to raise between HK$1.83 billion and HK$2.44 billion through the IPO to fund expansion of its copper mining and smelting projects in Zambia, southern-central Africa, fund potential acquisitions and retire bank loans.

It will open the offer of 870 million new shares to investors at HK$2.1 to HK$2.8 each, or 13.4 to 17.8 times its net profit per share last year. The company originally planned to launch the IPO late last month, but delayed it due to an unspecified 'technical issue' in the financial data submitted to the local stock exchange, according to a personal familiar with the deal.

Chairman Luo Tao did not explain the cause of the delay at yesterday's media briefing.

China Nonferrous Mining intends to raise its annual blister copper output to 270,000 tonnes in 2016 from 150,900 tonnes last year. Blister copper is produced from copper concentrate and contains 99 per cent of the metal. The firm sourced 92.5 per cent of its revenues last year from blister copper, which needs to be refined before it can be made into materials used in construction, electrical products and machinery.

China's share of global refined copper consumption is forecast by consultancy Wood Mackenzie to rise to 43 per cent in 2015 from 39 per cent last year, despite the annual average growth in demand for copper being tipped to slow to 6.5 per cent annually in the five years to 2015 from 13.3 per cent a year in the decade to 2011.

The consultancy forecast the average copper cash-market price on the London Metal Exchange to rise 1.3 per cent to US$8,600 a tonne next year, after a predicted 3.7 per cent fall this year to US$8,488 due to the global economic slowdown.

China Nonferrous Mining is the first mainland company to invest in Zambia's copper assets since the African nation privatised the industry in the late 1990s.

The Chinese company's net profit fell 5.3 per cent last year to US$70 million due to a one-month mine shut-down for maintenance, and a lack of one-time gain recorded as part of an asset purchase transaction in 2010.

The miner gave no profit forecast for this year, but chief financial officer Han Hong said profit was expected to rise given blister copper output was planned to rise 20 per cent to 180,000 tonnes. The company did not give dividend payout ratio guidance.