Yunnan Copper Industry, the mainland's third-biggest smelter of the metal, plans to raise 6 billion yuan (HK$6.81 billion) through a share placement to buy mining assets from its parent and repay debt.
The Shenzhen-listed company is the latest metal producer to express a desire to capitalise on the vibrant stock market, after Aluminum Corp of China (Chalco), which is looking to sell new shares on the Shanghai market, and Angang Steel, which aims to raise funds in Hong Kong.
Helen Lau, an analyst at OSK Securities, expects more metal producers to follow suit because of ample liquidity in the market, the recovery in metal demand and prices, and the jump in their share prices.
The Shanghai Composite Index rose 31.875 points or 0.97 per cent to 3,328.49 yesterday, the gauge's highest close in 13 months.
Hong Kong's benchmark Hang Seng Index also ended at its highest level in more than 10 months, rising 2.96 per cent to 19,817.7 points.
'Investors' risk appetite is increasing, especially for China-related stocks, as they expect demand for raw materials such as steel will increase with the strong recovery of the mainland economy,' Ms Lau said.
Yunnan Copper will sell as many as 300 million new shares to no more than 10 institutional investors for at least 20.59 yuan each after gaining approval from shareholders and the mainland securities watchdog.
About 2.37 billion yuan of the proceeds will be used to buy mining and production assets from its state-owned parent, Yunnan Copper Group, the company said in a statement yesterday.
It also plans to use 1.4 billion yuan to finance expansion at its Dahongshan copper project, which is scheduled for completion by 2012 with an annual capacity of 8,000 tonnes. It will also use one billion yuan to repay bank loans to reduce its gearing to 70 per cent, from 80 per cent at the end of last year.
Shares of Yunnan Copper surged their 10 per cent daily limit yesterday to close at 28.82 yuan following the news. The stock has risen 260 per cent so far this year.
However, shares of Angang Steel dropped after the Liaoning-based steelmaker said late on Wednesday it would seek a mandate from shareholders to raise as much as HK$3.21 billion by issuing as many as 217.16 million new shares in Hong Kong.
Angang's H shares declined 0.13 per cent to HK$14.90, while its A shares fell 1.54 per cent to 14.74 yuan in Shenzhen. The H shares have risen 72 per cent so far this year, and the A shares, 112 per cent.
Chalco, the mainland's biggest aluminium producer, said late last month it planned to raise as much as 10 billion yuan through a Shanghai stock exchange placement of up to one billion A shares with institutional investors.
Yunnan Copper will use funds to buy assets from parent and repay debt
Portion of the sales proceeds the firm will allot for acquisitions, in yuan: