Citic Dameng, which controls nearly a third of all manganese reserves on the mainland, is searching for manganese mines tio acquire in South Africa.
China is the world's largest steel producer and currently relies on imports of manganese, which is essential in the production of iron and steel.
To make matters worse, the quality of local manganese ores is much lower than overseas ores.
'We are looking at several mines in South Africa, which has the largest reserves of manganese in the world,' said the company's chief executive, Tian Yuchuan.
Tian was speaking on Thursday at the presentation of the company's annual results for the year ended December 31, which showed a 78 per cent increase in net profit to HK$408.6 million. Stripped of a HK$262 million one-off gain from the acquisition of a manganese mining and alloy processing plant in Guizhou, the underlying profit of the company dropped 36 per cent year on year.
Production disruption in the fourth quarter dented profits, Citic Dameng said. An extreme drought in Guizhou cut hydroelectric power supplies and led to a severe power shortage in the southwestern region where the company's mining and production facilities are located.
As a result production dropped more than 60 per cent year on year in the quarter, but had picked up again in the first quarter of this year, Tian said. The company expects to produce 140,000 tonnes of electrolytic manganese in 2012, up by 40 per cent year-on-year.
Electrolytic manganese, or EMM, is used by steel mills to increase the tensile strength of steel.
Tian predicted that the price of EMM would fall to as low as 16,500 yuan a ton this year from 19,000 a ton on average last year, because of the slowdown in new house construction, which would reduce demand for steel.
'Some mainland EMM processing plants will go bust this year, given that the selling price is just barely above operating cost,' Tian said. Consolidation of EMM plants on the mainland would offer opportunities for acquisitions, he said.
In the longer run, manganese would become a sought-after commodity when the technology of electric cars is mature enough to support mass production, Tian said. Lithium manganite, a processed product of manganese, is one of the essential materials for car batteries.