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SCMP Reporter

Molybdenum producer aims to raise at least US$200m

Luoyang Luanchuan Molybdenum Group, which owns the largest molybdenum deposits in the world, plans to file an application with the Hong Kong stock exchange  next month for an  initial public offering of at least US$200 million, market sources said.

Morgan Stanley will arrange the sale, expected late this year or early next year.

Luoyang Luanchuan,  based in  Chengguan, in Henan province, owns deposits that hold 260,000 tonnes of molybdenum.

It also  has a mining and concentration capability, where ore is prepared for smelting, of 10,000 tonnes per year.

The company will earn US$300 million from providing South Korea's Posco Steel,  the world's fourth-largest steelmaker, with about 9,000 tonnes of molybdenum over the next two years.

The white metal is used in making alloys, or mixtures of metals that are typically more durable than individual metals, such as stainless steel.

Luoyang Luanchuan  also has China's second-largest white tungsten reserves with 680,000 tonnes. The metal is used in light bulbs and is also used to strengthen steel.

The company also makes iron, aluminium, copper, nickel and silver products.

Jinduicheng Molybdenum Group, the mainland's largest producer of the metal, also plans to raise US$1 billion in an initial public offering in Hong Kong in November. The company will sell 30 per cent of its share capital.

Jinduicheng, which produces 12,000 tonnes of molybdenum a year, generated five billion yuan  profit last year on a 10 billion yuan turnover, sources said.

China's  molybdenum production is expected to rise to 35,600 tonnes this year, up  7 per cent from  last year. The price of a pound of molybdic oxide, the form of molybdenum primarily used in the steel industry, has risen 10-fold since 2000 to US$27.25, and hit a  high of US$37.50  in May  last year.

IPOs by  natural resource companies have attracted investors as the price of commodities hit record highs on demand from developing economies such as India and China.

Shares of Hunan Nonferrous Metals Corp, the mainland's largest zinc and tungsten producer, have risen 95 per cent  since it raised  US$228 million in a Hong Kong IPO in  March. Its shares leapt 73 per cent on the first day of trading.

Shares of Lingbao Gold, the world's fourth-largest gold producer, have risen 97 per cent  since it raised  US$111 million in an IPO in January. Its shares jumped 50 per cent on the first day of trading.



Luoyang Luanchuan plans share sale