Molybdenum firm to boost tungsten output
China Molybdenum, the mainland's largest producer of the metal in terms of annual ore-mining capacity, plans to expand tungsten production over the next two years, according to a research report obtained by fund managers.
The company, which is preparing for an up to US$800 million initial public offering, plans to build its own plants to triple its tungsten concentrate production to 3,080 tonnes this year, according to the report by China International Capital Corp, one of the arrangers of the share sale.
Morgan Stanley and UBS are also helping in the share sale.
Molybdenum, which is used in steel-making and related businesses, has been the company's main earner over the past 10 years, accounting for 88 per cent of annual income last year.
Prices for tungsten, which is used in a range of products from special seals to missiles and high-temperature applications, are expected to remain high this year on strong demand and government policies, the report said.
Molybdenum prices should also 'remain strong over the next two years because the fast industrial growth in Asian countries could translate into significantly greater demand in the long term', CICC said.
China Molybdenum reported a 31 per cent increase in net profit to 1.52 billion yuan for last year, thanks to strong demand in molybdenum products and limited supply of resources. CICC expects the firm's earnings growth to reach 53.4 per cent this financial year and 35.4 per cent next year.
The mainland market is the largest contributor to China Molybdenum's annual income, accounting for 55.1 per cent last year.
CICC said it would be appropriate for the firm to trade at between 11 and 15 times this year's earnings.
China Molybdenum, previously known as Luoyang Luanchuan Molybdenum, started pre-marketing yesterday and will meet local investors from today. The formal management roadshow would be in place on April 9, with trading tentatively scheduled for April 26, market sources said.
'The proceeds that it targets to raise range from US$600 million to US$800 million, depending on the valuation,' a source said.
The company was still adding cornerstone investors for its offering, the source said.
Alex Wong, a fund manager at Ample Capital, said the offering would receive a boost from talk that Henderson Land Development chairman Lee Shau-kee had bought into the offering.
'The company also produces nonferrous metals that have higher value-added qualities than Hunan Nonferrous Metal Corp and investors will like to chase a raw material play,' Mr Wong said.
Hunan Nonferrous Metal is the country's largest antimony and zinc producer.
Its target range is from US$600 million to US$800 million, depending on the valuation
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