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Denise Tsang

Cheung Kong Infrastructure Holdings said it would pay NZ$250 million (HK$1.4 billion) for the right to mine iron sands in New Zealand in a surprise deal to expand into extracting a raw material used in making iron.
The  diversified infrastructure flagship of Li Ka-shing revealed yesterday it would take over Taharoa Iron Sands Business, a producer of iron sands on the west coast of North Island, about 200km south of Auckland, for export to the mainland and Japan.
Iron sands is a key resource of titanomagnetite iron ore used as a raw material in making iron.
The deal, the group's second acquisition in New Zealand in about three months, would generate immediate revenue on completion expected in the last quarter of the year, said CKI managing director Kam Hing-lam.
CKI, challenged by an expected earnings shortfall in its electricity supply business in Hong Kong next year, has been seeking growth through acquisitions overseas.
But analysts were caught off guard by the group's decision to branch into iron sand production, a business beyond CKI's experience and expertise.
'We are surprised to see the investment, which is a new business to the company,' an analyst said.  'Based on the headline figures, the asset at stake appears to have generated a good return.'
Mr Kam said the Taharoa project had a rich iron sand deposit and its low operating costs led to a low-risk profile and 'acceptable margin', even in the adverse or tough pricing environments.
CKI is also attracted to the robust demand for iron sands on the mainland.
In the financial year to June, after-tax profit of the Taharoa project surged 146 per cent to HK$64 million while its pre-tax profit rose 142 per cent to HK$92 million.
According to Sydney-listed BlueScope Steel, the  project has operated under a 70-year lease since 1972 from Maori owners.
The project, which has an indicated reserve of 660 million tonnes, ships 850,000 tonnes of iron sands annually to the mainland and Japan.
Some commodity analysts said the profitability of iron sand production hinged largely on freight cost.
'The closer the iron sand deposit is to the deep-water port, the more profitable the production,' said Johnson Chan, OCBC Bank's head of structured finance for North Asia.
'The production cost of the raw material is relatively limited and simple because iron sand deposits are near the ground and easily dredged.'
Funding for the Taharoa deal would come from CKI's cash pile of HK$8.86 billion, CKI said.
Mr Kam said the group would continue to look for acquisitions in materials production and regulated infrastructure investment in New Zealand and other markets.
In May, CKI bought an electricity distributor in Wellington for HK$4.8 billion.
Shares in CKI declined 80 HK cents or 2.17 per cent to HK$36 yesterday after the announcement of the Taharoa deal.



CKI paying NZ$250m in surprise  acquisition of iron sands producer