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Leading Nonferrous Enterprises Kicked Off Acquisitions Frequently

The huge adjustment in the stock market since June inadvertently opened another door: In the sluggish nonferrous industry, a number of “l(fā)ong stagnant” asset acquisition projects have kicked off.

Recently, Xiamen Tungsten disclosed details of its acquisition of Jiangxi Tungsten assets, which unveiled the story of Xiamen Tungsten in M&A of world-class big tungsten mine.

According to assessment and record-keeping by the Ministry of Land and Resources, the south and north mining zones of Dahutang in Wuning County, Jiangxi, has tungsten metal volume of 930,000 tonnes, accompanied with multiple metals including copper, silver, and molybdenum, making it a world-class ultra large tungsten mine. In July 2005, Dahutang tungsten mine was integrated by Jiangxi Jutong. In February 2010, Xiamen Sanhong acquired 30% equity of Jiangxi Jutong. On September 8, 2015, Xiamen Tungsten published notice, saying it had acquired 32.36% equity of Jiangxi Jutong held by Fujian Rare Earth Group, its controlling shareholder, in this way, coupled with the fact that the equity of its affiliated unit Xiamen Sanhong had been entrusted to Xiamen Tungsten for management responsibility, after the acquisition is completed, Xiamen Tungsten actually controlled 72.13% equity of Jiangxi Jutong.

The fact that Xiamen Tungsten is able to control Wuning Dahutang ultra large mine to a certain degree received “benefit” from the sluggish nonferrous industry. Thanks to weak demand, since 2014, tungsten price dropped continually, a local industry insider in Wuning told the reporter that Liu Dianping, the original controller of Jiangxi Jutong, experienced capital chain rupture. Xiamen Tungsten also disclosed that in the acquisition process, Jiangxi Jutong increased capital in order to prospect Dahutang tungsten mine, but Liu Dianping and others abandoned capital increase due to lack of funds.

In addition to Xiamen Tungsten, recently there are several other large acquisition cases and acquisition commitments in the nonferrous metal sector.

China Tungsten And High-tech Materials Co., Ltd suspended trading on August 6, its actual controller China Minmetals Group planned key issues related to the company. As early as on December 26, 2012, Minmetals Group openly guaranteed that within three years it would enable China Tungsten And High-tech Materials Co., Ltd to develop complete tungsten industrial chain integrating tungsten mine, tungsten smelting, tungsten powder, carbide alloy and deep processing through M&A and restructuring approaches.

Minmetals Group’s subordinate tungsten mines are mainly under the control of Hunan Nonferrous Metals. On October 29, 2014, Hunan Nonferrous Metals, a Hong Kong listed company, announced privatization. In March 2015, Hunan Nonferrous Metals formally exited from Hong Kong Stock Exchange. This removed obstacle for Minmetals Group to inject asset into China Tungsten And High-tech Materials Co., Ltd.

According to relevant info, tungsten reserve of tungsten mines under Hunan Nonferrous Metals Holding accounts for about three fourths of all reserve under the Minmetals Group; tungsten ore mining quota accounts for about two fifths of all quotas under the Minmetals Group, making it the best performing asset in the Minmetals Group.

Share price of China Tungsten And High-tech Materials Co., Ltd rose quickly since February this year, and peaked at 29 yuan, the share price nearly doubled in half a year. Nevertheless, since mid June, the share price followed the general turned to drop sharply to 11 to 12 yuan.

According to one insider of an investment bank, when the Minmetals Group injects asset into China Tungsten And High-tech Materials Co., Ltd, the trading consideration is shares of the listed company, for the same asset, the lower the share price, the more shares that the controlling shareholder is able to obtain. Consequently, when the stock market is sluggish, asset injection will become more active.

Advanced Technology & Materials Co., Ltd also announced major purchase plan when the share price is at low point. On July 10, when the share market approached the bottom, the controlling shareholder China Iron & Steel Research Institute Group guaranteed that before December 2016, it would inject 40% equity of Shandong Weishanhu Rare Earth Co., Ltd into the listed company.

In April this year, Advanced Technology & Materials Co., Ltd released a private placement plan, proposing to acquire 100% equity of Tianlong Tungsten & Molybdenum, the identified issuing price is 8.17 yuan, on July 7, share price of Advanced Technology & Materials Co., Ltd was as slow as 9.7 yuan.

Against the background of systematic risk in the share market, and share price facing the prospect of falling under issuing price, Advanced Technology & Materials Co.,Ltd decisively produced “trump card”. Nevertheless, as rare earth price fell repeatedly, the market has become indifferent to rare earth asset injection. In the second round of downturn, share price of Advanced Technology & Materials Co.,Ltd fell under 9 yuan, but the company’s asset acquisition issue continued to move ahead.