Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
CHINAVTM MINING
HKEx Stock Code : 00893 
 
Corporate Profile
The activities are mining, ore processing, iron pelletising and sale of iron concentrates, iron pellets and titanium concentrates in the PRC.

Business Review - For the year ended December 31, 2012

During the year, the Group's revenue decreased by 10.5% to approximately RMB1,533.7 million as compared to last year. Gross profit of the Group also decreased by 16.1% to approximately RMB693.2 million as compared to last year. 2012 saw the end of the tax holiday for foreign investment enterprise of the PRC and therefore the corporate income tax rate of the Group's major subsidiary – Huili Caitong, increased from 12.5% to 25.0% for the year. Despite this, Xiushuihe Mining and Aba Mining each started to enjoy a tax holiday. Benefiting from the great western development strategy, their corporation tax rates were dropped from 25% to 15% since 2012. Profit and total comprehensive income attributable to owners of the Company decreased by 33.5% to approximately RMB403.0 million as compared to last year.

As at 31 December 2012, the Group owned the Baicao Mine, the Xiushuihe Mine, the Yangqueqing Mine, the Cizhuqing Mine and the Maoling-Yanglongshan Mine. Apart from these mines, in August 2011 the Group also entered into an agreement to develop the Dashanshu Section of the Pingchuan Mine through a joint venture arrangement. The exploration of the Dashanshu Section of the Pingchuan Mine was completed in April 2012 and the preliminary exploration report was concluded. Moreover, in December 2011 the Group entered into an agreement to acquire Panzhihua Yixingda, which owns the exploration right of the Haibaodang Mine.

On 21 May 2012, the Company announced that pursuant to the Aba Mining Acquisition Agreement, the warranties and guarantees given by Chuan Wei, a connected person to the Group, with respect to the volume of resources and reserves of the Maoling Extended Exploration Area and the Yanglongshan Mine, the average iron content of the ore at the Maoling Extended Exploration Area as well as Aba Mining's profit for the year 2011 have all been met. With respect to the geological exploration report on the Yanglongshan Mine received by Lingyu, an indirect wholly-owned subsidiary of the Company, the average iron content of the ore at the site is 21.6%, which is above the minimum acceptable average iron content level of 20%. Nevertheless, since the average iron content is below 23% as warranted by Chuan Wei, Chuan Wei is obliged to compensate Lingyu in the amount of RMB9.13 million in accordance with the Aba Mining Acquisition Agreement. Moreover, on 19 May 2012, Lingyu and Chuan Wei entered into a supplemental agreement to the Aba Mining Acquisition Agreement with the total consideration being adjusted by the compensatory amount from RMB150.0 million to RMB140.87 million. Please refer to the Company's announcement dated 21 May 2012 for further details.

As at 31 December 2012, the Group owned the Baicao Processing Plant, the Xiushuihe Processing Plant, the Hailong Processing Plant, the Heigutian Processing Plant and two iron pelletising plants in the Panxi Region. Furthermore, the Group also owned the Maoling Processing Plant in the Aba Prefecture. As at 31 December 2012, the Group's annual self-production capacity (on a wet basis) of vanadium-bearing iron concentrates, ordinary iron concentrates, iron pellets and high-grade titanium concentrates amounted to 2,600.0 Ktpa, 150.0 Ktpa, 1,360.0 Ktpa and 280.0 Ktpa, respectively.

During the year, total production volume and total sales volume of vanadium-bearing iron concentrates remained relatively stable, despite the fact that the production was adversely affected by the occasional power suspension and power supply restriction measures adopted for upgrading of the power grid during the first half of 2012 in the Panxi Region, the region where the Group's major processing plants are located.

During the year, total production volume and total sales volume of iron pellets decreased by 18.7% and 25.8%, respectively as compared to the previous year. This is mainly due to the decrease in customers' demand. As such, the production of iron pellets at the Old Iron Pelletising Plant has been suspended temporarily since August 2012.

During the year, total production volume and total sales volume of high-grade titanium concentrates increased by 36.2% and 40.2%, respectively. As high-grade titanium concentrates were in short supply and enjoyed higher profitability, such product has become a key growth driver for the Group. During the year, high-grade titanium concentrates contributed approximately 11.3% (2011: 6.7%) of the total revenue.

Business Outlook - For the year ended December 31, 2012

Benefiting from Favourable Government Policies

According to the 18th National Congress of The Communist Party of China(中國共產 黨第十八次全國代表大會), rapid reform of the western development is considered a top priority. To this end, the Chinese government is actively encouraging urban development, promoting the construction of highways, railway transport, gas pipelines and other infrastructure projects. 22 key projects of the western development have already begun, including a number of railway ventures, such as the Chongqing-Wanzhou (重慶至萬州)railway, the additional line of the west railway from Xi'an to Hefei(西 安至合肥), and several airport development projects, including the construction of a branch airport in the western region.

Regarding gas pipeline projects, construction of the 7,378 km West-East Gas Pipeline (西氣東輸)has already begun. It is estimated that the total national investment amount for this project is over RMB120 billion, which requires large volumes of steel pipe. These gas line projects are also expected to set a precedent in terms of domestic equipment and materials usage, which will, in turn, drive the development of the steel, machinery, metallurgy and other related industries in China.

All of the above policies will spur industry demand and further benefit domestic Chinese upstream mining companies, especially those located in the western region. In addition, the China Metallurgical Industry Planning and Research Institute(中國冶金工業規劃 研究院), expects that in 2013 the demand for iron ore products will reach 1.1 billion tonnes, representing a year-on-year growth of 4%.

Business Strategy

To cope with future demand, the Group will strive to actively develop its own valuable mineral resources. With respect to the Maoling-Yanglongshan Mine, because its resource volumes, reserve warranties and guarantees have all been met, the Group will start developing it with expected commercial production beginning by the end of 2014. The exploration of the Dashanshu Section of the Pingchuan Mine was completed in April 2012 and the preliminary exploration report has been completed. The Haibaodang Mine, though, is still under exploration. Upon various conditions such as level of resources and grading of these two mines meet the terms and conditions the Company which have been agreed upon with the sellers or partners, the Group will proceed and complete the acquisition and commence its capacity expansion plan. Following the gradual completion of all the plans, the Group's mining resources will be significantly enhanced.

Furthermore, the Group will adopt the following strategies:

– To increase resources and reserves in sustainable ways, including boundary extensions of existing mines as well as acquisitions of new mines;

– To enhance production processing capacity by further expanding production volume through the use of innovative technologies; and

– To maintain cost competitiveness strengths in order to leverage all opportunities, and carry out prudent overseas investments to maximise profits.

Going forward, as the industry's leader and prime integrator, the Group will continue to consolidate its economic advantages and proactively seek out all viable market opportunities. The Group will fully leverage its leading position in the iron ore mining industry and strive for satisfactory business performance.

Source: China Vanadium (00893) Annual Results Announcement
Chairman JIANG Zhong Ping Issued Capital (shares) 2,075M
Par Value HKD 0.1 Market Capitalisation (HKD) 2,345M
 
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