Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
CMOC
HKEx Stock Code : 03993 
 
Corporate Profile
The principal activities are mining, flotation, roasting, smelting and downstream processing of molybdenum products. The Group also sets out to develop mining and processing of precious metals after the acquisition of three gold mines in Luoning County, Henan Province.

Business Review - For the year ended December 31, 2012

During the year 2012, with the benefits of efficient management, detailed organization and continued commitment of our staff, the Company fully capitalized its resources and vertically integrated industry chain and industry scale. The Company maintained a stable production volume of molybdenum and achieved a steady growth in the production volume of tungsten products. In 2012, the production volume of molybdenum concentrates (including 47% Mo), molybdenum oxides (including 51% Mo), ferromolybdenum (including 60% Mo) and tungsten concentrates (including 100% WO3) (excluding Yulu Company) of the Company amounted to approximately 32,456 tonnes, 34,148 tonnes, 25,581 tonnes and 5,496 tonnes, respectively, representing a decrease of 1.7%, 7.6%, 13.3% and an increase of 16.4% as compared with that of 2011, respectively.

Statistics from Antaike indicated that the production volume of molybdenum concentrates in China (including 47% Mo) in 2012 was 195,107 tonnes. The Company's production volume of molybdenum concentrates accounted for approximately 16.6% of the total amount produced in China in 2012. According to an international research institution, the world's molybdenum production volume was approximately 490 million pounds for the year 2012, of which equivalents of approximately 33.63 million pounds were produced by the Company, representing approximately 6.9% of the total production volume of the world.

Based on the information from China Non-ferrous Metals Industry Association, the accumulative production volume of tungsten concentrates in China in 2012 was 124,706 tonnes (including 65% WO3), with metal equivalents of 81,059 tonnes. The Company's production of tungsten concentrate represented approximately 6.8% of the total production of China in 2012.

The Company firmly pressed on with technological innovation and significantly increased its capability in the research and development of technology. The Company successfully developed an integrated safety alarm system of precise gauging on quakes for disasters in surface and underground rocks, thereby positioned itself for the gauging of the activities of the pressure in the core of the earth and underground blasting, so as to provide scientific rationale for the alarm and reporting for the disasters of collapse of the overlying strata. Vertical foaming tube was successfully developed and applied in flotation column in molybdenum processing, thereby increased the efficiency of the process of the flotation columns and saved energy by 30%. In addition, the technology of saving the energy of roasting brought good economic benefit and social benefit, which reduced carbon emission by approximately 230 tonnes per year. Law firms were also engaged to study and rectify the system of intellectual property rights protection of the Company so as to develop an effective system for the protection of its intellectual property rights. During the year, a total of 37 patents were applied, of which 13 were invention patents.

The Company firmly pressed ahead with the application of information technology, whereby the efficiency of its corporate management and operation was significantly increased. The office automation system of the Company successfully operated, thus accomplished coordinated operation for the offices of the Company's entities and facilitated standardized, scientific and efficient management. The material control system of the Company functioned steadily, and a unified system of material coding was also set up, thereby effectively enhanced the science and efficiency of material procurement and utilisation. The system of business intelligence helped realize swift production and operation as well as scientific decision-making through the collection and analysis of the information on inventory, supply chain, capital and sales. The data reporting system also facilitated timely control of the management to different steps in procurement, production and sale.

The Company actively pressed ahead with standardized corporate operation. In 2012, the Company formulated or amended the Articles of Association, the Rules for the Registration and Administration of Holders of Insider Information, Working Rules for the Secretary to the Board, Rules for Management of Provision of Securities to Third Parties, Rules for External Investment Management, Rules for Connected Transactions, Principles on Information Disclosure, Management Measures on Proceeds, Working Rules for General Managers, Working Rules for Independent Directors, Terms of Reference and Operation Rules of the Strategic Committee, Terms of Reference and Operation Rules of the Remuneration Committee, Terms of Reference and Operation Rules of the Audit Committee, Terms of Reference and Operation Rules of the Nomination Committee, Rules for Shareholders' General Meetings, Working Rules for Supervisory Board Meetings, Rules for Board Meetings, thereby refined its system of internal control and standardized its corporate operation.

The Company actively implemented the strategy of capital operation. On 18 June 2012, the National Association of Financial Market Institutional Investors issued the Notice of Acceptance of Registration, Zhong Shi Xie Zhu [2012] No. MTNI159 (中市協註[2012]MTNI159號《接受註冊通知書》), and accepted the registration of the RMB2,000,000,000 medium-term note of the Company. On 2 August 2012, the Company successfully issued the first tranche of medium-term note in 2012, 12 CMOC MTN1, with the nominal value of each unit being RMB100 and nominal interest rate of 4.94% per annum and the term of the note as 5 years. The relevant offering documents of the medium-term note had been uploaded to the websites of the China Foreign Exchange Trade System (http://www.chinamoney.com.cn) and ChinaBond (http://www.chinabond.com.cn) on 26 July 2012. The proceeds from the medium-term note would be used for the replenishment of working capital and repayment of existing bank loans.
The Company accelerated the listing of its A shares. On 9 October 2012, the Company successfully completed the IPO and listing of its A shares on the Shanghai Stock Exchange. The volume and price of the issue were 200,000,000 shares and RMB3.00 per share, respectively. The par value was RMB0.2 per share, and a total proceeds of RMB600 million were raised. As a result, the Company has both Hong Kong and the PRC as its platforms of capital market operation.

Not only did the Company effectively bolster its sales volume and stabilize its customers base, it also aspired towards better sales and marketing strategies with the aim to achieve greater efficiency.

Apart from accelerating the Company's business development, we also took further steps to cultivate corporate culture by highlighting practical and innovative management skills so as to increase the efficiency of the corporate operation.

Business Outlook - For the year ended December 31, 2012

1. Macroeconomic Environment

In 2013, the global economy is slightly better than last year, issues besetting the world's economy such as the U.S. fiscal cliff and the European debt crisis eased to different extent. Under these circumstances, the economic environment in the developed countries will be improving, with the strongest recover now being seen in the U.S., whilst Europe has put steady growth on top of its agenda. The overall situation should be better than last year. Under the dual difficulties of weaken external demand and internal structural problems, the developing economies generally adopted loose monetary policies such as consecutive interest rate reductions or reductions on reserve ratio, and launched a series of stimulative policies for facilitating investment, with an aim to facilitate growth for the developing economies in 2013.

The economy of the PRC is now in a period of transformation. In 2013, positive fiscal policies and stable monetary policies will be continued in the PRC, the target of economic growth for the PRC in 2013 is expected to be 7.5%, with steady and moderate economic growth to be maintained.

2. Competition and Development in the Molybdenum Industry

Due to higher export tariff in the molybdenum industry, the current markets of the molybdenum products of the Company are mainly in the PRC, with the major product being ferromolybdenum. The application of molybdenum in the PRC is mainly in the steel industry, such as in the manufacturing of alloy structural steel, stainless steel, heat resistant steel and tool steel in the steel industry. The domestic market of steel industry in 2013 will be improving, particularly with the promotion of urbanization and support to the real economy proposed by the central government, which are benefit to the development of steel industry. The production and apparent consumption of rough steel in the PRC in 2013 are anticipated to be approximately 750 million tonnes and 700 million tonnes respectively, which are close to the highest range of rough steel demand of 770 to 820 million tonnes as estimated in the Development Plan for the Steel Industry in the “Twelfth Five-Year Period” (《鋼鐵工業「十二五」發展規劃》). The consumption and demand of rough steel will be stable. The environment of slight profit for the steel industry is not likely to improve before the demand from downstream and the issue of excessive production capacity could be solved. Although the excess capacity still exists in the domestic steel industry, the output of special steel, which has a relatively large demand for molybdenum, will enjoy a relatively high increase. Currently, the output of special steel in the PRC only accounts for 6-10% of the total output of iron and steel, which is lower than the global average level of 15-20% and much lower as compared with industrialized countries of over 30%. In the future, high quality special steel, special alloy material and the supporting materials for military industry will be the emerging sectors with strategic importance to the special steel industry, which will drive the domestic demand for molybdenum.

As for the supply of molybdenum, the domestic supply of molybdenum will basically be maintained at the level of the previous years. Part of the new production capacity will be postponed as the molybdenum price has remained at a low level for a long time. There is a moderate rebound in the molybdenum price as compared with the end of last year, whilst the utilization of high-price inventory is limited. If there is no substantial increase in the price of molybdenum, the production capacity previously subject to suspension or reduction may not be re-activated. As a result, the domestic supply of molybdenum in 2013 is expected to have limited impact on price.

From the above-mentioned analysis, we believe that although there is little sign of a substantial improvement in the global economy in 2013 and the oversupply in the domestic molybdenum market will continue to a certain extent, as an important element for special steel and new types of alloy material, molybdenum will see a relatively fast growth in domestic consumption. Hence, the molybdenum market may see stable and moderate growth in 2013.

3. Competition and Development in the Tungsten Industry

The global economy in 2013 will generally have a moderate improvement as compared with last year. The European debt crisis will be eased to a certain extent and the forward export market of tungsten is expected to pick up from the low ebb. The economy of the PRC will be improving under the influence of policy. Strong intensifying efforts in urbanization and encouragement of unleashing domestic demand will result in a recovery of the manufacturing industry, thereby providing new opportunities to the development of tungsten industry.

The tungsten industry in the PRC was stimulated by the satisfactory market situation in the last two years, many new projects and supporting projects were reported, the new hard alloy projects were launched in recent years. With the launch of the relevant projects, the growth of tungsten consumption in the PRC will be significantly boosted, at the same time facilitating upgrade of the hard alloy industry. The demand for tungsten in the industries closely related to tungsten consumption in the PRC will generally be higher than in 2012. Based on positive expectations to the macroeconomic environment and the new hard alloy projects, we anticipate that in 2013, the demand for tungsten in the PRC will increase, and the export will post a gradual recovery. The tungsten industry will be better than last year.

In regards to the supply of tungsten, despite the production of tungsten ore will remain at the level of the previous years, with large scale consolidation occurred in the general tungsten market, the tungsten industry in future will become increasingly concentrated. In conclusion, we anticipate that in the first half of 2013, upward fluctuations will occur in the market of tungsten due to the procurement needs from many enterprises which have started operation; in the second half, with satisfactory development of the overall economic environment and market demand, the tungsten market will stage a strong surge.

Source: China Molybdenum (03993) Annual Results Announcement
Chairman Wu Wenjun Issued Capital (shares) 1,311M
Par Value RMB 0.2 Market Capitalisation (HKD) 4,051M
 
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