Oxstones Investment Club™Chinalco’s Peru unit draws strong demand, leading the retail tranche to be about 25 times covered, while cornerstone investors take up 60% of the deal.
By Aiko AHayashi Finance Ai
Chinalco Mining Corporation International, an overseas unit of aluminium major Chinalco, aims to raise US$400 million to fund the construction of its copper mine in Peru.
Chinalco is the parent of Hong Kong and Shanghai-listed Aluminum Corp of China. It also controls mainland miner and smelter Yunnan Copper Group as well as rare earth and coal mining assets.
Xiong Weiping, chairman of both Chinalco and Chinalco Mining, said Chinalco’s priority is to develop its copper business, and Chinalco Mining will play a key role in this.
Chinalco has shifted its development focus to copper and iron ore, after chronic overcapacity in the aluminium industry and rising energy costs saw Chalco suffer periods of losses.
Chinalco Mining in 2007 bought the Toromocho mine and has spent about US$2 billion so far to build it. Another US$1.5 billion has been budgeted to bring it to commercial production in this year’s fourth quarter.
It has been backed by US$2.1 billion in credit facilities from the Export-Import Bank of China and China Development Bank.
The mine is expected to operate at full capacity in next year’s third-quarter. The average annual copper output in its entire 32-year mining life is estimated at 650,000 tonnes.
It has recoverable copper reserves of 7.3 million tonnes based on the standards stipulated by the internationally recognised Joint Ore Reserves Committee.
According to a technical report compiled by mining consultancy Behre Dolbear, the mine is forecast to see a net profit of US$367 million in 2014, rising to US$430 million in both 2015 and 2016.
The profit is projected to fall to US$216 million in 2017 and US$183 million in 2018, due to accelerated fixed-assets depreciation and lower copper price assumption, before rising to US$625 million in 2019.
The 2014 forecast represents a profit per share of 24.17 HK cents. Chinalco Mining is selling 1.76 billion shares, at an indicative price range of HK$1.52 to HK$1.91 each, to raise HK$2.67 billion to HK$3.36 billion. The price range represents 6.3 to 7.9 times the forecast 2014 profit per share.
Five cornerstone investors have committed to buy 62 per cent of the shares on offer for about US$240 million. They include four firms that have agreed to buy 60 per cent of Toromocho’s output.
Australian mining giant Rio Tinto, in which Chinalco is the largest shareholder, has agreed to buy US$30 million of the shares.
Chinalco Mining plans to use 30 per cent of the listing proceeds to fund the Toromocho project, 30 per cent to repay a loan due to parent Chinalco, 30 per cent to acquire non-aluminium non-ferrous mining projects, and the rest to bolster working capital. Chief executive Peng Huaisheng said Chinalco Mining will focus its acquisition effort in South America in the coming years.
Tags: capital raising, China, china aluminum giant, chinese stock, commodities, Copper, Hong Kong, IPO, mining, mining companies, overseas expansion, peru, peru ipo