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| Thursday, 13 September 2012, 08:30 HKT/SGT | |
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HONG KONG, Sept 13, 2012 - (ACN Newswire) - On 10 September, CMOC (3993.hk) published a letter of intent on initiating offering of not more than 542 million A shares with proceeds of RMB3,646 million to be raised, which will be invested in four major projects, namely, the "Clean and Efficient Resource Integrated Utilisation and Construction Project with an Annual Processing Capacity of 42,000 Tonnes of Low-grade and Complex Scheelite Ores", the Ammonium Molybdate Production Line Project with an Annual Production Capacity of 10,000 Tonnes,the High-performance Cemented Carbide Project and the Deep Processing Project of Tungsten Products and Tungsten Alloy Materials.
Industry leader with the largest reserves
Reserves are fundamental to the survival and development of a mining enterprise. The molybdenum and tungsten resources under the control of CMOC mainly include the Sandaozhuang molybdenum and tungsten mine and Shangfanggou molybdenum mine located in Luanchuan County, Luoyang City, Henan Province and the molybdenum mine located in East Gobi, Hami, Xinjiang.
According to the prospectus published by CMOC, the Sandaozhuang molybdenum and tungsten mine and Shangfanggou molybdenum mine are both principal parts of Luanchuan Molybdenum Mine, the world's largest primary molybdenum mine field. As stated in the reserve report, the Sandaozhuang Mine has a verified recoverable reserve of 680,800 tonnes of molybdenum, including 572,400 tonnes of industrial mine metal with an average grade of 0.10%; the recoverable reserve of scheelite associated with molybdenum is 407,200 tonnes including 396,200 tonnes of industrial mine metal with an average grade of 0.12%. According to the dynamic reserve survey report of the company, the recoverable reserve of molybdenum of the Sandaozhuang molybdenum mine was 595,200 tonnes as at the end of 2010.
The geological exploration report dated October 1987 shows the a recoverable reserve above elevation 1,025m (B+C+D) of the Shangfanggou molybdenum mine was 424,100 tonnes with a grade of 0.130%; the recoverable reserve of molybdenum below elevation 1,025m (D) amounted to 280,400 tonnes with a grade of 0.141%. In addition, the mine was accompanied by large amounts of iron ores. According to the reserve verification report dated April 2004, the mine held a reserve of 36,200,000 tonnes of 15.51%-grade iron ores above elevation 1,154m within the scope of the mining license.
The East Gobi mine is the first large porphyry-type molybdenum mine discovered in Xinjiang. According the exploration report of 2011, the mine had a reserve of 508,000 tonnes of molybdenum within the exploration scope with an average grade of 0.115%.
According to the Mineral Commodity Summary 2011 issued by the U.S. Geological Survey, China has the world's largest molybdenum and tungsten reserves, accounting for 43.7% and 65.5% respectively of the global proved reserves. CMOC has the largest reserve of molybdenum resources in China and the Sandaozhuang molybdenum and tungsten mine is the country's second largest scheelite mine, which seals CMOC's status as a leader of the domestic molybdenum and tungsten industries.
In addition, the company has achieved measurable results in gold mine exploration. As the exploration report shows, the recoverable reserve of its Shanggong Gold Mine within the scope of the mining license is 45,413.3kg with an average grade of 5.94g/t; the recoverable reserve of Hugou Gold Mine is 11,839.26kg with an average grade of 4.63g/t; the recoverable reserve of Ganshu Gold Mine is 9,668.95kg with an average grade of 4.72g/t; the recoverable reserve of Sanguanmiao Mine is 650.69kg with an average grade of 1.29g/t; the recoverable reserve of Qiliping Gold Mine is 1,054.85kg with an average grade of 2.29g/t.
Unique cost advantage
Apart from the leading position in ore reserves, the aforesaid mines also boasted high-quality mining resources and cutting-edge mining and processing technologies, which built on the unique cost advantage of CMOC.
As compared to other similar mines in China, Sandaozhuang Molybdenum and Tungsten Mine, Shangfanggou Molybdenum Mine and East Gobi Molybdenum Mine not only possess the advantage of high-grade ores, but are also suitable for large-scale open-pit mining, thus further reducing the mining cost. Meanwhile, each of the three mines has their own characteristics. Sandaozhuang Molybdenum and Tungsten Mine is a mine with intergrown ores. Its comparatively low ore-processing costs in the industry, together with barely added costs for extracting tungsten from molybdenum tailings to produce tungsten concentrates, contributed a extremely high gross profit margin of tungsten concentrates, as evidenced by almost 80% for the first half of 2012. Given that the extracted tungsten concentrates are low-grade and complex scheelite ores sold at a price lower than those from standard tungsten mines, the implementation of the Clean and Efficient Resource Integrated Utilisation and Construction Project with an Annual Processing Capacity of 42,000 Tonnes of Low-grade and Complex Scheelite Ores invested by the proceeds raised from this offering can offset the discount losses and bolster up the comprehensive profitability by further extracting the molybdenum and phosphorus minerals contained in ores. Shangfanggou Molybdenum Mine, adjacent to Sandaozhuang Mine, possesses comparable mining conditions and scale but a higher ore grade. Besides, its intergrown iron ores can be processed at a comparatively low cost, thus boosting the consolidated gross profit margin of such mine. Currently East Gobi Molybdenum Mine has obtained the approval from the Ministry of Land and Resources for the designation of mining area. Such mine is the largest molybdenum mine identified in Xinjiang with high-grade ores, mineral reserve of shallow burial and large scale, simple composition of ores, easy access to mining and processing, convenient transportation conditions and low construction cost of supporting facilities, which give a competitive edge of mining and processing cost over other domestic peers.
At present, the molybdenum price remains at a historical low position. According to industry insiders, due to the features of hundreds of domestic enterprises engaged in molybdenum processing, known as "numerous, disorderly, scattered and small-sized", the molybdenum price has fallen below the average mining and processing cost of the industry and a large number of medium- and small-sized mines and processing plants have suspended production. As a result of the Admission Conditions for the Molybdenum Industry issued by the Ministry of Industry and Information Technology in this July, and the increasing concern from local governments on safety and environmental protection, it is expected that most of the medium- and small-sized mines will not resume production and the molybdenum industry will be primarily based on a few competitive enterprises, signalling a phase of standardized and sound development for the industry. In addition, the restructuring of the downstream iron and steel industries and the wide application of molybdenum will bring forth a rapid growth in the demand for molybdenum and a slow rebound of the molybdenum price.
In respect of the tungsten price, the tungsten mines in China are primarily held by several companies such as China Minmetals, CMOC and Xiamen Tungsten, thus ensuring a comparatively concentrated upstream supply. The Chinese government also successively promulgated policies on industry admission, total mining volume control, export quotas and tariff increase, which exerted control over mining and export of tungsten concentrates, further concentrated the supply in the industry and facilitated the overall control over strategic mining. Therefore, in view of a solid increase in tungsten demand, the tungsten price will maintain an unyielding and solid growth momentum.
Topic: Press release summary
Sectors: Metals & Mining, Daily Finance, Daily News
https://www.acnnewswire.com
From the Asia Corporate News Network
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