CNR Buys Ferro Nickel Alloy Biz at RMB196M

BEIJING, Sept. 18 -- China Nickel Resources (02889) has agreed to acquire the entire registered capital of a company incorporated in the PRC at a consideration of RMB196 million in cash.

    The target company is principally engaged in the business of manufacturing and selling ferro nickel alloys. As completion is subject to certain conditions precedent, there can be no assurance that the acquisition will proceed.

    The target company is currently constructing a plant for the production of ferro nickel products in Lianyungang, Jiangsu Province. The production plant will have an annual capacity of up to 1 million tonnes of ferro nickel products.

    The consideration will be satisfied in full by payment of RMB11 million cash and by the assumption of the total liabilities of the target company amounting to RMB185 million by China Nickel Resources. A deposit of RMB5 million has been paid by China Nickel Resources and the remaining amount of the consideration will be settled by the company on the completion date. The company will finance the consideration through the proceeds from the issue of bonds and internal resources.

    China Nickel Resources is of the view that the acquisition will significantly reduce the production costs of ferro nickel alloys by lowering capital expenditures and fuel costs relating to production of such alloys by using the non-coke reduction iron making technology developed internally by the group; and reducing the transportation costs of raw materials and finished products due to the geographic location of the production plant. Based on current market data, the group's preliminary estimate of the savings in production costs is approximately RMB660 or more per tonne of ferro nickel alloy produced.

    (Source: Quamnet)