Prosperity Minerals
Prosperity is an iron ore trader serving customers in the People's Republic of China (the 'PRC') and holds investments in entities involved in the manufacture and sale of cement and clinker in the same market.
Prosperity also has a real estate division and has recently entered into a number of conditional agreements designed to build up a portfolio of PRC property and development assets.
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Prosperity Minerals takes step closer to selling cement operations for HK$3,380 million
Prosperity Minerals Holdings (AIM: PMHL) has taken another step towards selling its Chinese cement business Upper Value Investments Limited official, having entered into a conditional sale and purchase agreement for the disposal with TCC international Holdings (HKG: 1136) to focus its investment strategy on its iron ore business and seek expansion into new markets in China.
Upper Value, which is currently owned by Prosperity’s wholly
owned subsidiary Pro-Rise Business Limited, will be sold for a total
cash consideration of HK 3,800 million (circa £300 million), or roughly
twice Prosperity’s current market cap. The consideration assumes that
the shareholder loan to be transferred to TCC is about £86 million.
Following the completion of the transaction, which is now
subject to approval from Prosperity’s shareholders, the company will
increase its cash position by £300 million and will have no significant
debt. The agreement will terminate if not completed by 31 May 2010.
The completion is expected in March 2010.
The “capital intensity” of the cement business was stated as the
reason behind the sale as due to high transportation costs each cement
plant had a limited geographical reach and would require a continuous
investment flow in new production facilities, thus limiting
Prosperity’s ability to invest in its existing iron ore related
business, which it now intends to concentrate its capital. The company
will also look into venturing into other businesses in China, such as
real estate or natural resources.
“Capacity expansion is also often hampered by lack of suitable
sites for the new plants. Therefore, while the cement business has
generally performed well historically and the outlook for its existing
cement operation is promising, the board believes that it will become
harder to achieve further significant organic growth in the cement
business,” said Chairman and Chief Executive of Prosperity Wong Ben
Koon.
The agreement follows the MoU (memorandum of understanding),
which was signed by the companies in late November. Shares in
Prosperity rose 17% on the news of the MOU and were suspended from
trading on 14 December, pending the issue of an announcement about the
transaction. The suspension was lifted today and shares added a further
20%.
Prosperity will retain its 33.06% interest in Anhui Chaodong
Cement, which is located in Anhui Province in eastern China, currently
producing approximately 3.4 Mt (million tonnes) of cement per annum
with plans to increase production to 6.7 Mt per annum by the end of
2011. Anhui Chaodong Cement is listed on the Shanghai Stock Exchange
(SHA: 600318).
Prosperity will also retain its iron ore trading business.
Other Prosperity Minerals news
- Prosperity Minerals sees more domestic demand coming from China’s new 5 year plan
2010-11-30 - Prosperity Minerals performing in line with expectations
2010-10-08 - Prosperity Minerals completes acquisition of 25% stake in Liaoning Changqing Cement
2010-09-01 - Prosperity Minerals receives final payment from disposal of cement business
2010-08-21 - Prosperity Minerals to pay £70.1m for Guangzhou properties
2010-07-30
