Qiao Xing Universal Resources Inc an emerging Chinese resource company with a focus on several strategically important nonferrous metals such as molybdenum and copper announced that its wholly owned subsidiary has signed a definitive agreement with Chifeng Xingu Mining Co Ltd a non affiliated third party, to acquire the 100% equity interest in Balinzuo Banner Xinyuan Mining Co Ltd for CNY 588 million (USD 88.4 million) in cash to be paid in three installments within three months.
Xinyuan owns a mining license for a lead zinc copper mine that covers 3.3233 square kilometres in Wulandaba Suma, Balinzuo Banner, in the Inner Mongolia Autonomous Region of the People's Republic of China.
According to the Independent Technical Review issued by John T Boyd Company, one of the largest independent consulting firms in the world serving the mining, financial, utility and related industries, the Xinyuan Lead zinc copper Mine is verified to have ore reserves of 9,749,000 tons, which primarily contains 1.44% lead, 2.64% zinc and 0.59% copper.
The ITR also evaluated the net present value of the Mine based on a production capacity expansion plan. The Purchase Price was negotiated based on the formula determined in May 2010, when the letter of intent was signed and when commodity prices were at relatively low levels, and was determined by applying a discount to the NPV.
The Mine, with well developed infrastructure, including water and power supplies as well as transportation, and an experienced technical and management team, started operation in March 2010 and had processing capacity of 500 tons of ores per day in June 2010. It is expected that its processing capacity will be improved significantly up to 2,000 tons of ores per day by the middle of 2011. Should the Capacity Expansion Plan be fulfilled, the remaining life of the Mine would be around 18 years. The Mine will produce lead, zinc and copper concentrates to supply smelters in Chifeng and surrounding areas in China. In addition, silver and cobalt are also expected to be recovered in commercial quantities, as part of the main concentrate products.
Based on the Capacity Expansion Plan, it is estimated that in 2012 the Mine will generate revenue of CNY 430 million, operating profit of CNY 180 million and net cash flow of over CNY 100 million.
Mr Wu Ruilin chairman and CEO of XING commented that "We expect to be able to pay for this acquisition and to finance the expected capital expenditure by using our own cash on hand, and cash to be generated from our Haozhou molybdenum mine business as well as the newly acquired lead-zinc-copper mine business. With the addition of this promising resource asset, we expect to greatly enhance our foothold in China's resources industry. We are increasingly confident of our ability to create much higher value for our shareholders."
