China Yunnan Tin Minerals Group Co., a Hong Kong-based mining company, said it plans to buy two open-cut iron-ore mines for HK$1.2 billion ($155 million) after one of its facilities was forced to close after an accident.
The company will pay HK$690 million cash, 1.05 billion new shares and HK$300 million of five-year zero-coupon convertible bonds to Mega Marks Ltd., owner of the mines and an ore-processing plant in western China’s Xinjiang region, according to a Hong Kong stock exchange filing yesterday evening.
Mining activity at Yunnan Tin’s mixed-metals Lian Nan Country Damaishan Mine have been suspended since Feb. 16, 2012, due to a local-government order for a complete review of mining operations following a “serious geological disaster” caused by the mine, according to the filing. Adding the new iron-ore mines will boost sales, it said. The company last posted a semi-annual profit in the first half of 2009.
“The acquisition represents a valuable investment opportunity for the group, having considered the amount of proved and probable reserves as well as indicated resources at the target mines,” Yunnan Tin said.
The target company’s iron-ore sales were HK$364.2 million in 2012, compared with HK$215.8 million in 2011, according to the filing.
Yunnan Tin’s shares, halted since Feb. 14, will resume trading in Hong Kong today. The stock plunged 34 percent in the 12 months through the date of suspension, compared with a 12 percent gain in the benchmark Hang Seng Index.
Lai Leong, owner of iron-mine seller Charter Bonus Ltd., will join Yunnan Tin’s board as chairman and an executive director, according to the filing. This transaction is subject to independent holders’ approval, Yunnan Tin said.
The company also plans to raise HK$460 million in a rights offer, according to the filing. The company will probably price the new shares in the range of 10 Hong Kong cents to 20 Hong Kong cents, it said.