China Molybdenum Jumps After Company Seeks to Allay Debt Concern

  • A-shares in Shanghai climb by exchange limit as trade resumes
  • Planned purchases will contribute to profit, company says

China Molybdenum Co. shares surged in Shanghai, resuming trade after a one-month break, as the producer of niche metals sought to reassure investors that it can manage to fund the planned acquisition of overseas assets totaling more than $4 billion.

The mainland-listed stock, which last traded on April 27, rallied by the exchange-set limit of 10 percent to 3.71 yuan at 11:29 a.m. local time. During the suspension, the company’s shares in Hong Kong have risen by more than a quarter this month, and advanced as much as 5 percent on Thursday to the highest price since November.

CMOC, as the Luoyang-based company is known, has emerged as a leading mining deal-maker in the past two months. In April, it agreed to buy Anglo American Plc’s niobium and phosphate unit for $1.5 billion, and followed that with a $2.65 billion deal this month for Freeport-McMoRan Inc.’s Tenke copper and cobalt mine in the Democratic Republic of Congo. The company, which plans to raise 18 billion yuan in a share sale, received an inquiry from the Shanghai bourse on May 20 about its ability to manage the transactions.

“Those overseas assets, upon completion of the acquisition, can contribute to a profit stream that will be enough to cover interest and funding costs,” CMOC said in a statement on Wednesday in response to the bourse’s inquiry. Financing for the deals won’t lead to a sharp increase in the debt-to-asset ratio, it said.

The company will use the capital raised from the private placement, which was announced on May 21, to pay down debt first to reduce financing pressure, it said in the statement. In addition, an independent consultant had also found CMOC’s cash on hand at the end of March was more than needed to pay for the Anglo American unit, it said.

— With assistance by Feiwen Rong

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