Solid Minerals
Shaanxi Coal Nearly Halves IPO to $1.6 Billion
SHANGHAI — Chinese coal miner Shaanxi Coal Industry Co. is set to test China’s newly reopened initial-public-offering market with a 9.8 billion yuan ($1.6 billion) float, the biggest in the country since an IPO freeze was lifted in the past month.
Shaanxi Coal is the largest of 37 companies that have been allowed to float by regulator China Securities Regulatory Commission following reforms to make the IPO system in China more market focused. But reflecting both a weak outlook for coal and the Chinese stock market’s declines since the moratorium on IPOs was imposed in October 2012, Shaanxi is now raising almost half of what it initially said it would more than two years ago when it first filed for listing approval.
China imposed a freeze on new offerings more than a year ago, to give it time to reform a market where many new deals were mispriced, and massively underperformed the broader market after initial spurts. That freeze was lifted this month. But even without the supply of new stock, however, Chinese shares fell last year, with the Shanghai Composite Index’s 7% drop one of the biggest among major Asian indexes in 2013.
State-owned Shaanxi, one of the country’s biggest coal operators, said in its prospectus that it will begin selling 1 billion shares to investors, half of what it initially aimed to sell, meaning its fundraising size is well below its original target of 17.3 billion yuan. Despite the reduced size, Shaanxi Coal’s planned IPO is China’s largest since state-owned hydropower project contractor Sinohydro Group Ltd. raised 13.5 billion yuan in 2011.
Shaanxi said it would be premarketing, or gauging investor interest, in the IPO between Thursday and Jan. 15 before taking orders Jan. 16 and 17. Pricing of the IPO is slated for Jan. 15, with listing set to take place on the Shanghai Stock Exchange “as soon as possible,” it said in its prospectus on Wednesday.
The reduction in the size of the IPO comes as the company struggles with a gloomy outlook for coal in a country that is striving to reduce its reliance on traditional energy sources in favor of cleaner fuel sources like nuclear power.
Faced with a slide in coal prices due to the slowing economy and wider shifts in the country to new sources of energy, the company’s net profit dropped 62% to 488 million yuan in the third quarter from 1.272 billion yuan a year earlier, according to the prospectus. The miner said it expects its 2013 net profit to fall between 42% and 45%. In 2012, its net profit was 6.42 billion yuan.
Beijing said late last year that it would reopen the IPO market, following reforms that included a shift toward a disclosure-based system for filing IPOs, akin to procedures used in the U.S. The aim is to have investors, rather than the regulator, take more responsibility for pricing IPOs and leave the determination on when to launch a deal with the listing hopeful, rather than the CSRC.
Some of the reforms that have been put in include not letting controlling shareholders of IPO candidates to sell their shares for up to five years after the company lists if the share price is below the IPO price—one way to ensure that IPOs aren’t priced too high. In the past, controlling shareholders had to wait three years.
Since the freeze was lifted, four IPOs have priced high, while the remaining 33, including Shaanxi Coal, will price this week or next week. The four deals, of which the 839 million yuan IPO by industrial valve manufacturer Neway Valve (Suzhou) Co. is the biggest so far, have been priced at between 30 and 46 times the companies’ 2012 price earnings, well above the 12 times the Shanghai and Shenzhen stock markets are currently trading at.
“While the rise of IPOs at the first trading session has narrowed in recent years, buying into IPOs remains profitable and investors are still thirsty for new share sales, especially following a more-than-one-year hiatus,” said Huang Cendong, an analyst with Sinolink Securities in Shanghai.
Between 2011 and 2012, before the IPO freeze began, the average IPO in China surged more than 20% on its first day of trade but underperformed in the months after that. In those two years, the Chinese stock market fell 19%.
Shaanxi Coal said IPO proceeds would go toward building and purchasing coal mines as well as supplementing working capital. The company produced 106.6 million metric tons of coal in 2012, it said in its filing.
China International Capital Corp., BOC International (China) Ltd. and Citic Securities are the underwriters of Shaanxi Coal Industry’s IPO.
– WALLSTREET JOURNAL
Business
Nigeria set to boost Naira value and foreign reserve with local gold production, as Tinubu receives gold bar
IN a significant move to strengthen Nigeria’s economy, President Bola Tinubu received a symbolic gold bar on Sunday from the Minister of Solid Minerals Development, Dele Alake.
This gesture marks the commencement of the National Gold Purchase Program (NGPP), aimed at boosting the naira’s value and enhancing the country’s foreign reserves.
Minister Alake expressed gratitude to President Tinubu for his support of reforms in the solid minerals sector.
He highlighted that the NGPP, which involves sourcing gold from artisanal and small-scale miners and refining it to meet the London Bullion Market Association’s Good Delivery Standard, will substantially contribute to Nigeria’s economic stability.
Alake stated “This initiative will significantly increase our foreign reserves and strengthen the naira. The refined gold will be supplied to the Central Bank of Nigeria, marking a crucial step in our economic strategy.”
The presentation also underscored the first commercial transaction under the NGPP, establishing a centralized gold purchasing system that integrates small-scale miners, cooperatives, and production units across the nation.
This program is expected to provide a structured market for gold, fostering economic growth and stability.
He said, “The successful completion of the first commercial transaction clearly demonstrates the National Gold Purchase Program’s effectiveness. It has increased the nation’s foreign reserves assets and shown that using the Nigerian Naira to purchase a liquid asset traded in United States Dollars, such as gold, is a viable strategy. This transaction has also underscored the potential of the National Gold Purchase Program to enhance fiscal and monetary stability.”
Alake added that the initial commercial transaction under the program resulted in a +US$5 million boost in Nigeria’s foreign reserve assets.
The transaction involved refining over 70 kilograms of gold to meet the London Bullion Market quality standard and aggregating locally mined gold, thereby infusing approximately NGN6 billion into the rural economy.
President Tinubu expressed appreciation for the Ministry’s accomplishment in advancing the government’s goal of economic diversification by acknowledging and displaying the symbolic gold bar
The Nigerian Government has threatened to come down heavily on foreigners sponsoring bandictory as a way of sustaining illegal mining activities in parts of the country.
The warning was handed down in Abuja by Minister, Solid Minerals Development, Dr Oladele Alake, while receiving a delegation of the Nigeria-China Chamber of Mines led by its National President, Dr. Olugbenga Ajala.
Details of these were contained in a statement released by Head, Press & PR, Ministry of Solid Minerals Development, Alaba Balogun over the weekend.
The statement cited, Dr Alake, thus, “The government will come down firmly on these unscrupulous foreign operators sponsoring banditry to perpetrate illegal mining: let me use this medium to appeal through you to tell those sponsors to desist or face the full wrath of the law.”
According to Dr Alake, the Ministry is committed to establishing a multi-agency task force that will end the activities of illegal miners and their collaborators.
The Minster made it clear that the FG had given illegal miners a 30-day-ultimatum to legitimise their businesses, quit Nigeria or incur the wrath of the law.
According to him, this will help “to streamline and structure the Small-Scale Artisanal Miners for maximum yield to the Federal Government.”
The delegation paid a courtesy call on the Minsiter at the Ministry’s headquarters in Abuja.
By Edozie Obasi-Eze
Amidst heightening uncertainties in the domestic petroleum products market characterised by scarcity and irregular pricing, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has declared that there’s no intention to review pump prices upwards.
This was contained in an advisory issued by General Manager, Corporate Communications, NMDPRA, Kimchi Apollo.
He stated that the Nigerian National Petroleum Corporation Limited (NNPCL) had imported PMS with current stock levels sufficient for 34 days.
In an attempt to address panic buying and speculations which have seen price of Premium Motor Spirit (PMS) oscillate between N180-N250 in the Lagos area, Apollo assured that there was enough quantity of the product in the country already.
He said, “Consequently, marketers and the general public are advised to avoid panic buying, diversion of products and hoarding.
“In keeping with the Authority’s responsibilities as outlined in the Petroleum Industry Act (PIA), the Authority assures the public that it would continue to monitor the supply and distribution of petroleum products nationwide, especially during this holiday season.”
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