China VTM (0893)

[chaosdiablo]

23 April 2012 │ 7 pages
China Vanadium Titano-Magnetite Mining
(0893.HK)

Alert: Key Takeaways from Citi Metals & Mining Conference
1Q12 iron concentrates/pellets price weakened a bit, titanium shines –Iron concentrate and pellet prices dropped by Rmb 30-40/t in 1Q12 as compared to 2011 average. Selling price of high-grade titanium concentrates was approximately Rmb 1,200/t vs. Rmb 1,084/t in 11. Management thinks it should fluctuate within Rmb 1,300-Rmb 1,500/t during the year.

Greater revenue contribution from high-grade titanium concentrates – The company aims to expand sales of high-grade titanium concentrates from 100Kt last year to 170Kt this year. Its contribution to total revenue shall improve from 6.7% in 2011 to c.15% in 2012. Target iron concentrate sales should remain stable at 2.25Mt, with iron pellets up by 14% to 700Kt.

Aim for flat or improving GP margin of 48-50% – With the company internalizing all pellet production and improvement on utilization rate of the new pellet plant, the production cost for iron pellets should ease a bit this year. However, cost pressure remains due to concern on inflation as well lower grade raw ore used for iron concentrates production.

To expand resource to 600Mt by 2015 – China VTM holds 370Mt of iron ore resources. The acquisition of Dashanshu and Haibaodang should add 125Mt of attributable resources. It is actively looking for other M&A opportunities, and aims to expand resource to 600Mt within 3-5 years. Correspondingly, it targets to expand iron concentrates and high-grade titanium concentrates capacity to 5Mt and 400Kt by end-2014, respectively.

New steel capacity in Sichuan positive for long-term development – According to the company, Sichuan will have 12.5Mt new steel capacity to gradually start production by end-2012. As they fully ramp up in 2014, iron ore prices should be driven up due to increased demand.

Reiterate Buy; target at HK$ 3.59/sh – The company currently trades at 4.4x 12E PE. Valuation looks appealing; reiterate Buy.

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CHINAVTM MINING (00893) maintained OP with TP $3.69 by Stanchart

2012-01-06

China Vanadium announced that it entered into an Acquisition Agreement to acquire the entire paid-up registered capital of Panzhihua Yixingda Industrial Trading Co. Ltd. (Panzhihua) for a consideration of at least RMB600mn on 28 Dec 2011.

The only asset of Panzhihua is the Yixingda iron ore mine covering an area of 20.37sq.km at Panzhihua City, Sichuan Province, with exploration permit from 14 Nov 2011 to 31 Dec 2013. It is estimated by an independent geological agent that the mine has a minimum of 100mn tonnes of resources and reserves with minimum average iron content of 15% or above.

We think this is positive for China Vanadium’s long-term development, considering the potential capacity of the mine could reach 1-2 mtpa, depending on its final exploration results.

We maintain our Outperform rating on China Vanadium and price target of HK$3.69. The current share price suggests a valuation of 4.2× 2011E PER and 3.5× 2012E PER, which looks very attractive.


China Vanadium announced that through its wholly owned subsidiary Lingyu, it entered into an Acquisition Agreement to acquire the entire paid-up registered capital of Panzhihua for a consideration of at least RMB600mn on 28 Dec 2011.

The target asset. Panzhihua’s only asset is an iron ore mine (Yixingda mine), which covers an area of 20.37sq.km at Renhe District, Panzhihua City, Sichuan Province and it holds an exploration permit that is valid from 14 Nov 2011 to 31 Dec 2013. According to an independent geological agent, the estimated resource is at least 100mn tonnes with a minimum iron grade of 15%.

Completion of the acquisition is subject to satisfaction of condition. A minimum of 100mn tonnes of mineral resources and reserves with a minimum average grade of 15% needs to be confirmed by the Mineral Resources and Reserves Report issued by an independent geological agent before 30 Mar 2013.

Final consideration of this transaction. This is also based on the final mineral resources volume (with minimum Fe grade of 15%) determined by the report, and progressive rates apply: For the first 149,999,999 tonnes of resources, consideration is RMB6/tonne; rising to RMB5.5/tonne between the 150,000,000th tonne and 200,000,000th tonne; while consideration for resources above the 200,000,000th tonne is RMB5/tonne.

[chaosdiablo]

Financial Times
China daily crude steel output rises to 2 million tonnes: CISA

CNBC.com‎ - 49 minutes ago

SHANGHAI (Reuters) - China's steel mills produced an average of 2 ... News. Blog Posts. Videos. Current DateTime: 07:40:30 24 Jun 2012 ...


SHANGHAI (Reuters) - China's steel mills produced an average of 2 million tonnes of crude steel a day over the June 1-10 period, edging back to the record levels reached in early May, as large mills ramped up output, data from the China Iron and Steel Association (CISA) showed on Wednesday.

Total inventories held by large and medium-sized steel mills in the first 10 days of June were 11.51 million tonnes, up 0.14 percent from the previous period and a 35 percent jump since the start of the year.

Although small and medium-sized mills have begun to pare output, CISA data shows that large steel makers in China, the world's biggest steel producer and consumer, raised production to increase economies of scale, which would help boost their profit margins.

Despite sluggish demand, steel output in the country remains high as large mills prefer to keep their margins razor-thin rather than lose market share to other rivals in the country's fragmented sector.

However, the poor demand may soon hit the mills, according to Hu Yanping, an analyst at consultancy firm CUsteel.

"We're beginning to see more mills extend their maintenance schedules because of a combination of weak demand and poor profitability. So overall production will likely fall in June," said Hu.

Chinese steel prices, as measured by rebar futures in Shanghai, are down around 1 percent this year.

Separately, spot iron ore prices <.IO62-CNI=SI> rose for the eighth straight session to $136.60 a tonne on Tuesday, marking its longest upward streak in seven months, on trade expectations of more Chinese mills replenishing stocks. <IRONORE/>
The following table shows changes in daily output since the beginning of the year.

(This story corrects steel inventories in paragraph 2 to 11.51 million tonnes (Not 115.1 million tonnes)

(Reporting by Fayen Wong; Editing by Ramya Venugopal)

[chaosdiablo]

I had lost a lot on this stock...buying from 1.8 to 1.2...but it is still dropping....think I analyse wrongly and perhaps china economy is in such a bad shape that demand for iron ore is dropping drastically.....

[dzwm87]

The thing about mining is you can do a conservative forecast regarding their production.. you could add a conservative iron ore price to smooth out any commodity price volatility. Thereafter, apply discount to all future earnings to arrive at a fair value of the mining stock.

I didn't look much at China VTM. I do know the commodity market is looking quite bad now but my info might be out-of-date.

One thing that interest me is their claim of being the most cost competitive mining company... so if they are cost competitive to survive through this downturn.. it might help in the long term..

Interestingly, iron ore prices seem to be bullish.. so what's causing the price plunge?

[dzwm87]

Iron Ore Price Lowest Since Nov As Chinese Demand Sags
Published July 20, 2012
Dow Jones Newswires
The price of iron ore has dropped to its lowest level in more than eight months as weak sentiment and ample inventories damp demand from Chinese steelmakers.
Industry participants cite subdued buying interest from Chinese steel mills and traders, with domestic steel prices having also slumped. Analysts say consumers of iron ore, a key ingredient in steel, are focused on their own profitability as the economy cools and, as such, have been unwilling to bid up the price for commodity.
The spot reference price for 62% Fe grade imports at China's Tianjin Port fell 2.1% Thursday to US$125.60 a dry metric ton, according to data from information provider The Steel Index. It is the benchmark's lowest level since Nov. 7, when the price was recorded at US$125.00 a ton. The price, which has fallen for the past seven week days, is down 28% on year.
Iron ore was the worst performing commodity in the week to July 18, as pressure in the market continued to build, Credit Suisse said in a research note. Prices slid as the value of China's steel futures dropped to a contract low.
"While in part the weakness in steel prices appears related to previous overproduction--inventories remain high--it is also a sign that final demand is yet to convincingly recover," Credit Suisse said.
Xinjiang Bayi Iron & Steel (600581.SH) this week said its profit fell more than 50% in the first six months of the year as the country's cooling economy weighs on demand for raw materials. The company is a subsidiary of the Baosteel Group, one of China's largest steel producers.
"Inventories at the ports also seem adequate for now, and steel mills probably have all the ore they need to get through to the end of the year," said UBS analyst Tom Price.
Weak iron ore prices could upset the balance of Australia's economy, which depends heavily on commodity exports. Resources account for more than 60% of exports and weaker demand from China, Australia's largest trading partner, will weigh on overall growth.
Australia's largest miners have this week reported record output and shipments of the commodity. Reports of expanding production here, though, may well have eased concerns among steelmakers over the medium-term supply outlook, "taking away some of the urgency to buy," said Mr. Price.
BHP Billiton Ltd. (BHP) reported a 12th consecutive annual production record from its iron ore mining operations in Western Australia, while Rio Tinto PLC (RIO) said its first-half output climbed 4% to a new record. Fortescue Metals Group Ltd. (FMG.AU) announced record quarterly iron ore shipments and a 41% jump in mined volumes.
Also this week, Brazilian mining company Vale SA (VALE), the world's largest producer of iron ore, said its second-quarter production had risen 15% on-quarter, as "the end of the rainy season contributed to the recovery" in output.
Brokers say there have been no signs of an improvement in sentiment among Chinese buyers after iron ore imports fell 9% on-month in June, to 58.3 million tons. Soft demand elsewhere, as the U.S. recovery loses steam and Europe's debt crisis drags on, is meanwhile adding to an oversupply in the market.
"With iron ore, in addition to kick-on from the steel market, traders have again become concerned about the prospect of cargoes initially destined for Europe being diverted to China," Credit Suisse said.
Market analysts say iron ore prices will likely remain under pressure until later in the year, and may require considerable improvements in China's construction and manufacturing sectors before staging a recovery.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
Copyright © 2012 Dow Jones Newswires


Read more: http://www.foxbusiness.com/news/2012/07/...z21QQ1tqbb

[CY09]

Just curious why are global mining companies reporting increase iron ore outputs from mines given that the iron ore prices are so depressed with global slowdown.

Isnt that adding more supply to an already falling demand? Wont it hurt their profit margins unless they have been able to cut cost or is it due to the fact that they only have certain length of years of leasing for these mines?

P.S I am not very sure how the mining industry works in terms of obtaining these mines.

[Thriftville]

Hey buddies, VTM is a non state controlled company. Would that be higher risk on the corporate governance part? As there would be less oversight to make things right.

[chaosdiablo]

Actually, China vtm is a very well managed company....it had increased it output from 133mt to 400++mt at current date and will reach 600mt soon (please do your own research as I just recall from my memory regarding the number)

The current drop is the overall sentiment in the steel and iron ore industry. But it does not really affect china vtm as it operates in sichuan where it is tough to import iron ore from overseas and hence the supply and demand is pretty stable....the current sentiment just cause it to drop until like that....in fact, most analyst reports are very positive on the stock....

It eps is around HK$0.30 and pe around 3 at current price.....it profit marigin is near 50%.......

This is why I keep on buying.....but then I think I have make a mistake......when the sentiment in the industry is bad, then better avoid as most people just sold it down....

And the current drop is also due to power disruption on its mine which should not happen again.......

The thing about mining is you can do a conservative forecast regarding their production.. you could add a conservative iron ore price to smooth out any commodity price volatility. Thereafter, apply discount to all future earnings to arrive at a fair value of the mining stock.

I didn't look much at China VTM. I do know the commodity market is looking quite bad now but my info might be out-of-date.

One thing that interest me is their claim of being the most cost competitive mining company... so if they are cost competitive to survive through this downturn.. it might help in the long term..

Interestingly, iron ore prices seem to be bullish.. so what's causing the price plunge?

[chaosdiablo]

Today 1.10.........near to historic low.....

If drop below 1, then I buy more..... 0 or 1, either I get rich or I bankrupt.....

Actually, China vtm is a very well managed company....it had increased it output from 133mt to 400++mt at current date and will reach 600mt soon (please do your own research as I just recall from my memory regarding the number)

The current drop is the overall sentiment in the steel and iron ore industry. But it does not really affect china vtm as it operates in sichuan where it is tough to import iron ore from overseas and hence the supply and demand is pretty stable....the current sentiment just cause it to drop until like that....in fact, most analyst reports are very positive on the stock....

It eps is around HK$0.30 and pe around 3 at current price.....it profit marigin is near 50%.......

This is why I keep on buying.....but then I think I have make a mistake......when the sentiment in the industry is bad, then better avoid as most people just sold it down....

And the current drop is also due to power disruption on its mine which should not happen again.......

The thing about mining is you can do a conservative forecast regarding their production.. you could add a conservative iron ore price to smooth out any commodity price volatility. Thereafter, apply discount to all future earnings to arrive at a fair value of the mining stock.

I didn't look much at China VTM. I do know the commodity market is looking quite bad now but my info might be out-of-date.

One thing that interest me is their claim of being the most cost competitive mining company... so if they are cost competitive to survive through this downturn.. it might help in the long term..

Interestingly, iron ore prices seem to be bullish.. so what's causing the price plunge?

[dzwm87]

More flooding to take place

http://www.bloomberg.com/news/2012-07-24...ities.html

I will suggest to be convicted of your averaging down. Don't average down simply because price is falling.