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Abterra Rise To Glory

  Be prepared! This is like a retracted spring waiting to spring forth...........

 

ABTERRA: Crowd puller at SIAS mega seminar

Written by Sim Kih

Tuesday, 21 July 2009

INDIAN DEMAND for steel will shoot up in the next 6 months, predicted Mr Mahesh Mehta, an executive director of Abterra, the coal and iron ore trader that is integrating upstream into mining. And a high global turnover of steel is good news for Abterra, as its top line comes mainly from the trading of metallurgical coke, coal as well as iron ore, which are the key raw materials in steel production. As the world’s fifth largest steel producing and consuming nation, India’s huge infrastructure demand will boost global steel demand, Mr Mehta explained. He was speaking to over 80 investors at the Asia Investment Conference and Exhibition organized by SIAS at the Suntec International Convention Center on Sunday. The rising global trade in iron ore is a sharp contrast to the standstill it was at during the first quarter of this year. Despite this, Abterra was able to grow 1Q09 revenues by 49% yoy to reach S$65.9 million, thanks to a near doubling in its trading turnover for coking coal and coke to S$64.9 million (up 194%). Mr Mehta assured investors that demand has picked up again.  Things are also looking rosy in China, which is also the world’s largest steel producing nation. Its iron ore output in June had leapt 27% month-on-month to reach 93 million tons, while its crude steel output rose 6% yoy to reach 49 million tons. All met coke produced in China is consumed domestically, said Mr Mehta. Photo by Rachel Ho. In the same month, its coal output had jumped15.9% yoy to reach 279 million tons. The statistics are historical records, according to China’s National Bureau of Statistics. Analysts are also upbeat.  Hong Kong-based OSK analyst Helen Lau believes the utilization rate of China's steel sector has returned 2007 levels, according to a Reuters report published last Friday. Abterra currently owns 15% in Zuoquan Yongxing (its first coalmine investment), which is booked as an “available for sale investment”, and this will only boost group earnings when it pays dividends. Its acquisition of 49% in Taixing Jiaozhong was completed on 29 May.  As the second coalmine investment will be counted as a subsidiary, the management is excited about the unit’s impending boost to group revenues, especially when approval is obtained to raise annual production capacity by 6-fold to 900,000 metric tons. The company plans to acquire more coal and iron ore resources. Singapore-based analysts are currently visiting Abterra's coal mines and facilities in China. NextInsight's China correspondent, Andrew van Buren, is also on the trip. Watch this space for pictures of the trip. Coking coal is a sarce resource to source for, says Mahesh Mehta, Abterra's executive director. Photo by Sim Kih

 

Abterra enters into share swap agreement with HK strategic partner
•  Will swap 255 million shares at SGD 12.3 cents in exchange for 385 million of LeRoi Holdings at HKD 43.5 cents
•  Will explore investment opportunities together in the coking coal, coke and iron ore mining industry


Singapore and Hong Kong, 11 June 2009 – Abterra Ltd., (“Abterra”, or the “Group”), an emerging supply chain manager of resources and minerals in Asia Pacific, has entered into a share swap agreement with LeRoi Holdings Limited (“LeRoi”) (HKEx: 221), who is listed on Stock Exchange of Hong Kong Limited.

Abterra will conditionally agreed to subscribe for 385 million new shares, representing 5% of the entire issued share capital of LeRoi at HKD 43.5 cents and LeRoi has conditionally agreed to subscribe for 255 million new shares, representing 5% of the entire issued share capital in Abterra. Abterra’s share price closed at SGD 6.5 cents on 10 June 2009.

The consideration of approximately HK$ 140 million was arrived at arm’s length negotiations between both parties with reference to the 10-day average closing price of the Share, the audited consolidated net asset value of LeRoi as at 31 December 2008 of approximately HK$ 639 million, the historical financial results of Abterra and LeRoi, and the current businesses and developments of both companies.

“We are pleased to enter into this share-swap agreement with LeRoi Holdings. This collaboration allows both parties to leverage on our networks in the coal and iron ore mining industry. We are excited at the prospects of this partnership.”
- Mr Lau Yu, CEO of Abterra

Pursuant to the Agreement, both companies have agreed to a lock-up period of six months from the Completion Date.

 

ABTERRA: Trader-turned-miner’s new coal reserve revalued 6-fold

Tuesday, 16 June 2009

THE COAL RESERVES of iron and coal trader Shanxi Taixing Jiaozhong Coal Industry Co have been revalued to be six times that of previous estimates.

Proven reserves - that is, estimated coal deposits likely to be mined - were revalued to 61.4 million tons this month by Shanxi Coal Geological Assessment Institute.

That's much higher than the 10.2 million tons previously estimated when Abterra inked an agreement to acquire a 49% stake in the mine in 2007.

”Coal mining activities will positively impact FY09 earnings,” said Abterra’s CEO, Jaffe Lau, at a Financial PR road show last week.

A shrinking supply keeps coal prices high - China shut down 12,209 coalmines in 2008, causing its annual production capacity to be reduced by 300 million metric tons.

”The value of our coking coal is much higher than thermal coal”, clarified Jaffe. ”Coking coal in China is valued at 3 times that of thermal coal.”

The company’s strategy is to transform from a coal and iron ore trading business to an integrated supply chain providing raw materials to the steel sector, and its plan includes mine ownership.

So far, it has been showing a penchant for picking up mine operators at bargain prices.

The acquisition of Taixing Jiaozhong, completed on 29 May, was a bargain at Rmb 188 million, considering that mines with similar reserves in Shanxi are asking for as much as Rmb 3 billion.

Its first coal mine (15%-owned Zuoquan Yongxing) had capacity of Rmb 300 million metric tons a year at the time of acquisition in mid 2007.

The good news is: Yongxing's licensed capacity will be increased to Rmb 900 million tons by 2011 and will further increase to Rmb 1.5 billion thereafter.

However, this investment in the associate is still recorded on Abterra’s books at cost of Rmb 60 million.
Below is a summary of Jaffe’s answers to queries raised by investors at the road show:

Q: How did the coal reserves in Taixing Jiaozhong suddenly increase?
A: There are currently over 2,000 mines in the Shanxi province. These will be consolidated to only 300 mines by 2011.  Qualification for operator license will depend on scale of production capacity; that is, the large players will stay.

Abterra’s major shareholder, General Nice Group, has been in Shanxi since 1992 and is the first foreign investor in the inland province.

We sent a petition to the Shanxi government asking for support of our mines, and to consider how we have remained vested Shanxi for about 2 decades. (Currently, there are only one or two foreign investors left in Shanxi.)

The petition was acceded to and the government granted us access to another 40 million to 50 million tons of coal reserves.

This will enable us to be one of the 300 mine operators post-consolidation and allow us access to the smaller mines that shut down after their operation license is withdrawn.


Q: What is your cost of production?
A: Today, it costs about Rmb 300 to Rmb 350 to produce a ton of coking coal.


Q: What is your selling price?
A: Coking coal sells at US$160-US$200 a ton in China, which is higher than the global benchmark FOB price of US$150.

Chinese coking coal is always slightly higher than imports because the government wants to conserve domestic resources.
Q: Where are your customers and where do your products end up?
A: We sell directly to domestic steel mills.

 
Q: Is your target capacity of 5 million tons a year for coal attributive or aggregate?
A: It is the aggregate capacity of all the mines we want to hold stakes in.  The government restricts foreign investors from holding major ownership in domestic mines.


Q: How do you intend to achieve this 5 million-ton target?
A: We will expand the capacity of our existing mines and acquire stakes in other mines.


Q: How will you finance the M&A?
A:  It will be financed using internal cash reserves and share issue.  After being acquired, the mines will become cash cows for us to fund more M&A.

 

hmm.. i'm vested.. happy to hear your comments on this counter but was juz thinking wad other data you have other than their FS? hmm.. :)

newtothis      ( Date: 24-Jun-2009 22:11) Posted: China GDP expected to rise more than 8% this quarter..... We all know resources is limited. To grow, china has committed a huge stimulus to spur demands in all sectors. From the data I have on hands, I am very happy and very confident that Abterra is truly a rare gem at this low price. If one can think far enough about the prospect of this company.  Cars, Ship building, military, buildings, the 5 million people that lost thier homes during the earthquake and many many more... This share will be flying pretty soon............ WATCH :)

 

Logical.  I just bot 100 lots. Keep for double.

newtothis      ( Date: 24-Jun-2009 22:11) Posted: China GDP expected to rise more than 8% this quarter..... We all know resources is limited. To grow, china has committed a huge stimulus to spur demands in all sectors. From the data I have on hands, I am very happy and very confident that Abterra is truly a rare gem at this low price. If one can think far enough about the prospect of this company.  Cars, Ship building, military, buildings, the 5 million people that lost thier homes during the earthquake and many many more... This share will be flying pretty soon............ WATCH :)

 

Wah so sure... I think i must join to buy..

 

China GDP expected to rise more than 8% this quarter.....

We all know resources is limited. To grow, china has committed a huge stimulus to spur demands in all sectors. From the data I have on hands, I am very happy and very confident that Abterra is truly a rare gem at this low price.


If one can think far enough about the prospect of this company.  Cars, Ship building, military, buildings, the 5 million people that lost thier homes during the earthquake and many many more...

This share will be flying pretty soon............ WATCH :)

 

Higher, I think. 18 cents by end of year.

newtothis      ( Date: 24-Jun-2009 12:46) Posted: Do you guys believe by Mid July - Abterra will cross 0.10 Mark :)

 

Do you guys believe by Mid July - Abterra will cross 0.10 Mark :)