It’s only a tiddler of a deal, but its instructive of the wide ranging interest Chinese companies are showing in Australia.
The China buying Australia story has been concentrated in resources with deals like the Rio-Chinalco multi-billion discussions; the Minmetals $2.8 billion saving of Oz Minerals and continuing share sales by Fortescue Metals to a Chinese group.
Others have included the struggling Perilya selling control of a big Chinese metals processor and interest in small iron ore miners (Midwest, Mount Gibson etc) and some coal companies, such as Linc Energy and Macarthur Coal.
But yesterday we saw a tiny $3 million dollar between battery recycling plant operator Hydromet Corp and Chinese acid battery (ULAB) recycler Jiangsu Chunxing Alloy Co Ltd (Chunxing) of Nanking.
Hydromet shares closed at 4.1 cents on Monday; a day later the deal saw them valued at 6 cents.
In the transaction, Hydromet will issue 49.92 million shares – or just under 15% of its issued capital – at six cents each to Chunxing, subject to Chinese Government approval.
The deal will see an agreement for the supply of lead products to Chunxing from Hydromet’s Unanderra recycling operation and the just approved Newcastle smelter in NSW.
The money raised will be used for working capital and the cost of the Newcastle smelter.
"The board believes that the following benefits of the involvement with Chunxing will place Hydromet in a much stronger position within the ULAB recycling and secondary lead production markets within Australia and the Pacific," Hydromet said in a statement on Tuesday.
"With the volatile metal market, financial market turmoil and uncertainty experienced since 2008 we believe that joining with Chunxing will be invaluable in working through the challenges ahead and will place us in a positive position to take advantage of improved conditions as they emerge."
"In addition a commercial agreement for the supply of lead products to Chunxing along with a technical co – operation agreement has been signed.
.Hydromet said Chunxing is the largest lead recycling company in China with four operating plants located at various provinces in China.
"The current processing capacity is approximately 500,000 tonnes per annum of ULABs and with planned expansion to 1 Million tonnes per annum.
"The privately owned company has in excess of 30 years experience of secondary lead smelting and is the only waste metal recycling company in China recognised by the Chinese government under the National Circular Economy programme which supports selected organisations to expand their specific expertise through foreign investment strategies such as the Hydromet shareholding.
"The Board believes that the following benefits of the involvement with Chunxing will place Hydromet in a much stronger position within the ULAB recycling and secondary lead production markets within Australia and the Pacific."
At 6 cents a share Hydromet is valued at around $20 million. As I said a small deal, but one with considerable interest because of its mixture of resources (lead) and manufacturing.
In the six months to December Hydro met lost more than $2.79 million on revenues of $10.05 million.
The sharp fall in world lead prices played a major part in the loss
"Given the dramatic events experienced across the commodities and financial markets during the December half year and indications going forward, we expect business conditions to remain challenging throughout 2009.
"However we are adapting to changing circumstances as they emerge. Cash reserves remain a principal focus with close monitoring and attention to current and future anticipated requirements."
"We have successfully signed supply agreements with two substantial German based smelters which will absorb our entire planned output for calendar year 2009 with ongoing options beyond the initial 12 month period.
"Battery collections settled to more realistic arising levels after the strong activity experienced during our start up year in 2007."
