Chinese privately-owned steel group General Steel Holdings, Inc. (General Steel) has announced that through its joint venture, Shaanxi Longmen Iron and Steel Co., Ltd. (Shaanxi Longmen), it has obtained final government approval to acquire a controlling interest in Hancheng Tongxing Metallurgy Co., Ltd (Tongxing).
Accordingly, Shaanxi Longmen will obtain 22.76 percent of Tongxing and become its controlling shareholder. In return, Shaanxi Longmen will hand over land valued at approximately RMB 30,227,333 (approximately $4.1 million) to Hancheng Tongxing.
Tongxing has two core operating areas: coking coal production and rebar processing. Its coking coal operations have an annual production capacity of 250,000 metric tons, while its rebar processing facility has an annual yield of 300,000 metric tons.
Tongxing also owns 11 percent of the Daxigou iron ore mine, located 200 kilometers from Shaanxi Longmen. This mine has 300 million metric tons of proven iron ore reserves. Controlling ownership of the mine is held by Shaanxi Longmen Iron and Steel Group Co., Ltd., the strategic partner of Shaanxi Longmen. Shaanxi Longmen has first right of use for all sales from the mine as well as future development rights. In 2007, approximately 240,000 metric tons of iron ore were mined from the site. The expected yield for 2008 is 800,000 metric tons moving toward an annualized goal of three million metric tons in 2010. Similar quality iron ore would cost approximately RMB 809/mt ($111/mt) at current market prices.