China’s
TiO2 giant Lomon Billions is on a shopping spree for mining companies in order
to secure its supply of ilmenite and be self-sufficient.
On April 3, 2018, Lomon Billions announced
its approval for investing almost USD50 million of its self-owned funds in Lomon
Mining, whose shares were previously all owned by the former's subsidiary
Sichuan Lomon. Upon completion of this transaction, Lomon Mining's registered
capital will more than double.
Lomon Billions noted that this investment
will increase Lomon Mining's registered capital to reduce its debt/asset ratio,
fund its purchase of additional shares in subsidiaries, and facilitate its
technological improvement or capacity expansion. Afterwards, Lomon Mining's
beneficiation will improve and business will develop better. At the same time,
the company's profitability will increase, which is in line with its own
development strategy and long-term plan.
In 2016–2017, Henan Billions acquired
Sichuan Lomon and Panzhihua Ruierxin Industry and Trading to have an ilmenite
production capacity of about 750,000 t/a. More recently, in March 2018, it
announced a plan to buy 100% of shares in Anning Tietai. This acquisition will
increase Henan Billions' ilmenite capacity significantly, make it the largest
ilmenite producer at home and ensure it to be 100% self-sufficient in ilmenite
for the manufacture of sulphate process TiO2.
Anning Tietei produces around 480,000 tons
of ilmenite and 2.3 metric tons of iron ore concentrate a year. The acquisition
is intended to enable Lomon Billions to produce sufficient ilmenite from the
combination of Anning and its existing ilmenite operations in Panzhihua to
satisfy essentially all its sulfate pigment feedstock requirements.
In accordance with standard practice for
companies listed on the Shenzhen Stock Exchange, Lomon Billions has requested
suspension of its shares to help avoid stock price anomalies. The suspension is
expected to last for about 1 month.
In this context, Lomon Billions' intended
purchase of shares in Panzhihua Lomon via Lomon Mining is aimed at integrating
titanium ore resources in Panzhihua City and reinforcing its power of discourse
in the negotiations with upstream suppliers. Under the background that ilmenite
is a relatively expensive raw material for TiO2 and more than 30% of ilmenite
consumed in China is imported from other countries, the continuously high price
of ilmenite will support the global TiO2 price to go up. By contrast, a low
operating rate in the TiO2 industry and distributors' stock-up during this
period did not contribute a lot to the price rise of TiO2. This explains why
Lomon Billions intends to buy shares in a mining company.
Investments
in foreign mining companies
Lomon Billions announced earlier to
strengthen its cooperation with Brazil’s Mineracao Santa Elina Group (MSE). The
deal is about a large titanium ore mining enterprise operating in Brazil and
Uruguay and owned by MSE.
As the MoU is just the draft of the basic
deal for the two companies, the further process will include the financial
development of the mining company by Lomon Billions, which in return allows the
TiO2 enterprise to buy the mined titanium ore at a lower price than the market.
This provides the company with a huge advantage and the highly needed
independence from world market supply and fluctuating prices.
The titanium ore resources of the company
are estimated to succeed 1.5 billion tonnes, according to CCM’s research. This
amount of raw materials enables Lomon Billions to acquire sufficient supply for
the titanium-containing products at least for the coming 20 years.
Lomon Billions is able to achieve two major
goals with the deal ahead, strengthening its position in the world market as an
international player for TiO2. On the one hand, the cooperation will allow
having sufficient supply of titanium ore for future expansion plans, on the
other hand, the international partnership is demonstrated Lomon Billions
engagement in the global competition.
As the company is heading towards an
aggressive expansion strategy, ensuring the supply of raw materials is vital
for the production lines. Especially the chloride process of Tio2 is going to
be expanded enormously in 2018. Supported by national policies, chloride
process TiO2 is going to be a vital part of the production variety for Lomon
Billions, for which Chinese domestic titanium ore is not suitable. Hence,
exported titanium ore is the only source for the enterprise, and to be
independent of world market instabilities, the investment into MSE offers a
great opportunity for ensuring a steady supply to beneficial conditions.
About
the article
The information for this article comes from
CCM, China’s leading market intelligence provider for the fields of
agriculture, chemicals, food and feed.
Get regular and exclusive insights in China’s
TiO2 market by subscribing to CCM’s monthly published TiO2 China Monthly
Report.
Take part in the discussion by joining our
relevant groups in LinkedIn and Facebook.
Follow CCM on Twitter: @CCM_Kcomber