CCM: Anhui Sierte to acquire phosphorus ore manufacturer

  On 14 July, 2015, Anhui Sierte Fertilizer Industry Co., Ltd. (Anhui Sierte) released an announcement, claiming that it planned to add a capital of USD64.76 million (RMB396 million) in Guizhou Lufa Industry Co., Ltd. (Guizhou Lufa), a phosphorus ore manufacturer, in order to acquire 20% of the shares in the company. It also claimed that it would acquire no less than 55% of the shares in the company ultimately depending on the later acquisition conditions. 

  Acquiring Guizhou Lufa, Anhui Sierte will not only can reduce costs of raw materials and guarantee the supply of raw materials, but also can perfect its pyrites and phosphorus ore – phosphoric acid – MAP and DAP – compound fertilizers integrated production line. Besides, it also provides opportunities for Anhui Sierte to occupy markets in rural areas in Southwest China.

  After the acquisition, Anhui Sierte will depend on Guizhou Lufa's abundant phosphorus ore resources to produce phosphate fertilizers. This can not only reduce the operation risks brought by the price fluctuation of raw materials, but also improve the company's profitability by selling by-products. In addition, the high grade phosphorus ore of Guizhou Lufa is conductive to producing high-quality phosphate fertilizers.

  Apart from this, the acquisition also provides opportunities for Anhui Sierte to enter markets in rural areas in Southwest China so that it can increase its output and sales.

  Currently, the sales region of Anhui Sierte is mainly in provinces that are near the company's location, such as Anhui, Jiangxi, Henan, etc. Since the transport services radius (the farthest transportation distance and the most economical transportation method) pays a quite important role in the transportation of fertilizers, the brand influence and market coverage of Anhui Sierte's products are both at low level in Southwest China such as in Guizhou Province. Cooperating with Guizhou Lufa, Anhui Sierte will be able to realize its sales volume in Southwest China by depending on Guizhou Lufa's advantages. As a result, its brand influence will be growing and its market coverage will be increase in Southwest China. In this way, Anhui Sierte can complete its market distribution in rural areas in Southwest China.

  Guizhou Lufa is the biggest phosphorus ore supplier of Anhui Sierte. It owns abundant pyrites, phosphorus ore and other resources. It has phosphorus mining right in Mingniwan (4.56 km2) and prospecting right in Yongwen (8.39 km2). Both of the mining areas can produce high-quality and high-grade phosphorus ores. Currently, Guizhou Lufa has gained mining license from the local Land and Resource Department in Yongwen mining area which has predicted reserves of phosphorus of no less than 100 million tonnes and the grades of the ores are expected to be above 30%. Relying on such high-quality and high-grade phosphorus ore resources, Guizhou Lufa has built a sulfuric acid - MAP, DAP – other products integrated chemicals projects and it enjoys a special railway which has a handling capacity of about 3 million t/a.

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