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West China Cement (WCC)

  Print      Mail a friend       Annual reports

Monday 04 December, 2006

West China Cement

First day of dealings on AIM

West China Cement Limited
04 December 2006


4 December 2006

                           West China Cement Limited

                          First day of dealings on AIM


West China Cement Limited ('West China Cement' or 'the Company'), a producer of
cement based in Shaanxi Province in the People's Republic of China, announces
the commencement of dealings today in its ordinary share capital on AIM, a
market operated and regulated by London Stock Exchange plc.

The Company has raised a total of £22 million before expenses through the Placing 
of 20,952,381 Ordinary Shares of 10p each at 105p each principally with 
institutional investors. The Placing was more than twice oversubscribed.

Insinger de Beaufort is acting as nominated adviser and lead broker to the
Company. Blue Oak Capital Limited acted as joint broker to the placing.


Placing Statistics

  * Net proceeds of the Placing of approximately £20.1 million

  * Placing Price of 105p per Ordinary Share

  * Based on the above Placing Price per share, the market capitalisation of the 
    Company on commencement of dealings is approximately £66.8m

  * The proceeds of the Placing will be used to fund the expansion of its
    cement production capacity and associated working capital requirements. The
    Company is increasing its existing capacity from 1.5 million tonnes per
    annum to 3.5 million tonnes per annum by the end of 2007

  * The Company's mnemonic is WCC and the ISIN Number for the ordinary shares
    is JE00B1G5G525


Highlights

  * Established business with a demonstrable track record of profitability and 
    expansion

  * Cement output in Shaanxi Province has grown from 11.1 million tonnes in 2001 
    to 19.72 million tonnes in 2005. This is expected to rise to 35 million 
    tonnes by 2010 due to the estimated infrastructural spending growth of 13% 
    per annum over the period

  * Local industry is restructuring in response to national policy

  * West China Cement's plants utilise modern and environmentally friendly NCPP 
    production processes and, consequently, the Company receives favourable 
    taxation treatment

  * Little competition from producers in other provinces for geographical 
    reasons and due to the high costs of transportation

  * Experienced management team, led by Mr Zhang Jimin, who has over 30 years 
    experience in the cement industry


Mr Zhang Jimin, CEO, commented: ' We are thrilled that investors have responded 
so positively to our business and future strategy.  The continued growth in demand 
for cement in Shaanxi Province and the restructuring of the cement industry 
coupled with today's listing will enable the Company to further develop its cement 
production capacity and meet the current demand in the market.

'We are excited to be entering 2007 as an AIM quoted company and I am pleased to 
be welcoming new shareholders to the Company.'


                                    --ENDS--


For further information, please contact:

Haggie Financial                                      00 44 (0)20 7417 8989
David Haggie/Alexandra Parry/Sophie Sheppard

Insinger de Beaufort                                  00 44 (0)20 7190 7010
Anthony Schindler/Christopher Caldwell


Notes to editors


History

Pucheng County Hanjing Town Commune Cement Factory was established in 1977 by
the Hanjing Commune (a level of local government). In 1989 it became a legal
entity and its name was changed to Pucheng County Hanjing Cement Factory. In
March 1994 its name was changed to Shaanxi Province Pucheng Hanjing Cement
Industry Company and Mr Zhang was appointed as its legal representative. Under
Mr Zhang's direction the company undertook a number of reorganisations to
facilitate its growth and strategy and its name was changed to Yaobai Cement. On
18 July 2006, a BVI incorporated company named West China Cement acquired the
entire issued share capital of Yaobai Cement. On 27 October 2006, West China
Cement Limited acquired the entire issued share capital of West China Cement
(BVI).


The Business

The Company, which is headquartered in Xi'an the provincial capital of Shaanxi
Province, operates three cement production plants in Pucheng, the first of which
has been operational since 1977 and now have a combined production capacity of
1.5 million tonnes per annum. In order to service the growing demand for cement
in the region, two new cement production lines are currently under construction
at Lantian, Shaanxi Province. When completed, these two new lines are expected
to have a combined production capacity of 2 million tonnes per annum.


Activities

The Group manufactures three types of cement, as well as clinker, a cement
compound:

  * Ordinary Portland Cement is a mixture of clinker, mineral admixtures
    (accounting for 6 to 15 per cent.) and gypsum, which is widely used in
    industrial and civil construction projects

  * Flyash Portland Cement is a mixture of clinker, flyash and gypsum. The 
    content of flyash by weight ranges from 20 per cent. to 40 per cent.
    depending on its intended use

  * Composite Portland Cement is a mixture of clinker, at least two kinds of 
    prescribed mineral admixtures and gypsum, which is widely used in industrial 
    and civil construction projects

  * Clinker is the base of the above mentioned products, the principal raw 
    material of which is limestone. The Group does not intend to sell clinker as 
    a separate product in the future

These products are predominantly sold in the Weinan, Xi'an and Yan'an areas of
Shaanxi Province and the sales breakdown in the six months to June 2006 was 34
per cent. Ordinary Portland Cement, 29 per cent. Flyash Portland Cement, and 36
per cent. Composite Portland Cement. Major clients include ready mix concrete
plants, public construction contractors and wholesale cement distributors.


Operations

The Pucheng production plants are situated in the Weinan region to the North
East of Xi'an. The Group is the largest cement manufacturer in the region. There
are three production lines in Pucheng with annual cement production capacity of
1.2 million tonnes (commissioned in January of 2004), 150,000 tonnes (converted
to new cyclone preheated process technology ('NCCP') in March of 2002) and
150,000 tonnes (converted to NCCP in February of 2001) respectively. The Company
utilises two limestone mines in the Pucheng area, Yao Mountain and Jinsu
Mountain. Yao Mountain has an indicated resource of 83.9 million tonnes and
Jinsu Mountain has an indicated resource of 5.45 million tonnes. Yao Mountain is
approximately 1 kilometre from production line 1 (with an annual production
capacity of 1.2 million tonnes) and 1 kilometre from production line 2 (with an
annual production capacity of 150,000 tonnes) and is currently the main
limestone resource for these production lines. The mining licence for the Yao
Mountain is valid until November 2013. The limestone used in the production line
3 is bought from third parties.

The Group's second production centre is currently under construction in Lantian,
35 kilometres from Xi'an. The first line with 1 million tonnes of production
capacity is expected to start operations by March 2007 and the second line with
1 million tonnes of production capacity is expected to start production by
November 2007. These two lines both utilise NCPP technology. The limestone mine
which will be used for the Lantian plant is called Xiaozhai, which is 4
kilometres away from the plant and has an indicated resource of 91.9 million
tonnes. The mining licence for Xiaozhai is valid until September 2016.

The Lantian plant will mainly cater for the Xi'an area as it is the closest
production plant to the provincial capital. There are a number of different
projects currently being implemented or anticipated in this area that the plant
will aim to service, including the Zhengxi Passenger Railway Line.


The PRC Economy and Cement Industry

The PRC Government is actively promoting the restructuring of the Chinese cement
industry with a shift away from small-scale producers towards large, modern
environmentally friendly production plants.


Corporate Strategy

The Group aims to maintain its market share in East Shaanxi and consolidate its
market share in Xi'an and South Shaanxi. It aims to expand its production
capacity to 3.5 million tonnes by the end of 2007 via the completion of the
Lantian production base. Should favourable market conditions exist, further
expansion of its capacity will be considered. The Company will also evaluate any
opportunities that may exist for investment in new strategic sites.


Financials

West China Cement is profitable and has grown both turnover and profits in
recent years. In the year ended December 2005, the Company achieved a net profit
after tax of RMB44.4 million (£2.96 million) on sales of RMB238.2 million (£15.8
million). In the first six months of 2006, it achieved a profit after taxation
of RMB27.6 million (£1.8 million) on sales of RMB138.0 million (£9.2 million).


Management team

Zhang Jimin - Chief Executive Officer, aged 52
Mr. Zhang is a founder of the Group. He began his career in the cement industry
in Hanjing Cement and has more than 30 years of industry experience. From
1992-1994, he led the development of low-heat slag cement, moderate heat
Portland cement and highway cement, which won the Second Grade Science and
Technology Progress Prize issued by the Province Government. Mr Zhang is
currently undertaking an MBA at the Northwest University of China.

Robert Robertson - Non-executive Chairman, aged 54
Mr. Robertson has over 30 years' global experience in the extractive industry.
He headed Anglo American's Industrial Minerals division for nine years, during a
period of major growth. He was Chief executive of Tarmac, its building materials
subsidiary and major aggregates, concrete, asphalt, cement and lime producer
with operations in the EU, Eastern Europe, the Middle East and Asia. Robert has
held a number of senior industry positions. Prior to that, his career was in
finance, holding a number
of senior positions in London, Paris, Johannesburg, New York and Rio
de Janeiro. He has an MA from Oxford University.

Wang Jianli - Technical Director and Chief Engineer, aged 43
Mr. Wang graduated from Luoyang Building Material Industry College with
a degree in Cement Technology. He worked at the Shaanxi Design & Research
Institute of Building Materials from January 1983 to March 2002 where he became
director of the Institute. He has held his current position with Yaobai Cement
since March 2003.

Tian Zhenjun - Financial Director, aged 47
Mr. Tian has a degree in Accountancy from Xi'an Finance & Economy College and is
a qualified accountant. He joined Yaobai Cement in September 1998 where he has
held the positions of general accountant, director of the finance department,
assistant general manager and sales manager.

Brett Miller - Non-executive Director, aged 38
Mr. Miller graduated from University of Witwatersrand, South Africa, with a
Batchelors degree majoring in Law and Economics and he also has a degree in Law
from the London School of Economics. He joined Nabarro Nathanson, a London-based
law firm, in 1993 where he specialised in M&A and corporate finance in the
energy, natural resource and smaller companies sector until 1997 when he joined
Ruegg & Co Limited, a corporate finance boutique also in London where he is
managing director and a key shareholder. Mr Miller is also a director of
Pactolus Hungarian Property plc, an AIM listed property fund. He has significant
experience raising equity capital for smaller companies and in corporate
finance, corporate governance issues, corporate restructuring and optimising
financial capital structures.


Issued by Haggie Financial, Roman House, Wood Street, London EC2Y 5BA


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