China Nickel Resources profit up 592% to CNY106mn

The group’s integrated development of mineral resources, nickel and special steel products enters into a new stage of development.

China Nickel Resources Holdings Company Limited (“China Nickel Resources”), a leading integrated mineral resources, nickel and special steel enterprise in the PRC, announced its unaudited interim results for the six months ending 30 June 2011 (“the period under review”) .

Following the success of turning its business around in 2010, the Group continued the momentum in the first half of 2011. In the period under review, driven by the parallel development of ore trading and stainless steel based materials sales, the Group doubled its turnover by 140% over the prior period to RMB1.41 billion. Gross profit reported a 116% growth amounting to RMB217.74 million. Profit attributable to shareholders surged to RMB105.82 million, representing a significant increase of 592% compared with the corresponding period last year. Sales volume of limonitic ores increased by 117% to 1.52 million tonnes. In addition, sales volume of stainless steel based materials also recorded a significant growth of 457% to 91,763 tonnes. Basic earnings per share were RMB4.6 cents. The Directors do not recommend the payment of an interim dividend for the six months ended 30 June 2011.

Mr. Dong Shutong, Chairman and CEO of China Nickel Resources, said, “Under the ‘Two-year Preparation, Three-year Adjustment’ strategy, the Group has successfully completed its business transformation and has transitioned to ‘A Five-year Stage of Rapid Development’. The Group has finally achieved encouraging results during the period after the restructuring efforts over the past few years. As 2011 is the first year of the “Twelfth Five-Year Plan”, protecting and improving people’s living is the key objective for the State which will encourage spending and boost growth through implementing policy to stimulate consumption. With the planned new infrastructure projects, construction of more affordable housing and the faster economic development in the Central and Western regions, together with the implementation of the country’s strategies for encouraging and guiding private investment, social investment should steadily grow. Considering the above factors, domestic demand in driving up economic growth will be strong in 2011. The Group believes that the demand for and its market shares of limonitic ores, nickel-based products and special steel products will steadily increase in the future”.

During the period under review, the Lianyungang project has begun its trial production and is expected to be fully operational in 2012. It will then produce high-quality ferro-nickel for other steel plants to process into stainless steel or other steel alloys. The Lianyungang project applies low carbon metallurgical technology. Ordinary coal, rather than coke used in traditional process, is utilised in this reduction purification process, which decreases carbon consumption by up to 40% and the production cost of nickel is much lower than that of the general production process. Regarding the special steel business, the technical and stainless steel facilities upgrade of the Group’s Zhengzhou Yongtong and Luoyang Yongan plants was completed in the fourth quarter of 2010. They are expected to achieve flexible adjustment of output, optimisation of product mix and mass production based on the market situation and the overall needs of the Group. In addition, favorable progress has also been achieved for the preparation of iron and steel plant in South Kalimantan, Indonesia. This plant will be used for ore processing, in order to comply with the implementation of the new Indonesian mining regulations to come into effect in 2014. The application of land use rights and the feasibility study have basically been completed. The environmental assessment is also at the final stage and the construction of the plant is expected to commence in 2012, according to a China Nickel Resources report.

To strengthen the special steel business domestically, the Group is also striving to explore ore resources overseas in order to provide stable supplies of ores. China Nickel Resources has been purchasing ores from Indonesia through exclusive offtake agreement at fixed low prices for self-use or sale to third parties. Thanks to the growth of the industry and the increasing demand for resources and steel alloys, sales volume of ores for the first half of 2011 reached 1.52 million tonnes, exceeding the Group’s sales target. The Group is now actively developing relationships with upstream and downstream trading partners to further expand the ores trading business in order to bring a more steady growth of revenue for the Group.

Mr. Dong concluded, “Despite the slow global economic growth, the PRC’s economy has still expanded at a steady pace. Strong demand provides room for the steel industry’s development. A series of policies and measures, such as merger and consolidation, phasing outdated production, energy saving and emission reduction, and implementation of industry regulation, have created favorable conditions for the stable development of the steel industry and steel markets. Leveraging its competitive edges in rich self-owned resources, strong R&D capability, strategic geographical expansion and diversified product offerings, as well as the benefit from successful commercialization of R&D results, we will continue to execute a range of measures to enhance the Group’s overall efficiency and profitability. These will include implementing the vertically integrated business model, utilising the mineral resources platform in Indonesia, increasing product types and sales volume, developing production and trading in parallel, actively expanding domestic markets and optimising product mix. We are confident that these corporate strategies will enable the Group to attain new heights of success in the future, and bring fruitful returns to our shareholders”.