XinRen

XinRen: (Possible positive sentiment) Shareholders has approved proposed acquisition of a 21% stake in CLI (Rmb 1,890m)which indirectly owns Xinjiang Plant, and a 100% equity interest in aluminum smelter, Xinjiang Production and Construction Corps Agricultural Division Eight Tianshan Aluminum Plant, with a smelting production capacity of 447,000 tons, more than double XiNRen’s one of 275,000 tons. Grp intends to use its existing working capital, bank borrowings and/or proceeds from fund raising exercises to fund the Proposed Acquisition. Upon completion of the Proposed Acquisition, XinRen also has the right to exercise a second call option to acquire another 30% equity interest in CLI within the next five yrs. Overall, we note that acquisition could be positive for grp, in a sector where upstream expansion is heavily regulated and restricted, as the PRC govt aims to limit supply and phase out unproductive smelters. Furthermore, already one of the lowest cost aluminum producers in the PRC, Xinjiang Plant will enable XinRen to enjoy further cost savings from the plant’s on-site power plant, powered by the cheap and abundant coal resources in Xinjiang. Separately, data shows that more aluminum is being tied up in warehouses by so-called financing deals, raising cash premiums on the metal and signaling higher prices for co’s ranging from auto-parts producers to beer-can makers. Supplies have become less available because orders for delivery are coming in faster than metal can be shipped out. Premiums have also gained amid increased use of aluminum for financing deals, leaving the metal in inventory unavailable for manufacturers.