CAMEC acquires major Chinese cobalt plant

Central African Mining & Exploration (CAMEC) is to gain direct access to the Chinese economy through the acquisition of a major Chinese cobalt chemical plant. The company has signed a heads of agreement for the acquisition of Zhejiang Galico Cobalt & Nickel Material Co and Alliance Minerals and Resources Trading for $42.5 million in cash and shares.

The acquisition will provide CAMEC with a foothold in China, and also enable the company to leverage the financial benefits of becoming a fully integrated cobalt processor. CAMEC currently mines and processes copper and cobalt ore in the DRC.

Galico is one of the largest chemical salt producers in China specializing in the production of cobalt, nickel and copper inorganic salts and powders. Its primary assets are the Zhejiang chemical plant, situated in the Hangzhou Bay fine chemical zone. Located close to the international airports of Shanghai, Ningbo and Hangzhou and the corresponding major seaports, Galico is ideally placed to expand its current markets both within China and internationally.

The 120,000 m2 property and plant has a production capacity of 2,000 t/y of metallic cobalt in salts and 1,500 t/y of metallic copper in salts. Galico aims to increase its production capacity to 3,000-3,500 t/y of metallic cobalt in salts by year end 2007, which the directors believe will make it the largest specialized producer of cobalt salts in China. Its extensive range of inorganic salts are used in widely varying industrial applications including cathodic material for rechargeable batteries (used in items such as mobile phones and laptops), hard facing alloys, through to ceramic pigments and de-sulphurization catalysts. Galico has an effective sales network across the world and established customer bases in Japan, Korea, South East Asia, Europe, Brazil, Australia, Canada and the US.

Galico is located in the Yangtze River Delta, China’s industrial heartland. China is the world’s largest consumer of copper, in 2006 consuming in the region of 22% of the world’s production while this area alone consumes some 45% of the country’s copper metal per year. China is also the world’s largest importer and processor of cobalt. Demand for cobalt has been growing at a rate of 15-20% for the past two years, a trend that is likely to remain strong. In 2006 China processed in the region of 25% of the world’s cobalt production. With Galico’s ready sales network in the area, the acquisition will provide a new market for CAMEC’s cobalt and copper metal products. 

In the year ended December 2006, Galico reported a turnover of $65 million and profits of $5.5 million. The existing management will continue to run the operation and with the guaranteed supply of a dedicated cobalt feed, will look to extend Galico’s influence in the world’s fastest growing economy, expand its market share and increase the profitability of the operation.

Alliance is an international trading company based in Johannesburg, South Africa, traditionally focused on the supply of copper and cobalt feed material to Galico and other major processors within China.

CAMEC Chief Executive, Andrew Groves, commented, “This is a key transaction for CAMEC giving us a strong foothold in the burgeoning Chinese market and direct access to the end users of the cobalt produced at our 50,000 m2 Luita plant in the DRC. As the fastest growing economy, we believe that it is imperative for our growth strategy to have a presence in China for the long term benefit of shareholders. CAMEC is also keen to add value at source by transferring the knowledge and expertise of cobalt processing at Galico and utilising it in the production of semi-finished products in the DRC. Our aim is to become one of the largest and most influential cobalt producers in the world.

“Essentially, we now have producing mines in the DRC, primarily on the C19 concession area in Katanga Province, feeding our Luita facility. We have a 450 truck logistics operation to ensure product delivery and will have an industrial material plant in China with worldwide sales. This will stand us apart from other copper and cobalt miners and underlines the true ambition of the company.”

Under the terms of the agreement CAMEC has agreed to pay the vendors a total of $8 million in cash. Additionally, as part of the consideration, CAMEC will issue 35.4 million new ordinary shares of 0.1p each to the vendor. These shares will be locked in for a period of three years.