China GengSheng Minerals Acquires Minority Interest in Yili Yiqiang Silicon Company
11 April 2011
China GengSheng Minerals has acquired aminority interest in Yili Yiqiang Silicon Company. This is a strategic investment to improve GengSheng’s access to raw materials used in fine precision abrasives production. China GengSheng Minerals, Inc. a leading China-based high-tech industrial materials manufacturer producing heat resistant, energy efficient materials for a variety of industrial applications, has signed an agreement to acquire 24.5% ownership in the Yili Yiqiang Silicon Company (Yili Yiqiang) for RMB 15 million (approximately US$2.3 million).
Yili Yiqiang is a manufacturer of green silicon carbide ("SiC"), which is the primary material used in the production of GengSheng’s fine precision abrasive products. The Company funded this investment through a combination of cash from operations and domestic commercial bank loans. "Acquiring a minority stake in Yili Yiqiang enhances our emerging fine precision abrasives products and furthers our strategy to increase our sales and margins in this segments of our business," said Mr. Shunqing Zhang, China GengSheng’s Chairman and Chief Executive Officer, "With raw material costs high and continuing to rise as a result of tight capacity, our ability to improve the sourcing of high-quality, cost-effective green SiC was crucial to our success in this market. In addition to cost savings, we believe this investment will allow us greater control over the raw material production process, further improving the quality of the green SiC that Yili Yiqiang manufactures."
Yili Yiqiang, located in Yili, Xinjiang Province in China, one of the region’s leading producers of high-quality green SiC, with average purity of 98.8%. Yili Yiqiang has green SiC reserves of approximately six million metric tons, and current annual production capacity of approximately 16,000 metric tons. Yili Yiqiang expects 2011 revenue of approximately $24 million, based on current production capacity and an average green SiC price of $1,500 per metric ton. Through this investment, Yili Yiqiang has granted GengSheng right of first refusal on its production output, ensuring consistent, low-cost supply of the principal raw material used in the manufacture of fine precision abrasives.
Mr. Zhang continued, "As one of the safest clean energy technologies, the solar industry is experiencing tremendous growth, which is creating a sizeable market opportunity for fine precision abrasive products. Having launched this product line in third quarter of 2010, we believe that we can grow sales and expand margins by improving overall manufacturing efficiency and continued effective product marketing. With these key objectives in mind and our minority position in Yili Yigiang, we expect that our fine precision abrasives products will contribute to profitability and top-line growth in 2011."
China GengSheng Minerals, Inc. develops, manufactures and markets a broad range of high-tech industrial material products, including monolithic refractories, industrial ceramics, fracture proppants and fine precision abrasives. A market leader offering customized solutions, GengSheng sells its products primarily to the iron and steel industry as heat-resistant components for steel-making furnaces, industrial kilns and other high-temperature vessels to guarantee and improve the productivity of those expensive pieces of equipment, while reducing their consumption of energy. Founded in 1986 and based in China’s Henan province, GengSheng currently has over 200 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and other countries. GengSheng conducts business through GengSheng International Corporation, a British Virgin Islands company, and its Chinese subsidiaries, which are Henan GengSheng Refractories Co., Ltd., Zhengzhou Duesail Fracture Proppant Co., Ltd., Henan GengSheng Micronized Powder Materials Co., Ltd, Guizhou SouthEast Prefecture Co., Ltd., GengSheng New Materials Co., Ltd, and Henan GengSheng High Temperature Materials Co., Ltd.