Steelmaker Shougang Concord International Enterprises is buying a 12.05 percent stake in Fushan International Energy Group for HK$1.2 billion to ensure adequate coal supplies.

Shougang Concord, controlled by the Shougang Group, said the stake buy would help secure a long-term source of raw materials for its steel manufacturing operations. The steelmaker said it would pay HK$2.18 per share for the Fushan stake.

Fushan International Energy, the second-largest hard coking coal producer in China in terms of capacity, owns and operates three mines in Shanxi province with an aggregate raw coal production capacity of 6.3 million tons per annum.

Shougang Concord said it would buy 550 million shares from Fushan Director Wong Lik-ping. Shougang will pay HK$715 million cash for the shares and also issue 550 million new shares to Wong at HK$0.88 apiece. Following the share sale, Wong's stake in Fushan would fall to 19.13 percent from 31.18 percent.

Billionaire Li Ka-shing's Cheung Kong (Holdings) and affiliates currently own 6.4 percent of Shougang Concord.

Shougang shares fell 2.3 percent to close at HK$0.85 yesterday.

Chinese steelmakers have in the past attempted to acquire stakes in coal producers and other miners. Shougang bought a stake in Australian iron-ore miner Mount Gibson last year.

(China Daily February 12, 2009)