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Vinacomin, Hoa Phat vie for iron miner
Hoa Phat Group (HOSE: HPG) has announced its intention to buy a controlling stake in Thach Khe Iron Joint Stock Company, but is likely to face difficulties as the iron company's major stakeholder, State-owned mining group Vinacomin, also wishes to raise its stake to 51 per cent.
Thach Khe Iron Company (TIC), which is involved in iron ore exploitation in central Ha Tinh Province, currently has three major shareholders, including Vinacomin with 30 per cent stakes, Ha Tinh Trading & Minerals Corporation (Mitraco) with 24 per cent and Viet Nam Steel Corporation (VNSteel) with 20 per cent.
As the price of iron ore has increased, industry insiders say holding a stake in a large iron company such as Thach Khe Iron Company has become increasingly lucrative.
Hoa Phat Group (HPG) – one of the three largest steel producers in Viet Nam – recently expressed its interest in holding a controlling stake in the iron company.
In an initial move, HPG has begun finalising procedures to purchase a 5 per cent stake in TIC from the Bank for Investment and Development of Viet Nam (BIDV).
Tran Tuan Duong, HPG's General Director, said the group received great support from the provincial People's Committee due to its strong financial capacity and experience in implementing projects. "The best solution would be for the Government to assign competent shareholders to implement the project. Any shareholder who failed to contribute capital on schedule would be allowed to withdraw from the shareholder list," Duong said.
HPG recently also joined hands with Mitraco to establish Hoa Phat Mitraco Minerals Company in which it holds a 63.5 per cent stake with the aim of implementing an iron ore selection and processing plant at Thach Khe Mine. The one million tonne capacity plant signed an agreement with TIC to secure the supply of iron ore to the plant.
However, both Vinacomin and VNSteel plan to raise their stake in TIC and Vinacomin proposed to the Government to increase its stake to 51 per cent in order to speed up the project implementation.
"Vinacomin submitted a shareholder restructuring roadmap where Vinacomin would eventually hold a 51 per cent stake in TIC," said Phung Manh Dac, Vinacomin's general director and TIC's chairman.
Le Duong Quang, Deputy Minister of Industry and Trade, also said TIC would be restructured, with Vinacomin holding a controlling stake and the ministry had asked TIC's management board to specify the deadline and the increase in its charter capital.
"Shareholders who do not contribute enough would lose their shareholder rights," Quang said.
However, Dac also said if Vinacomin failed to take a controlling stake in TIC, it could consider the possibility of withdrawing capital from the iron company. And if Vinacomin retreated, an opportunity might open up to Hoa Phat Group.
"This is a complex and difficult project. Investors can easily build an iron ore processing plant but the mine is difficult to operate as it is located close to the sea and is several dozens to several hundreds of metres under sea level," he said.
Thach Khe iron mine is the largest iron mine in Southeast Asia with total production potentially reaching 370-400 million tonnes, according to the Ministry of Industry and Trade.
TIC, with a charter capital of VND2.4 trillion (US$114.8 million), began operations in May 2007. However, by the end of last year, shareholders had contributed only 50 per cent of TIC's charter capital.
At a recent shareholder's meeting, all parties agreed to contribute the remainder by May 15.
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