Shares of Baotou Steel: "Highly recommended" for non-public offerings

The company intends to acquire 100% stake in the Pakistan-run Mining Co., Ltd. and the mining right of the Bayan Obo Iron Mine, by offering a shares of not more than 10 special objects to the public. The total amount of funds to be raised shall not exceed 6 billion yuan, and the final price of the target assets is subject to the assessment data agreed or approved by the competent authority. The issue price is not less than 90% of the 20 trading days before the benchmark date (March 11, 2011), that is, 3.68 yuan/share, the final issue price is determined by bidding. The number of shares to be issued is no more than 1.63 billion shares, the final number of shares = The total amount of funds to be raised/the issue price of this non-public offering.　　The purchase plan will help reduce the impact of iron ore price fluctuations on the company's operations, reduce the relationship between major shareholders and companies, and enhance profitability. The controlling shareholder, Baotou Steel Group, intends to subscribe to this non-public offering in cash of not less than 500 million yuan, not exceeding 2 billion yuan. After the completion of the distribution, Baotou Steel Group shareholding will not be less than 50%.　　The shares of Baotou Steel group may not be transferred within 36 months from the date of issuance of this non-public offering. 6 billion of the total amount of funds proposed to be raised is basically a reference to the net assets and mining rights of the BA-run mining.　　Barun Mining Company's total assets of 6.2 billion yuan, net assets of 3.9 billion yuan (as of February 28, 2011, without audit). The company is responsible for the exploration, exploitation and management of all mineral resources in the Western mine of Bayan OBO. The mining method is open-pit mining. At present, the four major projects of mining, mineral processing, slurry conveying pipelines and concentrated tailings disposal have all been put into production, and the annual output is expected to be 10 million tons of iron ore. The value of mining rights in West mine is expected to be about 2 billion yuan.　　September 2005, the Ministry of Land and Resources evaluation of the record of the Bayan OBO iron ore West Ore resources reserves of 667 million tons (Land capital reserve word (2005)251). The issue of the non-public offering of a shares has been approved by the Board of Directors of the company, and the approval of the Inner Mongolia Sasac, the general meeting of shareholders and the CSRC is required.　　The company will announce the next relevant board resolution announcement, disclosure of the proposed acquisition of assets Audit, assessment, raise funds in various purposes investment limits, as well as the feasibility of the fund-raising investment Project review, and bring to the general meeting of shareholders for consideration.　　The final deal will be timing issued within six months of the CSRC's approval. If the transaction is completed, the total market value is expected to exceed 45 billion yuan. The production capacity of Baotou Steel Company is about 10 million tons, and the value of steel assets is about 22 billion yuan according to the average tonnage of steel companies, which is 2200 yuan. Barun Mining's iron powder production capacity and profitability were not disclosed in the announcement. Suppose the production capacity of iron powder is 5 million tons, and reference to the national iron and jinling mining industry to give 250 yuan/ton of net profit assumption.　　The potential annual profitability of the Barun mining industry is 1.25 billion yuan, at 20 times times P/E, worth 25 billion yuan (not counted on the possible value of Rare-earth elements). The current profitability of the stock and the run mining industry in Baogang is low, with assets considered in the valuationProfit potential. The bidding game of the additional price is the core factor that affects the stock price and the yield of the issue. The value of each share in the secondary market is proportional to the additional price.　　Because the issue of additional prices will affect the number of additional issuance, and the number will affect total equity.　　The issue price is inversely related to the yield of the additional issue. It is assumed that the assets in this non-public offering plan will be priced at around 6 billion yuan, which is beneficial to the participants and shareholders of non-public offerings.　　Compared with 4.79 yuan, the stock price has more than 20% growth space, up to the "strongly recommended" rating. Major risk tip: The final pricing of the target asset is subject to the assessment data agreed or approved by the competent authority, which is not yet established. According to the plan, the target asset is assumed to be priced at 6 billion yuan in this report. Responsible Editor: NF058