GKE’s subsidiary obtains rights for the mining of limestone for 9.5 years in Cangwu China

SINGAPORE: GKE Corporation Limited announced that its wholly-owned subsidiary, Wuzhou Xing Jian Readymix Co., Ltd., which is primarily engaged in the manufacture and supply of ready-mix concrete products, has successfully obtained mining rights from the municipal land authority of Cangwu County, China, for the mining and production of up to 500,000 tonnes per annum of limestone for 9.5 years at a consideration of RMB 5.05 million (approximately S$1.01 million).[the_ad id=”31605″]Limestone is a sedimentary rock composed primarily of calcium carbonate (CaCO3) in the form of mineral calcite. It is a compound with an enormous diversity of uses. Most limestone is made into crushed stone and used as construction materials, which can be used as road base, railroad ballast, sewage disposal systems, concrete, and cement. Powdered limestone is used as fillers in paper, paint, rubber and plastics.

To monetise the mining rights of the limestone mine, Wuzhou Xing Jian formed a strategic joint venture with Cangwu County Wanfu Trading Co., Ltd. and Wuzhou Xing Zhan Investment Co., Ltd. to participate in the mining and production of limestone products.

In this collaboration, Wuzhou Xing Jian shall hold 18% of the Mining JV after transferring its mining rights to the Mining JV for the partners to carry out the mining and production of limestone products, and contributing RMB 540,000 (approximately S$107,637) to the paid-up capital of the Mining JV.

Cangwu Wanfu which shall be entitled to 25% of the shareholding in the Mining JV, will provide the land use rights for two pieces of land. The land has an aggregate land area of approximately 1,622.1 mu (approximately 1,081,400 square metre) and will be used for the proposed mining activities.

The single largest shareholder of the Mining JV, Wuzhou Xing Zhan, which shall hold 57%, will contribute RMB 22 million (approximately S$4.4 million) in milestone tranches to allow Cangwu Wanfu to develop and construct the necessary infrastructure and equipment at the mine site to support the commencement of the mining and production activities. Both Cangwu Wanfu and Wuzhou Xing Zhan will also contribute their portions to the paid-up capital according to their respective shareholdings in the Mining JV.

In a separate agreement with Wuzhou Xing Zhan, Wuzhou Xing Jian shall be entitled to receive a fixed income of RMB 3/tonne of output produced and sold with a 15% increase every three years. This agreement is valid for the duration of the mining rights or until the completion of the aggregate output quota of 4.75 million tonnes of limestone (Phase 1), whichever is earlier.

The collaboration of the Mining JV will continue upon successful extension of the mining rights (Phase 2) and subsequently, the current terms with Wuzhou Xing Jian shall be subject to renegotiation.

Neo Cheow Hui, CEO and Executive Director of GKE said, “We are heartened to have this opportunity to extend our infrastructural materials operations upstream into mining through this collaboration. While we are focused on steering the Group back to profitability, we are mindful of not committing excessive resources.

“Phase 1 of this collaboration will limit our capital commitment to the cost of the mining rights and our portion to the paid-up capital, amounting to approximately S$1.12 million. In return, the Group is to receive a stable and sustainable income contribution from the joint venture compounded based on the aggregate output quota and the agreed fixed income per tonne. We believe that this joint venture will be an added booster to our net earnings once mining commences.

“As limestone is one of the key feedstocks for ready-mix concrete manufacturing, our participation in limestone mining could further enhance our competitive edge in the cities where we operate. We believe that the Group is well placed to compete effectively as urbanisation plans continue to roll out in the less developed areas of China.”

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