Sinoma made an investment in Qilianshan

Aiming to become the largest cement manufacturer in northern China, China National Materials Group Corp. Ltd. (Sinoma Group) has successfully completed the largest acquisition in cement industry this year, further strengthening its unshakable dominance in China s northwest cement markets.

December 27, China National Materials Co., Ltd (Sinoma Ltd) and Gansu Provincial SAC entered into an agreement on equity transfer in Lanzhou. Sinoma has become the controller of Gansu Qilianshan Cement Group Company Limited.

On behalf of the three parties, Sinoma Ltd President Zhou Yuxian, Gansu Provincial SAC Director Ma Aiwu and Qilianshan Holdings Chairman Yang Hao signed the agreement on capital increase and equity transfer.

Sinoma Chairman Tan Zhongming said that speeding expansion in northwest China is a key step for Sinoma to become the largest cement producer in northern China. He also said that Sinoma s cement output would amount to 100 million tons by 2011 and output from northwest and its surrounding areas would account for 70% of the total output.

Qilianshan a breakthrough of northwest markets

Northwest China is an important market where cement demand continues to increase at a highest speed. As the largest cement producer in northwest China, Sinoma owns two domestic listed companies ----Tianshan Co. and Saima Industry, accounting for 40% and 60% of the market shares in Xinjiang and Ningxia respectively.

Being listed on Shanghai Stock Exchange in June 1996, Qilianshan owns eight production bases and five major markets. As a leader in regional cement markets, Qilianshan s strategic layout has covered Gansu Province and stretched into Qinhai Province and surrounding areas.

At present, Qilianshan s total cement output exceeds 10 million tons, accounting for over 40% of the total output of Gansu Province, among which the NDP cement output is 9.2 million tons, maintaining the absolutely leading position in regional markets.

Two steps controlling Qilianshan

June 2009, China National Materials (Sinoma) entered into the Share Subscription Agreement with Qilianshan. Sinoma has agreed to participate in the A Share Issue and subscribe for 55,000,000 A Shares at the Subscription Price of RMB9.11 per share for an amount of RMB501, 050,000. Upon completion of the share subscription agreement, Sinoma has held approximately 11.58% shareholding interest in Qilianshan and becomes the second largest shareholder of Qilianshan.

27 December 2009, Sinoma acquired a 51% equity interest in Qilianshan Holdings by capital increase and equity transfer. Sinoma contributes additional capital in the amount of RMB100, 000,000 in cash to Qilianshan Holdings, representing approximately 15.33% of the enlarged registered capital of Qilianshan Holdings. At the same time, Sinoma acquired 35.67% equity interest in the enlarged registered capital of Qilianshan Holdings from Gansu Provincial SAC for a consideration in the amount of RMB232,769,543 in cash.

Before completion of the agreement, Qilianshan Holdings was the largest shareholder and controller of Qilianshan Co. with the equity interest of 12.78% and Sinoma Ltd was the second largest shareholder of Qilianshan Co. with the equity interest of 11.88%. Upon completion, Sinoma Ltd will acquire 24.66% equity interest in Qilianshan Co. and become the controller of Qilianshan Co.

Sinoma Ltd is of the view that the Investment in Qilianshan Holdings will further increase Sinoma Group s market share in the north-western region, so as to materialize its strategic target of establishing itself as the largest cement manufacturer in the northern China; and generate higher returns to the Group in future, should Qilianshan Holdings become more profitable in the future. It is estimated that Qilianshan s output in 2011 will reach 15 million tons.

On behalf of the three parties, Sinoma Ltd President Zhou Yuxian (center), Gansu Provincial SAC Director Ma Aiwu (right) and Qilianshan Holdings Chairman Yang Hao signed the agreement on capital increase and equity transfer