Lead producer Henan Yuguang Gold & Lead Co Ltd (Yuguang), is expanding its output and launching two new smelting lines in China this year to capitalize on the global price rally for the metal.
Yang Anguo, chairman of Yuguang, told China Daily that the company would grow lead output by 17 percent this year to 350,000 tons.
The company is also bolstering its resource footprint and has initiated talks to acquire mining assets. "Hopefully, we will be able to close some of the deals soon," said Yang without giving any details.
Yuguang's lead smelting line in Central China's Henan province, with a production capacity of 80,000 tons, is expected to start trial production by April. Yuguang and Western Mining Co Ltd would set up the second smelting line in Northwest China's Qinghai province this year, with an estimated capacity of 100,000 tons.
The company's listed arm said in a recent regulatory filing it expects the parent firm to report a 50 percent growth in 2009 net profit to 61 million yuan.
Lead prices rose nearly 144 percent last year and rose from $1,000 to $2,440. Yang, however, prefers to remain subdued on the outlook for this year.
"Though we have abundant supplies, overseas demand is yet to pick up," said Yang.
"Lead prices, to a certain extent have been boosted by the weak dollar and excess liquidity. However, prices may fluctuate this year due to the uncertainties in macroeconomic policies," he said.
To hedge the risks of fluctuating lead prices, Yuguang is cautiously using financial derivatives like futures and options. "The position will not be more than 30 percent of our total resource demand," said Yang.
Besides price fluctuation, other challenges before the company are the shortage of raw lead ore, rising electricity prices and lead pollution.
Nearly one third of Yuguang's resource feed is from lead powder imports. "Our resource self-supply is weak and we have decided to acquire more resources this year," said Yang.
The company is also looking at recycled storage cells to augment resource supplies. Yuguang recycled 150,000 tons of storage cells and reclaimed 60,000 tons of lead in 2009. The recycling capacity will be doubled in 2010 and account for nearly 30 percent of the resource demand, said Yang.
The company is also seeking for government approval to buy electricity directly from power plants at discounted prices, said Yang.
To save energy and reduce pollution, Yuguang plans to close its obsolete smelting lines, which make up for nearly for 10 to 15 percent of the total production capacity, this year.
