China Carbon Graphite Gets RMB180 Mln. Loan From China Construction Bank

Nov. 8, 2010 - China Carbon Graphite Group, Inc., the largest wholesale supplier of fine grain and high purity graphite in China and one of the nation's top overall producers of carbon and graphite products, announced that during the second and third quarters of 2010, it has received RMB 180 million in total from China Construction Bank through four loans, which is equal to roughly USD 27 million based on a RMB to US dollar conversion rate of 6.66 to 1.
Each of these loans has a one year term with an interest rate of 5.41% per year and will be renewable at the lender's option after the expiration of the loans. The loan agreement provides for operating and financial covenants typical for loan transactions of this type. Proceeds of the loans will be used by the Company to purchase raw materials, specifically focusing on higher purity graphite and fine grain graphite materials. This loan facility enables China Carbon to significantly reduce the risk of price inflation of raw materials and leverage increased facility capacity, and expand its profit margin, by allowing the Company to buy larger amounts of raw materials in advance in order to receive better pricing.
"We believe the price of raw materials will continue to rise in the coming years, the loans we received from China Construction Bank will allow us to lock in the price of our raw materials by facilitating larger advanced purchase arrangements at better pricing, in order to hedge against the risk of inflation. Furthermore, with the increasing sales and price of our products, we believe we will deliver improved results in next few quarters, showing incremental increases in our top and bottom line," said Donghai Yu, the Chief Executive Officer of China Carbon.
"The ability for us to receive these loans on such favorable terms from one of the largest Chinese banks further shows the confidence of our business operation and future industry potential," Donghai Yu continued.