Lion Industries Corporation Bhd (LICB) will undertake a slag processing and metal extraction business via a tripartite joint venture company with an initial capital of RM18 million.
In an announcement to Bursa Malaysia yesterday, LICB said its wholly owned subsidiary Slag Aggregate Sdn Bhd (SASB) had entered into a JV with US-based Tuner Industry & Trade Corp (TITCO) and Taiwan-based Bichain Trading Co Ltd to form Lion Titco Resources Sdn Bhd to undertake the businesses.
LICB said TITCO would hold 50% of the JV company, while SASB would own 40% and Bichain 10%. As such, SASB would invest US$7.2 million (RM23.11 million) in the JV company as initial capital. It said TITCO and Bichain had approached the group to jointly undertake the business.
LICB said the proposed slag processing business would involve a total investment of US$9.5 million or RM30.4 million. Out of that, US$3.3 million will be used to acquire machinery and construct a 45,512 sq ft plant at the existing Lion Steel Complex in Banting.
It added RM12.4 million, which was arrived at after deducting the initial investment of RM18 million from the shareholders’ fund, would come from bank borrowings or shareholders’ advances.
The JV company, which would require a manufacturing licence from the Malaysian Industrial Development Authority, is expected to be set up by the second half of the year, the group said.
LICB said through the JV company, LICB would be able to extract iron from slag, which could be re-introduced into the respective steel millers’ electric arc furnaces (EAF) as scrap.
“Therefore, under the proposed JV, LICB will be able to benefit both as a shareholder of the JV company and from having its steel mills recover iron metal from its slag at lower than market price (maximum 25% of the market price),” LICB said.
The group added that its steel mills would also be able to free up space occupied by the storage of the slag for other more productive purposes.
Slag is a by-product of steel manufacturing using the EAF method. Chemically, slag is made up of calcium silicate (similar to concrete) but also contains a small quantity of iron metal. Currently, there was no use for slag other than for land filling, LICB said.
It added that the proposal was a related party transaction as it involved the interest of Lin Chung Dien, a director of Lion Forest Industries Bhd, which is a subsidiary of the group. Lin is a substantial shareholder and chairman of Bichain.
Bichain has had a long history of trading with Megasteel Sdn Bhd, a related party of LICB.
Written by Yong Yen Nie
This article appeared in The Edge Financial Daily, July 7, 2010.
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