Xinjiang Xinxin Mining Industry Co, China's second-largest nickel producer, may raise as much as HK$3.9 billion (US$501 million) in a Hong Kong initial public offering, two people with direct information on the sale said.

 

Xinxin, based in the northwestern Xinjiang Uygur Autonomous Region, will sell 600 million shares, or a 28.3-percent stake, at HK$4.80 to HK$6.50 each, the people, who declined to be identified before a public statement, told Bloomberg News.

 

State-backed Xinxin is expanding to meet growing demand from steel producers in the world's fastest-growing major economy.

 

China accounts for 24 percent of global demand for the metal used mainly for the production of stainless steel, according to Guotai Jun'an Securities (Hong Kong) Ltd.

 

"Nickel mining is a profitable business and Xinxin is expanding to boost reserves," said Xu Aidong, analyst at Beijing Antaike Information Development Co by phone yesterday.

 

BOC International (Holdings) Ltd is arranging the sale.

 

Ning Xia, a Hong Kong-based spokeswoman for BOCI, was not available for comment. Xinxin's Xinjiang-based officials couldn't immediately be reached.

 

China produces a third of the world's steel and may increase output by 14 percent to 480 million tons this year, the China Iron and Steel Association said on July 30.

 

Nickel on the London Metal Exchange has gained 29 percent since reaching an 11-month low on August 16, as demand growth in China countered reduced appetite in west Europe and other Asian countries, where steel makers have cut production.

 

"Nickel prices may average lower next year," Xu said. "Still, as Xinxin owns mines, it benefits from lower production costs."

 

Nickel for delivery in three months peaked at US$51,600 a metric ton in May on the LME, the world's largest metals exchange.

 

(Shanghai Daily September 25, 2007)