(Yicai) Dec. 5 -- China’s Hebang Biotechnology plans to better ensure its supply of raw materials by increasing its stake in Australian mining company Avenira at a cost of AUD2 million (USD1.3 million).

Hebang Biotech will buy almost 182 million shares of Avenira through a private placement, thereby raising its stake to 12.04 percent from 2.84 percent, the Sichuan-based chemicals supplier said in a statement late yesterday.

The company plans to further raise its investment in Avenira in the future depending on how their partnership develops, it added.

Hebang Biotech will pay AUD0.011 (USD0.007) for each share, a 21 percent discount on the target firm’s closing price of AUD0.014 on Dec. 1. Trading in the shares is set to resume tomorrow.

Headquartered in West Perth, Avenira develops battery cathode and fertilizer-focused mining projects. It has rich reserves and a mining license for high-grade phosphate rocks as well as land to build a new plant to produce yellow phosphorus in the Northern Territory, the statement said.

Hebang Biotech has an annual capacity of 200,000 tons of PMIDA, an intermediate to make herbicides, and is building another new plant with an annual capacity of 500,000 tons in China’s Sichuan province. The company said its need for the key raw material yellow phosphorus will increase when the new plant goes into production. 

The share deal will not only better ensure the supply of raw materials but also facilitate business cooperation with Avenira in phosphate mining and yellow phosphorus production, Hebang Biotech said.

Hebang Biotech has also agreed to invest in the yellow phosphorus plant with an annual capacity of 50,000 tons that Avenira is planning to build in Australia, as well as provide the facility with technical support in construction and operation, Avenira said yesterday. 

Hebang Biotech will also buy some of the yellow phosphorus produced by the plant, and the two companies will join hands in seeking new clients in the renewable energy sector for it.

Shares of Hebang Biotech [SHA: 603077] closed down 0.8 percent at CNY2.35 (33 US cents) each in Shanghai today. The company’s stock price has fallen 23 percent since the end of last year.

Editor: Tom Litting