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Iron ore concentrate producer Fortress Minerals seeks Catalist listing

FORTRESS Minerals Limited, an iron ore concentrate producer, has lodged a preliminary prospectus for a planned initial public offering (IPO) on the Singapore Exchange's Catalist board.

Details of the pricing, amount to be raised and timing of the offering have not yet been announced.

Fortress Minerals is principally in the business of exploration, mining, production and sale of iron ore concentrate. It produces iron ore concentrate from iron ore mined from the East, Valley and West Deposits of its Bukit Besi Mine, and sells its iron ore concentrate primarily to steel mills and trading companies in China and Malaysia.

While business operations are principally located in Kuala Lumpur, its Bukit Besi Mine is situated in Terengganu in Malaysia. The mining right for Bukit Besi Mine covers a total area of about 526.2 hectares, and will expire in early 2033. Its subsidiary, Fortress Mining, operates the mine.

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Based on the prospectus lodged on Thursday, Fortress Minerals posted for the first half of fiscal 2019, revenue of US$6.6 million. Net profit for the period was US$2.0 million, from a net loss of US$546,000 the year before. 

Cost of sales was at US$2.7 million, while selling and distribution expenses were at US$2.3 million.

For fiscal 2018, the group posted a net loss of US$411,000; net profit for fiscal 2017 and 2016 stood at US$75,000 and US$1.8 million respectively.

The company does not have a fixed dividend policy and future dividends will depend on its earnings and financial position among other things.

The company expects profitability for fiscal 2019 to be impacted by a substantial increase in professional fees, compliance costs and administrative expenses incurred for the purpose of the group’s listing exercise. The group said that these expenses are one-off and will be a “substantial charge” to its financial statements. It also expects overall operating costs, especially labour and fuel costs, to rise due to inflationary pressures, and minimum wage rates to rise with any change in regulations.

In line with China’s strict control on industrial pollution, it also anticipates demand for the group’s iron ore concentrate to remain robust at present prices, where any price increase will benefit the group.

Proceeds from the IPO will be used to further develop the company’s Bukit Besi Mine, including continuing and future exploration and geology work, as well as expansion of iron ore processing capacities. On top of using the proceeds for general working capital purposes, the group will also look at acquisition, joint venture and/or development of new mines, whether in Malaysia or elsewhere.

Key risks to the business include a limited operating history and track record in carrying out business activities, the financial condition and performance of the group being dependent on the level and availability of mineral resource in the Bukit Besi Mine, and not having established a strong sales record yet. 

Fortress Minerals’ cornerstone investors are Loh Chen Yook, The Cheng Eng, The Kun Ann, Chang Chee Kheo, Arena Jujur Sdn Bhd, First Grand Investment Pte Ltd and Teambuild Construction Pte Ltd.

Prior to the placement, a restructure was carried out which resulted in Fortress Minerals Limited becoming the holding company of the group, and an increase in its capital. This also saw the incorporation of Fortress Minerals Limited, Fortress Resources, Fortress Logistics and Fortress Industries, along with the acquisition of Fortress Resources by Fortress Minerals Limited and the capitalisation of shareholder loans.

Major shareholders of the company with a direct interest in the number of shares include Y F Chee Holdings Pte Ltd (YFCH), which has a 51.5 per cent stake, and SDB Mining Sdn Bhd with a 37 per cent stake. Both companies are incorporated in Malaysia. Fortress Minerals executive director and chief executive officer, Chee Yew Fei, owns the entire equity interests in YFCH.

PrimePartners Corporate Finance is the sponsor, issue manager, underwriter and placement agent for this IPO.