General Steel's Longmen Joint Venture Signs Supply Agreement with Tianjin Product and Energy Resources Development Co. Agreement Provides Longmen JV with Guaranteed Iron Ore Supply
BEIJING, Dec. 5, 2012 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), one of China's leading non-state-owned producers of steel products and aggregators of domestic steel companies, today announced that its Longmen Joint Venture ("Longmen JV") has signed a one-year supply agreement with Tianjin Product and Energy Resources Development Co., Ltd. ("Tianwu"), through which Tianwu will provide Longmen JV with a minimum of 3 million metric tons of iron ore at market prices, with favorable credit terms.
"This agreement with Tianwu is another example of our successful efforts to enhance our raw materials procurement capabilities by establishing relationships with key suppliers, including prominent state-owned enterprises and their subsidiaries. We have worked closely with Tianwu and its parent Company, Tianjin Materials and Equipment Group Corporation ("Tewoo Group"), for several years and are extremely pleased to expand the scope of our cooperation through this agreement," said Henry Yu, Chairman and Chief Executive Officer of General Steel. "The current pricing pressure facing the construction steel market reinforces the importance of access to high quality raw materials and maximizing production efficiency. The minimum quantities guaranteed under this agreement coupled with the favorable purchasing terms will give us the resources needed to utilize more of our available production capacity. This increased access to iron ore and the recent efficiency improvements we have made at Longmen JV will allow us to better meet the growing demand for our products in Western China."
Tianwu has provided Longmen JV with credit of up to RMB1 billion for the purchase of iron ore under this agreement at an interest rate of 10% above the benchmark lending rate of the People's Bank of China. These financing terms provide the Company with an attractive alternative to bank debt, while freeing up cash to support working capital needs.
Tianwu is a leading Chinese trading company specializing in the procurement, sale and financing of raw materials including iron, steel and mineral resources. It operates through affiliates in key Chinese cities including Beijing and Hong Kong, and international markets such as Australia and India. Tianwu is one of China's largest iron ore trading companies, having sourced and sold over 16 million metric tons in 2011. It is a subsidiary of Tewoo Group, a state-owned commodity trading enterprise with nearly RMB2.5 billion in registered assets. Tewoo Group is one of the top-100 enterprises in China and one of the Fortune Global 500 companies for 2012. In 2010, General Steel and Tewoo Group partnered to form Tianwu General Steel Material Trading Co., Ltd. ("Tianwu JV"), a joint venture 60% owned by General Steel.
About General Steel Holdings, Inc.
General Steel Holdings, Inc., (NYSE: GSI), headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 7 million metric tons of crude steel production capacity under management, its companies serve various industries and produce a variety of steel products including rebar, high-speed wire and spiral-weld pipe. General Steel Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality. For more information, please visit www.gshi-steel.com.
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This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or beliefs about future events and financial, political and social trends and assumptions it has made based on information currently available to it. The Company cannot assure that any expectations, forecasts or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections will be realized. Actual results could differ materially from those projected in the forward-looking statements as a result of inaccurate assumptions or a number of risks and uncertainties. These risks and uncertainties are set forth in the Company's filings under the Securities Act of 1933 and the Securities Exchange Act of 1934 under "Risk Factors" and elsewhere, and include: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether the Company is able to manage its planned growth efficiently and operate profitable operations, including whether its management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether the Company is able to generate sufficient revenues or obtain financing to sustain and grow its operations; (d) whether the Company is able to successfully fulfill our primary requirements for cash; and (e) other risks, including those disclosed in the Company's Form 10-K, filed with the SEC. Forward-looking statements contained herein speak only as of the date of this release. The Company does not undertake any obligation to update or revise publicly any forward-looking statements, whether to reflect new information, future events or otherwise.
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