Masan Resources recently announced the acquisition of H.C. Starck GmBH’s 49 per cent stake in Nui Phao – H.C. Starck Tungsten Chemicals Manufacturing LLC (Joint Venture) for a consideration of US$29.1 million.

Following the deal, the joint venture is now a wholly owned subsidiary of Masan Resources. This is the first step in the company’s journey to becoming an industrial tungsten chemical downstream processor with a 50 per cent global market share ex-China.

The journey of a 5-year win-win partnership
The ownership of Nui Phao mine, which was discovered in the late 1990s, had changed hands a few times before landing in Masan Group’s. 
The Nui Phao project is located in Dai Tu District, Thai Nguyen Province. This is one of Vietnam’s largest mines with approximately 66 million tonnes of tungsten, fluorite, bismuth, and copper reserves in a 720-hectare area. Masan saw immense potential in the project and acquired the mine in 2010 to turn it into “The Pride of Vietnam” for its own sake as well as Vietnam’s. 

It has so far Masan invested nearly $1 billion for the mine’s construction, equipment, wastewater treatment, compensation, relocation, and community projects.

Masan Resources recruited the best executives, many of whom had many years of experience working at the world’s largest mines and processing plants, to develop the Nui Phao Project to international standards. 
Since it is an opencast mine, Nui Phao has the world’s lowest production cost. Besides, the average processing output is now at 95 per cent of designed capacity. 
Established in 2013, the Nui Phao – H.C. Starck Tungsten Chemicals Manufacturing LLC was a joint venture between Nui Phao and H.C. Starck of Germany, the world’s leading industrial resource processor. The joint venture allows MSR to acquire mid-stream processing technology to produce tungsten chemicals such as ammonium paratungstate (APT), blue tungsten oxide (BTO) and yellow tungsten oxide (YTO). 
In five years the joint venture grew into the world’s largest APT, BTO and YTO producer with a 36 per cent market share ex-China. 
The plant has the ability to enrich low-grade tungsten ore containing 0.12 – 0.32 per cent tungsten into concentrated tungsten that contains up to 60 per cent tungsten. 
After the process is complete, the tungsten concentrate must undergo a complicated mid-stream process of conversion to become APT, BTO and YTO, which contain almost 100 per cent tungsten. 
This is much higher the government’s minimum requirement of 55 per cent to be allowed for export. 
Dr Karlheinz Reichert, CEO of H.C. Starck’s tungsten division, said: “Nui Phao was a great partner during the course of our joint venture. The partnership resulted in a robust two-way exchange of technology and culture.”
The journey to become a global company
In the tungsten value chain, MSR is an upstream miner and midstream processor following the acquisition of the joint venture. 
Masan Resources’ vision is to become a fully integrated downstream tungsten chemicals business of global scale and influence.
MSR is on track to be the leading integrated downstream processor of industrial tungsten chemicals globally by 2022, and increase market to over 50 per cent from 36 per cent now. 
In the near future MSR aims to increase production capacity and procurement of tungsten ores from sources outside of Nui Phao to meet growing demand.
Craig Bradshaw, CEO of MSR, said: “This acquisition is a critical step to deliver our vision of becoming a fully integrated downstream tungsten chemicals business of global scale and influence.”
MSR’s $29.1 million deal to acquire H.C. Starck’s leading technology and expertise proved to be a bold and well-planned move. 
Tungsten is the material of the future because of its importance in electronics, renewable energy and display technologies such as OLED screens. It is widely used in making integrated circuits and chips, as well as anti-radiation materials. Tungsten also makes its way into nanotechnology, such as in the production of nanowires.
These are industries that demand a reliable and plentiful supply of materials. MSR is among the few suppliers in the world capable of meeting such demand for industrial chemicals, especially tungsten and fluorite.
MSR is actively seeking industry leaders to go further downstream. The goal is to manufacture tungsten industrial products for end-consumers such as cemented carbides, milled product and value-added chemical products, a $11 billion market (Masan Resources’ estimate).
MSR’s financial prospects looking up
Danny Le, head of strategy and development at Masan Group, said: “From a financial perspective, this transaction will enable us to consolidate our cash position by eliminating minority interests. This provides MSR better flexibility to pay down debt or to declare cash dividends to shareholders over the medium term.”
MSR posted revenues of VND3.239 trillion in H1 2018, a 26.6 per cent increase over the VND2.559 trillion recorded a year earlier due to a persistent rise in tungsten prices in 2018. 
MSR delivered an attributable net profit of VND300 billion for H1 2018, representing a 376.2 per cent increase over the same period last year. 
Management’s revenue and attributable net profit expectations for FY2018 are VND8 trillion and over VND1 trillion.

Thanks to the synergy with Nui Phao after the transaction, the total savings for MSR per annum is $8.5 million, including $3 million from waste disposal and processing optimisation, $4.5 million from greater capacity utilisation and $1 million from higher price realisation. 
The acquisition is also consistent with MSR’s five-year strategy to develop an integrated business model to generate strong cash flows and profits through commodity cycles. MSR may even pursue an international IPO to raise funds.

(Source: Zing)