Chapter 387: Not a Decision to Be Taken Lightly
Burs, South Australia.
Rinto Headquarters.
Alba sat at the head of the meeting room table, with all the senior executives of the group present.
This meeting today was of immense importance.
"Magnesium-Aluminum Group's latest bid of 28 billion magnesium dollars has once again been rejected by Gala Aluminum Group's board." Alba spoke slowly, his voice heavy.
In previous senior-level meetings, the atmosphere had often been more relaxed, with occasional casual banter interspersed with serious discussions.
But today was utterly different. The entire room was stiflingly solemn.
The decision they were going to make today could elevate Rinto's status in the mining world to an entirely new level.
"We have an opportunity," Alba declared as his eyes swept around the table, clearly expressing his stance.
Eric, the Chief Financial Officer, who was most familiar with the group's financial situation, stood up and said, "Since we acquired Northern Mining in 2000, it's been nearly seven years without any substantial investment. In recent years, due to the improving iron ore market, the group's annual profits have been quite robust. While a portion of these profits has been distributed as dividends to shareholders, another significant part has been used to repay existing loan principals and interest. Although our capital expenditures have been significant, we still have plenty of liquid funds available."
"How much?" Alba demanded the exact figure.
"Consolidating our funds from all channels, we can raise at least five billion magnesium dollars in cash," Eric replied precisely.
"We will still need loans."
Alba was acutely aware of how much energy and courage were required to dive headlong into the center of this acquisition storm. Far from being fearful, he felt a subtle thrill.
"The Board of Directors has already agreed with our intentions. Now, we must formulate a feasible and practical plan!"
"Magnesium-Aluminum Group's latest offer totals 28 billion magnesium dollars, of which approximately 18 billion is cash, and the remaining 10 billion is equity swaps," Eric briefly outlined the financial challenges. "To win with a surprise bid, we must defeat Magnesium-Aluminum Group and gain the approval of Gala Aluminum's board. It's exceedingly difficult!"
"Magnesium-Aluminum Group has prepared meticulously for this acquisition, operating for at least two years already. Our sudden participation may be too rushed to succeed," one executive expressed doubt.
"We must offer a bid that's more sincere than Magnesium-Aluminum Group, enough to convince Gala Aluminum's board and shareholders," Alba responded firmly, radiating confidence.
"To succeed without complications, first, our bid must surpass Magnesium-Aluminum's offer and Gala's current market capitalization," Eric laid out the acquisition strategy.
"Magnesium-Aluminum's repeated offers below market value are ridiculous. No wonder Gala Aluminum's shareholders are furious."
"If I were a Gala shareholder, I'd easily sell on the market for the face value of 80 magnesium dollars per share."
"So naturally, Gala's shareholders will never agree to Magnesium-Aluminum's offers!"
The executives were all closely monitoring this major event in the mining industry and were intimately familiar with the details.
"Our bid must definitely exceed Gala Aluminum's market price. We can't make the same mistakes as Magnesium-Aluminum; otherwise, we'll have no chance at a surprise victory," Eric affirmed before continuing with the strategy. "Second, we must pay entirely in cash! According to our research, Gala's board's biggest dissatisfaction with Magnesium-Aluminum's offer was precisely the payment method. They don't want equity swaps—they want cash!"
"But Gala Aluminum's current market capitalization is already over 32 billion magnesium dollars. An all-cash payment would put enormous financial pressure on us!" another executive raised concerns.
"Don't worry about that. We have already contacted an investment bank on Wall Street, capable of providing 30 billion magnesium dollars in short-term financing," Alba replied confidently. "And this money can be available very quickly!"
"Magnesium-Aluminum has submitted two formal bids already, both quickly rejected. But according to reliable intelligence gathered by our economic analysts, Magnesium-Aluminum hasn't given up yet."
"Magnesium-Aluminum will definitely increase their bid. After all, they've been preparing for years. They won't abandon their efforts easily."
"How high will their next offer be?"
"I think they've learned their lesson and will at least match Gala's current market capitalization."
"So, that's 32 billion magnesium dollars?"
"It will certainly exceed 32 billion. There will surely be a premium."
"This is already their third bid, and I believe Magnesium-Aluminum will finally go all in. Honestly, it's hard to predict their third offer."
"If their offer satisfies Gala's board, we lose our chance."
The executives discussed with urgency, all acutely aware of how quickly they needed to act.
Time was precious for Rinto.
"We will submit our bid simultaneously with Magnesium-Aluminum Group's third offer," Alba announced.
"Magnesium-Aluminum's bid this time is unpredictable."
"How much should we bid? It's a tough number to decide!"
"The bid we propose depends entirely on the value Gala Aluminum brings to us after acquisition!"
"Our alumina output currently accounts for 9% of the global market, but our primary aluminum production is relatively weak. Globally, we rank seventh among mining corporations. Our aluminum division has seen slow development, lacking major growth opportunities."
"If we want our aluminum division to match our iron ore division's scale and global influence, acquisition is our only viable route. Gala Aluminum becoming prey presents a rare opportunity!"
"Once acquired, our primary aluminum production will surpass Russian Aluminum's 12.5%, making us the world's largest primary aluminum producer!"
"In my view, the biggest gain from Gala Aluminum is their advanced aluminum rolling technologies and global sales channels. Our own bauxite can then be sold globally through these channels, allowing us to control profits throughout the entire supply chain!"
"But the most crucial point, in my opinion, is that if we successfully acquire and integrate Gala Aluminum, our aluminum division could ascend into the ranks of the world's top three aluminum companies. The power and influence within the industry are far more valuable than any visible profit!"
Everyone at the table had imagined the benefits of acquiring Gala Aluminum Group.
All were optimistic about the positive aspects, easy to envision and gladly welcomed.
"Actually, there's another financial consideration," Eric interjected again. "According to Gala's corporate tax law, there's a loss carryforward clause. If we acquire Gala Aluminum, their accumulated losses from previous years could offset our future tax obligations. Last year, Rinto paid Gala approximately one billion magnesium dollars in taxes. After acquiring Gala Aluminum, we'd pay roughly half this amount. This would create a significant financial synergy!"
"If that's the case, we can afford to raise our bid even further."
"Regardless of Magnesium-Aluminum's bid, we must submit an offer high enough that Gala Aluminum's board and shareholders accept immediately, decisively rejecting Magnesium-Aluminum's third offer!"
Alba spoke with absolute resolve, displaying remarkable ambition: "In 2004, bauxite prices were just 20 magnesium dollars per ton. Today, they're already at 70 magnesium dollars—more than tripling in just three years! I firmly believe prices will double again within two years. By then, our acquisition costs will quickly be offset by profits, and we'll easily repay our loans!"
"What we need now is to discuss exactly how much our bid should be," Eric asked the team. "I need everyone's input."
Alba also felt this was an extremely tough decision.
"This offer is not just a number—it represents immense wealth!"
But whatever the number, it must exceed 32 billion magnesium dollars!
Thirty-two billion was already nearly half of Rinto's entire market value.
This was not a decision to be taken lightly.
…
Li Tang was unaware that Rinto was meticulously plotting a surprise acquisition, but he already knew the outcome of the takeover battle and the final bid.
Thus, he felt entirely at ease after deciding to continuously increase his holdings in Gala Aluminum.
He leisurely arrived at Wukuang Group headquarters.
"Mr. Niu," Li Tang greeted Niu Fu cheerfully.
"I heard you've been fooling around lately—no longer involved in Lianying Mining operations, not launching new exploration projects, but instead playing around in the stock market!" Niu Fu scowled at Li Tang, clearly displeased with his apparent negligence.
In the eyes of many mining professionals domestically, given Li Tang's incredible exploration talent, he should be actively discovering more mineral resources to meet the country's severe shortage of essential materials.
"But Li Tang has been making a fortune from stocks!" Hu Zhenchi, general manager of Wukuang Investment Company, remarked enviously.
Ten billion magnesium dollars of capital leveraged into a 30-billion-dollar total investment had yielded over 800 million magnesium dollars in profits within just months—over an 80% return!
Absolutely astonishing!
"You made so much money—can you even spend it all?" Niu Fu grunted.
"Small money, small money," Li Tang laughed carelessly.
Hu Zhenchi curiously asked, "Gala Aluminum's stock is already very expensive, but you haven't cashed out recently. What's going on? Are you looking for even bigger profits?"
"My ambitions are indeed quite large," Li Tang continued laughing heartily.
"Those foreign capitalists are all cold-blooded animals who'd swallow you whole without even spitting out your bones! You'd better be careful!" Niu Fu offered this advice with genuine concern. "With investments, moderation is best. After all, you're not a regular in the capital markets. You've hit it big once by pure luck—just count your blessings and don't let it go to your head!"
"I understand," Li Tang replied humbly with a nod.
"Come, Li Tang, have some tea!"
Zhao Hepu was growing increasingly plump. Sitting on the sofa, he resembled a small hill. "Your capabilities just keep getting stronger, and your range of business activities is frighteningly wide. Initially, you started with exploration techniques, then moved onto investing in your own projects, acquiring listed companies to develop mines. Now, you're even playing sophisticated capital games. What's most impressive is you actually made money—figures that even many capital giants spend their entire lives chasing but never achieve!"
"I can't compare with those big financial sharks who casually make billions," Li Tang laughed modestly.
"You made eight hundred million magnesium dollars from a single investment and you're still unsatisfied?" Niu Fu snorted again. "In less than half a year, you've made over six billion yuan in profit—more than our Wukuang Group's total annual net profit!"
"It's different." Li Tang smiled lightly. "I'm earning money overseas, and money from abroad isn't valuable. But Wukuang Group operates domestically, genuinely contributing to industry by creating numerous job opportunities and paying salaries to countless families, making enormous contributions to the nation's economic development."
"You really have a smooth tongue," Niu Fu didn't know what to say about Li Tang.
"What's your next step?" Zhao Hepu asked.
"First, I'll handle the Gala Aluminum stock investment project. Once I clear that up, I plan to focus on developing Malihe Iron Mine. In the latter half of this year, I'll look into opportunities to acquire another iron ore mine in Australia. At that point, I'll have an initial investment plan over there." Li Tang briefly outlined his intentions.
"Still prioritizing iron ore?" Zhao Hepu asked.
"Yes, that'll remain my main focus for the coming years," Li Tang nodded.
"Last November, domestic steel companies entered another round of iron ore negotiations. You were overseas at that time, so you probably weren't very aware of domestic developments. Do you know this year's iron ore price?" Niu Fu began discussing the domestic iron ore market.
"I've seen some reports but not detailed specifics."
"This year's iron ore prices continue to rise, up 9.5%. Last year, the spot price for iron ore surged to 88 magnesium dollars per ton. Domestic steel companies panicked, fearing further increases, so they quickly reached new long-term agreements with the three major iron ore giants."
Niu Fu sighed, "Our country's iron ore imports are nearing 400 million tons! Each year, we spend more and more foreign currency importing iron ore. Top-level leadership is deeply concerned, but there's little they can do about it."
"I'm in a tough position too," Li Tang understood Niu Fu's implication—that he hoped Li Tang might help domestic steel companies tackle rising iron ore costs. "Our Lianying Mining has only recently stabilized iron ore production, and output isn't very high. Our influence over iron ore pricing negotiations is minimal. The Malihe Iron Mine project has run into issues and is practically stalled. I genuinely want to help our domestic companies, but my influence is limited."
"It's fine." Niu Fu waved his hand dismissively. He wasn't trying to force Li Tang into sacrifices; rather, he was just passing along sentiments from higher-ups. "Continue your development at your own pace. I'm mentioning this because senior leadership values you highly and has great expectations for you."
"I'm grateful for the leaders' care," Li Tang sincerely responded. After all, previously, Lianying Mining had received significant low-interest loans from the Export-Import Bank, resolving critical financial issues.
Included privately in this loan was a provision suggesting that Li Tang, if capable, support the steel association's iron ore pricing negotiations. Until now, the steel association had never pressured Li Tang using this provision.
Now, when Niu Fu mentioned this matter, given their close relationship, it wasn't pressure but merely a friendly reminder.
Niu Fu nodded, then added another piece of advice: "You should sell off those Gala Aluminum stocks now. You'll have a lot of cash to invest in tangible industries. Stocks are intangible and uncertain—avoid getting deeply involved. This quick money can trap you."
Li Tang didn't linger at Wukuang Group long and soon headed to Shenxia Group.
Noticing Li Xinqi was busy, he didn't disturb her and went directly to Li Xingchao's office.
"What a rare guest!" Li Xingchao greeted Li Tang with surprise mixed with mild annoyance.
"President Li, are you busy?" Li Tang adopted a formal greeting.
"Don't play dumb with me, kid!" Li Xingchao stood abruptly, slammed the door shut, and dropped heavily onto the sofa, crossing his legs without inviting Li Tang to sit. He stared at Li Tang. "Xinqi told me you've been back for a while now. What's going on? Planning on playing rogue?"
"Playing… rogue?" Li Tang had no idea what he meant but felt intimidated, his legs stiffened, and he hesitated to sit down.
"You really have a one-track mind—only thinking about work. You should pay attention to your life and personal affairs!"
Li Xingchao admired yet was annoyed by Li Tang's intense devotion to his career. During the Chinese New Year, his daughter, Li Xinqi, had taken care of Li Tang's parents every day, shopping with them, buying gifts, and making every effort to please them. He himself, as her father, had never enjoyed such treatment!
Just thinking about it made him furious!
"I'm doing fine," Li Tang felt nervous discussing such matters and quickly changed the subject. "I came today to discuss business matters."
When it came to work, Li Xingchao didn't presume to lecture Li Tang. He immediately gestured to the sofa opposite, "Sit and talk."
Li Tang sat down and slowly began, "The exploration of Maluhe Coal Mine achieved outstanding results. I've always kept this project in mind but have been too busy to discuss it until now."
"What's your plan?"
"Maluhe Coal Mine is definitely viable, but underground mining poses challenges, especially labor. Fortunately, our domestic coal supply is currently sufficient, so there's no urgent pressure to develop this mine."
Li Tang summarized briefly, "My thought is, let's wait until after 2009 to seriously consider extraction. What do you think?"
"Why 2009?"
"In two years, my capital resources will be more abundant." This was only part of Li Tang's reasoning.
The year 2009 had special significance. By that year, the global economy would begin to recover from the financial crisis, making investment attractive while avoiding risk.
Moreover, domestically, 2009 was a turning point for China's coal industry. Stricter environmental policies and sustainable development measures drastically curtailed coal production. Many coal mines would close, significantly reducing output. Electricity companies would face coal shortages, steel companies would need to import massive amounts of coking coal, and overseas investment in coal mining would become a trend.
At that time, securing domestic regulatory approval and financing for the Maluhe Coal Mine would be far easier.
"Indeed, there are discussions about investing in overseas coal mines now, but they're not urgent," Li Xingchao nodded in agreement, then inquired further, "How's Zhongcheng Mining's Talege Coal Mine progressing after all these delays?"
Li Tang hadn't directly participated in Zhongcheng Mining's affairs for a long time and didn't know the details precisely, though he understood the general situation: "Mongolia continues to have problems. After finally suppressing opposition, progress has been slow and intermittent."
"Coal prices are at historic highs. If you don't quickly develop it now, you might miss out on premium pricing."
"Yes, I'm also anxious, but there aren't many options." Li Tang knew perfectly well the years 2002-2011 were the golden decade for coal. The coal industry prospered significantly during this period, widely celebrated nationwide.
Missing this golden window wouldn't mean losing the market entirely, but getting the highest profits from investments would require waiting for many years.
"No need to keep talking to me—Xinqi is outside. Go find her."
Li Xingchao waved his hand, signaling Li Tang to leave.
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