The Company recently announced its intention to acquire development right of a lignite coal resource project and construct a new production facility nearby. Acquiring this mine is of great strategic importance as humic acid, which is extracted from lignite coal, accounts for the largest percentage of the Company's cost of goods sold and it is important for Yongye to secure this crucial resource at a cost effective price. This acquisition will help the Company ensure that its fast growing Shengmingsu business won't be subject to fluctuations in market price, quality or delivery of this key raw material.
The new production facility that the Company began construction recently will help the Yongye continue to meet the strong demand for its products in the domestic agricultural market in China. In addition, Yongye expects the new facility, once complete, to lead to significant cost savings as a result of the increasing vertical integration of the Company's business. Upon completion, the new facility will expand annual production capacity for Yongye's Shengmingsu plant nutrient product from 10,000 tons per annum currently to 30,000 tons per annum, and that for its Shengmingsu animal nutrient product from 1,000 tons per annum currently to 11,000 tons per annum. The new facility is expected to be operational by the end of the third quarter of 2010.
Capital expenditures for the new production facility are expected to be between $15 million to $20 million. The Company plans to use proceeds from its December 2009 financing towards the construction.
Mr. Wu added, "We expect to continue to see strong organic growth in our
business driven by geographic expansion into new markets, increased
penetration in existing markets, additional marketing and brand bu
|SOURCE Yongye International, Inc.|
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