Today before the
opening bell, Armco Metals Holdings announced its reception of a $15 million
(RMB 96 million) credit facility from a Chinese commercial bank. According to
Armco Metal Holdings’ credit approval letter, $7.5 million can be used for
general purposes such as Import Letters of Credit and Import Bill Advances. The
remaining $7.5 million is allowed to be used for special business purposes such
as secured business loans. The credit facility took effect on May 16, 2014 and
is in effect for a 12-month period. It replaces the previous credit facility of
$12.7 million (RMB 78 million) that Armco Metals Holdings had with the same
Chinese commercial bank.
Under the credit
facility’s terms of approval, Armco Metals Holdings will be able to financing
purchases of numerous raw materials. It is different from the company’s other
credit facilities for financing of scrap metal in addition to Chrome Ore,
Manganese Ore, Nickel Ore, Copper Ore, and Galena Ore. According to historic
data, the profit margin for scrap metal has generally fluctuated between 7% and
19%, which is normally around 10%.
For financing its
scrap metal business, Armco Metals Holdings had previously dipped into its own
cash-flow, which had placed severe obstacles on the company’s ability to scale.
With the company’s platform strategy in which customers share scrap metal
sourcing costs, the credit approval greatly improves Armco Metals Holdings in a
number of facets:
• Gives the company the ability to
purchase scrap metals with 20% of the cargo value as a deposit.
• Gives the company additional leverage
which the company believes will greatly improve its supply capabilities.
• Gives the company the capacity to
support up to $20 million in additional revenue capacity, which gives it
positioning for expanding its market share in the Chinese raw materials
industry.
Commenting on the
announcement, Kexuan Yao, Chairman and CEO of Armco Metals Holdings, stated,
“We are pleased to have obtained this new $15 million credit approval as it
will help us to significantly expand our scrap metal business capabilities. We
also see this as an indication that the Chinese government and banking industry
is planning to further support and stabilize the metals and steel business
through monetary policy. The approval of the facility demonstrates bank’s
continued confidence and recognition on our business operation and business
model. This new facility will provide us with significant financial flexibility
to opportunistically grow our business over the course of the next twelve
months and we look forward to putting it to use to help grow our business.”
For more
information, please visit: www.armcometals.com
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