Trucks loaded with coal drive on a road in Mongolia leading to China. Winsway Coking Coal Holdings Ltd, a company that transports coal from Mongolia to China, plans to raise as much as HK$4.46 billion in its Hong Kong IPO. Doug Kanter / Bloomberg news

Winsway Coking Coal Holdings Ltd, which processes and transports coal from Mongolia into China, said Monday it plans to expand its capacity with cash from its Hong Kong IPO to tap the country's growing coal demand.

China, the world's biggest steelmaker, last year increased imports of coking coal by a record fivefold as the Central Government closed smaller, unsafe mines.

Winsway is seeking to benefit from the increasing demand by raising funds to expand its shipments from Mongolia.

The company, which counts Hopu Investment Management Co as an investor, is seeking as much as HK$4.46 billion ($574 million) in a Hong Kong initial public offering.

Some 75 percent of the IPO proceeds will be used to acquire new logistics and transport infrastructure, while another 15 percent will be used to buy coal resources and fund mining, according to an email sent to investors.

The supplier of steelmaking coal will sell 990 million new shares at between HK$3.25 and HK$4.50 apiece, according to the email. It has an option to sell a further 148.5 million shares.

The company hired Deutsche Bank AG and Goldman Sachs Group Inc as the sale arrangers, according to the email. Bank of America's Merrill Lynch & Co unit is also underwriting the IPO, the email said.

Winsway is expected to post net profit of 773 million yuan ($115 million) for 2010 on sales of 8.1 billion yuan, according to an estimate by Deutsche Bank analysts Fred Lam and Nora Min. Earnings are expected to gain 70 percent from the previous year, according to the analysts.

Winsway plans to fix the price for its shares on September 29, according to the email sent to investors.

A Hopu Investment-led group that includes a unit of China Minmetals Corp and Silver Grant International Industries Ltd bought convertible bonds and preferred shares worth $110 million in Winsway earlier this year, according to the email. Hopu, a private equity fund backed by Singapore's Temasek Holdings Pte, was started by Fang Fenglei, a Chinese partner at Goldman Sachs.

Itochu Corp, Japan's fourth-largest trading company, also invested $10 million in Winsway through convertible bonds, the email said.

Mongolia's coal exports to China may climb to about 12 million metric tons this year from 8.5 million tons in 2009, Alexander Molyneux, the chief executive officer of SouthGobi Energy Resources Ltd, said in April.

Bloomberg news

(HK Edition 09/21/2010 page3)