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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