Ashapura Minechem stock price jumps higher after MoU with China Railways

The share value of a leading mining company, based in India, specialising in the extraction, manufacturing, and trading of minerals and their derivative products, surged by 10 per cent following the signing of a long-term Memorandum of Understanding (MoU) with China Railway.

Price hike stance

With a market capitalisation of INR 5,075.30 crore (approx. US$618.94 million) as of Monday, shares of Ashapura Minechem Ltd (NSE: ASHM) rose by 10 per cent, reaching a high of INR 571.55 (USD 6.62) per share compared to the previous closing price of INR 519.60 (USD 6.02) per share.

The back story

Ashapura Minechem Limited, through its overseas subsidiary, has been bound in a long-term Memorandum of Understanding (MoU) with China Railway. The company specialises in the mining, manufacturing, and trading of minerals and derivative products.

This strategic partnership revolves around the development of Ashapura’s Fako bauxite deposition in the Kindia region of Guinea. In accordance to the agreement, China Railway will oversee bauxite production and logistics, while Ashapura will be responsible for sales, marketing, technical support, and quality assurance.

The project is potent in generating employment opportunities in one of Guinea’s most underdeveloped regions, enhancing production capacity, and contributing to local economic growth and community welfare, significantly improving the lives of people in the Fako region.

Business growth

The company has managed to boost bauxite sales from Guinea in spite of a stack of hindrances, with all business segments—inclusive of bentonite, kaolin, and bleaching clay—performing well in FY 2023-24. It has also guaranteed long-term contracts for the supply of bauxite and iron ore. With the addition of a new port in Guinea, Ashapura foresees a significant increase in bauxite exports in FY 2024-25.

Financial influence

Ashapura’s revenue rose by 5.1 per cent, from INR 575.78 crore (USD 70.22 million) to INR 605.25 crore (USD 73.81 million) in Q2 FY 2024-25. However, net profit declined from ₹59.33 crore (USD 7.24 million) to INR 44.33 crore (USD 5.41 million) during the same period.