Sichuan Zhiquan Special Cement Closes $40M Financing to Expand Cement Production in the Earthquake Affected Areas

CHENGDU, China, Oct. 10 /Xinhua-PRNewswire/ -- Sichuan Zhiquan Special Cement ("Zhiquan" or the "Company") announced the closing of a $40M convertible preferred stock financing led by the corporate principal investment arm of Merrill Lynch and Lunar Capital Management. The investment will fund technological upgrade and expansion of Zhiquan's existing plants and will allow the Company to complete a 3000tpd production line already under construction at the site of its destroyed Ziping production line in BaiHua Village ( http://www.onehorizon.org/fund.htm ) near the Sichuan earthquake epicenter. This plant will be a key supplier of cement to the reconstruction efforts in the region. The investment will also allow Zhiquan to complete a 3000tpd production line already under construction in ShiYang, TianQuan county, in the mountainous region to the west of Chengdu. This plant will greatly expand the Company's ability to supply the numerous dams and hydroelectric power stations under construction as well as the earthquake repair and upgrades underway in the region.

Commenting on the new plants, founder, chairman and CEO Chen Zhiquan explained that "Zhiquan's existing plants are situated in perfect locations to supply both the earthquake reconstruction and hydroelectric build-out that is happening in the region. The plant expansions will help us meet the severe shortage of cement in these regions and we believe our business is unlikely to be impacted by the slowing economy." Following the earthquake Chen and the investors visited the devastated Aba and Tianquan county regions to meet with government officials in charge of the reconstruction. The Company has received strong support from the local governments to expand its existing plants to reduce the shortage.

Eos Asia Investments arranged the financing and is preparing the Company for a possible overseas IPO in 2010. As both investor and advisor to the Company, Eos organized and oversaw every step of the investment process. Eos President Jon Carnes stated: "We are very pleased to provide Zhiquan with the funding it deserves at a good valuation despite very poor market conditions. Zhiquan's tremendous growth potential and durable competitive advantages make this our favorite investment in China to date."

Merrill Lynch and Lunar Capital led the investor pool by purchasing a large proportion of the convertible preferred shares offered. Harvest Finance Ltd., an affiliate of Lunar Capital Management, further led a bridge financing to aid the acceleration of the Company's expansion efforts.

Jason Brand, president of Merrill Lynch Pacific Rim, expressed that "Merrill Lynch is honored to play a part in the continuing efforts to rebuild the areas devastated by the Sichuan earthquake." David Lee, managing director at Merrill Lynch (Asia Pacific) Limited, explained that "Zhiquan is now well-situated to assist in the reconstruction efforts essential for the future of the affected areas in Sichuan." Derek Sulger, partner of Lunar Capital Management and a director of Harvest Finance Ltd., added "We are pleased to have the opportunity to assist Zhiquan in driving further value creation, and also in providing the necessary additional liquidity to allow for continued production and expansion during the difficult earthquake period."

About the Company:

Sichuan Zhiquan Special Cement owns the only new dry rotary cement plant in the mountainous region west of Chengdu, PRC. The Company's chairman, Chen Zhiquan, has obtained approval to significantly upgrade and expand capacity in the region from two million tons per annum (2Mta) at the end of 2008 to 10Mta at the end of 2010. The added capacity will supply the growing demand from hydroelectric construction, earthquake reconstruction and development in the city of Chengdu.

About Merrill Lynch:

Merrill Lynch is one of the world's leading wealth management, capital markets and advisory companies, with offices in 40 countries and territories and total client assets of approximately $1.6 trillion. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. Merrill Lynch owns approximately half of BlackRock, one of the world's largest publicly traded investment management companies, with more than $1.4 trillion in assets under management. For more information on Merrill Lynch, please visit http://www.ml.com .

About Lunar Capital Management

Lunar Capital focuses on value-oriented private equity opportunities in China. Lunar takes equity stakes in asset rich businesses where it can apply expertise to drive value creation. Lunar targets value-oriented transactions that are mostly proprietary in nature. Lunar believes that China will be the primary driver of Asian growth over the coming decades, and along with it contribute an increasing share of world growth. Lunar Capital's presence extends to Beijing, Chengdu, Hong Kong, Kunming and Shanghai, with a growing team of 15 professionals, all with extensive investment, analysis, acquisition and/or operations experience in Mainland Chinese business. For more about Lunar Capital Management, please visit http://www.lunarcap.com .

About Eos Asia Investments:

Eos Asia Investments is a leading investment manager focusing exclusively on small and mid-sized companies in China, having made over 17 investments there since 2004. Eos seeks companies with superior management performance, sustainable market share and high return on invested capital. Their target investment is between $25 and $150 million. Eos manages its investments from offices in both the U.S. and China. For more information on Eos, please visit http://www.eosfunds.com .