Wellington, Sept 22 NZPA - Technology company Rakon will try to raise $65 million on the share market to expand its operations in China, the company said today.

Rakon, a manufacturer of quartz products and crystal components with operations in Europe and Asia, will begin the construction of a new Chinese manufacturing plant with its existing Chinese joint venture partner, Timemaker.

It plans to start building a crystal manufacturing plant in Chengdu, one of China's largest cities this year, and for operations to commence early 2011.

This new facility will build upon the existing Chinese joint venture operations. "We put our Chinese expansion on hold last year while the world was in recession. However, the scale of the earnings growth opportunities in front of us, and the speed at which they are developing, gives us confidence that now is the right time to proceed," said managing director Brent Robinson.

China is the centre of manufacturing for consumer electronics and expanding there would give Rakon a much stronger position in the world's largest market, he said.

Construction of the first stage is expected to cost $30m through to the end of the 2011 financial year.

Additional funds will be used for working capital, repayment of all debt and the settlement of outstanding deferred consideration for Timemaker of $6.3m.

"Expansion in China also aids in reducing our exposure to the highly volatile New Zealand dollar which can greatly affect the cost sensitive, high volume products we will manufacture there."

Rakon said it expected sales volumes in the second half of the year to be about 150 percent higher than those of the same period last year, when sales dropped off dramatically due to the global financial crisis.

"This volume increase is important as it gets us back to where our operations are much more efficient," Mr Robinson said.

The 2011 financial year is expected to generate significant earnings growth for Rakon, underpinned by growth in smart phones, femtocell roll outs and overall telecoms growth. Rakon estimates 2011 ebitda will be between $30m and $35m.

Rakon has been granted a trading halt to undertake its share placement. Normal trading in Rakon shares is expected to resume immediately following the placement, which is expected to be tomorrow.

The $65m equity raising comprises a $45m underwritten institutional placement, as well as a $20 million underwritten Share Purchase Plan for eligible shareholders. The placement price is underwritten at $1.10.

The institutional placement comprises two tranches, the first being an unconditional tranche raising of about $25m. The second tranche of approximately $20m will be conditional on approval by shareholders by way of a shareholder vote. This vote is scheduled to be held on October 12.