Chinese Dragon
Overseas investment by Chinese mining companies continues to increase. According to Zeng Shaojin, the vice president of China Mining Association, the country invested in 45 mining projects in the first quarter of this year, worth US$3.0 billion, compared with 155 projects, valued at US$4.5 billion, in the May-December period of last year.
Importantly, the Chinese private sector is also in the ascendancy. The proportion of these investment ventures conducted by state-owned enterprises (SOEs) has fallen from 53% in the May-December period of 2009 to 36% in the three months to end-March 2010.
Mr Zeng made the observation during the first day of the inaugural Mines and Money Beijing conference and exhibition.
This two-day event, attended by over 400 delegates, was organised by Aspermont UK, publisher of Mining Journal.
The global mining and metals leader of Ernst & Young, Mike Elliott, confirmed the dominance of Chinese companies, noting that they accounted for 30% of all mining transactions last year.
He described 2009 as a “deal-making hot spot” because of a shortage of funds from conventional sources.
Mr Elliott said that the trend has continued this year, with a further jump in deal-making. However, “the cheque book is no-longer enough”, according to Mr Elliott, and Chinese companies are now differentiating themselves by offering unique technology (particularly with regard to low-grade deposits) and, crucially, an “appetite in offering infrastructure”.
Lilian Luca, a director of The Beijing Axis, observed “it is always necessary to pay a premium for great projects but instead of paying investors, the Chinese were paying in the form of infrastructure”. This, he commented, was to the long-term benefit of the region, or whole country, rather than just the project’s shareholders.
Adrian Macartney, the African mining leader for Ernst & Young, described the Chinese offerings as a “package deal”.
The chairman of China International Mining Group, André Gauthier, accepted that Chinese companies were “not using the same business rules”. This did not make them worse, or wrong, he said, “just different”. The Chinese philosophy is based on the importance of national development, according to Mr Gauthier, while Western philosophy was based on corporate economic activity.
Mr Gauthier said that “Chinese companies know where they are going … other countries will have to follow”.
The president of Global Mining Capital Corp, Keith Spence, told delegates that Australia has remained the focus of most of China’s activity in the past year (42% of the total) but that there was increasing interest in other countries. There is also much less emphasis on control, with 52% of the deals in 2009-10 being for equity stakes of under 20% (there was half the appetite for this minority stake in 2007-09).
In their financing deals, Chinese companies are increasingly demanding long-term metals supply arrangements, rather than equity. This is to satisfy China’s metals consumption, which continues to dominate world markets.
Incorporating a large exhibition, the two-day conference, which will be staged at the five-star China World Hotel in Beijing’s central business district, will cover a broad spectrum of issues, including the following topics:
★ Understanding the evolving political , economic and operational environments in China- exmaining the implications for the global mining sector;
★ China's overseas investments in mining - a review and outlook;
★ Accessing project finance and the outlook for investment in the mining sector;
★ Chinese mineral commodity supply, demand outlooks;
★ Latest outlook on the Chinese economy and the drivers affecting the global mining industry;
★ Challenges and opportunities for China doing business in overseas jurisdictions;
★ Examining China's Africa investment policy;
★ What are the challenges and opportunities presented by China for the global mining sector?
For further details on exhibiting and sponsorship opportunities, contact Pablo Martin on:
