Chinese miners looking abroad

China’s mining industry is leading the way for cashed up Chinese companies looking to Asia and the rest of the world for potential acquisitions, mergers and takeovers. The booming economy of Asia in general and China specifically has generated the cash and the growth is being fuelled by a desire to become more westernized, which in turn means the need for more energy, more infrastructure and more steel. This cannot be achieved without resources and while some can be sourced from China and the rest of Asia, Chinese mining companies and manufacturers are increasingly looking further afield.

To date this has meant imports but now Chinese mining companies as well as other Asian miners are more cashed up it means a quest for purchases and there are a number of recent examples of Chinese companies flexing their muscles.

China Shenhua Energy Co, the world's second-largest coal company, has the capacity to raise almost $80 billion to spend on acquisitions of mines, power plants and ports to feed China’s growing demand for energy. Its market value at November 30 last year was equal to $163.5 billion. The company is in preliminary talks to invest in Indonesia and is looking at targets in Australia and Mongolia. BHP Billiton’s $134 billion unsolicited takeover offer for Rio Tinto Group may accelerate those plans.

China, the largest energy consumer after the US, burns coal to generate almost 80% of its power. The government estimates energy demand will rise about 4% annually to the equivalent of 2.7 billion metric tonnes of coal by 2010. There has also been talk of a Chinese counter-bid for Rio Tinto with steelmaker Baosteel reportedly considering making an offer for the Anglo-Australian miner. Baosteel's president Xu Lejiang was reported as saying that the company was studying counter-measures to BHP Billiton's proposed offer for Rio and this included purchase. He apparently said it would take more than $US200 billion to buy Rio.

In another show of strength China Strategic Holdings’ wholly-owned subsidiary Joinway Group has entered into a memorandum of understanding to buy mining assets from Gainpro Group for not less than 320 million yuan. Under the agreement, China Strategic will acquire Xiwuzhumuqinqi Jinzheng Mining, which owns a coal mine in the Inner Mongolia region of China. The mine has a proven reserve of 750 million tonnes of power coal, and has been granted a production permit of 1.2 million tonnes of coal per annum.

Also China's biggest producer of nickel, cobalt and platinum-group metals, Jinchuan Group, has offered Can$1.60 a share in cash for Canadian exploration firm Tyler Resources. The offer, which values Tyler at about Can$214 million, is a 54% premium to an earlier, unsolicited bid from Mercator Minerals. Tyler's board of directors has backed the offer. Tyler's primary project is the Bahuerachi property, which contains Mexico's largest undeveloped copper/zinc resource.

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Yolanda Torrisi - Managing Editor and Director of The ASIA Miner, publishers of the Asaia Miner magazine and mining conference hosts including investing in mining