Chinese companies invest in overseas minerals to speed up

Although the prices of mineral resources are constantly rising, the actions of Chinese companies to acquire mines and mergers and acquisitions resources companies have not been reduced. Large enterprises such as China Nonferrous Metals Group and Zijin Mining have announced that they have successfully acquired overseas mining companies. In addition, some private enterprises are also accelerating the pace of investment in overseas mineral resources through group formation. According to industry insiders, as iron ore negotiations begin, in order to enhance the controllability of ore and compete for the right to negotiate, Chinese companies will continue to accelerate their overseas acquisitions.
At a time when overseas M&A behavior is increasing, how to overcome the multiple difficulties of objective existence and increase the success rate of transactions are the topics that all Chinese companies need to study when they go out.
The pace of mineral investment will accelerate "it should be a good time for Chinese companies to invest in overseas mines." Mike Elette, managing partner of Ernst & Young's global minerals and metals industry, said in an interview with the Economic Information Daily recently. From the perspective of mine, I believe that the market demand for mineral resources will continue to improve next year.” According to the latest data from the Ministry of Commerce, the amount of overseas investment in China in the second quarter of this year was as high as 8.7 billion US dollars, up 37.6% year-on-year and 182% quarter-on-quarter.
Mike Leit believes that in the context of iron ore negotiations, controlling resources also means gaining more negotiating power. From this perspective, Chinese companies, especially large state-owned enterprises, will grow steadily in the later stages of overseas investment in mines. In addition, international Under the conditions of market recovery, the pace of overseas investment in some private enterprises will also accelerate as the price of resource products in the later period is bullish.
Since the beginning of this year, news of Chinese companies investing in mineral resources overseas has been heard. It is understood that China Nonferrous Metals Group recently announced that the acquisition of Luanshya Copper Company of Zambia has passed all the approvals of the governments of China and Zambia, marking that China National Color Group has officially become its largest shareholder. In addition, WISCO Group announced in late September that after arbitrarily approving Canadian CLM's private placement of shares on July 20 this year, WISCO Mining Company raised another RMB 28.748 million in funds and subscribed for 6.533 million common shares of CLM's additional shares, accounting for approximately 20% of the circulation continues to be the company's largest shareholder.
Chinese private companies are also accelerating the pace of overseas investment. Zijin Mining (9.60, 0.00, 0.00%) announced on the 9th of this month that it had subscribed for 21,121,495 common shares of Canada Mining Limited through its wholly-owned subsidiary, Golden Island Resources (BVI) Co., Ltd., for a total of 22.6 million Canadian dollars. The company's total share capital after the issuance was 12.80%, becoming the largest shareholder of the mainland mining industry. According to relevant sources, some private enterprises and trading companies in Guangdong are also negotiating to invest in overseas mine projects.
Approvals are delayed and competition is more intense. At present, overseas investment faces multiple challenges. “Time” is crucial for any transaction. Delaying the best time means that you may have to pay more price and re-adjust the strategy. However, since last year, many Chinese mining companies have been "carded" by the relevant countries for their overseas investment, and they missed the opportunity. In March of this year, Chinalco's acquisition of Rio Tinto was reviewed by the Australian Foreign Investment Review Board (FIRB) for 90 days, and the plan was eventually “aborted”. At the moment, on October 12, China's Yanzhou Coal (19.44, 0.00, 0.00%) hopes to acquire the Australian coal company Felix Resources Ltd.. FIRB is already asking for the second time to resubmit its request to acquire Felix.
“In addition, Chinese companies will face more competitors,” said Mike Ellet. He said that unlike the beginning of the year, with the recovery of the global economy, Japan, India, sovereign wealth funds and some emerging sources of funds have been very enthusiastic about mining investment in addition to China. In addition, the financing channels for mining companies have begun to enrich. In addition to seeking equity financing, you can go to the bank to go to the loan and seek debt financing.
Another industry insider who declined to be named said that in the sensitive period of iron ore negotiations, large state-owned enterprises will certainly add to the Chinese negotiations if they can successfully acquire mineral resources in Australia. Under this circumstance, for large-scale M&A projects involving some state-owned enterprises, large mining companies such as BHP Billiton and Rio Tinto are likely to hinder the smooth progress of the project by participating in competition, public opposition and pressure on the local government.
It is worth noting that the “favorite” of Chinese companies on overseas mines has gradually begun to increase the valuation of local mineral resources, which means that Chinese companies will pay more for acquisition costs later.
Chinese companies need to optimize M&A behavior Although many objective difficulties cannot be avoided, Mike Elite said that Chinese companies can pay more attention to many details in M&A transactions, maximizing the success rate of transactions. In particular, enterprises may consider selecting a relatively independent subsidiary company to cooperate with foreign parties, and focus on comprehensive business capabilities such as industry, professionalism and production performance, emphasizing independent operation and independent decision-making.
According to Mike Elite, companies should fully understand how to conduct transactions in the local market, understand changes in local tax laws and regulatory laws, and understand the values ​​and cultural differences of local stakeholders when conducting overseas M&A transactions. “This is very different in different parts of the world. For example, the problems and challenges of investing in Chile are different from investing in the Democratic Republic of the Congo, and it is different from investing in the interior of Queensland, Australia,” said Mike Ellet.
He also stressed that the ability to quickly complete transactions and a more flexible investment structure will also be very beneficial. “On some unimportant details, such as the timing of the settlement of transactions, the placement of managers, etc., you can make the necessary compromises. In addition, sometimes there are more than one way to achieve success, you can try some Different methods. Especially when the timing of the transaction has changed, it is more flexible to adjust according to market changes,” said Mike Ellet.
On October 19th, Sichuan Hanlong (Group) Co., Ltd. and Australian Molybdenum Mine Co., Ltd. officially signed an equity subscription and cooperative development framework agreement in Hong Kong. Hanlong Mining invested US$200 million to acquire a 55.3% stake in Australia Molybdenum Mine Co., Ltd., became its controlling shareholder, and provided US$500 million through financing to develop a world-class large-scale molybdenum-copper associated mine SpinifexRidge wholly owned by Australia Molybdenum Mines Co., Ltd. project.

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