The Strategist

China took an interest in the world's mining industry

07/27/2016 - 14:56

Chinese companies are actively buying up foreign mining companies. The volume of investment has already been increased to $ 4.5 billion. The cash flow is mainly targeted on copper and gold mine located in Africa and Latin America.

China took an interest in the world's mining industry
Chinese investors are buying up mining assets outside their home land. During the first half of 2016, Chinese companies and funds acquired overseas mining assets worth about $ 4.49 billion, which is 18.2% higher than in the same period last year ($ 3.8 billion).

Over half the past year, Chinese investors have spent a record $ 8.7 billion on acquisition of 22 mines and plants abroad. This is more than four times greater than that of the US, which took second place in the ranking in terms of cross-border transactions for purchase of mining assets, says report of Baker & McKenzie’s consulting company.

Share of companies from the Asia-Pacific region accounted for 70% of all cross-border transactions carried out over the first half of 2016.

"In the first half of the year, China's interest in the mining sector returned. <...> Now, it includes high-tech minerals and non-ferrous metals", - concluded John Mollard, Baker & McKenzie 's Global Head of Mining.

The report shows that the mining sector has bottomed out. This fact is attracting global investors who are taking this opportunity to buy assets at the best price.

Deposit of metals such as copper and gold, as well as non-ferrous metals in general, turned out to be the most attractive to investors from China.

Acquisition of Freeport-McMoRan copper mine in Congo was the largest cross-border deal with participation of Chinese investors in the mining sector. The deal was sponsored by China Molybdenum company, which paid $ 2.65 billion for the asset. The firm also purchased a Brazilian deposit of niobium and phosphates, worth $ 1, 5 billion, from Anglo American international mining conglomerate.

China is advancing in the gold mining sector, too. A good example for this is Chinese Sichuan Railway Investment Group (SRIG)’s major deal on purchase of a copper and gold mine in Australia for nearly $ 300 million.

Chinese investors have also got possession on Alpart, a Jamaican bauxite-alumina complex, previously owned by Russian steel UC Rusal. The buyer was a Chinese company Jiuquan Iron & Steel (Group); the transaction’s cost of amounted to $ 299 million.

Gold is a traditional object of investment, especially for investors from emerging economies. Price for gold in the world markets is also fueling interest in gold mining assets: the yellow metal has risen in price by almost 25% since January 2016, to $ 1314 per troy ounce.