*****china mining 2004/2005*****

Promise and Pitfalls



Friday, November 19, 2004

Exclusive report by Clifford Coonan in Beijing DELEGATES went home from China Mining 2004 a bit wiser to the workings of the country's rules and regulations on foreign investment in the mining sector, with everyone attending the conference agreeing that China's mining future could be glorious, with vast quantities of natural resources waiting to be tapped.

But for some delegates, this enthusiasm was tempered with caution.

"The conference is a useful forum for us, a chance to showcase ourselves. Every bit of research done shows China is highly prospective for new discoveries and I think we've got a strong future here. China is a very encouraging country," Gavin Collery, public affairs adviser at WMC Resources said.

"Like any new country you do business in, you have to get to know the system and operate within the culture of the country," said Collery.

"The application of technology means a lot to China. You'd think it's been strongly worked over before but the easy ones are also easy to find, it's the more difficult stuff to get to," he said.

Some of the biggest names in global mining attended the event, which was hosted by China's Ministry of Land and Resources.
Beijing is showing itself increasingly willing to allow foreign capital into the mining industry but at the same time it wants to maintain control.

Bob Graham, general manager Asia-Pacific at Boart Longyear, the drilling services outfit that is part of Anglo American, said his group's wide experience in Asia meant that China was a natural choice.

"Our intelligence on the mining and exploration scene here shows us that China is on the cusp of bigger and better things. Look at the conference, there are 1,100 delegates here! It's a sign the big boys are starting to kick the stones around," Graham said.

"It was time for us to look at this part of the world and provide drilling services. It's an opportunity to modernise the equipment here. There's a lot of activity on exploration and there is more maturity in the market. There's an opportunity to provide modern technology to achieve.

"The big boys are active here but they are waiting for local mine status. There's a lot of confidence around. People are still scared but it's about to happen," said Graham.

His colleague Leonard Stephens, who is country manager in China for Boart Longyear, warned against irrational exuberance on China.

"China is a tough challenge for manufacturing. Everyone sees the huge opportunities here, the big population, you can really see the market but you have also got to collect the money," Stephens said.

"China didn't invite foreigners in because they wanted them to share in the financial rewards, they invited them in because they want the expertise. Joint ventures are for the benefits of the Chinese, not for foreigners.

"It's a tough manufacturing and selling environment. Piracy is a huge problem – sometimes it's from our own employees filtering drawings out. We've had cases where competitors have paid warehouse owners of customers of ours to keep the packaging intact so they can use it for their pirated products.

"Sometimes it's brazen, we've had people coming up trying to buy the paint that we use so they can paint their machines the same. The Chinese authorities are doing something about it and they are trying to crack down. The senior officials are serious but it's not always the case at local level."

Overall his assessment of China's prospects remained positive.

"It will change. People talk about the boom in China, but China is booming now, it's a long-term boom, it's going to go for years."