I completely agree about the need to be careful about Chinese investments, and the leverage the Chinese can apply to the detriment
of foreign investors. It is a completely legitimate concern, and one which I have thought long and hard about.For the most part I have avoided Chinese securities on account of this issue.
The qualified operators on the AUZ thread added their first-hand experience with Chinese industrial suppliers as an additional concern.
In the case of CLQ, I have concluded, possibly erroneously, that Friedland and his companies are an exception. I will be the first to admit that I could be wrong. Everyone makes mistakes. But here are my reasons for thinking the Chinese will not do anything unfairly harmful to Friedland or his companies.
1. Friedland's history with the Chinese goes back a long way, the seminal event being when Friedland essentially gave a gold mine to China for no consideration at all. He is a benefactor to China, not an opponent.
2. Friedland cannot be bullied. Most of his interests are out of China geographically, and he is not in a position of weakness where he can be dominated financially. He has progressively built trust with very carefully balanced financial arrangements that give the Chinese status and profit, but stop short of putting Friedland's companies in a position where they can be unfairly dominated.
3. Friedland has a lot of things that the Chinese need besides the minerals in a particular mining project. For example, putting CLQ aside for the moment, Friedland has given a measure of supply security to the Chinese state on copper by allowing Zijin Mining to take a major equity position in the Kamoa-Kakula copper project in DRC. In passing you might note that Zijin Mining is the largest gold producer in China, and is the company that evolved from the gold mine that Friedland gave to China, for nothing, way back when.
4. Friedland is not dealing with an individual Chinese company that will dominate and take over a foreign micro-cap miner if given the opportunity. He has been brought into confidence with the Chinese establishment at high levels in a way that indicates mutual respect and trust.
For example, Friedland has joint ventures with China State Grid. He has a contract with Hubei, a Chinese province of 58 million people that is a mining and industrial center which is also the home to Three Gorges Corporation, China's premier hydro power authority, with which Friedland has a JV.
5. In the case of CLQ, the arrangement that has been made will let the Chinese profit handsomely from CLQ's international success,
and the Chinese will profit disproportionately from CLQ operations in China, which is fair, since they are going to provide the orders.
Jiang Zhao-Bai and Pengxin will profit from CLQ business in China. They are going to bring a lot of Chinese business to CLQ and profit on both sides. And there will be a lot of CLQ volume outside of China. I see no reason for the Chinese to do harm to Friedland or CLQ.
Now if I were a micro-cap miner desperate for capital, I think the concerns expressed would be very much worth considering.
But I do not think that CLQ is in that situation at all.
In sum, the concerns about involvement with China are excellent points to consider. One has to be careful and not be in a position of weakness. But with respect to CLQ, I have satisfied myself on the issue, though I grant I could be mistaken about it.
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