An interesting analysis (August 2015) may be interesting.
Source:
http://www.globalview.cn/html/strategy/info_5047.html
Depth analysis: international mining enterprises to overseas mergers and acquisitions in the bottom?
Source: China mining news author: Li ping time: 2015-08-07
Slower global economic growth and mineral demand, resource exploration and development costs continue to increase, the effect of global mining at depth adjustment. According to the forecast of China's mining, mining pick up time. How to make steady development of mining industry in a global context, becomes the focus of mining session to discuss.
"Along the way" strategy suggested that Chinese enterprises "going out", and to seek international cooperation, in the current environment is a good choice. Meanwhile, the now international mineral prices at rock bottom, many international mining companies market value plummeted, capital chain rupture, need overseas investment for Chinese enterprises in overseas bargain-hunting provided rare opportunities. And in a recent China mining investment Forum meeting, the China Mining Association Vice President Wang Jiahua also said the best timing of overseas mining investment, merger and acquisition of Chinese enterprises has come.
Facing the surge of overseas investment, Chinese enterprises should be based on what kind of attitude acquisition of overseas mining became a topic of concern to the industry. China mining investment Forum meeting, Wang Jiahua said that going out is the key to business success worldwide team of professionals and local operations teams, should not have casino-style adventure, especially the initial overseas mergers and acquisitions business, to employ a mergers and acquisitions Adviser, conducting detailed surveys and research.
Meanwhile, compared with the European and US companies, most of the practitioners of international business of Chinese enterprises and regulations new, technically inferior. Therefore, for overseas investments cannot be blindly, should take into account their minerals location factors and other natural reserves, mineral variety, and quality, and other relevant factors, different countries adopt different strategies and measures.
So, Chinese mining enterprises should be how to deal with overseas investment risk? Depth adjustment of the world economy, but the recovery is weak in the short term, foreign mining investment seems to be a good time. One of the most typical examples are, on April 20, 2015, Shandong iron and steel group ("steel") announced the acquisition of African minerals limited ("Africa mine") tangkelili 75% stake in the iron ore project in Sierra Leone in Africa. Upon completion of the transaction, steel rail services company 100% share tangkelili iron ore and African ports.
News that the 75% stakes, steel spent 170 million dollars. Tangkelili iron is a world-class iron ore asset, huge reserves, is Africa's second largest iron ore, is one of the world's largest Hematite and magnetite.
Four years ago in the 2011 mountain Hua $ 1.5 billion only got a 25% stake in the project. The view was expressed that, Shandong steel acquisition was on overseas mining resources of a successful "bottom".
However, the industry did not agree "resources a bottom" argument, this argument is in international politics distasteful, just in the case of international iron ore prices falling, Shandong iron and steel took over all, according to the current price of imported iron ore, no way to lose.
China Mining Association Vice President Wang Jiahua at a mining investment forum recently, said of Chinese enterprises ' overseas mergers and acquisitions of mining investment best time has come.
Buy mines abroad the opportunity to show current, slower global economic growth and mineral demand, increased resource exploration and development costs and other factors, global mining at depth adjustment. According to the forecast of China's mining, mining recovery time, as it should not only look at the extent of the global economic recovery, take another look at the breakout success of some emerging economies. As to precisely when the mining market begins to recover, some say 3 years, others say it takes 5 years, others say 10 years. However, Wang Jiahua thought, judgment of 3 to 5 years is relatively objective.
"At a time when global mining down depth adjustment, more difficult than our counterparts outside. On mining capital market in the world, junior exploration company's market value had fallen by 80%~90%, these assets have plenty of quality, is what we purchase, merger and acquisition opportunities. ' Along the way ' national strategies, but also creates new opportunities for us to go out. "Wang Jiahua said.
In fact, some mining market "foresight" of mining companies have started operations.
It is understood that on June 17, run resources published in the directional plan, the company intends to raise funds to no more than 28.368 billion yuan to acquire iron ore International (Mongolia) limited, Mingsheng limited, mengguxinlalegaote iron ore company limited 100% equity.
It is reported that iron ore International's Yi Luohe Ltd, with Mongolia's Bayangol mining iron ore, large primary magnetite, is currently mining operations up to 1406 hectares of mining areas. Its abundant reserves, high grade, retained ore resources of 725.4638 million tons of iron ore. Yi Luohe company's main suppliers of iron ore to China Steel and other major domestic iron and steel enterprises. Infiniti of xinlalegaote iron ore company limited, the main business import and export business for the exploration and mining of iron ore and its products. Infiniti company-owned lalegaote mine in Mongolia is a large primary magnetite, 935 hectares of mining mining area, volume of 263.8854 million tons of iron ore resources.
Run resource said company real estate business development bottleneck, mining business continued to be the focus of future business development of the company, therefore, the company needed at existing mining based on the search for new mineral resources.
On May 27, zijin mining announced that the company intends to raise funds through private placement not exceeding a total of 10 billion yuan to acquire Congolese (DRC) Kamal copper and baxinbogela gold projects.
According to zijin mining disclosure Kamal a copper mine is a newly-discovered world-class stratiform copper deposits, located within the Central African copper belt. According to the 2013 United Kingdom AMEC report prepared by the technical consultants, calculated according to the grade 1%, Kamal copper control weight for 739 million tonnes of copper ore resources, an average grade of 2.67%, 19.7 million tons copper; inferred resource of 227 million tons of copper ore, the average grade of 1.96%, 4.46 million tons copper; total reserves of about 24.16 million tons of copper. Bogra gold deposit is a world-class epithermal gold deposit, ranked 36th in gold deposit, and world's 580-a gold mine in the 65th. Based on publicly available information, Porgera gold mine have proven + control + total of 191 tonnes of inferred resources, average grade 3.47 g/ton; + rough confirmed reserves of 94 tons, with an average grade of 5.49 g/t total 285 tons of gold reserves.
China mining news reporter, and many domestic miners boss different, zijin mining group Chairman Chen jinghe overseas merger and acquisition decisions, there is a special consideration in international mining boom period, never easy to play the fun, when once mining down close to the bottom, eyeing the opportunity immediately and act fast to win. In fact, which is in zijin mining in international mergers and acquisitions often handling tips.
Market participants say, zijin mining market of the time, so not only can be cheap to buy mining assets, significantly reducing acquisition costs and commodity prices low, or at least not lose. If global commodity supplies tightened, prices rise, it will produce generous returns.
Avoid gambling adventure on July 24, an overseas mining project investment road show event in Beijing. In fact, this so-called road shows, is a mining project investment cooperation and capital invitation of pantomime. According to the reporter's observation, real investment are scarce, exchanging business cards with reporters, mostly heads of some companies that provide technical services. Organizers pulled out of three mining projects in African countries, despite the recommended host is hard, trying to promote cooperation, but did not reply. Reporters went out to chat with the number of people a few words, their presence is only incidentally, sell their company's service project, project investment and there is not much interest.
According to journalist observed for years, China's enterprises under the background of the international economic uncertainty, often wary of overseas investment, and prosperous stage in the international economic situation, are scrambling to catch up with the fun.
In fact, in the context of international economic situation good, resource class also tend to be a ridiculous price, in this case, lack of rational performance of some Chinese companies in overseas, Chinese companies compete for the same project, or even bidding against each other. This from the same country between "mutual-choke competition", but also many foreign friends, "amazing".
The previous "heat mining" period, large numbers of mines and geological prospecting units have been "going out" investment overseas, but learned the hard way. Chinese enterprises ' foreign mining investments are "broken halberd" case:
In June 2009 could become China's largest overseas acquisition of Chinalco and Rio's deal terminated. Chinalco intends to inject 19.5 billion dollars to increase its stake to Rio 19%. However, the plan after many setbacks, but ultimately failed due to a Rio Tinto break. According to the agreement, Rio Tinto pay Chinalco a $ 195 million "breakup fee".
In June 2010, zijin mining ended Australia acquisition of Indophil Resources NL. Company announced that terminated because "number of prerequisite for the acquisition is difficult to reach."
April 2011 Minmetals resources Ltd to buy Australian copper Miner, Equinox Minerals is the world's largest gold producer Barrick away. Barrick and Equinox Minerals finally reached 7.3 billion Canadian dollars (US $ 7.6 billion) deal.
September 2012 because of the difficulty of obtaining regulatory approval of Mongolia, Aluminum Corporation of China thoroughly terminated South Gobi resources limited takeover offer, about $ 920 million of the deal eventually fell through.
"China's investment in overseas mining, the failure rate of about 80%. "Wang Jiahua said, many companies are still" stones ".
However, the view was expressed that, 80% of failure may be optimistic. Wang Jiahua says "probably" is an overview, there is no specific samples. It is reported that after the agencies doing statistical and concluded that the real situation is much more serious than probably.
The past more than 10 years, with the booming domestic economy, China's rapid buying commodity assets all over the world, this one is to ensure that its domestic plants as sources of raw materials, but also to get rid of its dependence on raw materials in the West.
Today, more and more obvious is that purchased large quantities of China has produced a lot of bad investments. Many big deals are losing money, incur unexpected costs, or far less than expected. Some Chinese investors are already away from the resources sector, this change means that China invested money in countries such as Africa, Latin America and the Middle East may be reduced.
China is in this situation for many reasons. Global resources boom, China is a latecomer, and often for Western companies don't want to buy or to sell assets to pay too high a price.
Wang Jiahua believes that lack of specialization is an important constraint for overseas investment by Chinese enterprises. Non-professional enterprise mainly in cross-minerals, TRANS, trans-national investments in the process. In addition, the financial institutions investing in mining, although the finance is very good at, but lacking in mineral industry knowledge.
Wang Jiahua introduced said, currently China on overseas investment mining of enterprise roughly points four class: one is private mining enterprise, is has (economic) strength, but scale smaller; second is geological exploration class enterprise, expertise is technology support, but economic total lower; third class is large mine enterprises, has technology management advantage, forces strong; fourth class is financial enterprise, its capital volume maximum, but for technology, and whole mining and development of management in disadvantage. However, even so, the capital market has become miners "out to sea" an important force.
Wang Jiahua said that going out is the key to business success worldwide team of professionals and local operations team. When investing in overseas do not casino-style adventure, especially the initial overseas mergers and acquisitions business, to employ a mergers and acquisitions Adviser, detailed research and feasibility studies, "going to mature out of development thinking and strategy for overseas mergers and acquisitions. ”
How to dissolve the investment risks while the current global mining at depth adjustment, but in the long run, a new round of development of mining "Super cycle" has continued. The view was expressed that, current global emerging economy and industrialization and urbanization in developing countries is continuing to advance, in quite a long time in the future, demand for mineral resources will remain robust momentum. "Along the way" strategy of promoting Chinese enterprises "going out" seeking mining cooperation, continues to be a very wise choice. However, foreign investment by Chinese enterprises face many risks, including lack of a clear strategic positioning, risk awareness and lack of capacity; cross-cultural integration ability, lack of credibility; risk the legal and tax system, and so on. Therefore, learn to control and manage risks, are a required course for Chinese enterprises to play overseas. Experts suggest that business investment environment of mining industry of the country is a huge difference, taking into account the international competitiveness of China's mining enterprises, foreign investment in Central Asia and South-East Asia should be preferred, followed by Australia and Canada, then South America and Africa. Of course, also depends on the flexible adjustment. Wang Jiahua believes that the biggest problems encountered in the process of foreign direct investment of transnational corporations, is how to deal with a host of interests, this required country select mining companies carefully, and sent investigation organizations to mining investment areas to conduct field investigations, establishment of reserve personnel of the host country, to ensure that proactive and forward-looking decision. Compared with European and US companies, much of China's enterprises in China to international accounting standards and related regulations are quite rusty, when investing in mergers and acquisitions at an absolute disadvantage in technology and knowledge of Western culture and commercial laws and lack of senseTo investigate and the strategic importance of public relations for mergers and acquisitions.
Wang Jiahua suggested that Chinese transnational mining companies should develop practical strategies and integration strategies, focusing on mergers and acquisitions to expand and develop stable, continuous and long-term planning, reducing arbitrariness and blind, to mitigate risks. China's mining enterprises
