This article nailed it right on the head guys.Stakeholders view...

This article nailed it right on the head guys.

Stakeholders view China investment with caution

Australian investors have vowed not to back any miner exposed to Chinese funding lines as they tighten their investment approach in accordance with China’s clampdown on asset valuations.

Sundance Resources shareholder EIM Capital said the move by Hanlong Mining this week to “revalue” its 57¢-a-share offer from last October was yet another in a series of “lame” delays.

“As resources sector specialists, we are now actively avoiding companies that claim they will source funding from that region,” EIM director Tony Wiggins said. “The Chinese are getting a very poor reputation in this area.”

His comments come after The Australian Financial Review reported on Friday that Chinese authorities were asking all companies to revalue their mining assets as commodity prices fall. China’s state-owned Assets Supervision and Administration Commission has clamped down on approving investments by state-owned enterprises, particularly in iron ore and coal.

Local fund managers say the move heightens the risks for small and medium-sized miners considering deals with China as traditional funding lines dry up.

Chris Bain, chief investment officer at Phillip Resources Fund, said junior mining companies needed to be more wary of doing business with Chinese counter-parties. “We have always avoided companies [looking for Chinese funding] because there’s not a great record of the money coming through on time,” Mr Bain said.

“It’s probably the Chinese government reminding Chinese buyers to just have a careful look and not be the lender or buyer of last resort because I am sure there are a lot of Australian companies that have sold things to the Chinese that they couldn’t bank anywhere else.”

Mr Wiggins said there were many recent examples where Chinese funding had been promised but not delivered. “If you thought this behaviour [at Sundance] is bad, try [tungsten explorer] King Island Scheelite which was waiting around for Chinese funds for over a year and to my understanding, not one cent was ever paid,” Mr Wiggins said.

“Or, even better, have a look at the recent actions of [iron ore explorer] Pluton Resources where a Chinese party notified the company 45 minutes before a shareholders’ meeting, that no funds were forthcoming on a ‘binding agreement’.”

The increased wariness comes after Opposition Leader Tony Abbott warned that “it would rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business”. But Chinese authorities do not appear to be directing funds outside of Australia in retaliation for the comments, with certain commodities outside of iron ore and coal still retaining preference.

Private company Zijin Mining recently declared its $230 million takeover of Norton Goldfields unconditional, with Zijin chairman Chen Jinghe saying the company would look to add to its resources in the West Australian goldfields to reduce costs at Norton’s operations.

“The Australian mining industry is the best in the world and has a lot of good experience for the Chinese mining industry, and we are happy to learn from the Australian mining industry,” Mr Chen said. “Norton will provide a snapshot or window for Zijin to learn about Australian mining and technology.”

Investment criteria for Chinese SOEs also appears to have been tightened in response to concerns about rising Chinese debt.

http://www.afr.com/p/business/companies/stakeholders_view_china_investment_nc4PFA3eKqcnQmH2l5MP0L