The paragraph in the Annual Report about the recent visit by a...

The paragraph in the Annual Report about the recent visit by a representative of CRR deserves comment. Jervois management says that new information has to light about why CRR didn't weant to sign the frame agreement as if it was a revelation that the investment authorities in Beijing had put a temporary halt on outward investment.


At least this is what Mr Zhao said himself over tea in his hotel room after one of the Board meetings in front of three witnesses. He was clearly embarrassed that he wasn't able to finalise the agreement and very annooyed hat he was met with a demand for a two million dollar fee to keep the agreement open.

Whether he was justified in being as annoyed as he was is perhaps another matter, but the fact of the matter was that he was extremely annoyed as one of the Double Link executives will attest. This person, a retired senior mining executive spent the greater part of one morning trying to calm him down in the hope that there would be a way to resolve what had become a dead-lock and a very ugly situation. And there lies the whole point.

Jervois knew perfectly well that no other party was likely to be rushing the Young nickel lease then or for some time to come. The was at the height or depth of the GFC. The nickel price had collapsed and it was clear to every barista in Melbourne that the mining game would pretty quiet for six months at least. Beijing seemed to be very concerned about all its overseas commitments and as CRR was basically just an arm of government, it had, in the final anlysis, little scope for independent action. This added one would imagine to the frustration and embarrassment as CRR's own PR made great play of its size and apparent independence. In this sense Chinese state owned enterprises are caught by the total ambiguity of their hybrid capitalist-communist system. At one point Mr Zhao even joked that he would be shot if he tried to by-pass Beijing's approvals even though two million dollars was petty cash for CRR.

It was also pretty clear reading between the lines that CRR was very annoyed with its Chinese technical partner who was being evasive about its processing technology which didn't help matters.

Several around the company who became aware of all this assumed that this was the perfect time for the Jervois Board not to over-play a weak hand but to keep CRR engaged and interested as CRR had the power to chose from a score of projects from Guinea to Malagassy. This only required a a brief sentence, a handshake and inevitably a long evening meal with much discussion of Chinese history and culture in general and in particular the history of Mr Zhao's own province, Yunnan, which as it turns out, is particularly interesting as once had its own emperor, language and territories which Beijing gradually absorbed.

That was possible, easy to achieve and what's more would have been seen by shareholders as cost-free, canny and far-sighted. But it didn't happen.

And if the nickel project's cost hurdles were going to be too daunting for a few years CRR might even have been persuaded that there were other deals to be done as the Frame Agreement actually spoke about co-operation in other ventures. Since then perhaps half a dozen Chinese joint ventures have quitely gone ahead, one being the apparently harmonious arrangement between the Chinalco controlled Yunnan Copper and its Australian based partner China Yunnan Copper. CYU's copper discovery near Mt Isa may even be the goods.

But sad to say there's a easy way and the Jervois way.