The Business of Mining

Top Stories of the Week:

• Australia solicits Chinese infrastructure investment
  • The government of Western Australia is trying to speed up the development of port and rail facilities of the Mid West region’s Oakajee port by stripping the Mitsubishi/Murchison combination of exclusive development rights and inviting Chinese parties to step in. 8 of the 14 projects in development in the region have Chinese investors.
  • Sources: Wall Street Journal; Government statement; Murchison Metals statement
• Yanzhou teams up with Gloucester coal
  • Yanzhou’s Australian coal company Yancoal will merge with Gloucester coal, 64.5% owned by Singapore-based Noble group. As a result Yancoal obtains a listing on the Australian stock exchange, a condition put on the 2009 acquisition of Felix Resources
  • Sources: Wall Street Journal; Financial Times; Wall Street Journal blog on synergies
• Anglo and Codelco fight for Minas Sur stake
  • Anglo American launched a range of claims in Chilean court trying to prevent Codelco from being awarded the right to buy a full 49% of the Minas Sur assets. The scope of the option for Codelco to buy 49% has been unclear since Anglo sold a 24.5% stake to Mitsubishi. In response to Anglo’s claims Codelco restated its intention to acquire 49% of the full project.
  • Sources: Financial Times 1; Financial Times 2; Anglo American press release

Trends & Implications:

• As expected Chinese investments have proven to be a key driver of M&A activity in the mining industry in 2011. It is noteworthy that many Chinese firms are using a foreign based subsidiary or team up with a Western firm to do foreign investments. This structure holds 2 main benefits for the Chinese investors: they obtain an experienced western staff with knowledge of the way of doing business in the target countries; and they are viewed much more favorably by regulators when trying to execute deals.
• The fight of Anglo American and Codelco over Minas Sur appears to become a long term court fight. The longer this court fight stretches, the more inclined Anglo American will be to find a compromising deal, as the uncertainty about the ownership structure will delay all investment decisions for the company in the mining region.

©2011 | Wilfred Visser | thebusinessofmining.com