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Posts Tagged ‘China Development Bank’

China enters South Africa platinum sector

December 20, 2010 Comments off

“China is to enter the South African platinum sector in a transaction worth $877m, its biggest mining investment in the country, as it continues to target Africa as a source of raw materials.

The deal, announced on Friday, will be China’s second-largest investment in the continent outside the energy sector. The state-owned miner Jinchuan Group and the China-Africa Development Fund will take a 45 per cent stake in the junior miner Wesizwe Platinum for $200m, as well as funding a $27m stake for black investors in line with South African black empowerment rules.

The Chinese entities have further committed to raise $650m in project finance to develop Wesizwe’s Frischgewaagd-Ledig mine. Jinchuan – China’s biggest platinum producer, which acquired Canada’s Continental Minerals for $434m in September – will take all platinum group metals produced at the mine.”

Source: Financial Times, December 18 2010

Observations:

  • The $5bln China-African Development Fund is stepping up its involvement in the mining industry, signing an agreement with China National Nuclear Corp in September to develop uranium mines in September and an agreement with Wuhan Iron and Steel for a project in Liberia in April.
  • In May 2010 Jinchuan appeared to seal exactly the same deal with the China Development Bank as investment partner and a 51% share coming in Chinese hands. The 6% stake going to the Micawber investment group is the result of arbitration over cash funding and compliance with black empowerment rules.
  • The estimated cost to dig the mine northwest of Johannesburg is “similar” to a 2009 estimate of 6.6 billion rand ($960 million) and it could start production around 2013 (Source: BusinessWeek)

Implications:

  • The China-African Development Fund is one of the many state-controlled investment vehicles the Chinese government is using to help the domestic mining companies expand internationally. China Development Bank and China International Fund are more well-known investment partners. It is unclear why this deal was transferred from the China Development Bank to the China-African Development Fund.
  • As more Chinese mining companies go public to raise money, the need for government assistance in foreign investment will be reduced in the long term. However, the government assistance through development banks and funds will play an important role in defining which Chinese mining companies will become the domestic champions that arise from industry consolidation.

©2010 | Wilfred Visser | thebusinessofmining.com

Australia and China sign over A$10bn of deals

June 23, 2010 Comments off

“Canberra and Beijing signed 10 commercial deals worth more than A$10bn (US$8.8bn) on Monday as the two nations strengthened trade links during a state visit to Australia by Xi Jinping, the Chinese vice-president, who is expected to become the country’s next president.

The agreements, mainly in the resource and energy sectors, are small compared with a number of recent deals, including PetroChina’s decision last year to buy up to A$50bn worth of liquefied natural gas from Western Australia’s Gorgon project.”

Source: Financial Times, June 22 2010

Observations:

  • As part of the investment package China Development Bank, which recently was involved in an infrastructure deal in West-Africa, will invest over $1 bln in infrastructure for the new Western Australian iron ore operations in Karara.
  • The investment package, signed by Kevin Rudd and Xi Jinping, the Chinese trade minister, further includes an initial agreement on funding for a $8 bln coal mine, railway and coal-loading terminal in Queensland and funding for projects of Aquila Resources, including its $3.45 bln West Pilbara iron ore project.

Implications:

  • Mr. Rudd tries to show the Australian mining industry he is still committed to development of the sector, although a large part of the miners are currently fighting his proposed mining tax increase. The investments to be done by the Chinese will both help companies with Chinese stakeholders and miners that have a strong demand in China in terms of infrastructure investments.
  • Both Australian government and mining companies are struggling to improve relations with Chinese government and companies. China accounts for most of the growth and an increasing portion of the total revenue of the companies and is Australia’s primary trading partner. Building long term relationships with the customers is vital for the sustainability of the mining sector in Australia.

©2010 – thebusinessofmining.com

China seals African platinum deal

May 27, 2010 Comments off

“China is set to make its second largest investment in Africa outside the energy sector by ploughing $877m into South Africa’s platinum industry. The agreement signed last week adds intensity to China’s ambitious drive to sustain its economic boom by securing Africa’s natural resources.

For the first time, Beijing will take a direct stake in the continent’s platinum reserves, the majority of which are in South Africa. Jinchuan, a Chinese state-owned mining company, is to acquire a 51 per cent stake in Wesizwe, a junior South African platinum developer, for $227m (€185m, £158m).

The China Development Bank will then raise another $650m in project finance to develop its flagship Frischgewaagd-Ledig platinum project, near Rustenburg, west of Pretoria. After the mine is built, Jinchuan will take all of its platinum produced, according to a long-term supply agreement.”

Source: Financial Times, May 26 2010

Observations:

  • Platinum and paladium are mainly used as catalysts in the car industry and in jewellery. Over 75% of the total production of platinum is coming from South Africa.
  • After the investments by Rio Tinto, Chinalco, Vale and CIF in Guinea and Niger last month, this deal signifies the next billion of FDI in the mining industry in Africa.

Implications:

  • The involvement of the China Development Bank in this project is special. It increases the buying power of the Chinese (mostly state-owned or controlled) miners even further, accelerating the Chinese control over Africa’s natural resources.
  • Demand for precious & rare metals is increasing as many of them are used in high-tech applications. A significant part of the rare metal resources is located in Asia, but China will still increase its efforts of securing access over deposits over-seas. As the diversified miners do not really have an incentive to join this race, high-tech producers from the western world should be looking for ways to secure their supplies of critical inputs in the long term.