Archive

Posts Tagged ‘Jinchuan’

Vale drops $1.1bn bid to purchase Metorex

July 15, 2011 Comments off

“Brazil’s Vale has dropped its $1.1bn offer for Metorex, a central African copper and cobalt miner, clearing the way for China’s Jinchuan Group to complete a $1.4bn takeover that would establish the state-owned miner in risky frontier markets for metals.

The move came a week after Jinchuan, one of China’s largest mining companies, disrupted its Brazilian rival’s plans by offering R8.90 per share for Metorex. Metorex, however, has not yet recommended Jinchuan’s higher offer to shareholders. Its board will “convene shortly to consider its position with respect to the Vale offer and the Jinchuan offer”, the South Africa-based miner said.

‘Africa is a key focus for our company,’ a Jinchuan executive told the Financial Times. He said it aimed to expand production of copper and cobalt, two industrial metals with rising demand being driven by Chinese consumption.”

Source: Financial Times, July 11 2011

Observations:

  • Metorex is a South African copper and cobalt miner with operations in Zambia and Congo. The company’s board has recommended the shareholders to accept Jinchuan’s offer, paving the way for the takeover of the company. Vale withdrew its inferior bid quoting capital allocation rigor as the reason for not doing a higher bid.
  • Jinchuan is a government owned non-ferrous metals miner. The company has been rumoured to plan an IPO for many years. End of 2010 the company announced a small acquisition in South African platinum mining and furthermore the company bought a Canadian developer of a mine in Tibet.

Implications:

  • The acquisition by Jinchuan is an example of Chinese company’s high willingness to pay for foreign assets. The project is certainly not worth more to Jinchuan than to Vale, which owns assets nearby which could cause synergies. However, Chinese companies are willing to pay a high premium to grow internationally, positioning themselves as state champion in a consolidating industry.

©2011 | Wilfred Visser | thebusinessofmining.com

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

Jinchuan to Pay $419 Million for Canadian Developer of Tibet Mine

September 20, 2010 Comments off

“Jinchuan Group Ltd. is offering to buy Continental Minerals Corp. for about 432 million Canadian dollars (US$419 million), marking the latest move in China’s buying spree in the global mining sector. Jinchuan would acquire the Vancouver-based mining company—whose board is recommending the deal—at C$2.60 each, representing about an 18% premium to the stock’s average trading price over the last 30 days.

Continental is a junior miner active in Asia, focusing currently on the Xietongmen copper-gold property in Tibet. Jinchuan is an integrated company engaged in mining, concentrating, metallurgy and chemical engineering. It is the largest producer of nickel and cobalt in China.”

Source: Wall Street Journal, September 18, 2010

Observations:

  • Continental Minerals is in the permitting process to obtain mining licenses to start developing a mine that will extract 116 million pounds of copper and 190 thousand ounces of gold in 14 years in the deposit discovered in 2005. Another deposit, named Newtongmen, is in the exploration phase.
  • Jinchuan has been planning to raise money on the stock market for many years. Current plans are to have an IPO in 2011 in order to raise money for expansion and potential further acquisitions.

Implications:

  • The 18% premium offered by Jinchuan indicates that limited synergies are expected to be achieved. Jinchuan is mainly producing nickel and cobalt, while the Xietongmen mine will produce copper and gold, limiting management, trading and processing benefits of the expansion. The company tries to increase its copper output, currently being the 4th largest copper producer of China.
  • It is unlikely that any companies without gold/copper interests in China are willing to bid more for Continental Minerals. High transportation costs from Tibet will force the buyer to process the ore near the mine and customers will mainly be in mainland China.

©2010 | Wilfred Visser | 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.