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Posts Tagged ‘Zijin’

Xstrata steps up spending plans

December 8, 2010 Comments off

“Xstrata, the acquisition-built mining company, is once again stepping up spending on its internal portfolio, budgeting $23bn for new mines, smelters and other expansionary projects between 2011 and 2016. Expansionary capital expenditure – or spending exclusively on new projects, rather than the maintenance of old ones – for 2011 and 2012 is forecast at $6.8bn. That compares with expansionary capex of $4.5bn in 2010.

According to Xstrata, high spending in the two years to 2012 will put it over the hump in terms of funding construction of the projects expected to enter service this decade.”

Source: Financial Times, December 7 2010

Observations:

  • The $22.8bln CapEx to 2016 is the result of an increase of the 2011-2012 budget by $1.3bln to $13.6bln and investment plans of $5.0bln for 2013; $1.8bln for 2014; $1.5bln for 2015 and $0.9bln for 2016.
  • Projects expected to be approved in the near term are: Rolleston expansion; Oaky Creek expansion; Cerrejon expansion; Tweefontein; Fraser Morgan; Kabanga; Mt Isa Zinc expansion; and the MRM expansion. The bulk of the investments are in coal (36%) and copper (35%).

Implications:

  • Xstrata earmarks large amounts of cash of development projects, but preserves the flexiblity for further growth by acquisitions. Although the company has not benefited as much from high iron ore prices as major competitors due to lower exposure to the iron ore price, the gearing of 19% gives the company the flexibility to make significant acquisitions.
  • Just like for Rio Tinto the importance of good ties to the Chinese market becomes ever greater. As China is rising in importance as a copper and coal producer, Xstrata will be looking for access to the local market by partnering with Chinese players. Zijin might be a logical partner, although collaboration in the Tampakan deposit in Indonesia has not taken off.

©2010 | Wilfred Visser | thebusinessofmining.com

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The Rise of China in Mining

October 4, 2010 4 comments

China is rising as a global superpower in the mining industry. Ore from mining companies all around the world is shipped to Chinese ports to fuel the growth of the economy. Building relationships with Chinese government and customers is a top priority for many business leaders. However, few people in the industry know that China itself is a major producer of many minerals. This article explores the Chinese rise of production, the rise of demand, the rise of Chinese mining firms and the rise of investment and sketches the implications for the mining industry of the changing role of the country.

 

1. The Rise of Production

China’s mining industry is the world’s largest in many aspects: the country has 200,000 collectively owned mines1, employing over 10 million miners; it is the world’s major producer of coal, lead, zinc, tin and rare earth minerals and also ranks high in output of iron ore, gold, bauxite and other minerals.

The country has been a major producer for decades, but the enormous demand, the opening of the market to private investors and the introduction of modern mining techniques has boosted the productivity and production of the industry. Significant reserves of most minerals allowed China to grow the market share of mining output for all major minerals in the past 15 years (Figure 1). The growth of the iron metal content output share is even more remarkable when considering that Chinese iron ore typically has a very low metal content: while share of iron content grew from 14% to 15% since 1995, the share of gross weight grew from 24% to 37%2.

Figure 1 - Chinese share of world mining output

The largest part of worldwide reserves of rare earths, titanium, tungsten & molybdenum are in China. These minerals are crucial in the production of many high tech products, giving China a powerful position in international trade. Recently the country has demonstrated this power by implementing export quota for rare earth minerals, favoring the domestic high tech industry.


2. The Rise of Demand

China hardly exports any minerals; all domestic mine production is absorbed by the domestic. Value of total mineral exports in 2009 was a mere $0.2bln, 60% of which was molybdenum3. Until a few years ago the country was a net coal exporter, but the growing demand from the utility and steel industry has turned it into an importer. Though the country does not export ores, it has been building a large iron and steel industry, exporting at a total value of $53bln in 2008. In the same year the production of 500Mt of crude steel accounted for 38% of the world production2. In 2009 the imports exceeded exports, as steel companies responded to the crisis by cutting production. Stepping up production will turn the country into a net exporter of steel again.

Read more…

Security Regulator probes Zijin

July 16, 2010 1 comment

“Zijin Mining Group Co., China’s biggest gold producer by capacity, said that China’s securities regulator is looking into the company’s disclosure that one of its copper plants in eastern China is leaking acidic waste water.”

“Zijin Mining Group Co., China’s biggest gold producer, Zijin Mining, confirmed Friday that three executives at one of the company’s copper plants have been detained in connection with their investigation into a leak of contaminated water.

Zijin Mining board secretary Zheng Yuqiang told Dow Jones Newswires the head and deputy head of the plant, in Shanghang County, Fujian province, are among the detained. The company said Monday the plant was leaking acidic waste water, and operations there had been suspended.

Heavy rainfall caused a rapid rise in the underground water level and damaged the waterproofing layer at the bottom of the plant’s waste-water pond, leading to a leakage of acidic copper and sulfate and killing tons of fish in the nearby Ting River, Zijin said Monday.”

Source: Wall Street Journal, July 16, 2010

Observations:

  • The waterproof layer under the Zijin plant has been damaged by rising groundwater levels. Leakage of acid waste is reported to have reached Ting river. Operations in the plant have been suspended.
  • Zijin recently ended an acquisition offer for a copper-gold mining operation in the Philipines that was delayed because of environmental concerns.

Implications:

  • Depending on the amount of acidic waste leaking into the river the spill could have significant environmental impact. The coastal area in South-East China is heavily populated.
  • Extreme weather conditions caused by climate change might change conditions near many mine sites more than expected to be realistic when the sites were build. This could lead to more dangerous mining situations in the areas that are most affected by changing climate conditions.

©2010 – thebusinessofmining.com

Zijin Ends Offer for Indophil

June 29, 2010 1 comment

“China’s biggest gold producer, Zijin Mining Group Co., ended its offer to buy Australia’s Indophil Resources NL because the wait to get government approval for the deal in China was taking too long.”

Source: Wall Street Journal, June 27 2010

“China’s biggest gold producer, Zijin Mining Group Co., has made a 545 million Australian dollar (US$499.2 million) takeover bid for Australia’s Indophil Resources NL, seeking to gain access to the US$5.2 billion Tampakan copper-gold mine in the Philippines.

Tampakan is ‘a world-class copper-gold deposit [with] an annual production rate of 340,000 [metric] tons of copper in concentrates and 350,000 ounces of gold [about 10.89 tons],’ Zijin said in an official filing to the stock exchange, terming the Philippine asset as the key draw of the deal.

Source: Wall Street Journal, December 1 2009

Observations:

  • The Tampakan resource is developed by a Xstrata subsidiary which holds the remaining 62.5% of the shares.
  • Earlier this month Xstrata announced it would continue the mine studies on Tampakan, despite the potential ban on open pit mining imposed by local government.

Implications:

  • Chinese companies are not attempting to secure access to basic building materials, but as well to precious metals and diamonds. The market for these goods will shift increasingly to China and India. It is therefore likely that another Chinese company will contact Indophil.
  • As long as the Phillipine government does not decide on the future of the project it is unlikely Indophil will get a good price for its 37.5% stake in the project.

©2010 – thebusinessofmining.com