Chinese miners gaining from financial crisis

By David Stanway

With world capital markets in the doldrums since last year, the global mining sector has faced severe capital shortages, but self-reliant Chinese mining companies have emerged relatively unscathed and are in a strong position to take advantage -- despite well-publicised political setbacks, said Yang Junmin, vice-general manager of Beijing Sinodrill.
"Since world metals prices collapsed, a large number of Chinese firms have acquired overseas mining projects - including private companies - and this has given us a great business opportunity," he said at the Reuters office in Beijing.
Sinodrill was spun off from the State-owned China Non-Ferrous Metals Corp to provide services for foreign companies looking to develop resources within China.
Although its core business has shrunk as cash-strapped foreign firms have withdrawn from domestic projects, Sinodrill is currently riding a wave of Chinese investment in hundreds of underfunded foreign mining concessions, providing exploration and drilling services in Australia, Southeast Asia, Africa and the Americas, Yang told Reuters.
"Foreign projects now make up about 20 per cent of our total income, but I estimate that to rise to over 30 per cent by the end of the year," he said.
"I hope that figure will rise to 50 per cent (within two years), but the domestic market will still have a certain share."
Despite setbacks abroad - including Rio Tinto's decision to reject a $19.5 billion equity tie-up with Chinese metals conglomerate Chinalco - smaller and lower-profile deals have proceeded apace across the world.
Sinodrill itself is providing services to a number of overseas mining projects, including a massive 4-6 million tonne per annum copper mine launched by the China Railway Group in the Congo.
Yang said it has also been discussing long-term joint venture agreements with miners in Australia, Indonesia and the Philippines, with Sinodrill offering significantly lower labour and equipment costs than its competitors.
However, progress has not been smooth, with Government restrictions on foreign drilling teams far tougher abroad than in China.
"Foreigners reject Chinese projects more than China rejects foreign projects," he told Reuters.
Fears that China's growing economic might would give it greater control over the world's mineral resources were unfair, he said, especially when Chinese companies were the only ones prepared to take investment risks.
"Chinese companies have been investing in areas where there is more risk, where there are threats of war. Chinese workers can endure more difficult situations."
Yang said the company was planning to list on the domestic stock exchange, but he could not give any specific timetable.
He said Sinodrill has also been involved in discussions with potential foreign strategic investors, including Switzerland's Sandvik.

(Editing by Ken Wills)

Chinese growth can overcome falling stock market
By Shen Yan and Simon Rabinovitch

Beijing would hold fast to its "appropriately loose" monetary policy until the recovery is on solid ground, said a senior Government economist at the Reuters China Investment Summit, on August 31st.
Chen Dongqi, vice-head of the macro-economic institute under the National Development and Reform Commission (NDRC), said China's economy should be undented by the steep fall in the country's stock market, but private investment and consumption must pick up for the recovery to be sustainable.
He told Reuters the Government should not make policy decisions based on volatile stock market movements.
"There is pessimism for the market to have fallen so much in one month," Chen said. "But this should not change the trend of the economic recovery."
The stock market fell 22 per cent in August, its second-biggest monthly loss in 15 years.
"Sometimes rises in the market are irrational and sometimes falls in the market are irrational," he told Reuters.
"How should Government policy respond to this? Premier Wen (Jiabao) has already said many times that we will unswervingly apply an appropriately loose monetary policy, and there is no change here, and this is the way it should be."
He said the four biggest challenges faced by China's economy were: declining exports; negative inflation; stable but weak consumption; and a lack of private investment.
Stimulus spending by China's Government and a surge in lending by its banks powered the economy to 7.1 per cent annual growth in the first half after the global financial crisis slowed it to a crawl at the end of last year.
Wary of over-confidence, officials have repeatedly said that the recovery is not yet on firm ground, and the plunge in the stock market has fuelled concerns about the possibility of a double-dip in economic growth.
Looking to global markets, Chen said Beijing should press Washington to guarantee the safety of Chinese investments in US assets.
Premier Wen said earlier this year that China was worried about its heavy exposure to the United States. Bankers assume about two-thirds of China's more than $2 trillion in reserves is parked in dollar assets, primarily US Government and other bonds.
"I personally have lots of concerns because the US has huge piles of debts. Even though the economy is large, it is relying on debts, so its foundation is shaky," Chen told Reuters.
He said monetary easing by the Federal Reserve had sown the seeds of inflation and that the US Government should issue more inflation-protected products to China.
"China's money is hard-earned from selling socks, buttons, zippers, bras and furniture," he said. "You should at least guarantee the value of our investments."

(Additional reporting by Zhou Xin; Editing by Ken Wills)

Source: Thomson Reuters 2009.
http://www.reuters.com/summit/ChinaInvestmentSummit09