Chinese Enterprises Slams the Brakes on Acquisition of Overseas Mines

On June 25, China Mining Association revealed that, as of the middle of June, Chinese enterprises slammed the brakes on acquisition of overseas mines. There are only 53 overseas mine acquisition cases so far this year, with the investment of merely USD 3.678 billion and both of the indicators dropping significantly by more than 50%. Vice director of China Mining Association Chen Xianda indicated that,compared with Chinese mining enterprises’overseas investment boom in 2011, the investment slows down and key investment areas are changed this year.

According to Chen Xianda, during the whole year of 2011, the number of Chinese enterprises’ overseas mining investment increased sharply to 289, with a total investment of USD 21.87 billion, a two-digit growth in both quantity and amount.

Chen Xianda believes that the decline of overseas mining investment this year is more attributed to the rising trend of overseas mining investment and mining enterprises’ lack of confidence in quality of overseas projects.Other factors such as global economic slowdown, domestic economic restructuring,weakened expectation for consumption growth of mineral products as well as negative impact of unsuccessful investments of some enterprises are also included.

It is reported that Chinese enterprises acquired overseas mines actively in recent years.Nevertheless, increasing acquisition cases also made Chinese enterprises encounter problems such as strikes of overseas employees, project extension and cost increase, etc.

As of the middle of June 2012, Chinese enterprises only made an investment of USD 145 million in Australian mining industry,dropping significantly y-o-y. In fact, in 2011,the number of Chinese enterprises’ investment in Australian mining industry increased to 33,but the investment stood merely at USD 1,318 million, down 70.75% y-o-y.

Chen Xianda believes that the main reason is that Chinese enterprises have realized that making investment in Australian mines faces increasing risks and difficulties; and especially,Australia’s changes of tax policy on the mining industry dampened the enthusiasm of some investors.

Meanwhile, Chinese enterprises’ investment in Asian mining industry also showed a sign of decline, which is largely because geological work in these areas is weak and most investments go to grassroots prospecting project. In addition, the decline of prospecting(especially exploitation) activities in Asia is related to some Asia countries’ restriction on export of mineral products. In contrast, Chinese enterprises’ investment in the Americas and Africa are on the rise.