China Mining

Canaccord Genuity's Morning Coffee (07/22/2010)
"The Wall Street Journal reported that companies based in China or Hong Kong participated in US$13 billion of outbound mining acquisitions and investments in 2009, which was 100x the level in 2005, according to data tracker Dealogic. While China-based buyers have invested US$8.3 billion in mining deals year to date, according to Dealogic, it does appear to trail the record US$17.5 billion in outbound mining M&A in 2008. In 2009, China accounted for one-third of the value of all cross-border mining mergers and acquisitions—up from 7.4% in 2007 and less than 1.0% in 2004. Chinese acquirers accounted for nearly 40% of Australian inbound mining deals, according to PricewaterhouseCoopers. In Canada, this amount was about one quarter. While previously acquisitions tended to be made by state-owned enterprises with poorly executed outright takeovers, Chinese investments are now being made by a variety of Chinese entities, from manufacturing companies to its sovereign wealth funds, and are more flexible, making joint ventures or taking minority stakes. China consumes roughly one-third of the world's copper and 40% of its base metals, and produces half of the world's steel. According to the article, some Chinese investors are buying companies with assets that are at earlier stages of development or exploration—a riskier but potentially more profitable proposition, which is bringing more would-be Chinese deal makers to mining-finance centers like Toronto and Vancouver."

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