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Mining Weekly , June 10, 2008

Miners should position themselves for even bigger China resources assault

By: Matthew Hill

Mining companies needed to look strategically and systematically at how they could benefit from opportunities that resource-hungry China's increasing growth as global resources player presented, an expert on that country said on Tuesday.

Speaking at the ‘Africa Mining Congress' in Johannesburg, The Beijing Axis founder and MD Kobus van der Wath added that Africa could expect intensified engagement with the world's third-biggest economy, describing the past few years as "only the beginning".

He said there had been a "mushrooming of activity" from Chinese companies in mining and processing across all commodities, and that there was a "building up of appetite" in that country.

The Asian powerhouse could overtake the US as the world's biggest economy by 2035 to 2040, Van der Wath said. China's imports totalled more than $1-trillion last year, and would grow to some $1,2-trillion this year, he added.

The resources-linked deal flow was also becoming bigger, epitomised by State-owned aluminium producer Chinalco's buying into Rio Tinto for $14-billion earlier this year. This was the largest overseas investment ever made by a Chinese enterprise.

While the Chinese did struggle with aspects such as language and cultural differences, they were learning, as well as adapting to international business standards, Van der Wath asserted.

China also had $1,5-trillion in cash reserves, which dwarfed what the US had available.

Van der Wath, who had lived in the country for 15 years, said that what the world had seen in Chinese foreign-direct investment was "just the beginning", and that "phenomenal growth" should be expected in this regard.

There were already 70 Chinese construction contractors active in Africa, while the country's banks were also able to fund projects on the continent.

Ultimately, China could be seen as a competitor or an opportunity for African mining companies, Van der Wath said, suggesting that it would "probably be a bit of both".

He forecast that within 15 years, the world would be redefined in terms of the top names in the resources sector.

"The resources need in China is real and it's growing," he asserted. "China is clearly not going to pull back - that's not an option."

Van der Wath said that Africa had been a "frustration" for China, as the country wanted to be far more active on the continent than what it had hitherto been able to achieve.

He also said that China was willing to partner significantly more on projects than in the past, and didn't necessarily want operational control.