China eyes developed mine assets

China looks set to expand its mining and metals holdings in developed economies, industry analysts and executives claim, as global mining companies in financial distress search for cash-rich, long-term investors.

China has focused its overseas resources acquisitions in the world’s least-developed countries – such as copper concessions in the Democratic Republic of Congo – but could now be poised to expand its reach into Canada, Australia and mining companies in other countries.

Obviously, just as many deep-pocket Japanese companies are beginning a new wave of global acquisition, the Chinese companies realize there are massive opportunities in the market after this financial bloodbath. As I repeated several times, it’s a good time to buy foreign assets in the sake of expanding industry capacity and upgrading structures.

In addition, Chinese state-backed companies have more access to cash than their rivals in other countries, many state-backed companies can take a long-term view on the country’s demand for metals. Although industrial activity is slowing sharply in China, the government will step up spending on infrastructure as part of a fiscal stimulus package.

Some movements are already made. It’s reported that China began to build oil reserve on the wake of commodity slump. Last month, China’s third largest zinc producer, Zhongjin, bought a 50.1 per cent stake in Australian zinc miner Perilya for US$32m. Meanwhile, Chinese aluminium company Chinalco has indicated it might raise its stake in Rio Tinto to nearly 15 per cent.

The deals highlight Chinese companies’ ability in the current market to access developed assets in relatively developed parts of the world. But the Chinese companies should also be aware things have changed.