Anvil acquisition helps Minmetals turn the corner in Congo – by Geoffrey York (Globe and Mail – May 30, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

KINSEVERE, DEMOCRATIC REPUBLIC OF CONGO – Three months after a $1.3-billion takeover, the new owners of Anvil Mining Ltd. have posted an ambitious business plan on the wall of their Congo mining office.
At the top of the list: “savvy acquisitions” – with the goal of becoming one of the world’s three biggest mid-tier miners and creating a $20-billion global player. And the former Canadian-owned copper mine in Congo is crucial to the strategy.

Anvil’s acquirer, China Minmetals Corp., has learned its Canadian lessons well. Eight years ago, the state-owned company ignited a firestorm of controversy in Canada with its clumsy bid for Noranda Inc., sparking fierce criticism from Canadian politicians and leading to the eventual failure of the bid.
This time its expansion drive is shrewd and carefully planned. Anvil will become the springboard for Minmetals’ aggressive growth plan, which is focused primarily on Africa – especially the risky but mineral-rich terrain of Congo.
Senior executives at Minmetals acknowledge the Chinese company was unprepared for its 2004 attempt to acquire Noranda. It was rattled by the political furor and reportedly couldn’t even get clear support from Beijing as Noranda’s value soared.
After the Noranda fiasco, Minmetals licked its wounds and retreated to Beijing to do its homework. It learned to prepare its bids more diligently and avoid political controversy. Last year it made a hostile $6.3-billion bid for another Toronto-based company, Equinox Minerals Ltd., and failed again when it was outbid by Barrick Gold Corp.
But this year the Chinese company finally emerged with control of a key Canadian asset: Anvil and its Kinsevere copper mine in southern Congo. “We see it as a cornerstone,” says Andrew Michelmore, chief executive officer of Minmetals Resources Ltd. (MMR), the main international subsidiary of China Minmetals.
“Our focus for the moment is on Africa,” Mr. Michelmore said in an interview. “The Chinese take a long-term view.”
His goal is to help MMR to grow fivefold to become a $20-billion company by 2016. With China anxious to secure long-term supplies of the minerals it needs for its relentless economic growth, the executives at his Chinese parent company have access to capital that can only be dreamt of by most Western investors.
And now they have learned the political skills that they lacked in the Noranda bid. After spending $1.4-billion to acquire an Australian mining company in 2009, they retained the Australian management team, including Mr. Michelmore, to spearhead their global expansion.
“I think they learned a lot from Noranda,” he said. “They put their toe in the water, and they got burned.”
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