China returns to hunt for African mine assets – by Andrew England and Javier Blas (Financial Times – February 7, 2014)

Cape Town – China is making a return to African mining after a hiatus of nearly two years – seeking out new copper, iron ore and uranium deposits in a sign that Beijing is still a keen investor in the continent’s industry.

However, executives and bankers attending the annual Mining Indaba conference in Cape Town – the biggest of its kind in Africa – have warned that China is unlikely to spend large sums solely to secure a flow of commodities, as it did until 2012. Instead, they said Beijing was more likely to buy smaller assets offering strong financial returns and raw materials.

“Selectively, yes, they [the Chinese] are coming,” said Michael Rawlinson, co-head of mining and metals at Barclays. “Some of their acquisition vehicles are on the hunt.” Since the beginning of the year, deals have started to flow: China National Nuclear Corporation has taken a large stake in one of Africa’s largest uranium mines in Namibia for nearly $200m, and China National Gold is in final talks to buy a copper mine in Congo.

Rajat Kohli, head of mining and metals at Standard Bank, which is 20 per cent owned by ICBC, China’s largest bank, said: “The clear message . . . from state-owned enterprises and some of the better established private companies is that they are open for business to Africa.”

Chinese investment in African mining has declined in recent years, on the back of softer metals prices, tight credit and the leadership transition in Beijing. It fell about 10 per cent last year, according to industry estimates.

The drop came as Chinese officials questioned the success of M&A activity in overseas mining over the past decade, with Wang Jiahua, vice-president of the Chinese Mining Association, saying last year that 80 per cent of the investments had largely failed.

John Gravelle, head of mining at consultants PwC in Toronto, said that after a quieter period over the past year and-a-half when Chinese investors licked their wounds, Beijing was now “coming back”.

Bankers said Beijing was likely to rely on mining new companies it believes have the ability to carry the projects, including Gold One and Metorex, which are controlled by China-based investors, rather than relying on state-owned enterprises as in the past.

For the original version of this article, click here: