China is buying resources. The west is selling. Who’s got the timing right? That’s the $64 billion question as interest in mineral resources heats up just as some people expect it to continue cooling.
Over the past 12 months a series of deals has seen Chinese companies soak up surplus assets being offloaded by western companies or, more recently, step up their buying demands by launching unsolicited takeover offers.
The latest raid came on Tuesday when Guangdong Rising made a $1.4 billion, all-cash offer, for full control of the Australian-base copper producer, PanAust. That followed a similar $1.4 billion all-cash offer by China’s biggest steel-maker Baosteel, in conjunction with an Australian rail operator, Aurizon, for the iron ore project developer, Aquila Resources.
Buying Ahead Of A Possible Commodity-Price Recovery
Interesting as the bids are for PanAust and Aquila the more important message for investors is that they are not the only moves by Chinese companies on mining assets, nor are they the only recent examples of corporate activity in the global mining sector which seems to be developing a head of steam despite there being little evidence of a significant recovery in commodity prices.
What seems to be driving the recent burst of activity is a determination by Chinese companies to snatch control of non-core assets being sold by by western miners before the assets can be snapped up by private equity funds designed to do the same thing, and by Chinese interest in securing future supplies of raw materials.
Other recent deals include the $6 billion purchase of the Las Bambas copper project in Peru by China Minmetals from Glencore Xstrata and the $800 million purchase of the Northparkes copper mine by China Molybdenum from Rio Tinto .
More Assets On The Way For China To Consider
Brewing in the background is the proposed sale by BHP Billiton of its Nickel West assets in Australia, a collection of old mines and processing plants which are likely to attract the attention of private equity funds as well as Chinese nickel consuming companies which are currently being forced to pay high prices for the steel-hardening metal thanks to a ban on the export of unprocessed ore by the government of Indonesia.
The nickel-asset sale is likely to be followed by a much bigger spin-off by BHP Billiton of surplus aluminum, coal and manganese assets
For the rest of this article, click here: http://www.forbes.com/sites/timtreadgold/2014/05/16/western-investors-might-not-yet-have-redeveloped-an-appetite-for-resources-but-china-certainly-has/