China’s miners ‘must learn’ from bungled foreign acquisitions – by Eric Ng (South China Morning Post – October 21, 2015)

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Industry observers say Chinese companies must learn from their bungled foreign acquisitions

Tianjin – China’s mining firms have a mixed record on overseas acquisitions, but they can learn valuable lessons from missteps made in the past few years and adjust their strategies, say mining-sector executives.

“Chinese firms are still climbing the learning curve, many failures have dotted the path in the past few years,” said Wang Side, vice-president of Chinalco Resources – a unit of Aluminium Corp of China, the No 2 producer of the metal.

According to Dealogic, Chinese firms made US$4.25 billion in overseas mining acquisitions in the year’s first nine months, from US$8.8 billion in the year-earlier period, when the volume was boosted by a US$7 billion acquisition by state-backed MMG in Peru. The deal volume in the first nine months of 2014 was US$4.4 billion, and US$3.3 billion in the same period of 2013.

Wang told an annual mining conference that he considered the three main reasons for Chinese outbound-investment failures to be poor timing, poor selection of investment targets and poor deal pricing.

More than 80 per cent of the mining firms had made overseas acquisitions between 2008 and 2012, with most of the companies losing some 80 per cent of their market value since the boom years, he added.

“There has [also] been a lack of proper social corporate responsibility and management of local community expectations, [although much improvement has been made in the last few years],” said a report by industry consultancy CRU on overseas investments.

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