Consortium Led by China’s Biggest Gold Miner Zijin Mining Bids for Britain’s Monterrico Metals

Consortium Led by China’s Biggest Gold Miner Zijin Mining Bids for Britain’s Monterrico Metals

A consortium led by China’s biggest gold miner, Zijin Mining Group Co., has made a 94.6 million pound, or $185.4 million, offer for British copper miner Monterrico Metals PLC, in what could become China’s first outright takeover of an overseas listed company.

The proposed acquisition, announced earlier this week by Monterrico and Zijin, is the latest in a series of low profile but substantial purchases of overseas mining assets by Chinese companies — part of the country’s quest to diversify supplies of strategically important resources.

Monterrico, a London-based resource company with shares traded on the Alternative Investments Market, or AIM, holds rights to the still undeveloped Rio Blanco copper and molybdenum deposits in northern Peru, which the company says could yield up to 25 millions tons of copper ore a year.

Zijin holds a 45 percent share in the consortium, with Chinese copper miner Tongling taking 35 percent and Xiamen C & D, a trading and real estate conglomerate, holding 20 percent, Zijin said in a statement to the Hong Kong Stock Exchange.

The consortium, dubbed Xiamen Zijin Tongguan Investment Development Co., was set up in August to engage in mining investment, exploration and development.

Monterrico’s board unanimously recommended that shareholders accept its offer.

Previous overseas acquisitions by Chinese companies have involved non-listed companies or joint venture arrangements, state media reports said.

Xiamen C & D is a state-owned company based in the southeastern coastal city of Xiamen with shares listed in Shanghai. Its main businesses are international trading, real estate, conventions and exhibitions and manufacturing. If the deal goes through, it would handle logistics for the consortium, reports said.

China imports about 70 percent of all the copper it uses and wants a wider supply base. This week, President Hu Jintao, on an eight-nation African tour, offered a multimillion dollar investment package to copper-rich Zambia, where Chinese companies have spent billions of dollars developing the mining sector.

But China’s mining interests are not confined to copper.

Last month, Chinese private company Bosai Minerals Group bid $60 million to win an auction for bauxite mines in Guyana, in South America. The purchase of a controlling stake in Omai Bauxite Mining from Canada’s Cambior Inc. would make Bosai, based in the western city of Chongqing, the world’s biggest producer of calcined bauxite — a key material in aluminum used in aircraft, industrial construction and kitchen utensils.

Cambior had earlier suspended operations at the Guyana mine, citing intense competition from Chinese companies producing at lower cost.

In September, the Aluminum Corp. of China, or Chalco, acquired the rights to develop a bauxite mine and alumina refinery project, at an estimated cost of $2.2 billion, in Australia’s Queensland. Chalco has also committed $1.6 billion to develop a bauxite and alumina project in Vietnam.

Like Chalco, which also has shares traded in Hong Kong, Zijin is keen to take advantage of its cash-rich position to expand its assets. It announced last week it plans an initial public offering in Shanghai to raise funds for further expansion.

“The proposed acquisition of Monterrico would represent an important increase in the company’s resources and production,” Zijin said of its acquisition of loss-making Monterrico.

According to Monterrico, the Rio Blanco copper and molybdenum project would likely become Peru’s second-biggest copper mine, with a payback period of only four years.

However, it is not without controversy. In 2005, violent clashes erupted between police and farmers who were protesting against the project, saying they feared it would pollute water supplies downstream.

Source: AP via

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