Australia and China sign over A$10bn of deals

The Business of Mining - thebusinessofmining.com | June 23, 2010 | 9:25 am Energy Coal 

“Canberra and Beijing signed 10 commercial deals worth more than A$10bn (US$8.8bn) on Monday as the two nations strengthened trade links during a state visit to Australia by Xi Jinping, the Chinese vice-president, who is expected to become the country’s next president.

The agreements, mainly in the resource and energy sectors, are small compared with a number of recent deals, including PetroChina’s decision last year to buy up to A$50bn worth of liquefied natural gas from Western Australia’s Gorgon project.”

Source: Financial Times, June 22 2010

Observations:

  • As part of the investment package China Development Bank, which recently was involved in an infrastructure deal in West-Africa, will invest over $1 bln in infrastructure for the new Western Australian iron ore operations in Karara.
  • The investment package, signed by Kevin Rudd and Xi Jinping, the Chinese trade minister, further includes an initial agreement on funding for a $8 bln coal mine, railway and coal-loading terminal in Queensland and funding for projects of Aquila Resources, including its $3.45 bln West Pilbara iron ore project.

Implications:

  • Mr. Rudd tries to show the Australian mining industry he is still committed to development of the sector, although a large part of the miners are currently fighting his proposed mining tax increase. The investments to be done by the Chinese will both help companies with Chinese stakeholders and miners that have a strong demand in China in terms of infrastructure investments.
  • Both Australian government and mining companies are struggling to improve relationswith Chinese government and companies. China accounts for most of the growth and an increasing portion of the total revenue of the companies and is Australia’s primary trading partner. Building long term relationships with the customers is vital for the sustainability of the mining sector in Australia.

©2010 – thebusinessofmining.com

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