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China’s state-owned investors are aggressively pursuing equity stakes in Australian miners in order to shore up their already extensive interests in the African resources sector.
According to Matt Miller writing for The Deal Pipeline cash-flush state-owned investment vehicles such as the China-Africa Investment Fund and government-connected equity funds such as Cathay Fortune have recently stepped up efforts to increase their sub-Saharan mineral holdings via the backdoor strategy of investment in Sydney-listed miners.
These efforts are best exemplified by the hostile take-over bid jointly mounted by Cathay Fortune and China-Africa Investment Fund for Discovery Metals (ASX:DML), whose shareholders will mull over their options at their annual meeting in Brisbane on 16 November. Although Discovery is headquartered in Brisbane and listed in Sydney, its prize assets are the Boseto copper field located in north-west Botswana.
Miller says that the hostile bid by Cathay and China-Africa investment is significant of a “growing awareness by Chinese interests of how the takeover game is played, and a budding confidence to play the game hard.”
Miller also notes that bid comes as part of an increasingly pronounced trend of Chinese investors are pursuing stakes in Australian companies to obtain African assets, with Sichuan Hanlong Group recently offering AUD$1.2 billion for the remaining 81.4% stake in Sundance Resources Ltd. (ASX:SDL) that it doesn’t own, in order to claim iron ore assets in West Africa.
Zhongrun Resources Investment also recently made a AUD$84.7 million offer for a 41.5% stake in Noble Mineral Resources (ASX:NMG), which owns a string of gold mines along the West African coast. Noble shareholders eschewed that option earlier this month, accepting instead an $85 million financing offer from Aussie mining peer Resolute (ASX:RSG).
Despite small setbacks such as the overturned Noble Minerals bid, China is set to continue pursuing its current investment strategy, as the country sits on a huge pile of foreign reserves following the past decade of flourishing export-oriented growth.
Miller points out that China-Africa already has $3 billion in paid-up capital, a mere pittance compared to China’s largest sovereign wealth fund, China Investment Corp, which has capital currently approaching $500 billion.
Comments
Brenda Simbuleta
Well done China. I was fortunate to visit their investments in Central Africa (DR Congo and Zambia). They are doing an excellent job in the areas of job creation, technology transfer, knowledge transfer and corporate social responsibility. Essential components for mining in this region, and components neglected by Presidents Mobutu and Kaunda.