The rebound of asset prices is difficult to stop the “going out” boom of Chinese mining companies

Chinese companies’ overseas mergers and acquisitions have always been highly enthusiasm. Along with the global economic recovery, asset prices have risen sharply when the financial crisis raged in 2008, but they are afraid to block the strong pace of “going out” by Chinese mining companies, in line with the Chinese government’s flagging structural adjustment. , Supporting Chinese-funded enterprises to take energy-based overseas mergers and acquisitions, this year, China's mining companies to enter the overseas is expected to lift another wave of climax.

Last year, outbound investment by Chinese companies was the most important method for overseas acquisitions. It accounted for approximately 61% of the investment in the agreement reached by the Chinese, which was an increase of 36% compared to 2008. The average foreign investment in large and medium-sized mining in 2008-2009 was 9 per cent. Eight of the investment negotiations reached an agreement.

This year, China’s foreign investment, especially the merger of resources, is still a promising market. China’s huge reserves are also backing.

"Although asset prices have risen since last year, they still hope to seize the opportunity to seek relatively mature projects in Australia, Canada and other regions to implement mergers and acquisitions." The head of a merger and acquisition business of a large state-owned mining company in China told Reuters.

He also disclosed that potential projects that have been exposed through some large investment banks include the Canadian mining companies Quadra Mining Ltd (QUA.TO: Quote) and Lundin Mining Corp (LUMIsdb.ST: Quote), but no substantive progress has been made.

Quadra Mining's share price has risen nearly six-fold from the end of 2008. At the same time, major resource prices have also picked up. From the end of 2008 to the end of 2008, the three-month copper price of the London Metal Exchange (LME) has more than tripled.

Obviously, the issue of asset prices did not scare off Chinese buyers.

Earlier this month, Australia said that it approved China Zijin Mining Group (2899.HK: Quotes) to purchase the Australian Indophil Resources NL (IRN.AX: Quote) offer for $498 million.

A manager of the Investment Banking Department at Deutsche Bank (DBKGn.DE: Quotes) stated that energy-based mergers and acquisitions are a national strategic level of behavior. Generally speaking, it is unlikely that an enterprise will be prevented from trading due to the asset price.

Since 2009, successful cases of overseas acquisitions by Chinese mining companies include China Minmetals' successful acquisition of OZ Minerals (OZL.AX: Quotes) majority asset deal with Australian miners for US$1.4 billion; China Yanzhou Coal (1171.HK: Quotes) ( 600188.SS: Quotes) Successful bid for Australian coal mine company Felix Resources FLX.AX with US$2.9 billion.

The international accounting firm Price Waterhouse Coopers had expected that the growth trend of overseas M&A activity in China will continue, and an average annual increase of 40% in the next few years will not be unachievable. M&A in the energy and resources industry will continue to dominate.

Zhang Xiaoqiang, deputy director of the China Development and Reform Commission, said on Sunday that Chinese companies' non-financial overseas investment this year may reach 48 billion U.S. dollars. Last year, they reached a record high of 43.3 billion U.S. dollars, of which merger and acquisition investment totaled 17.5 billion U.S. dollars, accounting for 40.4 of the total investment in the same period. %.

Deloitte [DLTE.UL], deputy director of M&A trading services, also said that asset prices are only one of the considerations for mergers and acquisitions. When the financial crisis raged, some Chinese companies are looking for a bargain, but now their decisions will be more prudent and more. Seek professional advice.

**Government or Increasing Energy M&A Policy Support**

In order to serve the economic goals of "guarantee growth and structural adjustment," China this month re-emphasized that Chinese companies should "go global" and should focus on energy resources. The direction of investment should be further integrated with the adjustment and upgrading of domestic industrial structure. Industry insiders say that the adjustment is appropriate. As for the structural goals, the government will increase its support for energy mergers and acquisitions in the future to benefit domestic industry upgrading and adjustment.

One of the key adjustments made by the People's Bank of China this year is to provide credit support to key industry enterprises investing in the development of energy, minerals, and other resources abroad as well as the transfer of excess capacity abroad.

In addition, China’s holding of the world's first-reserve assets has a solid foundation. The use of good reserve resources can also help Chinese companies to successfully go out. By the end of 2009, China’s stock of reserves was US$2.4 trillion.

Song Ruibo, head of the investment banking department of Shanghai Pudong Development Bank and an investment bank, said that the current domestic economy has laid a certain foundation and has undergone a labor-intensive and resource-processing economic development model. The next step is to acquire or look for control resources and introduce advanced technologies. , Corporate management methods and a wide range of market channels to benefit domestic industry upgrading and adjustment, the government has also increased support from the policy perspective.

Zhang Xiaoqiang said earlier this month that the key tasks of overseas investment are to strengthen the development of overseas resources, actively participate in the global allocation of various resources such as oil and gas, minerals and market competition; the direction of overseas investment is further closely integrated with the adjustment and upgrading of domestic industrial structure, and guide the direction of domestic funds. Overseas high-tech industries and advanced manufacturing industries, transferring the remaining domestic production capacity.

"In the future, with industrial upgrading and structural adjustment, it is believed that there will be more and more cases of energy mergers and acquisitions. China will be the golden period for mergers and acquisitions in the next 3-5 years," Song Ruibo said.