Chinese Firms Lead in Global Metal & Mining Industry Investments

In the wake of the USA – China trade war, which China has since lost, according to Helen Raleigh, the owner of Colorado Investment Advisory firm, Red Meadow Advisors, President Xi Jinping’s country has turned to mineral investments for economic growth opportunities, ENN reports.

In September 2019, GlobalData announced mergers and acquisitions in the metals and mining industry worth US$1.9 billion. At country level, China topped the list on deal value, accounting for US$1.34 billion, which translates to 70.5 percent of the September 2019 global metals and mining industry deals’ value. As at end of September 2019, metals & mining M&A deals worth $36.46bn were announced globally, confirming a decrease of 55.1% year on year, thanks to the China – US trade war and a wave of geo-political tensions.

According to GlobalData, the following were the top five metals & mining industry deals for September 2019:

1) Beijing Haohua Energy Resource’s US$442.81million acquisition of Ningxia Hongdunzi Coal Industry

2) Shanxi Jinmei Distressed Equity Investment Partnership’s $408.55 million acquisition of Shanxi Meijin Energy

3) Osisko Gold Royalties’ US$254.73 million acquisition of Barkerville Gold Mines

4) Hunan Valin Xiangtan Iron and Steel’s US$231.6 million acquisition of Yangchun New Steel

5) Shandong Zhaojin Group’s US$129.93 million acquisition of Baoding Technology

At a regional level, the Asia Pacific region recorded the highest deals’ value of US$1.37 billion in September 2019, followed by North America with a deals’ value of US$0.48 billion. Risk adverse Europe recorded metals and mining industry deals worth US$0.002 billion, South and Central America had US$0.25 billion, with the Middle East and Africa region recording US$0.2 billion worth of deals in September 2019.

Commenting on the 2019 metals and mining industry trends, deal advisor Oliver Wright from White & Case legal advisers told global mining news experts Mining Global Review that companies have been coming under pressure to demonstrate growth and the quickest and most cost-effective way of doing this has been for the majors to consolidate and look to M&A for growth. “There is also an objective for companies to undertake a sale of non-core assets. This begs the obvious question of who is going to buy these assets, which depends to some extent on the location of the assets. Assets that are in Africa, Latin America in politically sensitive jurisdictions seem to be likely targets for Chinese companies”, said Wright as he anticipates to see more M& A activity in the metals and mining industry market.

Equipped with very sophisticated mining technology, Chinese companies, unlike the risk adverse Western companies, are taking mineral investment risks even in politically risky economies with resource-rich and financially poor Africa looking to be their biggest target for 2019 into 2020.

According to the IMF, the global economy is in a synchronised slowdown which has led to a downgraded growth of 3 percent for year 2019. This is the slowest growth pace since the global financial crisis of 2007. Geo-political tensions and rising trade barriers are at the centre of this global slowdown with US-China tensions estimated to cumulatively reduce global GDP levels by 0.8% by 2020. This global economic slowdown has implications on global demand for commodities, which may result in depressed metal and mineral prices for the coming year.   

Against these gloomy IMF forecasts and a trade war with America, Chinese premier Li Keqiang still thinks that the risk-daring Asian giant will achieve a 6% economic growth rate in 2019, and Chinese companies continue to lead in the acquisition of global metals and mining industry investments.

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