China Minmetals scouts globe for copper assets

PUBLISHED : Thursday, 29 January, 2009, 12:00am
UPDATED : Thursday, 29 January, 2009, 12:00am

China Minmetals Corp, the mainland's largest metals trader, and its Hong Kong arm are on the prowl for acquisitions of more than US$1 billion to help fuel the nation's demand for raw materials.

Undeterred by the economic slowdown, sources said the companies were 'going after bigger and better deals in copper'.

Minmetals paid US$450 million for Canadian-based Northern Peru Copper Corp at the end of 2007 with partner Jiangxi Copper, the largest integrated copper company in China.

'Minmetals is still pursuing deals of a few hundred million dollars but they are also looking at billion dollars-plus transactions,' said a source.

Copper assets owned by Australia's distressed OZ Minerals, which also produces zinc, lead, gold and silver, would fit well into Minmetals' portfolio, market observers said.

Creditor banks have given the company until February 27 to sort out US$560 million in refinancing.

The search for assets could also extend to Africa and Europe.

Zambia's president said earlier this month that Chinese and Indian firms had expressed interest in the country's Luanshya copper mines, which were forced to close last month.

Separately, London-listed Amur Minerals Corp, which has copper and nickel assets in the far east of Russia, also could be a target, while in Europe, the Serbian government extended until the end of next month the deadline for bids for state-owned copper miner RTB Bor.

Minmetals along with India's Tata Steel and others were competing for a stake of up to 49.99 per cent in iron ore development projects in Ukraine owned by Swiss-based Ferrexpo late last year, according to sources, but nothing has come of the deal thus far.

The stake was expected to go for between US$500 million and US$700 million, but extreme volatility in equity markets made agreeing on value and completing deals difficult last year.

China is the world's largest copper consumer and imports about 75 per cent of its supply.

China's economy last year posted the slowest growth in seven years as the impact of recession in its key trading partners began to be felt on the mainland.

Fears of reduced demand for natural resources caused a collapse in prices that had been hitting highs never before seen.

The three-month contract for a tonne of copper hit US$3,205 on Friday, down 64.15 per cent from a record high of US$8,940 on July 2 last year.

The contract price has been flat this year on hopes China's 4 trillion yuan (HK$4.53 trillion) stimulus package will help bring demand back.

China's copper demand growth, however, is expected to remain at a weak 4.1 per cent this year, according to a Morgan Stanley research report last week.

Chinese resources companies have had some recent success in bringing more of the materials required to fuel the economy back home. Sinopec Corp, the largest oil refiner on the mainland, paid US$1.8 billion last month for Tanganyika Oil, which owns assets in Syria.

Sinosteel Corp, the second-largest iron ore importer in China, acquired Australian iron ore producer Midwest Corp in September for US$1.31 billion.

Sinochem Corp, the mainland's largest chemicals trader, paid US$465 million in February to Britain's Soco International for the 16.79 per cent stake it owns in an oilfield in Yemen.