Mergers set to create mining giants

A record wave of consolidation in China's mining industry is creating bigger companies that will have the muscle to compete with the likes of BHP Billiton for overseas acquisitions.

Even after Chinese mining mergers reached US$19.6 billion last year, double the tally for 2011, the government wants to see more.

Easier access to capital and less Chinese competition for assets might make companies including China Minmetals Corp and Aluminium Corp of China more robust overseas buyers, said Deloitte & Touche.

That will help reverse a slump in acquisitions of mining assets outside of China, which fell to a five-year low of US$2.9 billion last year, data shows. As the world's biggest importer of iron ore and coal, China relies on foreign sources of the raw materials.

"With stronger and bigger Chinese players emerging, we could see a significant pickup in the volume of overseas acquisitions," said Richard Tory, the Hong Kong-based head of natural resources for the Asia-Pacific region at Morgan Stanley.

China's mining industry, while one of the world's largest producers of minerals, is now peppered with thousands of smaller companies.

Minmetals, its largest miner by revenue, had assets of US$36.6 billion at the end of 2011 - dwarfed by BHP's US$122.1 billion.