Chinese firms back on the hunt for mining treasure as majors offload assets

Resurgent Chinese interest in overseas mining acquisitions is expected to remain strong, amid expectations that metal prices may be bottoming out and as international mining majors look to improve their portfolios by selling assets.

Domestic firms snapped up US$4.49 billion worth of overseas mining assets in the first six months of the year, an 18.2 per cent rise on the US$3.8 billion in the same period last year, according to data collated by Mergermarket which has co-published a report on the findings with international law firm Baker & McKenzie.

“In the past, China’s demand [for overseas assets] has been driven by central [government] policy, [but now] we are seeing more opportunistic buying,” said John Mollard, global head of mining at Baker & McKenzie.

“The [rising deal flow] perhaps reflects a view that commodity prices are near the bottom [of their cycle], and the fact that many international majors have been adjusting their asset portfolios [amid the downturn] so that better assets are becoming available.”

The law firm has advised Chinese firms in their outbound acquisition deals and earned fees from such work.

Mollard expects this year’s total deal value to at least match last year’s, after what had been an annual downtrend since 2011.

Deal volumes are being influenced, primarily, by whether Australian coal mines — put on the block by mining giants such as Anglo American, Rio Tinto and Peabody — are sold and if the rising interest in “high-tech” minerals like lithium and graphite, used in advanced batteries, is maintained.

During the first half, China Molybdenum, controlled by mainland businessman Yu Yong but also substantially owned by the Luoyang municipal government, stood out as the biggest overseas asset buyer.