China on the prowl for smaller Oz miners
05 August 2009 @ 11:08 am ET
http://www.ibtimes.com/articles/20090805/china-on-prowl-smaller-oz-miners.htm
KALGOORLIE, Australia - Who ever said China's loss of face over Chinalco's collapsed $19.5 billion Rio Tinto tie-up bid would curb the country's hunger for Australian natural resources?
Chinese state-owned and privately-held metals firms are actively on the prowl for acquisition and financing deals with Australia's small and medium-capped miners of base metals and iron ore, analysts and bankers say.
"I reckon there's still a few in the cards, there's still more to do -- particularly in steel-related products," said James Wilson, an analyst at DJ Carmichael.
"You can't shut the door on these guys because they are related to the long-term health of the mining industry here," Wilson said, adding that Chinese companies account for a huge proportion of Australian mining firm's customers.
"It's a symbiotic relationship these days."
China's hunger for Australian assets is far from satisfied, two regional investment banking sources told Reuters, even though most of the distressed deals have already been completed earlier this year in the immediate wake of the global financial crisis.
New potential buyout or financing deals may include Australia's smaller iron ore players, the likes of Atlas Iron, and small base metals firms such as Kagara Ltd -- anything involved in steel making or infrastructure to assist in China's massive modernization drive.
Just last month Australia gave the green light to China's Guangdong Foreign Trade Group to take a 19.9 per cent stake in debt-laden Kagara.
Rumors are also swarming China Investment Corp (CIC), the country's $200 billion sovereign wealth fund, is eyeing a financing deal with
Fortescue Metals, Australia's third largest iron ore miner.
What is more, Fortescue's boss Andrew Forrest is expected to ultimately sell his firm sometime in the near future -- even after Fortescue struck a $438 million stake deal with China's Hunan Valin Iron and Steel Group earlier this year.
"I think that Andrew Forrest is definitely a seller," one Hong Kong-based banker with knowledge of the Fortescue-Hunan Valin deal said, adding that Forrest may prefer to develop the company more before he exits at a higher price.
The banker predicted that Chinese firms, including Hunan Valin Iron and Steel, could be interested in buying Fortescue.
Both bankers declined to be named to protect client sensitivities.
Analysts say, there will be scant political opposition to such deals, because they will be with smaller-sized companies, and won't attract headlines such as Chinalco's failed $19.5 billion mega tie-up attempt with household name Rio Tinto.
"At the end of the day, its the shareholders who vote on these things," said DJ Carmichael's Wilson.