Knowledge is the new black.
30 May 2016 06:56 (South Africa)
Business

All mine! The Chinese close their first Africa mining play

  • Richard Poplak
    HEADSHOT_Rich-Poplak_orange.jpg
    Richard Poplak

    Richard Poplak was born and lives in Johannesburg, South Africa. He trained as a filmmaker and fine artist at Montreal’s Concordia University and has produced and directed numerous short films, music videos and commercials. Now a full-time writer, Richard is a senior contributor at South Africa’s leading news site, Daily Maverick, and a frequent contributor to publications all over the world. He is a member of Deca Stories, the international long-form non-fiction collective.

    His first book was the highly acclaimed Ja, No, Man: Growing Up White in Apartheid-Era South Africa (Penguin, 2007); his follow-up was entitled The Sheikh’s Batmobile: In Pursuit of American Pop-Culture in the Muslim World (Soft Skull, 2010). Poplak has also written the experimental journalistic graphic novel Kenk: A Graphic Portrait (Pop Sandbox, 2010). His election coverage from South Africa’s 2014 election, written under the nom de plume Hannibal Elector, was collected as Until Julius Comes: Adventures in the Political Jungle (Tafelberg, 2014).  Ja, No, Man was longlisted for the Alan Paton Non-Fiction prize, shortlisted for the University of Johannesburg Literary Award and voted one of the Top-10 books of 2007 by Now Magazine. Richard has won South Africa’s Media-24 Best Feature Writing Award and a National Magazine Award in Canada.

    Since 2010, Poplak has been travelling across Africa, seeking out the catalysts and characters behind the continent’s 21stcentury metamorphosis. The coming book, co-authored with Kevin Bloom, is called The Shift

  • Business
minmetals drc

It’s on. China Minmetals Group, the Hong Kong listed Chinese state-backed mining company, has been trying for years to buy themselves an African mining company. Last week, they just did that. Anvil Mining is the first shining jewel in the Chinese parastatal’s mining crown. It won’t be the last. By RICHARD POPLAK.

Ah, property in the Democratic Republic of the Congo! Forget the American Dream – this is the African dream. Who can refuse a plot of land in a tsetse fly-infested warzone? Especially when its studded with copper, the magical metal that is weaving together China’s massive year-on-year growth, driven by fixed income investment that builds roads, buildings and conference centres in megacities you have never heard of.

Certainly not Chinese state-backed miner Minmetals. The company has been sniffing around African mining companies for a couple of years now, parrying for a play that would earn them an acquisition that makes sense. Last year, Minmetals threw C$6,3-billion (ZAR48,6-billion) at Equinox Minerals Ltd, which has copper assets aplenty in Zambia. Minmetals finally walked away from the deal, considering it way too dear, which in turn woke up African miners to a fundamental truth: the Chinese may indeed have deep pockets, but they weren’t going to buy just for the sake of buying. Deep pockets don’t stay deep that way.

So, the Chinese miner waited. And along came copper diggers Anvil Mining Ltd. At C$8 (ZAR61.7) per share, the company was in the right price range, and the play was in accordance with the Chinese tolerance for risk: its major asset is in the Democratic Republic of the Congo. The Kinsevere mine produced 16,000 tonnes of copper in concentrates in 2010, and is looking to quadruple that output.

So Melbourne-based Minmetals CEO Andrew Michelmore pounced. An offer was made to purchase 90% of Anvil’s shares. And C$1,3-billion (ZAR10-billion) later, Minmetals is now in the position to produce 60,000 tonnes of copper a year. It will delist Anvil from the Toronto and Australian stock exchanges post-haste, and make it a member of the Minmetals family.

Just another mining play in what is shaping up to be the year of the miner? Not really. Despite the blockbuster (potential) merger of Glencore and Xstrata, which still awaits Xstrata shareholder approval, this deal remains significant. It represents Minmetals entry into the African market – and while fellow Chinese miner Jinchuan Group Co. outbid Brazil’s Vale for South Africa-listed Metorex Ltd last year, this is the deal that seems to signal the tipping point. The Chinese have, officially, arrived.

Is this a thing? Not necessarily. On one hand, it represents a new player on the block, which means increased competition. It also means, with Minmetals’ risk tolerance, that even a joint like the DRC can expect real interest in its properties. (Not that political instability and internecine war has ever stopped mining companies, but it does make them think twice.) Minmetals is determined to become a major international player, and signalled as much when it purchased Minerals & Metals Group from its parent China Minmetals Non-Ferrous Metals Co. in October 2010. Andrew Michelmore came with the property, and he has brought Minmetals a wealth of experience and a Western sheen, all of which seems to have helped.

As for the DRC? "We bid for Equinox, now we've got Anvil, so we're interested in that part of the world," Michelmore has said. "We like that prospectivity.” Minmetals is now looking all over the globe for new acquisitions, and is willing to drop anything between the C$1 to the C$7-billion (ZAR7 to ZAR54-billion) range for an asset about to go online.

Ultimately, it doesn’t have much choice. Minmetals is backed by the Chinese state, and is answerable to state-backed policy. And with China using over 40% of the world’s copper resources, with a further 6 to 7% projected rise this year alone, they need commodities in massive amounts. This means that the Chinese remain buyers, and that African miners who put their assets on the block can expect serious and sustained interest.

There was nothing hostile about the Anvil purchase – it had effectively put up a For Sale sign last August, when a majority owner signalled an interest in selling 39% of the company’s shares – so this was very much in the cards. Still, it underscores something we already knew: the Chinese are here. And in 10 years, this continent is going to look very different, especially if China keeps booming. If it doesn’t, it will look more different still. DM




Read more:

  • China’s Minmetals wins 90% acceptance for Anvil takeover in Mineweb.
  • At long last, Minmetals get’s African mine in the Wall Street Journal.

Photo: MMG Ltd Chief Executive Officer Andrew Michelmore speaks at a news conference in Melbourne. REUTERS/Mick Tsikas.

  • Richard Poplak
    HEADSHOT_Rich-Poplak_orange.jpg
    Richard Poplak

    Richard Poplak was born and lives in Johannesburg, South Africa. He trained as a filmmaker and fine artist at Montreal’s Concordia University and has produced and directed numerous short films, music videos and commercials. Now a full-time writer, Richard is a senior contributor at South Africa’s leading news site, Daily Maverick, and a frequent contributor to publications all over the world. He is a member of Deca Stories, the international long-form non-fiction collective.

    His first book was the highly acclaimed Ja, No, Man: Growing Up White in Apartheid-Era South Africa (Penguin, 2007); his follow-up was entitled The Sheikh’s Batmobile: In Pursuit of American Pop-Culture in the Muslim World (Soft Skull, 2010). Poplak has also written the experimental journalistic graphic novel Kenk: A Graphic Portrait (Pop Sandbox, 2010). His election coverage from South Africa’s 2014 election, written under the nom de plume Hannibal Elector, was collected as Until Julius Comes: Adventures in the Political Jungle (Tafelberg, 2014).  Ja, No, Man was longlisted for the Alan Paton Non-Fiction prize, shortlisted for the University of Johannesburg Literary Award and voted one of the Top-10 books of 2007 by Now Magazine. Richard has won South Africa’s Media-24 Best Feature Writing Award and a National Magazine Award in Canada.

    Since 2010, Poplak has been travelling across Africa, seeking out the catalysts and characters behind the continent’s 21stcentury metamorphosis. The coming book, co-authored with Kevin Bloom, is called The Shift

  • Business

Get overnight news and latest Daily Maverick articles

Daily Maverick has temporarily suspended comments on the site. Until the interwebs figures out a better way to deal with the naughty kids in the class, the space for your comments is on our Facebook page and the Twitterverse.

Alternatively, you are welcome to send a letter to the editor.