China’s mining companies are actually industrial complexes

Chinese investments in foreign mining assets totalled $50-billion over the past ten years. As a result, a number of Chinese companies have already emerged as global mining majors, and more will follow them. It should be noted that few of these groups are dedicated mining companies; most are vertically integrated industrial complexes that do everything from exploration and mining through to metals and/or chemicals production and/or electricity generation and/or equipment manufacturing.

PriceWaterhouseCoopers (PwC) has now ranked China Shenhua Energy as the world’s fourth-largest mining company in terms of market capitalisation, after BHP Billiton, Vale and Rio Tinto, and ahead of Anglo American (fifth) and Xstrata (sixth). Moreover, there are now five Chinese companies in PwC’s list of the world’s top 40 miners in terms of market capital-isation. Apart from China Shenhua, they are China Coal Energy, Jiangxi Copper, Shanxi Xishan Coal & Electricity Power and Zijin Mining Group. Of these, only China Shenhua and China Coal Energy were in PwC’s top 40 in 2008.
However, as this list is based on market capitalisation, it is unavoidably misleading. Many major Chinese mining companies are wholly State-owned (some by the central government in Beijing and some by provincial governments) and are not listed on any stock exchange and so have no market capitalisation at all.

Thus, China’s largest diversified mining company is not China Shenhua but the Aluminium Corporation of China (Chinalco), which owns 9% of Rio Tinto. Other major and entirely State-owned Chinese mining companies include China Minmetals Corporation, Sinosteel and Jinchuan Group.
Chinalco mines bauxite, copper and titanium, producing alumina, aluminium, copper concentrate, copper cathodes, fabricated copper products, sponge titanium and titanium alloys. Chinalco’s groupwide strategy is to expand its businesses vertically, including the exploration, mining and processing of metals and minerals, and become a global major diversified resources company.

China Minmetals is the country’s largest supplier of raw materials to the metal- lurgical industry and has iron-ore reserves of 600-million tons and coking coal reserves of 250-million tons. It sells some 20-million tons of steel products annually, and manufactures equipment for the metallurgical industry, including blast furnaces. In 2008, China Minmetals achieved total revenues of $27,7-billion and was ranked 331st in the Fortune magazine ‘Global 500’ list.

Sinosteel is active in the development and processing of metals resources, in metallurgical resources trade and logistics, the manufacture of mining equipment, and in engineering and technical services and science and technology. It has 86 subsidiary companies, 60 in China and 26 in other countries, and the group ranked 372nd in the ‘Fortune 500’ list for 2009. It mines iron-ore, chrome, manganese, nickel, cobalt and zinc.
China Shenhua is listed on both the Hong Kong (primary) and Shanghai (secondary listing) stock exchanges and is a coal-mining, transport and electricity-generating group. Last year, it produced 210,3-million tons of coal and has saleable coal reserves (calculated according to the Joint Ore Reserves Committee) of 6,927-billion tons. The group also operates five railways in China and (as of December 31) 55 coal-fired and three gas-fired power stations and 21 wind power units, with a total generating capacity of 23 520 MW.

China Coal Energy is also listed on the Hong Kong Stock Exchange and is, in terms of reserves, the second-largest listed coal company in China and the fifth-largest in the world. Its production amounted to 100,37-million tons in 2008. The group also produces coke and provides consultancy and design services for collieries, and manufactures coal-mining equipment
Jiangxi Copper is based in the province of the same name and mines, mills, smelts and processes copper. It is the country’s gest producer of copper, sulphur, gold and silver and also produces lead, molybdenum, palladium, platinum, selenium and zinc, besides other commodities. It is listed primarily on the Hong Kong and secondarily on the Shanghai stock exchanges.
Shanxi Xishan mines and sells coal, generates electricity and provides mine design and development services. During 2009, the group produced some 18,55-million tons of raw coal and generated about 4,473-billion kilowatt hours of electricity. It is listed on the Shenzhen Stock Exchange.

The Jinchuan group has its home base in the city of Jinchang, in the province of Gansu, in north-west China, and is an integrated nonferrous metallurgical and chemical engineering business. Jinchuan is China’s largest producer of nickel and cobalt, with a production capacity of 130 000 t/y of nickel – amounting to more than 90% of the country’s total output of this metal – and 6 000 t/y of cobalt, but it also produces copper (a capacity of 200 000 t/y) and precious metals, including platinum-group metals (PGMs). With an output of 8 t/y, the company accounts for more than 90% of China’s PGMs production. It also produces 1 200 000 t/y of chemical products.
Zijin Mining produces (mines, processes and refines) gold, copper, zinc, silver and molybdenum and is listed on the Shanghai Stock Exchange. During 2009, it produced more than 75 t (2 423 286 oz) of gold.