Chinese miners active globally to feed economic growth at home

 In its recently released report on the state of the global mining industry – ‘Mine – Back to the Boom’ – PriceWaterhouseCoopers (PwC) reported that, in 2009, the Chinese had been in the forefront of mining mergers and acquisitions (M&A) across the world. “Chinese investment in 2009 made up $17 billion, or 22%, of all global mining M&A activity and 30% of the top ten deals by value,” it highlighted.  This is hardly surprising, given that, as the World Bank reported in its China Quarterly Update March 2010, the Chinese economy grew at a rate of 8.7% last year.

Already, in purchasing power parity (PPP) terms, China’s gross domestic product (GDP) is the second-gest in the world, at $8,789 trillion. (The US is still number one, at $14,260 trillion). However, with a population estimated to reach 1,330,141,295 next month, the result is that China ranks only 126th out of 225 countries and territories in the world in terms of per capita GDP, in PPP terms. Of the other members of the now-famous Bric group (Brazil, Russia, India and China), only India is placed lower than China in per capita terms, ranking 162nd (Russia is 74th and Brazil 103rd).
In dollar terms, China’s per capita PPP GDP for 2009 is estimated at $6,600, while for 2008 it was $6,100 and for 2007, $5,700. This is below the 2009 world average of $10,500. The figure for Russia is $15,100, Brazil $10,200, and India $3,100, while the average for the European Union is $32,600.

China is thus both very rich and very poor and while it has made enormous progress, it needs to make even greater progress in the future. A sustained high rate of economic growth is thus absolutely essential to China, morally, socially and politically. It is widely perceived that the very legitimacy of the current Chinese political system – and not merely of the current government – depends on Beijing’s success in delivering continuing rapid growth.

Economic growth requires natural resources to feed the population, create and feed the industries and provide the energy for domestic, industrial, agricultural, services and State use. Little wonder, then, that modern China has a voracious appetite for just about every kind of resource.

China is, geographically, the world’s fourth-largest country and, within its total area of 9,596,961 m2, contains 158 recognised minerals with proven reserves. Of these, 91 are nonmetal minerals, 54 are metals, ten are energy minerals and three are water and gas minerals. The country’s proven mineral resources are the third-largest in the world (after the US and Russia) and account for some 12% of the global total.

Notably, the country possesses high-quality and internationally competitive rare earth (or lanthanide) minerals. It also has high-quality and competitive resources of barite, bentonite, fluorite, graphite, gypsum, magnesite, mirabilite (which contains the decahydrate form of sodium sulphate, called Glauber’s salt), molybdenum, niobium, talcum, tin and tungsten.
Unfortunately for China, its reserves of key resources, including bauxite, copper, iron-ore, lead, manganese, phosphorous, sulphur and zinc, are limited and mostly of low grade. Its other resources include antimony, coal, mercury, natural gas, petroleum, uranium and vanadium. But, again, the natural gas and petroleum reserves are limited and generally of low grade.
Overall, while China’s resources are rich in terms of total volume, they are lacking in per capita volume and most of the country’s mineral deposits are only of medium to small size. However, it is believed that there are a number of unexploited large and even super-large mineral resources lying in the remote far western regions of the country. Nevertheless, China is still the world’s gest producer of aluminium, antimony, cement, coal, fluorspar, lead, magnesium, mercury, rare earths, steel, tin, tungsten and zinc.

Among resources currently being exploited, coal production is concentrated in the north-western and northern regions of the country, copper along the middle and lower reaches of the Yangtze river, iron-ore in the north-eastern, northern and south-western regions, petroleum in the north-east, north and north-west, phosphorus in the south-western and south-central regions, while the production of antimony, manganese and tin is concentrated in the provinces of Guizhou, Hunan, Jiangxi and Yunnan. The exploitation of these resources is overwhelmingly in the hands of a domestic mining industry comprising some 80 000 State-owned mining companies and roughly 200 000 collectively owned mines, but China is opening the industry to foreign investment.

Unable to supply the necessary quantity and quality of mineral and metal inputs to support its economic growth from its own resources, China turned to foreign sources of supply. For example, in 2003, the country became – and remains today – the world’s gest importer of iron-ore. And, despite being the world number one coal producer, the country still has to import scores of millions of tons of the energy mineral – net imports of coal came to 103-million tons last year. Indeed, in its 2010 ‘Mine – Back to the Boom’ report on global mining, PwC has highlighted that China is on the verge of overtaking North America and becoming the global mining industry’s gest customer.

Not surprising, Chinese mining companies have been moving out of their homeland, looking to find, buy and develop mining projects in other countries, either on their own or in joint ventures (JVs). They have prioritised the developing world, and in particular Africa and Central Asia – although Australia is also an area of great interest.