China’s Wen Jiabao soothes on rare earths, investment worries

Chinese premier Wen Jiabao recently told a German trade delegation that China would not block exports of rare earth metals, while disputing allegations that China’s investment climate has worsened for foreign businesses. European and American business associations have expressed concern over the past year at Chinese policies that favour procurement of goods and services with “indigenous innovation” as well as China’s promotion of national standards instead of international norms for technology and equipment.

German business leaders called for open access to Chinese markets, better intellectual property right protection, and equal access to resources including rare earth minerals. “Currently, there is an allegation that China’s investment environment is worsening. I think it is untrue,” Wen said in response. Wen said China would never block the export of rare earth minerals to foreign countries, but said minerals should be exported at a reasonable price and volume, the Xinhua news agency reported. Those remarks were not made in the presence of foreign reporters. Wen said foreign firms would be given the same treatment as Chinese firms if they manufacture in China.

Foreign traders, manufacturers and military strategists have grown increasingly vocal about Chinese moves to reduce the volume of exports of rare earths. Chinese planners say export controls will prevent wasteful exploitation, support volatile international prices and encourage high-tech manufacturers to shift operations to China, where rare earth prices are cheaper.

Chinese to invest $1.5 billion in West African iron-ore project

Iron-ore and base-metals-miner African Minerals has entered into a $1.5-billion strategic investment understanding with Chinese steel company Shandong Iron & Steel Group (SISG) to fund its flagship iron-ore Tonkolili project in Sierra Leone. African Minerals executive chairperson Frank Timis said it would use the funds for the construction of infrastructure and mine operations at the project, including a shift from a combined haul-road and rail system to an all-rail transport and logistics system.

Funding by SISG would be provided in a three-stage subscription agreement in exchange for a long-term supply of iron-ore and a 25% interest in the Tonkolili project. The offtake agreement would be for a total of up to ten million tons a year of iron-ore at discounted prices. At the end of each stage of funding, SISG could elect to receive either iron-ore production or a dividend corresponding to its percentage of ownership, which would be at 13.3% after stage one, 21.6% after stage two, and 25% after the funding was completed.
The deal has the potential to transform the West African country’s economy, its mines minister has said. The cash injection will help build a mine employing thousands of Sierra Leoneans and providing much-needed government revenue.

“For too long Sierra Leone has been described as a country with rich mineral resources, but ... it has demonstrated no impact on our economy, instead we have continued to regress and remain poor, but this time the goverment is determined that progress must be achieved,” Mines Minister Alpha Kanu said. “Sierra Leone’s government is very confident it will bring in a lot of money both foreign exchange as well local payment of royalties and other taxation,” Kanu said, declining to give a figure for how much the government expects to earn from Tonkolili.

Minmetals of China eyes new Australia copper mine

China’s Minmetals could develop a new open pit copper deposit at its Golden Grove zinc mine in Western Australia and has reactivated a study shelved during last year’s financial crisis. Melbourne-based Minerals and Metals Group (MMG), the company’s Australian subsidiary, has started a feasibility study into the development that could yield around 59,000 tons of copper metal annually from 240,000 tons of ore concentrate, it said.

Plans to construct the mine to supplement production from underground deposits at Golden Grove was put on hold by MMG in 2009, after commodities markets were drawn into the financial turmoil. But recent improvements in commodities priceshave convinced MMG to take a second look at the plan. MMG was formed in 2009 by Minmetals to acquire the majority of the zinc and copper mining assets of Oz Minerals and act as vehicle for acquisitions and organic growth in the sector.


Russia to get $55 billion in new oil, gas, metals duties

Russia will raise the mineral extraction tax on gas by 61 percent from January 1 and increase export tariffs on copper, nickel and oil products to add billions to state coffers, the Finance Ministry has said. The Ministry has been pressing for tax hikes on gas extraction for years, but the government rejected proposals in favour of gas export monopoly Gazprom which claimed the increases would force it to cut investment.

“Finally we have succeeded, and all government ministries are in uniform agreement with our proposals,” the head of the Finance Ministry’s tax department, Ilya Trunin, told reporters. Other proposals include raising crude oil extraction taxes; setting oil-product export duties at 60 percent of the crude export duty rate from 2013; and increasing gasoline and diesel fuel excise duties by one rouble for the next three years.

The entire package of proposed tax increases on oil and gas will add $24.4 billion to the state budget through 2013, Trunin said. Taxes from oil and gas account for over half of Russia’s budget and the proposed increases will be used to help plug the country’s 5.4 percent budget deficit, which totalled $14.25 billion for the first six months of the year.
According to the Finance Ministry’s gas extraction tax proposal, which will mark the first increase since 2005, the tariff would rise by 61 percent in 2011 and then in smaller increments of 6 percent in 2012 and 4.5 percent in 2013.

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