and Beijing still demonstrates a willingness to let Chinese mining
companies invest in attractively priced assets. Between 2006
and 2012, an average of 19% of the completed deals exceeded
US$500 million, whereas by 2012 this figure had risen to 30%.
Moreover, only eight deals accounted for 83.4% of the total
transactions by value in 2012.
This trend has continued in 2013. In July 2013, Rio Tinto
announced the sale of its Northparkes copper and gold mine
to China Molybdenum for US$820 million. Furthermore, while
commodities demand may be on a downward slip, China’s biggest
gold producer Zijin Mining Group – who now has a majority
stake in Australia’s Norton Gold Fields – has a mandate to double
output to 300,000 ounces over the next three to five years.
Given the significant lengths Chinese companies have gone to
in carrying out these deals, and considering the long-term nature
of the mining industry, it clearly demonstrates a willingness to
continue doing business in Australia over and above expansion
into other commodities markets.
What can Australia do?
Australia cannot control the demand for commodities. However,
Canberra can maintain an advantage over resource-rich
developing countries by continuing to offer China a stable
environment in which to operate. Other factors within Australia’s
control include labour costs and the quality of infrastructure.
The resources boom has put the country’s mining infrastructure
under pressure in recent years. A clear message from the state
government in 2012 that their capacity for capital funding
is limited means that funding from China becomes a viable
alternative source of funding.
Encouraging Chinese investment in the Australian resources
industry, while proving challenging in certain quarters, is
keenly welcomed by the mining sector. Australian companies
are perfectly positioned to help Chinese companies adapt to
and comply with a range of recent hurdles set in place by the
Australian government, including local listing requirements;
the number of Australian-based directors; where meetings and
decisions by directors are made; and specific requirements that
contracts be made on an arm’s length basis, among other issues.
Adapting to, rather than countering, Chinese diversification
would better serve Australia’s long-term interests. Having been
one of the largest beneficiaries of China’s “going out” policy
thus far, Australia has developed a bilateral relationship with
China that is based on mutual trust and cooperation. Ensuring
this relationship continues to be beneficial to both countries will
require significant input from Canberra’s side to ensure that
increasingly risk-averse China will stay on Australian shores.
Stairway
Simon Phelps Photography
Australia cannot
control the demand for
commodities. However,
Canberra can maintain
an advantage over
resource-rich developing
countries by continuing
to offer China a stable
environment in which
to operate. Other factors
within Australia’s control
include labour costs and the
quality of infrastructure
.
Minesite 2013
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