Last week we learned that state-owned China Investment Corp. made a $1.74-billion private placement in international miner Teck Resources of Vancouver. The Chinese bought 101.3 million Class B subordinate voting shares at $17.21 per share, giving it a 17.5% stake in the miner. The extra cash gives Teck the opportunity to further reduce the debt remaining after last year's purchase of Fording Coal.
Nor is this the only deal the Chinese have made this year with Canadian mining companies. Last month Wuhan Iron and Steel Corp. agreed to invest US$240 million in Consolidated Thompson Iron Mines of Toronto. The deal gives the Chinese an interest of approximately 20% of Thompson. The two parties have further agreed to create a joint venture in which Wuhan will assume 25% of the Bloom Lake project in northern Quebec.
China is on a buying spree in Australia, too. Its business entities have ploughed US$185.7 million into rare earths miner Lynas Corp., US$1.21 billion into zinc miner OZ Minerals, US$770 million into marketer Fortescue Metals Group, and A$45.5 million into zinc miner Perilya.
I doubt China is very upset that the Chinalco-Rio Tinto deal fell apart. Or perhaps it is. I have just learned that Rio Tinto's top iron ore negotiator has been detained by the Chinese government on suspicion of espionage.
When I was very new to this job, more than 30 years ago, then-editor Richard Fish and I used to discuss the "sleeping dragon" that was China. We thought that China could change the course of the global mineral industry solely because the country is so large.
Now the dragon is not only awake, but very hungry.
The beast began to rouse in 1997 when the British returned control of Hong Kong to China. Financial success there and in Singapore has helped propel the world's most populous country into the new century. China used the opportunity to host the 2008 Olympic Games to showcase itself as a modern and progressive nation. The xenophobic policies of Mao have been set aside in favour of creating a country poised to be a world superpower.
The Chinese government is committed to economic growth. It knows that ready access to resources will be key. Fortunately, the country has the cash to secure what it needs, whether it is in Canada, Australia or another part of the world.
Some analysts caution the Western World's miners against relying so heavily on a single market to return them to profitability. But the choices are few. No other economy is growing as steadily as China's. Its sheer size makes it impossible to overlook.
Readers wishing to polish their Chinese language skills can do so at the Consolidated Thompson website, www.ConsolidatedThompson.com.
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