CANADIAN MINING PERSPECTIVE: Deals underscore Chinese interest in Canada

Not so long ago, say 10 years, the Chinese were thought of as a poor, insular nation, mysterious and of a pecu...

Not so long ago, say 10 years, the Chinese were thought of as a poor, insular nation, mysterious and of a peculiar political stripe. Now we must lay aside those notions and recognize that China is an economic powerhouse. Whatever remains of "communism" in that country is proving to have very capitalistic talents. Hence, the many foreign investments made in the last two years while the rest of the world suffered economic meltdown.

Here are a few of the investments made by Chinese investors outside that country in the past two years:    

?    Aluminum Corp. of China (Chinalco) attempted to invest US$19.5 billion in Rio Tinto.

?    China Minmetals made a A$2.6 billion bid for Australian miner Oz Minerals.

?    China Mining United Fund bought into Canadian juniors including Allana Resources, Klondex Mines and Murgor Resources.

?    China Nonferrous Metals Exploration purchased a 15% stake in Murgor.

?    Jilien Jien Nickel Industry invested $30 million in Liberty Mines and became a joint venture partner with Goldbrook Ventures.

The aim of these investments is to secure a source of base metals - copper, nickel, zinc - for Chinese industry. And the Chinese remain on target with the $150 million offer made by Jinchuan Group for Toronto-based Crowflight Minerals and its producing Bucko Lake nickel mine in Manitoba. 

Jinchuan proposes to acquire all of Crowflight's outstanding common shares for approximately $0.26 per share or a total of $150 million. The offer represents a premium of 47.3% to the closing price on April 2, 2010, and a 56.8% premium to the 20-day volume-weighted average trading price. 

Jinchuan is an integrated nickel producer whose flagship property is the Jinchuan nickel-copper mine in northern China. The company says it is the fourth largest nickel producer and second largest cobalt producer in the world. 

It is no secret that Jinchuan intends to secure for itself all of the nickel concentrate that the 1,000-t/d Bucko mill can produce. Crowflight declared commercial production in June 2009, but was forced to suspend mining last November in favour of an accelerated development program. Concentrate shipments were resumed on March 22, 2010. Crowflight currently has an off take agreement to treat its concentrates at Xstrata Nickel's smelter near Sudbury, ON. Obtaining the off take agreement and a positive due diligence study are necessary conditions of Jinchuan's offer. Crowflight shareholders must also approve the deal. 

More than the output of a modest nickel mine and mill in the middle of the country figure into the Chinese company's strategy. Jinchuan certainly must have its eye on Crowflight's less advanced projects. The Canadian company holds the Bowden Lake deposit, M11A and Apex zone projects, also in the southern portion of the Thompson Nickel Belt. It also has property in the northern part of the Belt. Crowflight also has three properties - AER Kidd, Peter's Roost and Airport - in the Sudbury Basin. 

Obviously, Jinchuan is buying into Crowflight's potential, and with deep pockets a new Chinese owner could move several of them toward production. In retrospect, an investment of $150 million in a mine and half a dozen potential mines may look like a bargain.


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