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Mining Chapter of Capital Distribution Series
2019-6-6
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  • As a "country sitting on a miner's truck", Australia is rich in mineral resources. Because of its vast territory and many mountains, Australia has rich and diverse mineral resources. Among them, black coal, lignite, copper mine, iron ore, bauxite, gold, diamond and other mineral reserves have reached the top five levels in the world. As a highly developed capitalist country, with the 6th largest territory in the world, Lia is not only the most developed country in the southern hemisphere, the 12th largest economic system in the world, the 4th largest exporter of agricultural products in the world, but also the first country in the world with many kinds of mineral exports. Therefore, the reputation of "the country sitting on the tramcar" has a long history. As for mineral resources, it is generally the artery of the country. Australia, as an open market, also allows foreign enterprises to participate. But the distribution of Chinese-funded enterprises in Australia's mineral industry is not leading. After all, Australia is a Commonwealth country, and the United States and some European countries are still in the forefront of the distribution of their mineral assets. With the development of China's economy and enterprises in recent years, Chinese-funded enterprises have begun to emerge in Australia. They also have a certain layout for Australia's superior mineral resources. Here is a brief description of the layout of Chinese-funded enterprises in Australia's mineral industry.
    1: Coal Mines
    June 16 Xinlian Coal Industry Co., Ltd. holds and operates three large-scale coal mines in New State, Australia, all of which are world class I coal assets, producing power coal and semi-soft coking coal. The operation scale of the mine is large, the exploitation cycle of resource reserves is long, and the cost of cash is low.

    At present, United Coal is a 100% shareholding subsidiary of Rio Tinto, while Mitsubishi is a joint venture partner of Hunter Valley Project (HVO) under United Coal, with nearly 30% of the shares. At present, Rio Tinto's main coal assets in Australia include about 67% equity in HVO Coal Mine (joint venture with Mitsubishi), 80% equity in MTO Coal Mine and 56% equity in Warkworth Coal Mine (joint venture with Mitsubishi). Several major mining areas are rich in resources and reserves, producing high-quality coal.

    On January 25, Yancoal Australia (ASX: YAL) announced that it would buy 100% of United Coal from Rio Tinto for $2.45 billion (A$3.27 billion), with a total consideration of $2.45 billion, including $1.95 billion in cash, deferred cash payments and subsequent royalties. At that time, the company expected the acquisition to be completed in the third quarter, when Yanzhou Coal will become Australia's first exclusive coal producer.
    2: Copper Mines

    On June 8, Havilah Resources Co., Ltd. (ASX: HAV), a prospector, took part in Exchange SA Investment Conference to showcase outstanding listed companies in South Australia, holding large-scale gold projects and high potential copper-gold-cobalt projects.

    Speaking about the recently upgraded Kal Karoo project, Dr Chris Giles, managing director, stressed that the company had formed a strategic cooperation intention with Wanbao Mining, a Chinese company. It is believed that future cooperation with Marlboro Minerals will be able to contribute to the development of this project with considerable scale mineral deposits.

    According to the company announcement, the Kal Karoo project, located in northeastern South Australia, is one of Australia's largest undeveloped copper and gold deposits, including 1.14 million tons of copper and 3.3 million ounces of gold. The total ore volume is 230 million tons, copper grade is 0.49%, gold grade is 0.37%. Ore bodies open in many directions. There is a homogeneous mineralization zone 40-80 m thick along the 3 km long strike.

    Dr. Chris Giles said that Marlboro Minerals is a Beijing-based copper and cobalt mining enterprise with good reputation and successful operation. It has large-scale mining operations in Myanmar and the Republic of Congo. It is believed that the future cooperation can well combine the professional technology of Marlboro Mine in copper processing with its own resources and mine planning knowledge.

    According to the official website of Marlboro Minerals, Marlboro Minerals was established in October 2004. It is a professional mining company registered in Beijing with a registered capital of 3.4 billion yuan. It has a holding subsidiary company overseas to invest in overseas projects. In addition to promoting the development and operation of key projects, the company focuses on the development of trade and marketing of copper, cobalt and other metal products, and focuses on acquiring overseas high-quality mineral resources through mergers and acquisitions, reorganization and replacement.
    3: Iron ore
    In 2008, Shagang International, a Chinese private enterprise, acquired 45.3% of Grange Resources in Tazhou. Grange has about 800 million tons of iron ore reserves, and its flagship project is the Southdown project, which plans to produce 6.8 million tons of iron ore annually. With this acquisition, Shagang has more than 1 billion tons of iron ore reserves in Australia.

    A year ago, when ore prices were freezing, Grange Resources cut 55 jobs and made a loss of A$278 million between 2015 and 2016. Because of the high grade ore and the recovery of the market, the average ore price reached 72.94 US dollars per ton, and the company made a profit of 93 million Australian dollars in fiscal year 2016-2017 at the end of last year.

    But Grange's most prominent problem is the high cost of production at $58.85 per ton, which does not include freight and royalties. But compared with other miners, Grange Resources has the advantage of market resources. One third of its output is sold to Shagang.

    Munt Gibson Iron (MGX) of Shougang

    In 2008, Shougang Group acquired a 9.74% stake in Mount Gibson Iron for A$201 million. The latter produces 7 million tons of iron ore annually and is listed on the Australian Stock Exchange.

    Since 2015, Mount Gibson Iron has effectively controlled production costs. At present, the cost of iron ore wet ton has dropped to A$48. Due to the proper cost control, the company has a stronger ability to resist pressure in the face of the possibility of falling iron ore prices in the future.
    There is a sentence in Global Early Warning: "In the whole process of human history, the war to acquire and control natural resources has always been the root of international tension and armed conflict." If the two previous world wars were the struggle for living space, then the third must be the struggle for resources. Of course, Xiaobian here is not to take things seriously, but to look at the problem from a higher level. However, from a commercial point of view, the acquisition of Australian mineral resources by Chinese-funded enterprises is only an action of capital operation. With the consumption of China's own resources, the cost of developing mineral resources at home is far greater than the cost of foreign acquisition. Readers may recall the mergers and acquisitions of several large domestic coal mining enterprises and iron and steel enterprises in 2016. It is not difficult to find that the development cost of some resources in China is already very high. However, as the lifeblood of the current country, how to seek better and cheaper resources globally is a problem before the large domestic resource-based enterprises. At present, Australia is the only place where China can participate in large-scale resource gathering with high quality.
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