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China Mining Report Q2 2010
Business Monitor International, March 2010, Pages: 61
The China Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's mining industry.
Gold Production Hits New Record Chinese gold production rose by 11.34% in 2009, to 313.98 tonnes, according to statistics released by the China Gold Association in early 2010. Shandong, Henan, Jiangxi, Fujian and Yunnan provinces produced nearly 60% of total output, with the country’s 10 largest gold firms accounting for some 47.31% of the total by company. In recent years, the country has been encouraging M&A activity within the sector, with the total number of gold producers having dropped from over 1,200 in 2002 to around 700 in 2009, according to local media reports.
Australian Acquisitions Continue Early 2010 has seen a continuation of moves by China to acquire stakes in Australian mining assets. In January 2010, it was reported that Zijin Mining had been successful in its AUD547mn bid for Indophil Resources. This follows several high-profile purchases of Australian mining assets over the course of 2009, including China Minmetals’ US$1.69bn takeover of OZ Minerals and Yanzhou Coal’s US$3bn takeover of Felix Resources. Indeed, already in 2010, Yanzhou has stated that it is looking for more acquisitions in the year to come. The publisher expects China to maintain strong levels of investment into the Australian mining sector during 2010.
Coal Output Seen Higher All indications are that China will have increased coal output again in 2009. Several leading state-owned coal producers have announced strong production figures for the year just passed. ChinaCoal said that output was up by 9.65% y-o-y, to 125mn tonnes, with Shenhua Energy announcing a 13.2% increase in output, to 210.3mn tonnes. Although no full-year figures for the entire industry were available as this report went to press, the most recent data (Jan-Oct 2009) showed an 11.4% increase, to 2.42bn tonnes. New Data For 2010, the publisher has made significant changes to the way in which we forecast mining data. As well as using local statistics agencies and associations, we now also draw on the expertise of the UN’s Industrial Commodity Statistics Database, the US Geological Survey and the World Bureau of Metal Statistics for our historical export and production data. We then forecast this data using our own proprietary econometric model. Human intervention also plays a necessary and desirable role in our mining forecasting; experience, expertise and knowledge of industry trends and developments ensuring that we can spot likely future changes and anomalous data that a purely mechanical model would not.
Country Overview The People’s Republic of China is a natural world leader in terms of both reserves and the production of several metals and minerals Endowed with abundant mineral wealth, the country leads in the production of copper, coal, aluminium and gold.
China is also in the fortunate position of being cash rich at a time when many mining companies around the world are struggling to locate financing. In recent months, Beijing has been very active in buying up foreign mining assets, notably in Australia.
The national government is taking active steps to make the mining industry more competitive. Although it is a communist state, China introduced market reforms in the 1980s and today only about a third of the economy is directly state-controlled. The government is encouraging mergers and acquisitions (M&As) as a means of ensuring optimal use of mineral resources and barriers to foreign investment are gradually being removed.
Industry Forecast In 2008, China became the world’s largest supplier of gold, surpassing South Africa. China is also implementing its 11th Five-Year Plan (2006-2010), which emphasises securing the economy’s future metals and minerals resource needs. The focus is on further geological exploration of mineral reserves and increasing the supply of mineral products to fuel China’s rapid economic expansion. One area where China is especially keen to increase its reserves is uranium. With the country looking to rapidly increase its nuclear power generation, the government is seeking to secure a stable supply of raw materials.
Uranium exploration is concentrating on Inner Mongolia and north-west China. the report forecasts that the mining industry in China is expected to grow at a rate in excess of 8% per annum over our forecast period, reaching US$505.9bn by 2014.
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