China Update
Published by MAC on 2007-05-28
China update
28th May 2007
Indonesia and Cambodia have become new targets for Chinese mining and metallurgical companies – joining current exploration and joint ventures in Australia, Vietnam, Peru, Burma, South Africa, Tibet and elsewhere. Russia is also in-line, both as a source of future resources and a potential partner in domestic Chinese projects.
A report released in early May by five Northern-based NGOs reveals some disturbing information about Chinese banking in "unsustainable" projects around the world. One of the report's five contributing organisation is MAC-member group, the Mineral Policy Institute of Australia (MPI).
The assembled data highlights the prime role that investment in dubious mines and metals ventures plays for several of China's largest banks; along with two brief case studies on iron ore mining in Gabon and the Ramu nickel project in Papua New Guinea.
Equally, if not more, important is the fact that, among global private lenders, Goldman Sachs, Standard Bank and Barclays Capital seem to have their fingers deepest in this sector.
Dameng Manganese to develop Indonesian mines
Guangxi Dameng Manganese Co. Ltd. recently reached agreements with several Indonesian companies for the development of mineral resources in Indonesia, according to a Chongzuo Municipal Economic and Trade Commission announcement on May 21. Dameng Manganese will invest $40 million to jointly develop copper and molybdenum reserves with Aijia Mining Industry in Indonesia's Kalimantan State and also intends to invest $30 million in a joint nickel-project with Indonesian Precious Stone and Energy Co. Ltd.
Also, Dameng Manganese has plans to collaborate with Jiawang Group to develop manganese resources in Kalimantan State, and will invest funds to acquire a 50 percent stake in the project.
When reached by Interfax, a Dameng Manganese official, who asked to remain anonymous, declined to comment on the project.
Dameng Manganese's first step in solidifying its Indonesian plans was through the establishment of its first overseas office, the Dameng International Resource Investment Company, in Indonesian capital Jakarta last Tuesday.
Dameng Manganese was established in the city of Nanning, in Guangxi Province in 2001 as a state-run manganese miner and manufacturer. Currently, the company's total assets amount to RMB 650 million ($84.80 million).
It is a leading global manganese sulphate manufacturer with a capacity of 40,000 tons per annum and produces 30,000 to 40,000 tons of natural manganese dioxides per annum, accounting for 50 percent of the market share in China.
In August 2005, Dameng Manganese established a manganese mining and processing joint venture with CITIC Resources in Chongzuo City. CITIC Resources acquired a 60 percent stake by investing RMB 300 million ($39.14 million) in cash with Dameng Manganese contributed the remaining RMB 200 million ($26.09 million) in the form of fixed assets.
Note: Indonesian company names are based on the transliteration of their Chinese names.
Chalco signs land-use deal for Aurukun project
Chinese mining giant, the Aluminum Corporation of China (Chalco), reached a land-use agreement Friday that paves the way for a feasibility study at the Aurukun bauxite mine project in Queensland, Australia, according to a statement from the Queensland government. The land use agreement, signed by Chalco, Australia's indigenous Wik and Wik Way peoples, and the Aurukun Shire Council, enables Chalco to commence a feasibility study and begin comprehensive planning for the Aurukun bauxite project. It also ensures that the project will adhere to the best environmental practices at present and preserve the region's cultural heritage, Deputy Premier, Anna Bligh, said.
The deal also includes a plan for the sustainable development of the Aurukun region, in which Chalco has agreed to commit more than AUD $2 million ($1.64 million) a year to work with the community to ensure their ongoing involvement in the project. Chalco signed the final agreement to develop the bauxite mine with the Queensland government on March 23. The project will cost AUD $3 billion ($2.46 billion) and is designed to extract 7.5 million tons of bauxite and refine 2.1 million tons of alumina each year.
The mine is located in the remote Cape York area of Queensland and contains bauxite reserves estimated to range between 500 and 650 million tons.
Chalco joined the bidding campaign for the Aurukun project in September 2005 and edged out competitors BHP Billiton, Xstrata, Comalco Aluminium, and Alcoa and Alcan, winning the mining rights in March last year.
Zijin Mining plans A-share IPO this year
Hong Kong-listed Zijin Mining Group Co. Ltd., one of China's largest gold miners, is planning an A-share IPO at the end of the year, a company official told Interfax on May 21.
"We are aiming to hold the A-share IPO by the end of the year at the earliest," a Zijin Mining securities department official, surnamed Zhang, said. "The completion of the A-share IPO will definitely aid in funding overseas expansion."
According to Zhang, Zijin Mining is currently undergoing initial talks for several overseas mining projects in order to secure resources, including the lead and zinc mine in Tuva Republic in the east of Russia's Siberia, a copper and nickel project in Russia, and gold mining projects in Vietnam and Mongolia.
However, Zhang declined to further comment on project plans.
"Zijin Mining also plans to construct a 400,000-ton copper smelter in Fujian Province," Zhang said. "The overseas copper mining projects will provide raw material for the smelter."
Over the past two years, Zijin Mining's primary focus has been on overseas rather than domestic mining projects, including the Rio Blanco copper mine in Peru *, a laterite nickel project in Burma and projects at the Blue Ridge platinum mine and Sheba's Ridge polymetallic mine, both located in South Africa.
Zijin Mining produced 46,280 kilograms of gold in 2006, up 135 percent from the previous year. Copper output increased by 103 percent to 40,302 tons last year, including 6,781 tons of copper cathodes, 33,187 tons of copper concentrate and 334 tons of copper. The company also produced 54,703 tons of zinc and 600,000 tons of iron concentrate. Zijin Mining's shares closed at HKD 4.39 ($0.56) last Friday, down 0.45 percent from the previous day's trading.
*Editorial note: The Rio Blanco project is managed by Monterrico Metals, listed on the London Stock Exchange. Zijin acquired the majority of shares in Monterrico last month.
Continental Minerals to develop Xiangcun copper-gold mine in Tibet
The Continental Minerals Corporation's Xiangcun copper-gold deposit in Tibet is due to start development in the near future, a source close to the situation said Thursday. Continental Minerals is a publicly-traded mining company based in Canada, and is a member of Hunter Dickson Inc., a Canadian private company providing geological, engineering, executive and administrative services to its 10 company members.
The Xiangcun project, which has an estimated life span of 12 years, has proven reserves of 220 million tons of porphyry copper-gold, with an estimated annual output of 50,000 tons of copper metal, over 6 tons of gold and 60 tons of silver, HDI's chief representative in China, Jonathon Guo, said at the Western China Mining Summit 2007, held in Sichuan, the provincial capital of Chengdu.
The Xiangcun copper-gold project is situated approximately 240 kilometers west of the Tibetan capital of Lhasa, in Continental Mineral's Xietongmen copper-gold mining site. The Xiangcun copper project has a total investment of $450 million and is wholly owned by Continental Minerals through its subsidiaries Highland Mining Inc. and Tibet Tian Yuan Minerals Exploration Ltd. with Gansu Jinchuan Group as a strategic partner, Guo said. Being the largest nickel producer in China, Jinchuan Group entered into a framework agreement with Continental Minerals in February of this, which includes two signed memorandums of understanding for a copper concentrate off-take for the Xietongmen project and project capital financing. Jinchuan Group will probably increase its interests in Continental Minerals to 12 percent in the near future.
Prospecting began at the Xietongmen mining site in 2005, with all drill holes registering positive for porphyry copper at a maximum of 1.00 percent copper equivalent, which has led to the expansion of the mine site from an initial 12 square kilometers to a current 120 square kilometers.
In 2006, an additional site, named Newtongmen, was discovered 3 kilometers from the Xietongmen site and contains similar amounts of porphyry copper reserves. Guo commented that the Xietongmen site has excellent metallurgy, with copper continuity in excess of 90 percent, and does not require cyanide for copper recovery. The site has excellent logistic links, being only 3 kilometers from a paved road, and rail links, including the Tibet-Xinjiang railway, which are due to be fully completed by the time the mine commences operation.
During 2007, Continental Minerals intends to complete the feasibility study and obtain a mining license for the Xietongmen project, as well as list on the Hong Kong Stock Exchange and carry out 10,000 meters of drilling in the Newtongmen site.
Top Chinese steelmakers set up JV for Cambodian iron ore project
Wuhan Iron and Steel Group (WISCO), Baoshan Iron and Steel Group (Baosteel Group), Anshan Iron and Steel Group (Angang) and Shoudu Iron and Steel Group (Shougang) have formed a joint venture for an iron ore project in Cambodia, a WISCO official told Interfax Thursday.
The group signed the agreement in Beijing Wednesday, which marks the first time a group of domestic Chinese steelmakers have joined hands on an overseas iron ore project. WISCO holds a 50 percent stake in the joint venture, Baosteel Group holds 25 percent, Angang, 15 percent, and Shougang, 15 percent.
The current cooperation between the four big steelmakers still depends on the due diligence of the iron ore project, which is located in the northern province of Preah Vihear near the Thai border, WISCO's head of media relations, Bai Fang, said.
"The result of the due diligence matters considerably, and if it turns out to be ideal, this will enable further collaboration between the four companies," Bai said. Bai said he expected the due diligence to be completed shortly.
Once the project enters the development stage, the four are likely to set up another joint venture with a Cambodian company. Bai would not disclose the name of the potential Cambodian partner nor the investment value of the project.
Bai said the efforts of the China Iron and Steel Association had helped get the joint venture off the ground.
A senior official from CISA, Chen Xianwen, said the possible consortium between the four companies would set a positive example to other domestic steelmakers, and help revitalize the current "disorderly state" and high costs incurred on overseas mining projects by domestic steelmakers.
A second WISCO official, surnamed Wang, said the company was confident the JV would go further than the Cambodian iron ore project.
Domestic steelmakers have been urged to develop overseas mines in order to secure iron ore supplies and relieve future resource shortages in China.
The government has encouraged domestic steelmakers to cooperate in overseas projects to develop high-grade mines that are rich in reserves, easy to develop and close to seaports and railroads.
It has advised steelmakers to show caution and long-term vision, as well as considering the political stability of the host country to minimize risks.
Russian companies interested in buying metallurgic assets in China - Titov
Russian companies are interested in acquiring metallurgic companies in China, Russian co-chairman of the Russian-Chinese Business Council Boris Titov said.
"We hope that proposals in the metallurgic area will be implemented. Our companies are interested in acquiring metallurgic assets in China," he said in an interview with Interfax. Commenting on whether it is possible that Chinese companies will acquire energy resources in Russia, just like Sinopec's purchase of Russia's Udmurtneft, Titov said that "any assets on Russian territory are accessible to Chinese investment within the framework of the current legislation."
"Large projects are implemented in Russia primarily in the energy area; however, I think that prospects to develop the production and processing of oil and gas, and the construction of energy facilities exist within the framework of the current legislation. Yes, we should be implementing large joint projects together," he said.
Titov marked the importance of implementing joint projects in the area of small and medium-sized business in order to increase Russian-Chinese trade turnover up to $60 - 80 billion. "It is necessary to make projects to in automobile assembly, construction, light and chemical industries work," he said.
It is important to develop projects in the innovation industry using Russia's knowledge in the area.
"If China invests in innovations, we will say thank you to them," he said.
[The source for all the above articles is Interfax China Metals, 28 May 2007]
Chinese banks still have a long way to go on environment
Announcement by Friends of the Earth (US) and BankTrack
9 May 2007
Report finds that international banks must take responsibility in advocating for better standards.
A report released today by BankTrack, the international NGO network monitoring the financial sector, and Friends of the Earth-U.S. finds that only two of China's ten most important banks -- China Development Bank (CDB) and the Export-Import Bank of China (Chexim) -- have publicly disclosed environmental policies. Both banks' policies fall short of international best practices, while the rest of the eight banks surveyed had no publicly available environmental financing standards. [1]
With this report, BankTrack aims to fill a gap in public knowledge on the environmental policies of Chinese banks. China's financial institutions have long played a key role in bankrolling industrial development within China, and today they are also becoming important players in financing environmentally and socially sensitive activities around the world.
"By adopting world-class environmental financing standards, Chinese banks can play an important role in advancing sustainability on a global level," said Johan Frijns, coordinator of BankTrack. "Otherwise, they threaten to drag down whatever progress that has been made in developing such standards for the international banking sector."
Current standards focus on legal compliance
The report, titled Time to Go Green: Environmental Responsibility in the Chinese Banking Sector, concluded that environmental financing policies at Chinese banks focus mainly on ensuring the clients obey environmental laws, and thus lag far behind those of international banks. The report includes examples of several environmentally and socially sensitive transactions financed by Chinese banks, such as China National Machinery & Equipment Import-Export Corp's Kiani Kertas pulp mill in Indonesia.
However, the report also points to some encouraging signs that Beijing is beginning to encourage banks to pay more attention to environmental matters. For example, the Peoples' Bank of China has recently developed a new credit database which includes borrowers' environmental compliance data. This will allow Chinese banks to evaluate how well companies have followed environmental laws before offering loans.
Finally, the report shows that many international banks, who own significant shares of Chinese banks, have the ability to institute world-class environmental standards through their strategic investment agreements.
"International banks have complained that the lack of environmental financing standards at Chinese peers is putting them at a competitive disadvantage," said Friends of the Earth-U.S.'s Michelle Chan-Fishel, who authored the report.
"But banks like HSBC, RBS, Citigroup, Goldman Sachs, and Bank of America all own large shares in Chinese banks. They must take responsibility for ensuring that high environmental standards, which they all claim to have, are also adopted by their strategic business partners."
Secrecy prohibits proper assessment
None of the commercial banks in the study had publicly-disclosed environmental policies, and a key challenge in writing the report was Chinese banks' lack of transparency. For example, Chexim's policy was only released in late April 2007, in response to a request by Pacific Environment, a BankTrack member group.
"Chinese banks' lack of transparency and public participation mechanisms are two fundamental deficiencies which put them far behind their international peers," said Doug Norlen of Pacific Environment. "In the last several years, almost all of the world's other public and private banks which have adopted leading environmental standards have done so in consultation with civil society."
Implementation unclear
The report also raised questions about how well banks' stated environmental policies are being implemented, a problem which also plagues the Equator Principles, a voluntary initiative on project finance, as well as individual banks that have adopted their own standards. For example, CDB's policy summary states that it only finances deals included on an approved project list published by China's State Environmental Protection Agency. But given CDB's rapidly expanding overseas profile, it is unclear how the bank ensures regulatory compliance in its clients' overseas activities.
Similarly, implementation questions also apply to the Export-Import Bank of China, whose environmental policy includes vague language preventing it from financing projects which create unacceptable environmental damage. For example, the Ramu nickel mine in Papua New Guinea, financed by both CDB and Chexim, proposes to use the controversial practice of submarine tailings disposal as a mechanism for disposing of toxic mine waste.
"The proposal to utilize submarine tailings disposal at this mine site has been discredited by independent scientific studies," said Techa Beaumont of Mineral Policy Institute. "The use of this practice, particularly in a region known for upwelling currents that can bring these toxic wastes to the surface, poses significant environmental harm that could lead to violations of Chexim environmental policies. There is little indication that adequate environmental assessment and monitoring has been done, despite commitments in Chexim?s environmental policy to enhance these aspects of project development."
The report also includes a case study on the Chexim-financed Merowe dam in Sudan, a project which is indicative of the bank's new role as a key financier of infrastructure projects in poor countries.
"China Exim bank should avoid the mistakes that Western financial institutions have made, and address environmental and governance concerns in its lending decisions," said Peter Bosshard of International Rivers Network. "Projects such as the Merowe Dam in Sudan, which destroy the environment and impoverish affected people, will not bring about sustainable development, and will squander the great opportunity which China's new role presents."
[1] The banks covered in this report include: Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, China Development Bank, China Export-Import Bank, China Export & Credit Insurance Corporation (Sinosure), Agricultural Development Bank of China, Bank of Communications, and China CITIC Group (China CITIC Bank).
For more information contact:
Johan Frijns, BankTrack (Utrecht, the Netherlands):
+31-30-2334343
Michelle Chan-Fishel, Friends of the Earth (San Francisco,
USA): +1 202 427 3000
Doug Norlen, Pacific Environment (Washington, DC, USA): +1 202
785-8700
Techa Beaumont, Mineral Policy Institute (Erskineville,
Australia): +61 2 9557 9019
/ Peter Bosshard, International Rivers Network (Berkeley, USA):
+1 510 848 1155
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The report can be found at:
www.FOE.org/pdf/Chinese_Bank_Report_5-9-07.pdf
Chexim Environmental policy:
http://www.pacificenvironment.org/article.php?id=2362 ----------------------------------------------------------------