Hu Jintao's Africa tour will help secure mining projects for Chinese companies

Hu Jintao's Africa tour will help secure mining projects for Chinese companies

Chinese president Hu Jintao began his eight-nation tour of Africa , analysts say that the tour is expected to help Chinese companies secure deals in mineral resources development on the continent.

Li Yusheng, a nonferrous metals expert with Beijing Antaike Information Co. Ltd, said Hu's tour would help accelerate several mineral resource development contracts signed between state-owned companies and African countries at the summit on China-Africa cooperation in Beijing last November.

Sinosteel, one of China's largest steel and raw material traders, signed a contract to mine and smelt ferrochrome in South Africa with Samancor. worth $230 million during the summit. Another example of a Sino-African mineral related joint venture is China Nonferrous Mining Group Co.(CNMC) which has started construction of a 150,000 ton crude copper smelter in the vicinity of Zambia's Chambishi copper mine last December. CNMC invested a total of $200million in the project making it the controlling shareholder. The Company also owns 85 percent of the copper mine with the remaining 15 percent belonging to the state-owned Zambia Consolidated Copper Mine company.

"Volatile political situations are of utmost concern to Chinese companies which wish to invest in Africa, they need the central government's efforts to secure their projects," Li said.

Li said Chinese government showed great support to the CNMC's Chambishi mine project, as the Chinese Central Government provided finance of $ 80 million when CNMC bought into the copper mine in 1998, furthermore, the Central Government has been actively involved in providing aid to alleviate poverty in Zambia.

China faces great pressure from the shortage of raw materials such as copper, nickel, iron ore and cobalt. Major state-owned companies are eying Africa's rich metals resources as a part of their business development strategy to obtain more of these minerals for the China market.

However, the surging cost of raw materials has also spurred an increase in the cost of investing Africa, which is a major concern for Chinese companies who need to keep operating costs down in-order to remain profitable.

Wang Haizhou, vice president of Jinchuan Group, China's largest nickel producer suggested that the Chinese government should provide grants to local companies embarking on risky overseas exploration projects, as well as lower tax tariffs for the imports of the produce from these projects.

"The Central Government has not set up any specific regulation or policy encouraging local companies to invest overseas in exploration and mining projects", said Antaike's Li.

Jinchuan also has plans to invest in the Munali nickel mine in Zambia, jointly with Australia's Albidon, and is simultaneously sourcing for a nickel & cobalt mine in the Democratic Republic of Congo.

[Interfax China, 2 February 2007]