China: Opening Up The Minerals Sector To Foreign Investors

CHINA: Opening up the minerals sector to foreign investors

15th November 2005

Reuters

BEIJING - China will step up the opening of its minerals sector to foreign investment while trying to make its legal framework more transparent, officials said on Tuesday.

Relatively poor in base metals but boasting many of the world's reserves of rare metals, China has been trying to encourage foreign investment in the mining sector.

But while mining giants like Inco Ltd. and BHP Billiton are exploring in the country, investors have been generally cautious.

One area of concern has been the murky legal system, particularly on whether it ensures that a company that finds a quality deposit will be able to develop it.

"China will continue its policy of opening up to the outside world in the mineral resources sector," Sun Wencheng, Minister of Land and Resources, told a conference in Beijing.

"We shall promote the process of reform by opening up and improving the overall efficiency and capacity of mineral development, further create a stable, open and transparent legal and regulatory environment and protect the legal rights of foreign investors in mineral exploration and development activities in China."

Sun said China would encourage greater cooperation between domestic firms and their global counterparts in mineral exploration and development.

"The mining sector faces numerous challenges... such as overcoming low efficiency, battling environmental degradation and a limited number of internationally competitive producers," Australia's ambassador to China, Alan Thomas, said.

DEVELOPMENT RIGHTS

Some companies are wary that millions spent exploring will not necessarily pay off if they hit pay dirt.

"In China, there's an element in the law which says that the explorations would have 'priority rights' to obtain mining rights," Douglas Horswill, a Teck Cominco Ltd. senior vice president, told reporters.

"That term, 'priority rights', is suggestive of a second decision, and that worries us and a lot of other Western companies."

Teck Cominco plans to open a representative office in Beijing early next year to step up its search for exploration opportunities in China and for Chinese partners with whom to invest abroad, Horswill said.

China intends to create a level playing field and to focus on foreign companies coming in, as well as domestic companies investing overseas, said Ye Zhanghe, deputy director general of the department of foreign investment administration at the Ministry of Commerce.

Disclosure of geological data is one of the bottlenecks for development of mining sector, he acknowledged.

Earlier this year, Canadian miner TVI Pacific Co Ltd. had to revise down its planned investment in a gold project in central Hunan Province, after drilling showed reserves fell far short of those in the data provided by its Chinese partner.