April 5, 2011 / 10:08 AM / 7 years ago

UPDATE 1-China's Minmetals seeks to diversify into Africa, S.America

* Copper, lead, zinc assets most wanted

* Chinese investment in Africa seen to further rise (Adds detail, comment, background)

By Rujun Shen and Nick Trevethan

SINGAPORE, April 5 (Reuters) - Minmetals Resources , China’s biggest metals trading firm, said it seeks to add assets from Africa and South America to its portfolio over the next five years — with copper, lead, and zinc at the top of its priority list — in a bid to become a diversified mining company.

Minmetals is already chasing Equinox Minerals’ copper assets in Zambia and Saudi Arabia and has offered $6.5 billion to buy the Sydney- and Toronto-listed company. [ID:nL3E7F30DI]

“Our current portfolio is overweight zinc, underweight copper for a diversified base metals company,” said Michael Nossal, executive general manager of business development of Minmetals Resources.

“We don’t set a definite target for each of the metals in terms of percentage of contribution, but we want exposure to each of the metals.”

Three-month copper on the London Metal Exchange gained 30 percent in 2010, zinc fell 4 percent, while lead gained 4.9 percent.

Nossal said the company is also seeking nickel and aluminium bauxite, but that these two minerals have slightly lower priority than copper, lead and zinc.

Minmetals Resources has the ambition to move into the top three of mid-tier diversified mining companies in the next five years, through internal growth as well as merger and acquisition, he said.

The company, which owns mining operations in Australia and Asia, is interested in acquiring assets in central Africa’s copper belt and the Andean region in South America in the next five years, Nossal told reporters on the sidelines of a mining conference in Singapore on Tuesday.


China’s investment in Africa’s resource sectors is expected to grow further, despite controversy around some projects, said industry officials.

“There is a lot of criticism that China is coming in as a predator and is exploiting. There’s an element of truth to that, but we shouldn’t be too carried away by it,” said Kobus van der Wath, founder and Group Managing Director of The Beijing Axis, an advisory firm with focus on cross-border China transactions.

“The last thing the local communities in Africa should do is to turn away the Chinese. This is a global power. It comes to Africa with a resource need, with a lot of money. Shape it. Shape the engagement,” he told Reuters.

Chinese companies have become more savvy in deal making and negotiation and learned to adapt to different business environment, which will help in their quest for more deals in Africa, he added.

Over the next six months there may be a shift in focus away from riskier to more stable as a result of the violence in Libya where China has some fairly significant investments, said Tim Goldsmith, Global Leader Mining practice at PricewaterhouseCoopers.

“Looking at Africa, there are 53 countries and their ranking changes from year to year... but if you want copper, Zambia and the Democratic Republic of Congo are where you have to go. (China) won’t walk away from those places,” Goldsmith said.


Miners with an Africa focus were over the moon about the Minmetal’s offer for Equinox, hoping to ride a wave of investors interest in the sector.

“It’s fantastic for the industry. It shows depth of support and is a reflection that copper prices will be higher in the long term,” said Brad Marwood, managing director of Tiger Resources.

“If this deal was to come through, that would mean a large number of institutions with lots and lots of money in their bank accounts, which will only be good for me. They’ll be looking for the next investment — where is the next Equinox?” (Additional Reporting by Walter Sim; Editing by Himani Sarkar)

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