China's Zijin May Bid for Copper Deposit in Peru (Update3)
By Xiao Yu and Feiwen Rong
Nov. 15 (Bloomberg) -- Zijin Mining Group Co., which runs China's largest gold mine, may bid for Peru's fourth- largest copper deposit to diversify and bolster reserves amid soaring demand for metals.
``We are interested in the project, and are seeking Chinese government approval to bid,'' Chairman Chen Jinghe, said in Beijing today. The Michiquillay deposit will cost $700 million to develop, according to Proinversion, the Peruvian state agency for promoting private investment.
Chen is tapping Zijin's increased earnings to buy mines in China and overseas. The world's fastest-growing major economy is taking stakes in industries from Australia to Mexico to guarantee resources for its booming economy.
``Chinese companies are increasing overseas investment as it's government policy to encourage them to look for raw materials outside and to protect domestic resources,'' said Lin Hai, an analyst with Guotai Asset Management Co., which manages $1.8 billion of assets.
Zijin's stock has almost trebled this year, giving the company a market value of HK$50.1 billion ($6.4 billion). It rose 0.8 percent to close at HK$4.80.
Zijin's first-half profit doubled after gold touched a 26-year high in May and copper more than doubled in the past year.
Australia, Africa
Zijin signed an initial agreement on Sept. 26 to pay at least A$18 million ($14 million) for a 10 percent stake in Allied Gold Ltd., an Australian metals-exploration company. It agreed in October to pay 8.2 million pounds ($15 million) for a 20 percent stake in Ridge Mining Plc., giving China its first foothold in South Africa's platinum industry, the world's biggest. Ridge wants Zijin to help develop a $690 million nickel and platinum deposit.
Michiquillay, located in the Andes mountains 560 kilometers (350 miles) northwest of the capital Lima, has resources of 544 million metric tons with ore grades of 0.69 percent copper, 4 grams a ton of silver and 0.5 grams a ton of gold, Proinversion said Sept. 22. The winning bid for the mine is scheduled to be picked Dec. 15, it said.
Peru, the world's fourth-biggest copper producer, aims to line up $10 billion in mining investment over the next five years to take advantage of the surging metal prices. Michiquillay was the second copper project to be put up for auction by the government in the nine months ended Sept. 22.
Merger Experience
A lack of merger and acquisition experience and the government's complicated approval procedure are posing challenges to Zijin and other Chinese companies aiming to invest abroad, Zijin's Chen said.
The top 10 global mining companies account for 55 percent of the global mining sector's entire market valuation, according to Chen. Developing countries with only 25 percent of the global population are consuming 75 percent of the world's minerals resources, he said.
``Lack of capital and advanced technologies hinders China's steps to invest overseas,'' Guotai's Lin said. ``The biggest advantage that attracts their foreign partners remains huge demand from the Chinese market.''
To contact the reporter on this story: Xiao Yu in Beijing at yxiao@bloomberg.net
Last Updated: November 15, 2006 04:05 EST
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