Engineering & Mining Journal

JUN 2013

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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W E S I Z W E B A KU B U N G In this regard, Jinchuan succeeded where others failed. Several other large Africa-focused takeovers by Chinese companies have fallen apart because they could not secure financing from one of China's state-owned banks, such as the CDB. In March, the Hanlong Group's attempted takeover of Australia's Sundance, which is developing the Mbalam iron ore project on the Cameroon/Republic of Congo border, collapsed after loan guarantees did not materialize. And in January, Barrick's attempt to sell subsidiary African Barrick Gold to China National Gold Group Corp. collapsed. "To secure permission from the Chinese regulatory authorities is necessary to secure funding from its banks, and this means jumping through a lot of hoops," said Milton Osborne, a Beijing-based banking and finance partner for global legal firm Norton Rose. "It is a long and complicated process." Offshore deals are scrutinized and viewed according to how they meet Beijing's national strategic plans. "Most companies are heavily dependent on the state. Without permission from the regulatory authorities, they won't be able to www.e-mj.com access finance from banks, which are very much an extension of the state," Osborne said. He also noted that Wesizwe would have had to go through this process, but now that it is done, it would have access to Chinese capital. "It still took a long time to get done. But approval is absolutely necessary to secure funding." The $650-million tranche the CDB released is about half of the expected capital development cost of the project. Current estimates say it will require 12 billion rand ($1.3 billion) to bring to production. This will eventually mean either raising another loan or going to the market for additional capital. However, this is unlikely to present much of an obstacle. Beijing is tightening up vehicle emission standards and platinum as a key ingredient in catalytic converters and will likely experience increased demand from China. China recently surpassed the U.S. to become the largest automaker globally and auto sales are projected to grow at 5% per year over the next three years, according to IHS Global. At the same time, China is also the world's largest buyer of platinum, although this is mostly for jewelry. The South African platinum industry faces its worst crisis in years but the Chinese backers of the Bakubung mine are confident their investment will pay off. JUNE 2013 • E&MJ 79

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