Overseas investment in energy and mineral resources increased five times in the second quarter

In the second quarter of 2014, China's energy mining companies' overseas investment in mergers and acquisitions swept the “downturn” of the first quarter and entered the “peak season”, with a significant increase in both the amount and the number of cases.

According to statistics from the Morning Post Network, the total investment in China's foreign energy and mineral resources sector reached 22 in the second quarter, ranking first in all industries. 16 of these 22 transactions disclosed transaction amounts, totaling approximately US$13.366 billion, accounting for 25.94% of China’s total foreign investment in M&As during the quarter, more than five times more than the US$2.992 billion in the first quarter. Of the 22 transactions, 19 were potential mergers and acquisitions, of which 13 were disclosed as transaction amount, and the total amount was about 7.134 billion U.S. dollars; and only 3 cases belonged to the confirmed mergers and acquisitions, and the transaction amount was disclosed. 6.232 billion U.S. dollars.

In the second quarter of 2014, the increase in the scale of overseas mergers and acquisitions of China's energy mining industry was mainly due to the “accumulation outbreak” of China’s state-owned holding companies and share-holding companies, while private enterprises’ “powerlessness” in the second quarter did not reach the same level as in the first quarter. State-owned enterprises are "respecting courtesies." In the 22 transactions in the energy and mineral sector in the second quarter, there were 17 transactions involving Chinese state-controlled and joint-stock companies. The total amount disclosed was approximately US$9.984 billion, accounting for 74.7% of the total foreign investment in all energy and mineral resources; the transaction amount exceeded. There were four US$1 billion transactions and the merger parties were China Minmetals, PetroChina, Baosteel Group and Guangsheng Nonferrous (600259) four large state-owned enterprises.

Among them, China Minmetals' acquisition of the Las Bambas copper project in Peru amounted to US$5,850 million, accounting for 43.77% of the total, making it the largest overseas acquisition in recent years. This costly acquisition is to a certain extent affected by the demand of China's domestic market. According to public statistics, China's copper consumption accounts for about 40% of the world's total supply. With the continuous development of the Chinese economy, the demand for copper, a common metal, will continue to rise in the Chinese market. Zhou Zhongshu, president of Minmetals, said, “The state's Bangbas project is fully in line with the long-term strategy of China Minmetals and MMG and will further optimize China Minmetals’ mining asset portfolio and will create a good strategic synergy with the company’s existing business.”

From the perspective of the regional distribution of overseas investment and acquisition of energy minerals, the two traditional sources of energy ore production in Canada and Australia are still hot areas for Chinese companies to invest in energy and mineral resources. According to the statistics from Morning Post, in the second quarter of 2014, China's energy mining companies had a total of 10 investments in Canada and Australia, and the disclosed transaction amounts were 1.582 billion U.S. dollars and 2.459 billion U.S. dollars, respectively, accounting for 11.84% of the total overseas investment in energy and mineral resources. And 18.4%.

However, Chinese companies have relatively large differences in the investment fields of the two countries: Investment in Canada is mainly concentrated in the oil and gas sector. This is mainly affected by the US energy crisis. The original US, which was Canada, was a natural gas buyer. Substantial reductions in oil and gas imports have led many companies in Canada to start reducing their oil and gas assets. This is providing opportunities for Chinese companies; Chinese companies’ investment in Australia is mainly concentrated in the minerals industry. This is mainly due to the Australian government’s It plans to cancel the lease tax on mineral resources. At the same time, it plans to set aside A$100 million for the “Exploration Development Incentive” (EPI) within four years to encourage primary mining enterprises to explore undeveloped areas (greenfields).

In the second quarter of 2014, the increase in overseas investment in China's energy mining industry was relatively large. Apart from the influence of Chinese companies' active expansion for their own development needs, the international energy giant hopes to improve its own industrial structure through the sale of some assets. The privatization plan of some foreign governments also provides more options for China's energy mining industry to invest overseas.