Mining in China – a Changing Dynamic
Peter Arkell reflects on the changing dynamics of the Chinese mining and resources sector.
Over the past decade the characteristics of the international mining community in China have gone through many changes. In the early 2000s it was a very lively exploration community with Chinese and foreign geologists in great demand, as many of the major mining companies and the entrepreneurial juniors were all looking across China for mineral opportunities to develop. These were heady days, with joint ventures between local Chinese enterprises and international explorers obtaining exploration licenses for gold, copper, coal, even platinum. In fact, there was once a Canadian company looking for diamonds in Shandong province.
A meeting of the international community in those days would be dominated by discussions about mineralisation, international reporting and capital raising. In that time, it was an Australian gold miner, Sino Gold that blazed the trail and converted its successful exploration to a mining license and they developed a number of world class gold mining operations. The most significant, in the south of China, Jinfeng remains one of the model gold mining operations in the country. Sino Gold grew to be an ASX top 200 company and dual listed on the Hong Kong Exchange. It was a model, not only for the international miners, but also for the large Chinese miners too. They not only showed how to develop a mine and to market the value in the asset, but also how to develop a first class workforce of Chinese and expat mining professionals.
Now almost all of these explorers, who had had great optimism about developing operations in China, have moved out of China. There remains only a small handful of that community of geologists in international mining communities still out in the bush drilling and testing for the next big discovery.
Sino Gold was sold to the Canadian TSX listed Eldorado Gold, who already had an operating mine in Qinghai province. They have integrated that asset and the Sino Gold mines into a very impressive international operation in China. While they prove that it is possible for an international company to mine in China, they are one of only a handful of operating international miners in China.
It has been very disappointing for many of those explorers to have found the environment here not sufficiently encouraging for them to persevere. There have been huge difficulties that even the well-resourced international companies have struggled to overcome. Besides, exploration globally is declining from its peak of five or so years ago.
On the other hand, there have emerged many other sectors of the international mining industry, all looking to make their contribution to this industry in China. While there remain some exploration companies, they have been joined by equipment manufacturers, lawyers, bankers, environmental, even headhunters, international procurement operations and mineral laboratories.
Of course, as China’s demand for natural resources has brought the biggest ever minerals super-cycle, the focus of miners and traders has been firmly on their China market. Rather than geologists, their offices are staffed with a highly talented spread of marketers, finance, economists, analysts, logistics and shipping professionals. Then, as the Chinese corporations look abroad for investment opportunities linked to the country’s drive for resource security, there has also been terrific growth in the sectors that is working closely with those Chinese enterprises.
There is a major role for international companies and professionals in China who appreciate the workings of Chinese and global mining and capital markets. These companies are participating in China’s global push so that the Chinese are well prepared for the differing demands of the global business environment.
International companies and professionals with an appreciation for the ways of doing business in China are invaluable “adaptors” for the savvy Chinese investors seeking opportunities abroad. Lessons learned by foreign enterprises in China can be well applied in Chinese corporations as they establish their global investments.
*Pictured above: Australian company Sino Gold was a trailblazer when it successfully gained a mining license in China, developing a number of world class gold mining operations and working to develop a first class workforce of Chinese and expat mining professionals, as well as introducing western CSR values to the communities in and around its operations. Sino Gold community consultation in China (Sino Gold 2009).
There is now recognition in the higher levels of government and industry in China that there is a significant advantage to be had by collaboration between the international companies with great standards and productivity and the Chinese who have the resources and markets.
There is much to be anticipated from a joint venture exploration company that was formed last year between Rio Tinto and Chinalco, called Chinalco Rio Tinto Exploration (CRTX). This is perhaps the exploration model for the future for international companies in China. And, CRTX is not restricting its sights to China only, looking at potential projects abroad. This could be a model that shows the way for other international miners to return to China for exploration and mining projects.
The international mining community in China has matured markedly. No longer is it just about exploration, it is an industry sector that has multiple dimensions and engages in a wide range of issues on a daily basis. These issues are as basic as operating in the different regulatory environment or dealing with language and cultural differences, to major strategic hurdles around government policy and investment sentiment.
The broad mining community, with all of the various participants in addition to the miners themselves, has a remarkable collaborative spirit. Not just in China but everywhere. Put a bunch of people from across the mining community in a room and it will quickly be abuzz as they rediscover old friendships or share common problems. It happens in Bendigo, Brussels or Beijing.
In that spirit of collaboration and cooperation, a couple of years ago a number of the longer standing mining people in China formed GMAC (the Global Mining Association of China). This is an association of the broad international mining community in China. And not just the Australian mining and resources community, but across the range of nations with companies actively engaged in the Chinese mining sector. GMAC’s main goals are focused on advocacy, networking, representation and support. GMAC is recognised and encouraged by the Chinese officials at organizations such as the Ministry of Land and Resources and they have enabled GMAC to be a voice and face of the international mining community to the Central government.
Similarly, GMAC is also in dialogue with local and provincial governments where many decisions impacting on mining development are critically made. GMAC is open to all who have an engagement with international mining and China. There are miners from all corners of the world who are members and they are the membership equals of service providers and equipment manufacturers. Also there are representatives of nations that have mining industries and there are companies that specialise in economic analysis of this industry’s part in the global economy. All have a most important role and contribution to make in our community. GMAC draws great strength through that diversity of interests and expertise.
*Peter Arkell is the Managing Director, Asia for executive search firm Swann Global and Chairman of the Global Mining Association of China (GMAC) – the peak body representing the international mining community in China. He is also the Chairman of the Oriental Mining Club and Chairman of the Australian Chamber of Commerce in Shanghai. Peter has lived in China for almost a decade and has been active in the Chinese resources sector for the past 16 years. He is originally from Melbourne. ■