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Nation eyes Africa mining

By Song Shengxia (Global Times)

08:01, June 21, 2012

China's investments in the African mining sector have increased tenfold since 2011, and the country is pouring more money into the continent while moving away from traditional markets such as Australia due to cost concerns, the China Mining Association said yesterday.

Chinese investment in Africa's mining sector reached $15.6 billion in 2011, ten times larger than that in the previous year, data released by the trade body yesterday showed.

"The country's rapid increase of investment in Africa was mainly driven by several large successful projects undertaken by Chinese companies in the continent last year," Yang Qiuling, a spokesperson of the association, told the Global Times yesterday.

Seven such investments in the mining sector in 2011, with even the smallest deal exceeding $1 billion, reached a total of $14.7 billion, accounting for 94 percent of China's investment in mining in Africa last year, she said.

Meanwhile, China's mining investment in Australia dropped dramatically to $1.3 billion in 2011, a 70 percent drop from the previous year, figures from the association showed.

In the first half of the year, the country's total mining investment in Australia was only $140 million, according to the figures.

"The change of Australia's mining tax policy has made it more expensive to invest in the country," Zheng Jiaxin, chief analyst at Beijing-based ATKEPP International Consulting, told the Global Times.

In March, Australia's parliament passed laws for a new 30 percent tax on iron ore and coal mine profits.

"Compared to traditional markets such as Australia where it is getting increasingly difficult to get approval, Africa has a lower access threshold," Zheng said.

"Chinese firms now tend to form a consortium to jointly hold shares in mining companies in the emerging mining markets instead of holding controlling stakes as they did in the traditional markets," he noted.

"In this way, it makes it easier to be accepted by the recipient countries and regions such as Africa," he said.

In March, the National Development and Reform Commission approved Aluminum Corporation of China to form a consortium with four other Chinese companies to jointly develop Simandou iron ore mine in Guinea, Africa with Anglo-Australian miner Rio Tinto.

Chalco will hold a 47 percent stake in the joint venture with a total investment of $1.35 billion.

"Transportation issues and labor disputes are big concerns for investment in Africa," Yuan Li, a spokesman with Aluminum Corporation of China, parent of Chalco, told the Global Times yesterday.

"The joint venture makes it easier to share the risks and maximize efficiency," Yuan said.

With China's growing presence in Africa, labor disputes and threats to Chinese workers' safety are on the rise.

In January, a total of 29 Chinese workers of Sinohydro Group Ltd were taken hostage by rebels in Sudan where the company had a $63 million road project.

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