Abstract: Following the outbreak of the global financial crisis in 2008, the global mining market reversed its six-year-long upward trend and began to decline sharply starting from the third quarter of 2008, presenting both opportunities and challenges for the internationalization of China’s mining industry. This article analyzes data on China’s overseas mineral resource investments since 2008, systematically collecting and organizing information on the overall picture of overseas mining investments, popular mineral types, and the countries or regions receiving these investments. Based on this analysis, the article explores the characteristics of overseas investments, the achievements made, and the challenges currently faced.
Keywords: Internationalization of the mining industry, overseas investment, current status and characteristics, trends
I. Current Status of China’s Overseas Mining Investments
1. Overview of Overseas Mining Investments
We have compiled over 800 direct and indirect investment projects involving Chinese enterprises’ exploration, mining, and M&A activities in overseas mineral resources (excluding oil and gas) from the end of 2007 to the present. These projects involve more than 300 entities (enterprises and institutions), with project locations spread across over 50 countries. The total value of these projects exceeds 50 billion U.S. dollars—actual investment amounts are used for projects where such data is available; for those projects where actual investment amounts cannot be obtained, the agreed-upon investment amounts are used instead; preliminary intentions to invest are not included. Among these, there are over 60 cases of enterprises directly acquiring all or part of the equity in overseas mining companies, involving an amount of approximately 30 billion U.S. dollars. There are also over 700 exploration and mining investment projects, with a total value exceeding 20 billion U.S. dollars.
2. From the perspective of project numbers, the popular mineral types for overseas investment
From the perspective of the overall number of projects, the most popular target minerals for overseas investments by enterprises are primarily copper, iron, and gold (Note: Exploration and mining projects are categorized based on their primary mineral resource; co-produced minerals are not included; mergers and acquisitions are classified according to the target company’s main mineral resource). The number of projects investing in these minerals each accounts for roughly 20% of the total project count. Next in popularity are lead-zinc ores, aluminum ores, and nickel ores, with the number of investment projects accounting for about 5% of the total. Uranium mines account for 21 cases, representing approximately 2%. Among non-metallic projects, coal (6%) and potash (2%) dominate, while other non-metallic minerals—such as gemstones and cement-related materials—make up a relatively small proportion (Figure 1, Figure 2).
3. From the perspective of investment amounts, the popular mineral types for overseas investments are:
If mergers and acquisitions are categorized by the primary mineral resource of the target company, while exploration and mining projects are classified according to their respective primary minerals (note: coexisting minerals are not included), then the flow of investment funds is predominantly directed toward iron ore mines, with an amount exceeding 20 billion U.S. dollars—accounting for nearly 50% of the total investment. Among these deals, the most notable is Chinalco’s acquisition of Rio Tinto shares. Since iron ore is Rio Tinto’s primary mineral resource, all 15.55 billion U.S. dollars involved in this deal have been counted under iron ore investments. (Note: Intended investments have not been included in the statistical data.) Funds flowing into copper mines amount to roughly over 10 billion U.S. dollars, representing nearly 20% of the total investment. Investments directed toward gold mines total about 4.7 billion U.S. dollars, accounting for nearly 8% of the total. Investments in aluminum mines and lead-zinc mines each amount to slightly over 2 billion U.S. dollars, respectively accounting for 3% of the total. As for investments in radioactive metals, the exact amount cannot be precisely tallied; based on currently available information, uranium mines represent the primary target, with investments exceeding 780 million U.S. dollars.
The total amount invested in other metals amounts to roughly over 6 billion U.S. dollars, accounting for about 8%. Among these, investments in nickel are approximately 2 billion U.S. dollars, and those in chromium are around 800 million U.S. dollars. Thus, nickel and chromium can be considered among the major target minerals, aside from iron, copper, gold, aluminum, and lead-zinc ores. Manganese and tin each account for roughly 100 million U.S. dollars, while other metals such as cobalt, molybdenum, titanium, tantalum, antimony, tungsten, and platinum all have investments below 100 million U.S. dollars.
The investment in non-metallic minerals amounts to approximately 3 billion U.S. dollars, accounting for about 6% of the total investment. Among these, more than 2.5 billion U.S. dollars has been allocated to coal, making it the largest single category of investment in non-metallic mineral resources; followed by potash, with an investment of 530 million U.S. dollars, and then investments in various gemstones and cement products (Figure 3, Figure 4).
4. Popular countries (regions) for overseas mining investments
We compile statistics on exploration and mining activities based on the actual locations where these projects are conducted. For indirect investments such as mergers and acquisitions, we categorize them according to the home country of the target mining enterprise. If a company has headquarters in more than one country, we classify it according to the location of its headquarters for its primary mineral resource. For example, Rio Tinto has headquarters in both Australia and the United Kingdom; however, since 89% of its total assets are concentrated in Australia and North America, and it controls Australia’s second-largest iron ore producer—with iron ore being its primary mineral resource—we include all over 15 billion U.S. dollars invested in this acquisition under Australia. Additionally, there are nearly 60 investment projects in Australia, including China Minmetals’ $1.2 billion acquisition of assets from Australia’s OZ Minerals. Overall, the majority of investment funds—over 20 billion U.S. dollars—have flowed into Australia in Oceania, accounting for roughly 45% of total overseas investment. The second-largest recipient is Central and South America, with investments totaling about 10 billion U.S. dollars, or approximately 16% of total overseas investment. Among Central and South American countries, Peru and Argentina have received relatively large investments, accounting for roughly 10% and 4% of total investment, respectively. The third-largest recipient is Asia, with investments amounting to over 8 billion U.S. dollars, representing more than 13% of total overseas investment. China has the largest number of investment projects in Asia, reaching 445, far surpassing Africa’s 168 projects, which ranks second. The main target countries in Asia include neighboring nations such as Laos, the Philippines, North Korea, India-Pakistan, Mongolia, and Myanmar. Among these, Laos, the Philippines, and North Korea have received relatively large investments, each accounting for around 2% of total overseas investment. The fourth-largest recipient is Africa, with investments totaling over 7 billion U.S. dollars, or about 12% of total overseas investment. Among African countries, Madagascar and South Africa have received relatively large investments, accounting for roughly 8% and 1.2% of total investment, respectively. The fifth-largest recipient is Europe, accounting for about 6% of total investment. Russia is the primary target country in Europe, with investments exceeding 3.5 billion U.S. dollars, representing more than 5% of total overseas investment. Other major European investing countries include Norway, Germany, and Denmark. Notably, in May 2008, China Minmetals fully acquired a German tungsten company, and the equity transfer has already been completed; however, the specific amount involved remains undisclosed. This tungsten company holds a market share of around 40% in Europe and is a leading player in the industry. The sixth-largest recipient is North America, with investments exceeding 3 billion U.S. dollars, or about 5% of total overseas investment. Most of these funds have flowed into Canada, while the United States has received relatively little (see Figures 5, 6, 7, and 8).
2. Characteristics of China’s Overseas Mining Investments
Looking at the current state of China's overseas mineral resource investments, the trend toward the internationalization of China's mining industry exhibits the following characteristics:
First, the investors are showing a trend toward diversification, with small and medium-sized enterprises, investment groups from outside the mining industry, and private companies all participating.
Second, investment approaches have become more sophisticated and diversified, with involvement throughout the upstream and downstream stages of projects.
Third, exploration investments and mining M&A investments are showing a polarized trend. In terms of project stages, most exploration projects are at the grassroots stage—high-risk exploration projects—while the targets of development and M&A are primarily mining companies that already hold mining projects; there is a noticeable lack of projects at the intermediate stage.
Fourth, exploration investments are primarily concentrated in neighboring countries as well as developing countries in regions such as South America and Africa; whereas merger and acquisition investments are mainly directed toward mature mining companies in developed countries like Australia and Canada.
Fifth, the targeted minerals for exploration are relatively dispersed. In contrast, the minerals targeted in mergers and acquisitions are relatively concentrated—primarily iron ore, followed by copper ore and precious metals such as gold.
3. Achievements Made in the Trend of Mining Internationalization
1. Economic benefits have been achieved in overseas investments in mineral resources.
Many Chinese enterprises have acquired a number of valuable mining rights and discovered several promising mineral deposits through overseas investments. Primarily led by geological exploration institutions, Chinese exploration companies have secured a portfolio of mining rights—either independently or via joint ventures and equity participation—in countries that offer favorable conditions for mineral formation and hold significant resource potential. As exploration efforts deepen, some projects are leveraging their existing mining rights as a base and have identified new prospective areas for mineral exploration in the surrounding and peripheral regions, with plans to further apply for additional mining rights.
2. The actors involved in overseas mineral resource investments have become more diversified.
The investors range from state-owned holding companies to private enterprises, including mining firms, investment groups from outside the industry, and private equity firms. Their financing channels are highly diversified, encompassing fundraising through A-shares as well as bank loans and other sources. Among these, mergers and acquisitions are primarily led by strong listed companies such as Chinalco, China Minmetals, Hunan Hualing, Wuhan Iron and Steel, Ansteel, China Steel, Shenhua Group, Yunnan Tin Industry, Zhongjin Lingnan, Jinchuan Group, Zijin Group, China Gold, and Shandong Luneng. Exploration and mining projects are mainly commissioned by mining companies to state-owned geological survey institutions. Overseas mining investments, spearheaded by private enterprises like Zijin Group, are also remarkably active, accounting for 35% of the total number of projects and involving approximately 11% of the total investment amount. Although currently these overseas investments do not yet represent a major share of the overall picture, they have made significant progress compared to just a few years ago and are now exhibiting a more dynamic trend toward internationalization.
3. The methods for investing in overseas mineral resources have become more mature and diversified.
The primary approach to exploration investment involves registering wholly-owned subsidiaries abroad and forming joint ventures with local enterprises in the host country to jointly apply for prospecting rights, with our side typically holding a controlling stake. Equity investments mainly take the form of small minority stakes, and funding is primarily sourced through loans. Overall, Chinese enterprises have been actively engaged in overseas mineral resource investments—whether through direct investments such as mergers and acquisitions or indirect investments involving exploration and mining. From acquiring foreign mining companies and taking small- to medium-sized equity stakes to partnering with foreign firms and establishing subsidiaries overseas, Chinese investors are involved across the entire value chain of these projects, and their investment approaches are becoming increasingly sophisticated and diversified.
4. Continuously accumulate experience in the exploration of the path toward internationalization.
Over the years, some Chinese enterprises have persistently explored the path of internationalizing their mining operations, facing repeated setbacks yet remaining undeterred. As a result, they have accumulated rich experience in “going global.” In this process, we have cultivated a group of professionals who are thoroughly familiar with and adept at the standard operating procedures commonly adopted by international exploration companies. This has enhanced China’s understanding of overseas mining investment environments, boosted the development of related domestic industries such as equipment and materials exports, and provided host countries with valuable geological data and information, thereby elevating the quality of geological resources available to those countries. For instance, during Chinalco’s acquisition of Rio Tinto, the first attempt occurred in February 2008, when China Aluminum acquired a 9.3% stake in Rio Tinto from the open market for US$14.05 billion. The second attempt took place in February 2009, when Chinalco sought to increase its stake in Rio Tinto to 18% by investing a massive US$19.5 billion. However, due to intense pressure from the international community, this deal ultimately failed. Subsequently, Rio Tinto announced a rights issue. If China Aluminum had accepted the rights issue, it would have suffered a severe loss of face; but if it had refused to participate, it would have risked losing its position as Rio Tinto’s single largest shareholder. Ultimately, Chinalco still chose to participate in Rio Tinto’s rights issue, investing US$1.5 billion and taking another tentative step forward on its journey toward internationalization.
4. Many challenges still remain in the trend toward the internationalization of the mining industry.
The scale of overseas exploration and development investments by China’s mining enterprises is steadily expanding, yielding positive results. Against the backdrop of the financial crisis, foreign mining companies generally face a shortage of funds, whereas Chinese banks and corporations enjoy relatively ample liquidity. Moreover, China boasts substantial savings, and several private equity funds are highly active in risk investment—making the opportunities self-evident. However, based on what we’ve learned, China’s mineral resource exploration and development enterprises are confronting a number of unfavorable external and internal conditions, and companies planning to invest overseas need to prepare accordingly in advance. The external unfavorable conditions primarily manifest themselves in the fact that Chinese enterprises, during their overseas exploration, development, and M&A activities, face various forms of pressure—from governments, enterprises, local communities, and even the media—in the host countries. They also face intense competition from powerful multinational mining companies as well as resource-demanding nations such as Japan and India. The internal unfavorable conditions mainly include superficial government coordination that lacks real coherence; weak overall strength and capabilities of exploration and mining enterprises, lacking the capacity for sustainable development; lack of coordination between the government and enterprises, as well as among enterprises themselves; and an incomplete supporting infrastructure system.
5. Implications: China’s path toward the internationalization of its mining industry still has a long way to go.
Today, as the pace of industrialization accelerates and mineral resources become increasingly precious, these resources have emerged as a critical bottleneck restricting the economic and social development of various countries. Consequently, competition among nations for mineral resources is intensifying. The trend toward the globalization of mining development has already become evident: in some developed countries, such as the United States, more than 50% of mining investment projects are located abroad. Even resource-poor countries like Japan and South Korea spare no expense, elevating the acquisition and stockpiling of overseas mineral resources to the level of national security strategy. Although since 2007, China has stepped up its efforts toward the internationalization of the mining sector and has achieved certain experiences and accomplishments, truly realizing the internationalization of the mining industry remains a long and arduous journey. Many challenges still lie ahead, requiring us continually to draw on our experiences and learn from our mistakes.
References
[1] Ministry of Commerce website, http://www.fdi.gov.cn/pub/FDI/tzdt/dt/t20090924_112318.htm  
[2] NDRC website, http://www.sdpc.gov.cn/wzly/
[3] Xinhua Net, http://news.xinhuanet.com
[4] People's Daily Online, http://energy.people.com.cn
[5] Steel Home Website, http://www.steelhome.cn/
[6] China Mining Network, http://www.chinamining.com.cn
[7] MySteel.com, http://www.mysteel.com