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China Gobbling Up Natural Resource Companies

Posted February. 16, 2009 03:05,   


China is taking using the global crisis to obtain more overseas resources.

China’s Xinhua News Agency said yesterday that Chinese aluminum giant Chinalco will invest 19.5 billion dollars in Rio Tinto, one of the world’s three largest mining companies. This will be the largest overseas investment by a Chinese company in history.

“The investment was made according to the company s development strategy for internationalization and growth into a multiple-underground resources development company, said Chinalco President Xiao Yaqing. The largest aluminum company in China is also planning to buy 7.2 billion dollars of bonds convertible into shares of Rio. This will almost double Chinalco`s existing 9.3 percent stake in Rio to 18 percent.

Chinalco will also spend 12.3 billion dollars on stakes of Rio`s aluminum, copper and iron ore mining assets.

The mines Chinalco has agreed on the joint ventures have excellent property value and they include Weipa, a bauxite mine located in Queensland, Australia, and copper mines in Chile, the United States, Indonesia and Peru.

Thank to the investment, China, which heavily depends on energy and resources such oil and iron ore, will not only secure a stable supply of iron ore, aluminum and copper, but also influence prices in the international market.

Experts say China’s strategy is to invest in resources development companies when their stock and resource prices are low to make a big profit when the global economy recovers.

In October last year, China National Offshore Oil Corp. acquired the Norwegian oil services company Awilco for 2.5 billion dollars. Sinopec also bought Canada’s Tanganyika Oil for 1.5 billion dollars.

orionha@donga.com bonhong@donga.com