3,571.47
Aluminum Corp of China (Chalco)”s
bid to take a controlling stake in
Canadian coal miner SouthGobi Resources, which
mainly operates coal mines in Mongolia,
may face hurdles due to policy uncertainties
in Mongolia, analysts said yesterday.
State-run aluminum giant Chalco said that
it aims to purchase a 56 percent to
60 percent stake in SouthGobi at the price
of up to $1 billion. But the Mongolian
government recently enacted a bill which
seeks to impose a 49 percent cap on
foreign ownership in key industries including
the country”s booming mining sector.
SouthGobi said Wednesday that one of
its subsidiaries has been involved in
investigations by Mongolia”s anti-corruption
authorities, which has added further uncertainties
to Chalco”s takeover bid.
Chalco did not comment on the acquisition
bid when contacted by the Global Times
yesterday.
“It is very hard for Chalco to
successfully get a controlling stake in
SouthGobi in view of the political uncertainties,”
Mu Wenxin, a senior analyst with commodities
portal Umetal, told the Global Times yesterday.
Analysts said that the current investment
environment in Mongolia is not very favorable
to Chinese investors.
“The Mongolian government on the one
hand needs foreign investors to help in
developing its resources, but on the other
hand, sometimes tends to be protective
to their natural resources,” said Mu.
Peter Markey, China mining and metals
industry leader at Ernst & Young, said
a better time for Chinese companies to
make acquisitions would be after the Mongolian
election in June.
Ernst & Young also noted in a report
that “resources nationalism” has become
a growing source of uncertainty in international
acquisitions during the economic slowdown.
“Chinese companies can always choose
not to seek a controlling stake in
international acquisitions, which can serve as
a way to avert such political risks,”
Mu noted.
Despite the uncertainties, analysts said that
there will be increasing cooperation between
the two countries in natural resources.
“The exploration cost in Mongolia is
comparatively low. Given that Mongolia also
considers China as a crucial market, the
two countries will see more cooperation
in future,” Li Chaolin, an analyst
from the China Coal Transportation & Sales
Society, said yesterday.
Chalco said in April that it will
also buy a 29 percent stake in Winsway
Coking Coal, which owns coal mines in
Mongolia.
By Liang Fei
