This Firm Just Became China’s “Preferred Vehicle” For Mining M&A

China’s independent oil refiners declared war on the state this week. Saying they will set up a $5 billion multi-company joint venture to challenge state-owned oil firms for market share. 

But in the mining space, competition seems to be decreasing. With one major Chinese company this week apparently being declared the winner in the race for overseas projects and profits. 

That’s MMG — a state-owned mining giant, formed in 2009 after buying a global asset package from Australia’s OZ Minerals. 

And this firm will reportedly be China’s go-to vehicle for new international projects going forward. 

MMG’s CEO Jerry Jiao told attendees at a mining function in Melbourne that his company has been selected as the main player for new mining deals. Here’s the full quote: “Minmetals has been selected as a pilot program for SOE (state-owned enterprise) reform – the only one in the metals sector. This has now positioned MMG as a preferred vehicle for foreign direct investment into international resource investment in ‘China-short’ commodities.”

The announcement is potentially critical for a number of reasons. First and most important because it suggests we will see a growing surge of deals coming from MMG — perhaps supported by increased state funding to this “preferred vehicle”.

Such a move also raises the question of why China would need to select a single company to go abroad in mining. With China commonly having multiple state-owned firms active in M&A in other resource sectors like energy. 

The development may mean Chinese officials are narrowing their focus in terms of assets. Which plays into CEO Jiao’s comments about “China-short” commodities — which he later said includes copper, zinc and possibly metals related to electric vehicles (read cobalt, lithium and graphite). 

The Chinese government has also been ordering state-owned firms to inject private capital into their operations. And the nomination of MMG as top in mining may be aimed at directing investment dollars into this firm. 

Whatever the case, watch for more deals coming soon from this rising player in the base and strategic metals spaces. 

Here’s to the chosen one,

Dave Forest

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