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Overseas mining acquisitions by Chinese firms at highest level in over a decade; here's why

China's immense demand for raw materials as the world's top consumer of most key minerals. It has long driven its firms to pursue assets abroad read more A mining machine is seen at the Bayan Obo mine containing rare earth minerals, in Inner Mongolia, China. File photo/Reuters Chinese mining companies have stepped up acquisitions abroad, reaching their highest level in more than a decade as they seek to secure vital raw materials amid rising geopolitical tensions. There were 10 overseas mining deals by Chinese firms worth more than $100 million in 2023, the most since 2013, according to an analysis of data from S&P and Mergermarket. Separate research from the Griffith Asia Institute also found that last year marked the busiest period for Chinese overseas mining investment and construction since at least 2013. STORY CONTINUES BELOW THIS AD China's immense demand for raw materials as the world's top consumer of most key minerals. It has long driven its firms to pursue assets abroad. Analysts say the recent rise in dealmaking reflects efforts by Chinese groups to accelerate acquisitions before global political tensions restrict such activity, Financial Times reported. Michael Scherb, founder of private equity firm Appian Capital Advisory, said there had been 'more activity in the past 12 months because Chinese groups believe they have this near-term window … They're trying to get a lot of M&A done before geopolitics get difficult.' The momentum has continued into 2024. Zijin Mining of China recently announced a $1.2 billion deal to acquire a gold mine in Kazakhstan, while in April, Appian sold its Mineração Vale Verde copper and gold mine in Brazil to Baiyin Nonferrous Group for $420 million. 'In the next few years we are likely to continue to see a healthy level of dealmaking activity from Chinese mining companies,' said Richard Horrocks-Taylor, global head of metals and mining at Standard Chartered. Christoph Nedopil, director of the Griffith Asia Institute and a specialist in Chinese overseas investment, said that unlike transport and infrastructure projects under the Belt and Road Initiative — which have tended to be smaller — mining and resource deals have remained substantial. He said this shift aligns with China's emphasis on high-tech manufacturing, particularly in sectors such as batteries and renewable energy. STORY CONTINUES BELOW THIS AD China maintains a dominant position in processing critical minerals such as lithium, cobalt and rare earths, but still depends on imports for many raw materials. The United States and several European nations are working to reduce reliance on Chinese supply chains for these materials, which are vital for electric vehicles, semiconductors and green technologies. Western countries including Canada and Australia have grown 'increasingly wary' of Chinese investment in domestic mining operations due to the 'strategic nature of a lot of these minerals,' said Adam Webb, head of battery raw materials at Benchmark Mineral Intelligence. Analysts say Chinese firms have grown more adept at acquiring mining assets from western rivals, often willing to take longer-term views on value and invest in riskier locations. 'There has been a [growing] sophistication of Chinese buyers' outbound M&A strategies,' said Scherb. 'The Chinese government used to select one buyer per asset sale process and back that group. What's evolved over the past three to four years is the government allowing Chinese groups to compete with one another. That implies they don't fear losing to the west anymore.' STORY CONTINUES BELOW THIS AD John Meyer, an analyst at SP Angel, said Chinese groups were 'actively' acquiring resources 'to keep the west out of certain critical materials which they dominate'. He added, 'Every time someone gets close to mining lithium, the Chinese come running with a cheque book.' Among the most active players in overseas deals are CMOC, MMG and Zijin Mining. Meanwhile, Chinese financial institutions have issued billions of dollars in loans for mining and mineral processing projects in developing countries. Timothy Foden, co-head of the international arbitration group at law firm Boies Schiller Flexner, said Chinese firms were also benefiting from a rise in resource nationalism, particularly in African countries such as Mali. Some military-led governments have taken over western-owned mining assets and demanded increased royalties. Chinese companies are often willing to accept lower returns in exchange for operating control of such assets, Foden said.