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Jinchuan buys 70% stake in Tiomin Kenya

Chinese mining firm Jinchuan has acquired 70 percent stake in Tiomin Kenya Limited (TKL) in a bid to revive the titanium mining project located in Kenya’s coastal region.
A statement from the Canada-based mining firm, Tiomin, received in Nairobi Wednesday, said Jinchuan acquired the controlling equity interest in Tiomin Kenya, a wholly owned subsidiary of Tiomin that owns 100 percent of the Kwale Mineral Sands Project in Kenya.
The investment agreement which was signed on Monday offers Jinchuan a 70 percent stake in Tiomin Kenya Limited, leaving the Canadian parent with 30 percent.
The statement said Jinchuan is expected to immediately invest $25 million into the mining project to offer it the financial muscle it needs to take off.
“Tiomin Resources is pleased to announce that it has taken a significant step forward and signed an investment agreement with Jinchuan Group Limited, one of China’s largest companies,” the statement said.

The Canadian and Chinese firms hope to mine an average of 330,000 tons of titanium-bearing ilmenite, 77,000 tons of rutile and 37,000 tons of zircon a year from the Kwale Mineral Sands site.
The statement said all net cash flow generated by Kwale will be used initially to repay project debt and thereafter net free cash flow will be distributed pro-rata 70 percent to Jinchuan and 30 percent to Tiomin.
“The transaction is expected to close in about two months and is subject to regulatory and shareholder approval,” the statement said.
Jinchuan is China’s biggest nickel producer and fourth-largest copper producer.
“Closing this flagship deal, which has had such a long and painful gestation period, will be a key event for Tiomin. We believe that the closing conditions can be met in the next two months,” said Robert Jackson, CEO of Tiomin.
He said a 30 percent carried interest in a good project for no further investment is highly valuable to Tiomin particularly given the potential upside of higher commodity prices and exploration success.
“Investors should look at this transaction in the context of the enormous benefit to Tiomin of Jinchuan’s ability to obtain project financing to construct the project,” Jackson said.
“In addition, closing this transaction with Jinchuan will give Tiomin more flexibility to pursue its strategy of leveraging its strong cash position and management team to find and execute an accretive, company-making transaction.”

Shougang output to hit 30m tons in 2012

Shougang Iron and Steel Group expects its annual steel output to reach 30 million tons by 2012, two years after its Beijing facilities are to be shut down, the group’s chairman said Wednesday.
Shougang, meaning “Capital Steel”, was Beijing’s biggest polluter before it began cutting output at its Beijing plants for last year’s Olympics. It is now moving production to a 10-million-ton, state-of-the-art mill on the nearby coast of Hebei Province.
The 21-sq-km new plant in Caofeidian, an islet 220 km east of Beijing, will replace Shougang’s old facilities in Beijing next year, to become the country’s largest steel production base.
“The new plant will produce 9.7 million tons by the end of next year,” said chairman Zhu Jimin at a Beijing assembly commemorating the group’s 90th founding anniversary.
He said the group would further expand production by launching new projects as well as merging and acquiring smaller plants in different provinces.
In its latest expansion plan, Shougang last month acquired 90 percent of the equities of Changzhi Iron & Steel Co, Ltd, a 3.6-million-ton plant in the northern Shanxi province.
“By 2012, we’ll be producing 30 million tons of steel a year, ” said Zhu.
Meanwhile, the Beijing factory site will become a development zone for a wide range of industries including logistic services, real estate development and auto spares production, which will yield an additional 100 billion yuan ($14.7 billion) a year, he said.
Founded in 1919, Shougang is widely considered the flagship of China’s heavy industry. With its production base just 17 km west of Tiananmen Square in central Beijing, however, it has long been blamed for causing heavy pollution as the plant’s chimneys belch out thick clouds of smoke.
Its Beijing plant produced more than 12 million tons of steel annually before it was forced to cut output and pollution in 2007.
Last year, the plant said it cut output and pollution by 70 percent to ensure better air quality for the Beijing Olympics.

CHICO to expand operations in Liberia

A Chinese company operating in Liberia Monday has unveiled its plans for the West African nation, promising to expand its operations in the mining, agriculture, and electricity sectors.
China Henan International Cooperation Group of Companies Limited (CHICO) said although it came to Liberia under an agreement reached with the World Bank and the government of Liberia to construct and rehabilitate roads, it has already began mining exploration in the country.

The company’s Vice Director Liu Shanliang told Xinhua that its team of explorers is in the Western Liberian mining concession area of Bomi, one of the west Liberian counties, and has embarked on massive exploration of the country’s mining concession area in that part of the country.
Liu said the latest exploration started in early 2009, and plans are in the process for the company’s mining exploration to be extended to northern Liberia, where it has requested the Liberian government to allow it to carry out mining at the highly rich mining area of Wologisi, located in Liberia’s biggest county of Lofa.
“We also have plans to engage in agriculture; we intend to bid to do water supply by December this year and repair and construct drainages; engage in power projects and the construction of sub- stations,” he said.
Liu said the decision by the company to carry out all of these initiatives clearly shows that it intends to stay in Liberia for long, as it has been operating in other countries like Senegal, where it has operated since 1980 as well as nations across Africa like Tanzania, Mozambique, Zambia, Namibia and Guinea, where it is currently active.
“We will also in the not too remote future begin oil exploration, “he assured.
Since its arrival in Liberia in 2007, after it won a bid to reconstruct roads in Liberia, CHICO has built most of the roads in Monrovia city and its environs. The company is currently extending its road construction work in Liberia’s interior and according to the Liberian government by the end of the dry season massive operation mainly in the interior side will begin on a full scale.

GM seeks to cozy up with SAIC

A SAIC-GM-Wuling factory in the Guangxi Zhuang autonomous region. GM is in talks with the Guangxi government to boost its holding in SAIC-GM-Wuling to 44.9 percent from the current 34 percent, according to SAIC’s top official. [China Daily]
General Motors (GM), the largest foreign automaker in China, is considering purchasing an additional 10.9 percent stake in the nation’s mini-commercial vehicle sales leader, SAIC-GM-Wuling, said an executive at its Chinese partner Shanghai Automotive Industry Corp (Group), or SAIC.
The SAIC-GM-Wuling venture currently includes GM with a 34 percent share, Shanghai Automotive with a 50.1 percent share and Guangxi government-owned Wuling Motors with a 15.9 percent stake.
The US automaker is said to be in talks with the Guangxi government to boost its holding in SAIC-GM-Wuling to 44.9 percent from the current 34 percent, Chen Hong, president of SAIC, the venture’s biggest stockholder said at a shareholders’ general meeting yesterday in Shanghai.
Shanghai-listed SAIC would retain its 50.1 percent stake, said Chen, indicating that SAIC won’t alter its holdings in the venture.
If the proposed deal goes through, GM would be able to increase its shareholding, leaving the Guangxi government-owned Wuling Motors with a 5 percent stake.
While GM China officials refused to comment on the news yesterday, the vehicle venture has been good for all the parties involved. Just last Friday, SAIC-GM-Wuling announced that it had become the first Chinese automaker to sell 1 million vehicles in a single calendar year. Wuling is the first domestic brand to achieve annual sales of 1 million units.
Boosted by government encouragement of rural residents to upgrade from farm vehicles to more efficient mini-vehicles, SAIC-GM-Wuling has been one of the fastest growing automakers in China, with sales jumping nearly 60 percent on an annual basis in 2009.
In the first 11 months, the venture delivered more than 980,000 vehicles to customers, compared with 647,296 units in 2008.
It is on track to remain China’s mini-commercial vehicle sales leader for a fourth consecutive year.
SAIC-GM-Wuling plans to roll out another two new minivan models next year, said Yang Jie, general manager of SAIC-GM-Wuling Sales Co. It may also contribute to GM and SAIC’s new joint venture in India, which will leverage products and expertise from SAIC-GM-Wuling.
Automobile sales in India may double to 4 million units by 2015 from 2 million units this year, said Chen of SAIC. Indian vehicle sales may rise 12 percent annually in the next few years, he said.
With the government also offering tax breaks for vehicles with an engine capacity of 1.6 liters or less, and subsidies for vehicle trade-ins, these moves are being seen as good news for the automotive industry next year, Chen said. The executive added that he expected total vehicle sales to increase 10 percent in 2010.
China was crowned the world’s biggest auto market this year with over 13 million units sold across the country.
Launched in 2002 in Liuzhou, the Guangxi Zhuang autonomous region, SAIC-GM-Wuling manufactures a range of Wuling brand mini-trucks and minivans as well as the Chevrolet Spark mini-car. It has a second manufacturing base in Qingdao, Shandong province.

Canada’s Athabasca to sell oilsand stake to PetroChina

Canada’s Athabasca Oil Sands Corp announced on Monday that it plans to sell a 60-percent working interest in its two oilsand projects to PetroChina, a Chinese energy giant.
PetroChina will pay 1.9 billion Canadian dollars (1.7 billion U.S. dollars) for the MacKay River and Dover oilsand projects. The agreements also provide for certain financing arrangements for Athabasca.
The projects are located in the center of Athabasca region in northeastern Alberta, an oil-rich province in western Canada. The company says they contain approximately five billion barrels of bitumen, which can be refined into conventional oil.
“Oilsands projects are very capital-intensive long-term investments and difficult to fully finance in the traditional equity market,” Athabasca Chairman Bill Gallacher said in a press release.
“These strategic joint venture arrangements with PetroChina, one of the world’s largest energy companies, can ensure that the MacKay River and Dover projects will be developed in (a) timely manner, which is excellent news for Alberta and the rest of Canada,” Gallacher added.
Athabasca is focused on the sustainable development of oilsand resources in northern Alberta with net working interest in over 1.3 million acres.

Mercedes-Benz goes to top of class

German car maker Mercedes-Benz (China) Ltd officially began the domestic sales of its new generation of S-Class luxury sedans in Beijing on Friday.
The company is counting on the iconic model to keep its leading position in the luxury car segment and continue its success in China.
The full array of the new S-Class luxury sedans, the ninth generation, includes nine models with engine capacities ranging from 3.0 liters to 6.0 liters and will sell for between 930,000 yuan ($136,144 U.S. dollars) and 2.59 million yuan in China.
In order to meet the growing demand for energy-saving and eco-friendly vehicles, the new S-Class family has also added the S400 Hybrid, the world’s first series-production vehicle to feature a hybrid drive with a lithium-ion battery.
“Currently, China has become the largest S-Class market in the world, and the flagship model continued to reign in the top luxury segment with 7,300 units delivered to Chinese customers in the past seven months,” said Klaus Maier, president and chief executive officer of Mercedes-Benz (China) Ltd.
“With such success, we are confident that the new generation models will extend the S-Class leadership position, and attract even more of China’s top-echelon customers.”
As the flagship model of Mercedes-Benz, the S-Class is designed to set the benchmark in the luxury saloon segment. Worldwide sales of the legendary models reached 3.3 million units for the previous generations.
The product line-up made a great contribution to Mercedes-Benz’s overall sales in China and became strategically important for the German car maker to reinforce a leading position in the world’s fastest-growing market.
Maier said the S-Class’s market share in the top luxury car market came to 44 percent for the first seven months, leading against rivals the BMW 7 Series and the Audi A8.
“The S-Class is so popular because the Mercedes-Benz brand is the most recognized nameplate in China’s top luxury vehicle segment, whose customers are most brand-sensitive,” said Lang Xuehong, director of the automotive division from auto consulting research and consulting firm Sinotrust.
Mercedes-Benz said its vehicle sales on China’s mainland posted a 49 percent increase for the first seven months of this year, totaling 31,711 cars.
Sales growth in July reached 45 percent.
Industry analysts said the remarkable sales increase was a result of its low comparable bases a year earlier. But the diverse product strategy also works effectively to catch with the current market leader in China, Audi.
Despite the global financial crisis depressing demand in other markets, Mercedes-Benz expected the growing momentum in China would continue in the second half of this year given the positive economic growth and low market penetration of the premier cars, said Bjoern Hauber, general manager of sales and marketing of Mercedes-Benz (China).
Mercedes-Benz has introduced about 10 new models, such as the B-Class, the new E-Class and the Smart, in China so far this year. Some entry-level models expand its customer base with appeals to younger consumers.
In the upcoming months, Mercedes-Benz also plans to launch more than 10 new models as it remained upbeat about China’s luxury car market, Maier told Shanghai Daily.

GM China, China’s FAW launch joint venture

General Motors China and state-owned automaker FAW Group Corp. launched a 2 billion yuan ($293 million) joint venture Sunday to make light-duty trucks and vans, initially for the fast-growing Chinese market.

GM said the joint venture will use two existing factories affiliated with FAW and have a capacity of over 100,000 vehicles. That is expected to double by the end of 2010, GM China Group President Kevin Wale told reporters in a conference call.
Plans call for building a new assembly plant in Harbin, he said.
China is a key growth market for GM, which is expanding here despite its difficulties in the US market.
“Light trucks and vans have a significant role in China and other parts of the world,” Wale said. “Adding trucks rounds out our vehicle portfolio in China. It’s really a key focus for future growth.”
The 50-50 joint venture, based in the northeastern Chinese city of Changchun, where FAW is also based, will make FAW-branded vehicles for the Chinese market, GM said in a statement. The venture might make GM-branded vehicles for export later, but the focus for now is on meeting demand in China, Wale said.

Production will be at the existing factories in southwestern China’s Yunnan province, a facility owned by FAW-affiliate Hongta Yunnan Automobile Manufacturing Co. Ltd., and at Harbin Light Vehicle Co. Ltd. in the northeastern city of Harbin, GM said.
It said the two companies will conduct research and development, exports and after-sales support as well as vehicle production.
“Our new joint venture combines the expertise of two industry leaders in a partnership that benefits both,” Nick Reilly, GM executive vice president, said in a statement.
“It will address demand in China and other markets for high-quality, affordable products in one of the industry’s most robust segments, while complementing the portfolio of products that GM and FAW currently offer,” Reilly said.
Discussions on the venture began in early 2007 and it obtained regulatory approval in July, GM said.
FAW, originally known as First Auto Works, was founded in 1953 and began production in 1956. It sold 1.53 million vehicles, including sedans, vans and trucks, in 2008.
GM’s sales in China jumped 38 percent in the first half of this year, helped by strong demand for its minivans and other small vehicles. The automaker sold more than 100,000 vehicles a month in China from January to June for a total of 814,442, a record for any half year, the company said. That compares with sales of 1,094,561 GM vehicles in China for all of 2008.
Adding truck production will help expand the company’s exposure in one of the few major markets that continues to grow.
“These are quite different customers and quite different products,” Wale said.
He said he expected GM’s commercial vehicle sales to reach 80,000 to 90,000 this year and to rise further next year.

China’s CIC wealth fund muscles up

China Investment Corp is investing as much overseas each month this year as it did in all of 2008, Lou Jiwei, the chairman of the $298 billion sovereign wealth fund, said on Saturday.

CIC is counting on handsome returns this year and might one day ask the government to hand it more of the country’s record hoard of foreign reserves to manage, Lou, a former vice finance minister, said.
The fund invested just $4.8 billion outside China last year as it kept its powder dry during the global financial crisis, when asset prices tumbled. It held fully 87.4 percent of its overseas investments in cash or cash equivalents.
Now that markets are recovering, CIC is constructing a broad-based portfolio, Lou told reporters on the sidelines of a forum organized by the Washington-based Brookings Institution and the Chinese Economists 50 Forum, a Beijing think-tank.
CIC posted a negative 2.1 percent return on its global investment portfolio last year as the value of stakes such as those in Wall Street bank Morgan Stanley and private equity giant Blackstone Group slumped.
But Lou said 2009 was shaping up better.
“It will not be too bad this year. Both China and America are addressing bubbles by creating more bubbles and we’re just taking advantage of that. So we can’t lose,” he said.
CIC was set up in September 2007 with $200 billion of foreign currency reserves transferred from the central bank, which manages its own stockpile of $2.13 trillion.
“If our returns are not bad and the state’s FX reserves are still rising, we may go and ask for more,” Lou said.
He said the risk of a decline in the dollar risks was more of a national issue for China than for CIC because its capital is in dollars.
Asked whether CIC would be a keen buyer in the United States, Lou said CIC can buy anywhere in the world, but it cannot avoid buying US assets because the American economy and capital markets are so large.
Lou said CIC was building a broad investment portfolio that includes products designed to generate both alpha and beta; to hedge against both inflation and deflation; and to provide guaranteed returns in the event of a new crisis.
“We have to be in everything because you never know what’s going to happen in this world,” he said.
As well as investing overseas, CIC controls Central Huijin, a company that holds the state’s shares in big commercial banks. The increase in the value of these stakes is the reason why CIC’s assets had soared to $298 billion by the end of last year.
Lou said he expected returns from Central Huijin to decline in coming years because domestic banks profits will come under pressure as their net interest margin shrinks.
Moreover, banks will have to bolster their capital base by issuing subordinated bonds or equity, diluting Huijin’s returns, he said.

Dell gets ready for rural push

US computer maker Dell Inc said on Friday that it would continue to expand its reach outside the top tier cities as it steps up its efforts to fuel growth in China.
Steve Felice, president, small and medium business, Dell, said on Friday that the company would expand its network in the mainland to lower-tier cities and rural areas for further growth.
“We don’t have a very big presence in the rural communities,” Felice said. “Our focus has been in the top tier cities, and we are now in the process of expanding our reach.”
But he said Dell would maintain its profitability during the expansion and conduct the whole process “in a prudent manner”.
The world’s second largest PC maker posted 21 percent decline in revenue in the second quarter, as consumers and companies reduced their spending on technology products amid the economic slowdown.

Felice said China appears to be emerging fastest out of the financial crisis. He said increasing demand from emerging countries like China and India would help grow revenues on an annual basis from 2010 onwards.
As part of its efforts to stimulate the domestic consumer market, the Chinese government launched a program earlier this year to give subsidy to PC buyers in rural areas, where most people do not have computers.
But foreign companies like Dell and HP only took less than 1 percent each of this market that saw 110,000 new computers being sold in the past three months. Lenovo Group, the country’s largest domestic vendor, accounted for nearly half of the sales.
Felice confirmed on Friday that Dell is teaming up with China Mobile to develop smart phones in the country, but declined to disclose details. It was expected that China Mobile would launch the device as early as next Monday.

Macquarie forms China trust joint venture

Macquarie Group Ltd, Australia’s biggest investment bank has set up a trust company joint venture in China with an initial capital of 300 million yuan (44 million U.S. dollars), reported Friday’s China Daily.
The Shanghai-based joint venture, Sino-Australian International Trust Co., enables the global provider of diversified financial services to offer yuan-dominated products, arrange domestic debt and equity financing, the newspaper said, citing a statement released by Macquarie.
Macquarie owns 19.99 percent of the venture, the maximum allowed under current regulations. Beijing Sanjili Energy Co Ltd (Sanjili), a state-owned power generation company, owns 60 percent of the joint venture while Beijing Rongda Investment Ltd owns 20.01 percent.
Several State-owned firms including the State Development and Investment Corp control Sanjili and Rongda.
The joint venture will initially focus on raising funds for companies and local government entities and provide yuan-based investment products to wealthy investors and institutional investors, according to the newspaper.
Founded in 1969, Macquarie operates in more than 70 office locations in 26 countries. It employed approximately 12,700 people and had assets under management of 243 billion Australian dollars as of March 31, 2009.
Last week Macquarie and China Everbright Ltd had announced plans to raise 1.5 billion U.S. dollars for two funds to invest in infrastructure projects in China.