SOURCE:[Nanning China – Metal Investment News]
If China is slowing down, then it’s a Lamborghini cruising into a light breeze. Construction cranes dot the landscape like dandelions. According to The World Bank, the number of 1 million-plus cities in China will increase from 100 to 220 in the next two decades. The Chinese are ravenous for copper, iron ore, potash, zinc, silver, gold etc.
Increasingly, China is looking to Canadian miners to fill this demand. In 2011, China invested about $7 billion in the Canadian Resource Sector through the following five mechanisms:
- Equity stakes
- Strategic partnerships
- Off-take agreements
2012 will extend the trend. China’s state-owned CNOOC recently made a $15.1 billion offer for Canadian energy giant Nexen (NXY-TSX). The Canadian government has raised the review threshold for foreign takeover deals from $330 million to $1 billion. That smooths the path for the Canadian resource sector where the majority of deals are below $1 billion in value.
But doing business in China requires patience, knowledge and cultural sensitivity. In North America, we typically do business with people, and then (sometimes) become friends. In China, you become friends and then (often) do business.
But how do you make friends in China without an existing network?
Trident Financial, a Vancouver based Investor Relations and Business Development Company is helping Canadian resource companies solve this riddle.
During a recent trip to China, Trident introduced Catalyst Copper (CCY-TSX), Lexaria Energy (LXX-CNSX), Anglo Pacific (APY-TSX), Kenai Resources (KAI-TSX.V) and a private U.S. Coal Company to its network of Chinese investors, funds, government stakeholders, state and private resource companies.
“This was our second year visiting and presenting in China, and we now have a clear understanding of who the Chinese players are, and what they are looking for,” explains Trident President Rob Riley, “They are not interested in private placements with quick exit positions. They take a long term approach and want to develop and own the resources in the ground.”
Mr. Riley’s partner, Vice President Edward Zuo speaks Mandarin and carefully nurtures relationships in China and Canada. “Bridging the gap between China and Canadian Mining companies takes diligence,” states Zuo, “You can’t just walk into a meeting and expect to close a deal. They want to know who you are, and – equally importantly – who you know.”
Zuo credits The Guangxi Business Association of Canada [GBAC] with opening doors to decision makers in China. “The GBAC has about 700 members here in Canada. Collectively they do about $1.5 billion of business a year in China and Canada. They are an influential group who have helped us a great deal.”
Trident’s recently attended the 9th China Asean Expo – a commodities conference in Nanning China. This trip resulted in spin-off meetings at The Guangxi Department of Land Resources, Shanghai Landmark Investment, The Geology and Exploration Bureau, China Institute of the Geology, Investment Bureau of Nanning, Fujiian Development Research Center, Canadian Consulate of Economic Affairs in Shanghai, Zhejiang Energy, and numerous state-owned and private resource giants looking for mid and late stage mineral assets.
“Canada has strong expertise in gold, copper and nickel exploration,” stated Tian Fengming Vice Director-General of Guangxi Land Resources in a closed door meeting with the Trident mining delegation, “We require the technology to explore these resources at lower depths and we’re flexible in the ways in which we will partner with Canadians.”
“So often at these conferences you find yourself in the wrong place at the wrong time with the wrong people,” states Catalyst Copper CEO John Greenslade, “so it was a pleasant surprise to find that Trident had put me in the right place at the right time with the right people.” CCY is developing a Porphyry Copper Deposit, under an option agreement, in Michoacán State, Mexico with two large mineralised zones.
“China is consuming 42% of the world’s copper,” adds Greenslade, “so it’s obvious this is a country I should be visiting and getting to know.” Catalyst’s project has a global geologic resource of six plus billion pounds of copper. CCY is currently working on a Preliminary Economic Assessment and anticipates annual gross operating costs of in the vicinity of $240 million, utilizing a daily production rate of 80,000 tonnes of ore per day. Potential gross revenue during the first 5 years of production (with anticipated higher grades) is approximately $1 billion at current metal prices. “I’ve been meeting with senior decision-makers capable of closing deals,” states Greenslade, “They’re not kicking tires. They’re looking for assets. And they understand the geology and the numbers”.
Trident has demonstrated knack for finding Canadian Juniors with the potential to peak China’s interest. Lexaria Energy is a technology innovator with several producing oil wells in the Belmont Lake Oil Field in South-western Mississippi. Lexaria 2011 revenues rose 310% over the previous year with costs of about $22 a barrel. They have identified 30 new targets.
“We’re here in China to explore a J.V partner to more rapidly explore and develop our 130,000 acre property,” states Lexaria President Chris Bunka, “The quality of the meetings has been superb. Rob Riley and Edward Zuo are respected by the Chinese. I’ve established relationships with a number of potential partners. These are high level leads. I expect to do new business as a result of this trip”.
Other signals suggest Trident is on the right path. Last year, China moved its ambassador in Australia, Zhang Junsai, to Canada. Zhang has publically reprimanded Canadian companies for their lack of skill and ambition in doing business with the Chinese. He pointed out there are only 2,000 Canadians studying in China, while some 70,000 Chinese study English in Canada.
The QDII (Qualified Domestic Institution Investor) scheme allows Chinese fund managers to invest in overseas financial markets, including the TSX. As of September, 2012, the total QDII quota stands at $84.3 billion.
“Big investment dollars are coming to Canada from China over the next five years,” says Riley, “It is important that Canadian companies visit China and begin forging those relationships. For companies like Catalyst and Lexaria we targeted qualified groups who would understand and appreciate their assets. There is a great synergy between Canadian Exploration Technology and Chinese Capital. But you can’t expect the Chinese to do all the work. So we are going to them.”