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Miners digging deep for a new global strategy

Updated: 2013-11-05 00:34
By Du Juan ( China Daily)

Weak commodity prices, a shifting investment environment, and problems with governments and workers prompt Chinese mining companies to slow their expansion abroad, reports Du Juan from Tianjin

Chinese investors in overseas mining projects are stepping back and reconsidering their goals and strategies after encountering legal, financial and labor problems during their foreign expansion.

China's outbound investment in the mining industry fell 10.9 percent year-on-year to $3.14 billion during the first three quarters of 2013, according to the China Mining Association. The number of investments declined 8 percent to 103 cases.

There are many reasons for the declines, said Chang Xingguo, project director of the association's international minerals and finance department.

"Chinese companies (in the sector) are facing challenges, because commodity prices are declining and the overseas investment environment is changing," he said.

"After 20 years of development in the overseas mining sector, the phase of dramatic growth is over," said Chang.

Now, resources companies will have to base their overseas investments on rational evaluation. They'll also have to place greater emphasis on sustainable development in foreign countries.

Chinese companies need to be fully aware of policies in foreign countries and avoid investing blindly. For instance, in January, the African nation of Uganda banned iron ore exports. Other countries on the continent are moving to restrict foreign investment, according to Chang.

In recent years, many members of the Association of Southeast Asian Nations have limited exports of unprocessed minerals to support the development of local downstream industries.

Likewise, African countries want foreign participants in the mining industry to invest more in local downstream processing or refining plants, which is forcing Chinese companies to reconsider the rate of return of many projects.

Another issue facing the mining industry is that overseas projects are often unregulated, a situation that's led to disputes between foreign investors and the local communities and governments.

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