25 September 2018

Can China Minmetals dig its way out of trouble?

Time was that state-owned conglomerate China Minmetals Corp. could do no wrong. Back in 2008, it was the darling of the propaganda apparatus, with cheerleaders touting its buying spree as an example of the “rising power of Chinese enterprises on a global scale” as the rest of the world’s mining industry grappled with the global financial tsunami.

That was the year that Minmetals Corp. made the list of the world’s top five metals and mining companies by operating revenue.

Sadly, the sizzling gains of those earlier days were a flash in the pan. Minmetals’ subsidiary MMG (01208.HK) said that its Century Mine, Australia’s biggest open-cut zinc mine, will have to close for good. And, OZ Minerals, Australia’s third-largest mining company, which Minmetals Corp. bought for US$1.39 billion in 2009, will also have to go in a painful process to cut excess capacity, the Economic Observer reports.

Worse still, six out of the eight listed subsidiaries under the Minmetals umbrella are suffering alarming losses, prompting the parent corporation to embark on a daunting business overhaul.

The source of the problem? Weak market demand coincided with excess capacity to create a perfect storm. Minmetals Development (600058.CN), China’s largest steel products vendor and also Minmetals Corp.’s major income source, sank into the red in 2012. Minmetals Rare Earth (000831.CN) also booked a 386 million yuan (US$63.38 million) loss last year.

Kingray New Materials Science & Tech (600390.CN) and Hunan Nonferrous Metals (02626.HK) stayed mired in loss in the first half. Zhuzhou Smelter (600961.CN) and China Tungsten and Hightech Materials (000657.CN) – both classed as counters in need of “special treatment” (ST shares) by the Shanghai and Shenzhen bourses due to formidable risks will be delisted if they fail to orchestrate a genuine turnaround after three consecutive years of losses.

Minmetals Development announced in a circular that Minmetals Corp. is planning to inject its profit-making ferrous metal assets, while rumor has it that Kingray will take charge of some lithium business.

Media reports say that twice in three month this year the China Securities Regulatory Commission vetoed Minmetals Corp.’s plan to revamp China Tungsten and Hightech Materials. The stock market watchdog’s major concern was the potential loss of state-owned assets during the process.

– Contact the writer at [email protected]


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