Deal of the day: Chinese miner buys Canadian copper explorer

Summary:
China’s largest producer of nickel and cobalt, Jinchuan agreed to buy a Canadian metals explorer. It is therefore obvious that Chinese companies are expanding significantly with their new government’s “going out” policy which encourages companies to push overseas. Jinchuan already owns 14% of Continental Minerals (listed in TSX) and they will now pay $417million for an additional 13% premium. Continental is currently exploring a large copper-gold property in Xietongmen and has discovered two deposits that will help diversify Jinchuan. Jinchuan also bought Crowflight Minerals (another Canadian company) in April for $140million.Unlike Continental, Crowflight’s mining activities are in Canada itself. Additional to that another Chinese company, Shinochem may also be preparing a massive bid for PotashCorp. In total, Chinese companies have purchased 17 North American companies during the past year.

Connections:
This article is connected to chapter 1 in many ways. One main connection is the business activities used by these Chinese companies. Jinchuan buying large North American companies is one perfect example of investing activities. Investing activities require a company to obtain funds and Jinchuan most likely got their funds out of the Chinese government or a loan. Most companies make both long and short term investments and in this case, Jinchuan made a long term investment. Purchasing another company is part of investing activities, because it requires Jinchuan to purchase shares off another company, which as a result directly affect’s Jinchuan’s equity depending on how well or bad that company does.

Reflections:
Being a large country with a large population, China has many opportunities for expansion. It is evident that China is expanding and catching up to North America economically after reading this article. Chinese companies buying Canadian companies may be both good and bad for Canada’s economy. This would be advantageous in a short term because Canada would be developing good relationship with China which creates more international business opportunities for Canada in the future. On the other hand, this might also be disadvantageous in the long run for Canada. If Canadian companies such as Crowflight end up doing really well, ultimately china would profit from this more than Canada would. Therefore I believe that it would be more beneficial for large Canadian companies such as PotashCorp to stay as a large Canadian company and not another countries company.

http://blogs.ft.com/beyond-brics/2010/09/20/deal-of-the-day-chinese-miner-buys-canadian-copper-explorer/