China bets big on mines merger

China, the world's biggest consumer of commodities, plans to merge the miners of 15 minerals into fewer, larger groups to improve their efficiency and safety, the land ministry said.

The plan covers miners of minerals such as coal, iron ore, copper ore and gold, the ministry of land and resources said in a statement today on its website. The government supported larger miners acquiring smaller ones, in regional mergers, it said.

China's economy grew 10.7 per cent last year, the fastest pace in 11 years, driving rising demand for raw materials and increasing pressure to improve the performance of its mining industry. The nation also plans to build strategic stockpiles of commodities such as copper.

"The next few years will be the climax of large-scale mergers and acquisitions in China,'' said Zhang Fang, analyst at China Securities Co by phone from Beijing today. "China realised it had to do more to conserve valuable resources, especially after going through the commodity price rally in the past few years.''

The mergers would cut mine numbers from an existing 120,000, mostly small-scale projects owned by individuals, it said. China wanted to reduce mining deaths and accidents by 10 per cent and reduce pollution by 15 per cent, it said. It would boost the use of new technology for cleaner mining and increase mineral ore recovery rates, it said.

China's safety administration has said 4,746 people died in 2,845 coal-mine accidents in 2006, according to state-run Xinhua News Agency.

"The consolidation will help reduce the number of smaller miners, boost efficiency of the utilisation and development of the minerals and improve safety and environmental standards of mining,'' the statement said. The government wants to cut the number of prospecting and mining permits issued by 20 per cent, moving to allow only a single permit for each mining zone, the statement said.

Rising commodity prices have left miners in China flush with cash, with companies such as China Shenhua Energy Co, the nation's biggest coal miner, and Aluminum Corp of China, its largest producer of the metal, stepping up domestic acquisitions to secure resources.

"The mergers will create a lot of buying opportunities'' for investors in the stock market, through buying the shares of the acquirers or companies to be acquired, China Securities' Zhang said.

China aimed to complete the merger plans in three of the 15 minerals in five prospecting areas by the end of 2007, it said, without naming the areas to be given priority. It will finish the remainder by the end of 2008.

The central government asked provincial governments to conduct investigations of local mineral resources and submit proposals to the land ministry and the National Development and Reform Commission.

The plan also covers manganese, bauxite ore, lead, zinc, molybdenum, tungsten and tin, antimony, rare earths, phosphorus and sylvite.

Chinese Vice-Premier Zeng Peiyan said China would use its $1 trillion foreign reserves to build a national strategic stockpile of key minerals. China is building an emergency supply of crude oil and plans to expand that to metals and uranium. The country is the world's biggest consumer of copper, used in buildings, pipes and power generators.