Wang Jiahua: Optimize Various Elements, Form a “Aircraft Carrier Battle Group”
Source: www.mlr.gov.cn Citation: www.chinamining.com.cn Date: May.28, 2013
In the current situation, one of the hot issues in China`s mining industry is how to "go out", and how can we go further.
On May 26, in the national mining-seeking assembly (The 7th Hundred Geological Captains Symposium), the conference organizers held Chinese enterprises overseas mining symposium. Wang Jiahua, Executive Vice President of China Mining Association, together with the representatives, analyzed the current situation of "going out", and put forward the solutions.
Wang Jiahua said that China`s mining enterprises must use the international vision of "going out", realize the different situation in each different country, and according to different countries adopt different strategies and tactics so as to avoid the same pattern.
According to his introduction, from the point of general classification, the common points in developed countries are: complete mining policy and law, strong protection of environment, proper implementation of the market economy rule, powerful protection of indigenous people, much concern about human resource utilization in their own countries, and high labor costs; the common points in developing countries are as followed: basically sound law and regulation but does not reach the designated position, sufficient labor force but labor price rises gradually, increasingly attach importance to environmental protection but still has a lot of vacancy, abundance of mineral resources with fair potential, and the leading role of the government; Common points in relatively backward countries are: abundance of mineral resources, -500 meters shallow resources without exploration and basic geology is very weak, abundant cheap labor force, mining laws and regulations have a large scale space, relatively serious government corruption, poor infrastructure.
He combed the reasons why China’s mining industry "going out" is disappointing, which are: In form, mainly because of the backward production mode of small-scale producers; On the concept, the lack of international modern vision; On the operation, improper environment, including indigenous people, labor and other problems; On the standards, disconnection with international standards; On the organizational, lack of support, all the "solo"; On the strategy, not optimal division of labor, not obvious advantage, and obvious disadvantage.
"So we must renew the idea, innovate the form, build platform, guide operation, establish standards, strengthen the organization and reshape strategy." he said. Only in this way of paying attention to "going out" strategy and tactics, we can go further.
However, we need to build a risk exploration market like Australia, Canada. Without this platform, "going out" of China`s mining industry is the empty talk.
Wang Jiahua think, the first stage is the construction of Tianjin mining industry financial reform demonstration base, to form a pattern of "four in one", namely, doing a good job in mining conference, creating a platform of campaign, contact and information exchange. Modify and improve the existing Tianjin Mining Right Exchange to make it become the risk exploration market platform connecting exploring results and capital. Form a third party service system to provide elements system of market service to the risk exploration market, including the law firm, mining rights appraisal firm, accounting firm, drilling company, laboratory, etc. Build good "capital" reservoir, because this is the "gas station" "Arsenal" of the risk exploration market. The “capital" reservoir includes various types of special funds, private equity funds, all kinds of financial products of financial institutions, and mining enterprise funds, etc.
He also vividly compared risk exploration market to "aircraft carrier joint fleet". Aircraft carrier itself has four big systems. Among them, the power system is to inject into the government resources, including the Ministry of Land and Resources, the National Development and Reform Commission, the Ministry of Industry and Information and Technology, the Ministry of Commerce and other public resources; Radar system is to do a good job in information collection, such as the real-time information of mineral countries including mining policy, investment environment, the risk degree, etc.; Communication system is to set up overseas connect points, contact points, such as building mining embassy counselor; Supply system is the "capital" reservoir.
"The aircraft on the carrier is the real productivity." He emphasized, "spy plane" is the geological exploration unit of ore prospecting, "fighter" is private enterprises and geological exploration units with a small capital, “bomber" is the large enterprises and financial enterprises with large capital development, "AEW" is overseas Chinese firms.
"To form a complete, three-dimensional defense system in fleet construction, single carrier is not enough. The mineral exploration and development, overseas mergers and acquisitions of mining projects, a high degree of risk determine the must of building a `carrier battle groups." He stressed that it is necessary to have "frigate” namely third party service system and "destroyer" namely the risk exploration market trading platform.
At the end of the seminar, on behalf of the China mining association, he also put forward to the "going out" road map of China`s mining industry: The private enterprises play forward and geological exploration makes efforts together with them. Big mining companies accept the offer, and financial supports don’t relax. Resident land converts into the cash, and leave some stock dividends. Large companies come into the make for development, and several parties will all be win-win.
He said, "going out" strategy which was the combination of various factors of enterprise could be successful only to use the various corporate advantages and lower the disadvantages to minimum. The charge of private enterprises lies in its flexible mechanism, relatively simple examination and approval procedures for overseas. Mergers need to catch the opportunity of changing. Therefore the charge of private enterprises is very reasonable. Risk exploration must have technical support, so geological exploration unit can raise the money themselves to the exploration or, also can undertake exploration through enterprise cooperation, the combination of whom can have better effects. In addition, no matter grassroots exploration or project merging, no matter it is a private enterprise or a combination input of private and geological exploration, faced with the problem of "offer acceptance", thinking exit before entering. Large companies’ merging is slow, so in the way of "offer acceptance" the cost can be decreased. Private enterprises and geological prospecting units obtain the cash through the transfer of stock share forming prospecting new productivity, optimizing the advantages, but also save some original stock, securing a stable income through the long-term effective mechanism of mining development.
For a specific path, he said, for large special fund purchase, purchase object is capital chain rupture stage, the primary exploration company that has better mining assets, control its 15% ~ 20% of stock share, not considering rewarding in short-term, but as a reserve, after waiting for its growth converted into cash or transfer to large mining companies. For enterprise’s commercialization merging, in the current situation, the project of commercialization merging should be subject to preliminary feasibility study or a bank study, and the advisable object is the listed company; Mergers team with rich operation experiences is advisable, and localization strategy is the primary strategy; The assets, at the present stage are advisable for mature project, facilitating rapid formation of cash flow; The project place for merging is advisable for the friendly relations with China, good infrastructure, less uncertainties; The price of the merging is advisable for the bottom of current market value; The strategy is advisable for reasonable combination support of private, geological exploration, big companies, financial institutions; The time of merging should be rational, and decisions should be made quickly. (Zhang Li) （translated by TLRHVC）
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