African Mining Investment 

A survey of Chinese mining firms reveals that Africa is expected to receive the greatest share of China's mining investment over the next year. Active diplomacy between African leaders and those in China are setting the stage for record breaking deals in what is increasing becoming a focal point in the economic rise of the developing world.

 

High expectations 

Despite the global financial crisis, 2009 was a record year for Chinese investment in the mining sector. A record 33 deals worth $9.2 billion were completed last year, a marked increase from the 20 deals completed in 2008. Although the vast majority of Chinese global mining investment in 2009, both in volume and in value, centered on Australia and North America, Chinese investors are increasingly looking toward to Africa to secure a greater share of China's mineral demand. In a 2010 survey conducted by Deloitte, 76 percent of Chinese mining companies surveyed believed that the bulk of mining investment over the next 12 months would take place in Africa, followed by Australia (44 percent) and North America (24 percent).

The optimism expressed toward Africa in the survey is not hard to understand. During the global financial crisis, the severe credit crunch experienced primarily in North America and Europe allowed Chinese companies to snap up troubled North American and European mining assets at bargain prices. With the economy in Europe and America slowly recovering, however, these opportunistic deals will become increasingly rare while associated transaction costs are likely to go up as well.

New taxes for newly mined iron ore and coal in Australia have caused Chinese companies interested in investing in this traditional mining hub to re-evaluate the profitability and viability of future projects. Some 85 percent of mining companies in the Deloitte survey believe that Chinese mining investments will increasingly look elsewhere to mitigate the negative effects of the new tax, with many identifying Africa as the main beneficiary.