China Hanking Holdings Ltd. is in a race against the clock to secure new acquisitions after recently cashing out of a substantial part of its business in two transactions, and as the commodities rebound pushes asset prices up.
Earlier this year, the Hong Kong-listed company sold its Australian gold unit Hanking Australia Pty Ltd for A$330 million and disposed of its iron ore unit Xingzhou Mining for 360 million yuan.
"We are discussing several projects that are within the range of between US$50 million and US$300 million, and hopefully we would make material advances by the end of this year," CEO Pan Guocheng said in an interview with S&P Global Market Intelligence.
Precious metals will be a main focus during the company's search for new projects, but China Hanking is also considering projects in new energy metals such as lithium and uranium, as well as copper and nickel, according to Pan.
The company currently only operates two producing projects, the Maogong and Aoniu iron ore mines in China, which posted a combined output of less than 1.0 million tonnes for the first half, according to its latest earnings result.
In an earlier interview, Pan said the company budgeted US$300 million for future acquisitions, but so far the company has only announced a A$1.7 million acquisition of an 11% stake in Australian nickel and copper producer Corazon Mining Ltd.
Pan admitted that the rebound in mineral prices this year caused the company to slow down its M&A activities, as the bargaining power of potential vendors of assets has strengthened in the bull market.
"It has become harder to close a deal as the price is picking up. But I believe that it is still a good time for M&A."
"This rise in the cycle is expected to last at least three to five years, so we still have time to buy low before the peak of the current growth cycle," Pan said.
He added that the current cycle has been supported by improved supply-demand dynamics, China's supply-side reform, a weak U.S. dollar, as well as continuing inflation resulting from central banks' quantitative easing policies in past years.
"I don't expect these bullish factors to change in the short term. But we will need to hurry up and the next 12 to 18 months will be a key period for China Hanking's long-term development," he said.
Even with the clock ticking, the company has stayed away from the open bidding market. "We prefer deals that are introduced or arranged through private connections," Pan said, noting that open bidding procedures usually represent higher costs and more competition.
"Our relatively high standards for projects also limited the search scope and sometimes other investors would act before us," Pan said, noting that the Chinese miner is looking for producing or near-production projects with low geopolitical risk and high quality.
"Funding is not a problem for us. We have found partners who agreed to join us in future acquisitions," Pan said, noting that bank loans, as well as equity and debt issuances, are also possible options.
As of Aug. 31, US$1 was equivalent to 6.60 Chinese yuan.