Four out of a total 23 Chinese outbound mining investment deals have been terminated since December 2016 when Beijing increased scrutiny on overseas megadeals, according to an analysis by S&P Global Market Intelligence.
Among the four failed deals, only Shanghai-listed real estate developer Shandong Tyan Home Co. Ltd.'s unsuccessful bid for a 50% stake in Barrick Gold Corp.'s Kalgoorlie gold project super pit in Western Australia specifically cited heightened regulations from Chinese authorities as a reason, with the company saying it was due to "China's regulatory bodies strengthening controls over approval for outbound investments."
In addition, Chinese oil and gas giant Sinochem Group's withdrawal of interest in investing in Noble Group Ltd. in May was also reportedly linked to tightened regulations in China.
The other two terminated deals were Shandong Mingrui Group's acquisition of the Bougouni lithium project in Mali for 48.13 billion BCEAO CFA Franc and Zhongrong Xinda Group Co. Ltd.'s plan to acquire Strike Resources Ltd.'s Apurimac and Cusco iron ore projects in Peru for US$10 million.
Only two deals were completed in the past six months, consisting of Guangdong Rising Assets Management Co. Ltd.'s A$10 million acquisition of Northern Minerals Ltd.'s rare earth assets in Australia and China Baowu Steel Group Corp. Ltd.'s takeoverr of Moscow-based Mechel PAO's coking coal assets in Russia. Both deals involved large state-owned groups pursuing assets that are relatively low-profile.
Deals pending completion included Yanzhou Coal Mining Co. Ltd.'s US$2.45 billion acquisition of Rio Tinto's coal assets in Australia, Shandong Gold Mining Co. Ltd.'s US$960 million acquisition of a 50% stake in the Veladero gold mine in Argentina from Barrick Gold, as well as Zhaojin Mining Industry Co. Ltd. and Hainan Mining Co. Ltd.'s recent move to join a consortium of investors to purchasing a 10% stake in PJSC Polyus.
Tim Sun, chairman of the Hong Kong International Mining Association, said in an interview with S&P that deals stand a better chance of being approved if they are within the buyers' core business scope.
The country's nonfinancial outbound direct investment, or ODI, slowed further in April, declining 70.8% year over year to US$5.83 billion. Combined outbound investments in the first four months dropped 56.1% to US$26.37 billion, according to data released by Ministry of Commerce in May.
This follows a record 2016 with China's ODI surging 44.1% to US$170.11 billion for the year.
In mid-January, Beijing announced new outbound investment guidelines for enterprises owned by the government, with officials being cited as saying that the state-owned Assets Supervision and Administration Commission was strengthening regulation over overseas investments and state-owned enterprises generally would not be allowed to make investments in noncore businesses.
The new guidelines introduced stricter risk control standards for investments in overseas markets to reduce potential losses. There has been media speculation that they were linked to efforts to defend the country's currency and curb capital outflow.
"While Chinese miners remained interested in overseas assets, it is taking longer for them to complete a deal due to tightened regulations," Sun said.
As of June 1, US$1 was equivalent to 6.80 Chinese yuan.