CHINA | AFRICA Sparklers for Beijing 16th Oct 2013 CHINA | AFRICA Sparklers for Beijing Chinese companies are seeking new joint venture partners and buying stakes in established companies to increase the supply of rough diamonds to Chinese markets While China is getting ready to take its turn at the presidency of the Kimberley Process Certification Scheme, Chinese companies have launched a new drive in the African diamond sector. The Kimberley Process was created in 2003 to group together consumers, producers, non-governmental organisations and industry actors to check the flow of diamonds from zones of conflict. Chinas Anhui Foreign Economic Construction Group has led the charge, first signing a joint venture with Zimbabwe in 2009 (AAC Vol 3 No 12, Blood diamonds and old soldiers) and then with Congo-Kinshasa in the first trimester of this year (AAC Vol 6 No 7, Kasai mines go to Anhui The strategy also involves the acquisition of stakes in established companies, through either the purchase of shares of companies that already possess licences or by signing strategic partnerships. In early October, several Chinese investors were lining up to buy shares in the Russian state-backed diamond miner Alrosa as it prepared to list a 16% stake worth an estimated US$1.5 billion on the Moscow stock exchange. Alrosa is the worlds second-largest diamond producer, behind South Africas De Beers, and holds a 32.8% of the Catoca mine in Angola. In April 2012, Alrosas management said that it was considering establishing joint ventures with companies in Angola, Botswana and Zimbabwe. In June 2013, Alrosa announced that it had signed a deal with state-owned diamond company Empresa Nacional de Diamantes de Angola and projected that it would spend up to $20 million per year on new exploration projects there. The Russian and Angolan companies could take over the Sociedade Mineira do Luminas, a company majority owned by Israeli diamond magnate Lev Leviev and which has had problems with artisanal miners on its licence area. An Angolan-Chinese company already has a strong position in the countrys diamond-producing areas. In 2011, China Sonangol purchased an 18% share in Angolas Sociedade Mineira de Catoca from Leviev for US$400 million (AAC Vol 4 No 7, Shine on you crazy diamond). The potential involvement of Chinese investors in the sector in Africa is not surprising due to the demand for diamonds at the Shanghai Diamond Exchange. Deputy Mayor of Antwerp Ludo van Campenhout says that China is now the largest destination of cut diamonds from Antwerp, receiving 31.2% of the cut diamond exports from the city, one of the worlds principal diamond hubs. Lin Qiang, the president of the Shanghai diamond bourse, does not want to miss an occasion to get new sources of supplies, especially with the help of Alrosa, which is set to become the exchanges strategic partner. In April 2013, Lin signed a deal with Alrosas President Fyodor Andreyev to allow the Russian company to sell cut and uncut diamonds in Shanghai. The move should create a triangular relationship between China, a powerful consumer and transformer of diamonds, Alrosa, which is an important producer and trader, and Angola, which is another producer with great potential. Over the years, Indias Gem and Jewellery Export Promotion Council has complained that Chinese companies are locking up supplies of rough diamonds in Africa and that Indian traders cannot compete with the direct government-to-government deals that Chinese state-owned companies often develop. India is still the top importer of rough diamonds, of which an estimated 60% come from African countries. In 2012, India imported $15 bn. of rough diamonds, followed by Belgium, with $12 bn. The Shanghai Diamond Exchange traded just $4.7 bn. in diamonds in 2011. Chinese companies have also recently strengthened their hands in Congo-Kinshasa. A Hong Kong-based company swooped in to improve Congo-Kinshasas Mwana Africa mining company in September, when the firms stock price dropped 25% in one day on news that the company would soon run out of cash. The Hong Kong-based and Cayman Island-registered China International Mining Group Company increased its stake in Mwana Africa, which holds a 20% stake in state-controlled Société Minière de Bakwanga through its Sibeka subsidiary. MIBA holds diamond concessions that cover tens of thousands of square kilometres. When Mwana Africa started a new capital raising exercise on 17 September, CIMG and its President Ning Yat Hoi increased their stakes in the company from 23% to 29.8%. This gives CIMG, the largest single shareholder, preferential access to resources with 100 mn. carats. In July 2012, Mwana Africa welcomed Taiwanese businessman Hu Yuan Ching, the founder of Taiyou Investment in Hong Kong and a specialist in brokerage, insurance and financial products, to its board of directors. Ning also joined the board in June 2012 and has set up a series of mining companies including African PGM Processing, Congo International Mining Corporation and Fareast Nickel Mining Corporation. The Chinese diamond drive in Africa could continue in Namibia, where Malaysian businessman Subramaniam Ragubathi, the owner of Nambib Resources, who holds several leases on the Skeleton Coast. The Toscanini permit there contains an estimated 57 mn. carats. Ragubathi has approached several state-owned Chinese companies in order to get them to take a stake and finance the exploration costs. Copyright © Africa-Asia Confidential 2013 africa-asia-confidential
Posted on: Thu, 17 Oct 2013 15:57:04 +0000
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