Metals News
Japan Plans Law to Boost Mine Investment to Compete With China
industry news
Jan 28,2010

Jan. 28 (Bloomberg) -- Japan plans to revise legislation in order to help domestic companies acquire mining rights overseas and secure raw materials amid competition from neighboring China and South Korea.

The Ministry of Economy, Trade and Industry has prepared a bill that will allow state-owned Japan Oil, Gas and Metals National Corp. to invest in foreign mines in collaboration with private companies and to provide government guarantees to fund projects, according to Yohei Matsuda, deputy director at the ministry's natural resources and energy agency.

"Compared with China's recent investment growth, Japan is well behind,"said Takashi Murata, an analyst at Daiwa Securities Capital Markets Co. in Tokyo. "This will help boost domestic companies' investment in mines abroad."

China is purchasing overseas mines to feed growth that accelerated at the fastest pace since 2007 in the fourth quarter, moving it closer to overtaking Japan as the world's second- largest economy. China's central government plans to boost investment in overseas mineral exploration, the China Securities Journal reported in December.

Under the proposed bill, JOGMEC, as the agency is known, can invest as much as 27.5 billion yen ($308 million) in overseas mines, Masanori Okada, chairman of the Japan Mining Industry Association, said Jan. 21. Under the current law, it can invest only in overseas projects for oil and natural gas.

State Guarantees

The bill, which will be submitted to the cabinet early next month, will allow JOGMEC to provide government guarantees to help private companies get financing for mineral resources projects such as rare metals, base metals and iron ore, Matsuda said in an interview today.

"If everything goes well, the revised law will be effective from July,"he said.

Japan's auto and electronics sectors are among the world's major consumers of metals such as platinum, indium, lithium and chrome that are used in mobile phones, computers, catalytic converters, liquid-crystal displays and so-called green technologies, including low-energy light bulbs.

"With JOGMEC's participation, private companies can hedge political risk in overseas mine investment,"said Yasuhiro Narita, an analyst specializing in trading companies at Nomura Securities Co. in Tokyo.

On Jan. 20, Orocobre Ltd., an Australian mineral exploration company, said it will set up a joint venture with Toyota Tsusho Corp., which is 22 percent owned by Toyota Motor Corp., to develop a mine in Argentina that will provide raw materials for vehicles powered by lithium-ion batteries.

Foreign Mines

If the proposed bill is passed by parliament, "companies can invest in overseas mines promptly if prices of mineral resources decline amid the yen's rally,"Murata said.

In addition to JOGMEC, the Japan Bank for International Cooperation, a unit of government-owned Japan Finance Corp., provides support for overseas mining projects.

The bank signed a contract to provide a $245 million loan for a copper mine expansion project in Chile, it said on Jan. 26. Japan is the biggest importer of copper concentrate after China.

China's foreign currency reserves, the world's largest, rose to a record $2.4 trillion at the end of December. The central government has spent 735 million yuan ($108 million) supporting efforts by Chinese companies to explore and develop mines overseas, the China Securities Journal said last month.

Chinese companies had spent $47.3 billion on overseas projects, excluding oil and gas developments, up to the end of 2008, the report said.

China Investment

China Investment Corp., the nation's sovereign wealth fund, has had "early"talks for direct investments in Brazil and Mexico, Chairman Lou Jiwei said Jan. 20. CIC, which held almost $300 billion in assets at the end of 2008, last year accelerated investments in resource-related companies, including Teck Resources Ltd., Canada's largest base-metals producer.

Teck Resources sold a 17 percent stake to CIC in July for C$1.74 billion ($1.5 billion) to reduce debt. China Minmetals Corp., the nation's largest metals trader, bought $1.4 billion of mines, including the Century mine, from Australia's OZ Minerals Ltd. in June.

South Korea expects domestic companies to make record investments of more than $12 billion on overseas energy and mineral resource projects this year to boost supplies. That's an increase of about 80 percent from $6.7 billion last year, the Ministry of Knowledge Economy said Jan. 19.

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