BEIJING, Mar. 3 -- The nation's largest metals trader, China Minmetals Corp, will set up a joint venture with its controlled company Hunan Nonferrous Metals Holding Group (HNG) to further consolidate its domestic nonferrous metals business.
Minmetals will inject most of its nonferrous mining assets into the new joint venture and use it as a platform to acquire more mining assets domestic, said sources familiar with the matter. "The new joint venture will be based in Central China's Hunan province," the sources said.
Details such as shareholding percentages and candidate executives of the joint venture were not disclosed.
Zhou Zhongshu, president of Minmetals, said in February that the company was seeking to acquire more mining assets both at home and abroad this year and aims to become one of the world's leading miners.
Zhou said Minmetals would focus on State-owned mines because the government is encouraging mergers and acquisitions in the mining sector to build up scale and competitiveness.
"We aim to be the world's largest rare earth supplier and the leading producer of tungsten, antimony, lead and zinc," he said.
Minmetals' business is wide-ranging and includes the mining and trading of iron ore and nonferrous metals, financial services, real estate development and logistics. Mining and metals trading account for half of its profits.
Minmetals' revenue dropped 4.37 percent to 173 billion yuan ($25.34 billion) in 2009 from 180.9 billion yuan in 2008 because of the global financial crisis. Its profits shrank by more than half to 3.15 billion yuan in 2009 from 7.1 billion yuan in 2008.
In spite of the revenue decline on falling commodity prices, Minmetals' portfolio expanded after it successfully acquired several mining assets in 2009.
Minmetals gained control of HNG after hiking its stake to 51 percent in the Hong Kong-listed State-run miner in December. In October, it acquired another two State-owned enterprises, Changsha Research Institute of Mining & Metallurgy (CRIMM) and Luzhong Metallurgy & Mining Group, which are now fully owned subsidiaries of Minmetals.
In June 2009, Minmetals bought Australian zinc and mining company Oz Minerals for $1.4 billion to shore up its overseas presence.
Analysts said this year would see more mergers and acquisitions among miners as the government strives to streamline the fragmented sector.
Peng Bo, an analyst at Guosen Securities, said a few central State-owned enterprises would grow bigger and stronger. "They will become more competitive and active globally, boosted by China's demand for resources," he said.
In December, the Ministry of Industry and Information Technology drafted a plan to upgrade the raw materials sector in Central China and called for provincial governments, who are also shareholders in local State-owned enterprises, to support large central State-owned businesses including Minmetals in their merger and acquisition efforts.
To facilitate such mergers and acquisitions, the State-owned assets regulator simplified the transfer procedure of State-owned assets in February.
Central State-owned enterprises are no longer required to get permission from local governments to acquire local State-owned enterprises.