Infrastructure Funding An Edge For China In Metal Buys -Ernst and Young

Jun 06, BEIJING (Dow Jones)--Chinese metal and mining deals have risen 247% in the first quarter, with volume up 225% in the same period compared with 2009, but China's share of global deals has fallen to 5.6% by volume in the quarter from 7.5% a year earlier, underscoring the rising competition for such deals and China's need to enhance its deal making, Ernst and Young said at a press briefing Monday.

"China is finding it harder to retain...(its) proportion of successful deal making," said Mike Elliott, global sector leader for Ernst and Young.

Outbound investment reached $451 million in the quarter, with 13 deals done and 82 pending.

The pending deals are worth $9.3 billion, with Canada, Australia, Guinea, Brazil and Chile as destinations, among others, said Adrian Macartney, the company's Africa Mining and Metals Leader.

Chinese companies' willingness to fund infrastructure alongside their foreign mining and metal investments will be a competitive factor, especially in Latin America and Africa, Elliott said.

"China has capital and desire" to help fund infrastructure, he said, adding investors need to be flexible in being willing to take minority stakes if there are concerns with foreign ownership concerns and contracting for offtake, among other steps.

Mining and metal deals are rising this year, with a 300% increase in global deal volume and a 25% on-year rise in deal values in the first quarter, Ernst and Young said.

China has concluded 370 metals and mining deals worth $50 billion in the last 10 years, four-fifths of which were done since 2008, Elliott said.