Resource World Magazine

j u n e / j u l y 2 0 1 4 www.resourceworld.com 13 Hong Kong On the way to becoming an international mining investment centre by John Murray, P Geo, FGC Held in late March each year and billed as "Asia's leading mining investment event," Mines and Money Hong Kong is fast devel- oping into a must attend convention. This year's conference at the impressive Convention Centre drew over 2,500 participants from around the world. A broad spectrum of valuable informa- tion from a global perspective relevant to both investors and mineral explorationists and mine developers was offered. While there were high quality speakers and presentations, perhaps most important was the opportunity to meet and network with poten- tial investors from around the world. The event also attracted representatives of banks, institutional and private equity inves- tors from Asia, Australia, Europe, the Middle East, Africa and the Americas, as well as Chinese State Owned Enterprises (SOEs). Over 30 investor-hosted, lunchtime, Round Tables were avail- able as well as areas for more private discussions, and networking opportunities each day. Concurrently the Canadian Chamber of Commerce in Hong Kong hosted a one-day Natural Resources Investment Forum sponsored by Blakes Canadian Lawyers, British Columbia and the BC Jobs Plan, McMillan Canadian Lawyers, Asia Mining Club (HK), Canadian Institute of Mining, Metallurgy and Petroleum Resources – Mining and Economics Society (Hong Kong chapter) and Hong Kong International Mining Association. Presentations were made by a number of Canadian mining companies including Zimtu Capital, Panoro Minerals, Daycon Minerals, Hunter Dickinson, TomaGold and Gold Standard Ventures. Kendal Hembroff, Consul and Senior Trade Commissioner with the Consulate General of Canada, pointed out that Canada is not just a raw material supplier. Canada is also at the leading edge of mine design, CSR, human capital and finan- cial institutions (with the world's soundest banking system) as well as legal and educational institutes. According to the World Bank, Canada is the easiest place in the G7 to start a business and Hong Kong is already a big trading partner, bigger than Germany. In 2013, mining and energy deals constituted over 70% of total outbound Chinese investment with many multibillion dollar deals, according to Carrie Chen, Senior VP M&A of CITIC Securities. However, going forward, a shift from SOEs to private investment is expected. And while acquir- ing resources is still key for SOEs, Chen now expects to see Chinese construction companies going after international mining and labour oppor- tunities. A clear message for our industry is that much depends on China and how it services its SOE debt. During a Round Table discussion, Alistair McIntyre, (Behre Dolbear), noted that although metal prices are cyclic they haven't fallen that much and there is good growth potential. With urbanization and industrialization in China still progressing, the demand side is good – the issue is supply. The focus in 2014 is on miners' abilities to cut costs and find operational efficiencies. There is a big gap in expectations between buyers and sellers. For now, majors are still too balance sheet focused and shedding assets to consider new acquisitions. As for project financing, the story is streaming and off-take agreements with off-takes in the driver's seat. In the past projects were driven by SOEs wanting 100% off-takes and 100% manage- ment but that hasn't worked well for them. They are now moving away from an "I need control" attitude. Mark O'Kane, (Azarga Resources), maintains that markets are now fundamentals-driven with a focus on companies with good business cases. While evaluations are low, investors need to see a clear path to the next stages, that is, production. O'Kane is seeing more relationship based private equity deals. Darren Benson (Bank of Nova Scotia) agrees investors need to see a direct path to financing and construction but is seeing more investor interest in IPOs, though very selective. In his view, peo- ple are becoming less aggressive about financing. Where in the past they may have wanted all of the production, now they may settle for just a portion. Benson is seeing a more sober approach, more due diligence and more social management interaction. Social License was a particular topic – local people must be on board with projects. O'Kane noted that experience in places like Mongolia has shown that educating locals about the benefits of projects is difficult. Trust must first be established before they can be convinced of the benefits. They may have goals other than eco- nomic and this is just as important in developed economies. He gave the pipeline debates in Canada as an example. It was clear that Mines and Money Hong Kong will play an important role in the future for miners, financiers and investors. n The Hong Kong Convention Centre. Photo by John Murray.

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