China Beats Foreign Investment Curbs with Prospecting

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"What we don't have any idea of is how much they (China) are spending"

CHINA Inc is poised to be the biggest foreign investor in Australia's $2.4 billion/year minerals prospecting sector.

It switched its strategy over the past year from attempting landmark company investments to smaller stakes, debt funding and now investment in grassroots exploration, enabling many groups to slip past the Foreign Investment Review Board.

Australia's biggest trading partner now has up to 100 companies involved in searching for new deposits of the minerals that it desperately wants for its remarkable and continuing industrialization and urbanization.

A stream of new companies is fronting up to state governments for licenses each month.

Currently, Canada is the largest foreign investor in pure exploration activities, having spent about $160 million last year. But experts from the state governments responsible for handing out exploration licenses told The Australian at the China Mining conference that China was fast catching up and would outstrip the North American nations in coming years.

"Grassroots exploration is all about long-term security, whereas, up until now, the shorter-term investments have all been about production and mines about to be in production," Geoscience Australia mineral exploration manager Mike Huleatt said.

Last year $2.4bn was spent on minerals exploration—not including fuels such as oil and gas—in Australia. Between $900m and $1bn was spent on the big export items of iron ore and coal.

But little is known about how much different countries collectively spend on prospecting beyond a figure of $160m by Canada, released by the country's Metals Economics Group.

"What we don't have any idea of is how much they (China) are spending," Huleatt said. This is because exploration investment can take many forms—an equity or debt investment into an existing Australian company, a simple payment, joint venture or buying an unlisted Australian shelf company and using it for prospecting operations.

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