Brazil Set to Battle China over African Copper


"The nations view themselves in 'direct competition' for strategic resources."

Bloomberg, Tara Lachapelle and Rita Nazareth

Brazil and China are heading for a battle of strategic necessity over copper in Africa that will leave the winner walking away with the most expensive acquisition of a diversified minerals company.

Jinchuan Group, the biggest Chinese nickel producer, is considering a bid for Johannesburg-based Metorex to rival Vale's offer. Vale, the world's largest iron-ore producer, and Jinchuan are seeking Metorex's copper and cobalt mines in the Democratic Republic of Congo and Zambia after demand in China for copper used in construction and appliances pushed the metal to a record this year

"The Chinese and the Brazilians have voracious appetites" for mining, said Andrew Ross, partner and global equity trader at First New York Securities LLC, a New York-based proprietary trading firm. "They view themselves in direct competition for these strategic natural resource assets."

"Good copper assets are hard to find and Zambian copper assets are prized," said John Stephenson at First Asset Investment in Toronto.

Brazil's gross domestic product grew 7.5% in 2010, the fastest pace in over two decades, according to a central bank survey of economists. The country overtook Italy last year as the world's seventh-largest economy, according to the International Monetary Fund.

"Copper and cobalt are in strong demand in China," said Bernard Horn Jr., president of Boston-based Polaris Capital Management LLC. China agreed in January 2008 to help rebuild Congo in return for access to copper and cobalt. Congo has a third of the world's cobalt, which is used in medical implants and rechargeable batteries.

Premier Wen Jiabao said that China, the world's largest user of copper, plans to build 36 million affordable homes in the next five years.

"Copper demand will continue to expand," Dahlman Rose's Rizzuto said. "Copper is a basic building block of infrastructure development."

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