MLR Encourages Private Enterprises to Invest in Overseas Mineral Resources

On March 28, MLR and All-China Federation of Industry & Commerce jointly held a forum concerning encouraging private enterprises to take strategic action for prospecting breakthrough and invited 26 private entrepreneurs in the area of mineral resources in China, including Liu Canglong, Chairman of Sichuan Hongda Group; Wang Yusuo, Chairman of ENN Group; Zhang Hongwei, Chairman of Orient Group and Zheng Yuewen, Chairman of Kerui Group, etc.

Peng Qiming, Director of MLR Geological Survey Department, introduced “Implementation Plan on Prospecting Breakthrough Strategic Action” at the meeting, and expounded on the issues such as policies related to private enterprises’ investment in mineral resources,simplifying procedure for examination and approval and exploiting overseas mineral resources, etc.

Xu Shaoshi, the minister of MLR, indicated clearly at the meeting that: “MLR will focus on encouraging and guiding private capital to invest in mineral survey and exploitation in the future.” The private entrepreneurs suggested that China should learn from Japan and USA to prioritize exploitation of overseas resources.

Quan Zhezhu, Party Secretary and First Vice Chairman of All-China Federation of Industry& Commerce and Xu Shaoshi proposed that, in the future, All-China Federation of Industry &Commerce and MLR should strengthen ties with each other and set up a mechanism of cooperation and coordination, so as to convey reform measures and project information in the prospecting breakthrough action to private enterprises in a timely manner and feed back the problems of private enterprises encountered in the process of prospecting, make necessary communications and assist enterprises in solving troubles in the process of prospecting.

The private entrepreneurs put forward many comments and suggestions, covering sorting out normative files, reforming support mode,introducing overseas mineral exploration and exploitation technologies, strictly implementing exit mechanism of prospecting right and mining right, public vs. private capital in mineral exploration and exploitation and solving financing difficulties of enterprises, etc.

According to Liu Canglong, Hongda Group has started to make inroads in mineral areas since 1995. At that time, the group always played second fiddle to SOEs. He proposed to reform the support mode, that is, change the past mode in which only SOEs are supported, and allocate resources to the strongest contender through open and reasonable mechanism. “We must properly deal with management and allocation of mining rights and appropriately allocate the interests of prospecting achievements, so as to ensure a standardized and orderly competition.”He said.

What Liu Canglong talked about revealed the heartfelt wishes of all private enterprises involved in mineral resources.

According to a survey conducted by All-China Federation of Industry & Commerce, now,some of the top 500 private enterprises have become involved in prospecting and mining at home and abroad. Some large private manufacturing enterprises closely related to resources energy also started to extend to upstream mineral areas of the industrial chain, and quite some have capabilities and aspirations to make inroads into the field of mineral resources. “In the next 3 years, nearly half of the top 500 enterprises plan to make investment in infrastructure of resources and energy, etc.” he said.

As one of monopoly industries, mineral resources are very limited to private enterprises.China has unveiled a series of policies in order to facilitate private enterprises to make investment in mineral resources, such as “Non-public Economy Article 36” released in 2005 and“Private Investment Article 36” released in 2010. These policies clearly proposed to “encourage private capital to participate in land management and mineral exploration and exploitation, adhere to fully open the mining rights market to private capital”. However, now only a few of Chinese private enterprises are engaging in mineral resources, which is caused by, apart from high investment risk, high capital threshold, long ROI period and strict technical requirement, problems of institutional mechanism, for example, the phenomena of“glass door” and “swing door” that prevent private enterprises entering into monopoly industries.

“Prospecting breakthrough strategic action is a major move to implement “Several Opinions of the State Council on Encouraging and Guiding the Healthy Development of Private Investment”, providing private enterprises with a rare opportunity to make investment in mineral resources.” Quan Zhezhu pointed out that, as the reform deepens and the system construction continuously improves, private capital will play a greater role in the areas of mineral exploration and exploitation, and will make further breakthroughs in the way to monopoly industries.

“We prospect not only for making money, but shall integrate the prospecting with the national resources strategy.” Zhang Hongwei suggested that MLR should work out a proportional allocation in the aspect of prospecting. “Domestically, what is the reasonable proportion between SOEs and private enterprises? I think that it is reasonable for capital from SOEs to account for 40% and private capital to account for 60%.”

As for foreign market, Zhang Hongwei indicated that it is not necessary to exploit domestic mines immediately, but a great deal of manpower, material resources and financial resources should be put into overseas prospecting.

“MLR may screen out top 100 private enterprises in the field of mineral resources in China, and encourage them to exploit overseas resources, so as to realize reasonable allocation and ensure sufficient supply.” Zhang Hongwei is of the opinion that we should foster a new model of China enterprises to “go out” which is spearheaded by private enterprises and backed by state-owned enterprises.

Xu Shaoshi points out, in order to actively guide private enterprises to devote to the prospecting breakthrough strategic action, land and resources authorities will concentrate on the following aspects: reinforce non-profit geological operation, offer more information on prospecting; provide enterprises with financial supports via geological fund and mining bank; improve mining right market and prospecting service market; coordinate stakeholders, effectively protect legitimate rights and interests of sources of investment; provide private enterprises with equal principal status in mining activities.

At the end of the meeting, both Quan Zhezhu and Xu Shaoshi proposed that All-China Federation of Industry & Commerce and MLR should strengthen ties with each other and set up a mechanism of cooperation and coordination, so as to convey reform measures and project information in the prospecting break-through action to private enterprises in a timely manner and feed back the problems of private enterprises encountered in the process of prospecting, make necessary communications and assist enterprises in solving troubles in the process of prospecting.