China business strategy, sourcing and investment company The Beijing Axis group MD Kobus van der Wath tells Mining Weekly that he will participate in the Mining Indaba 2009 commodities review and output forum and panel discussion, discussing China in the world of resources and, specifically, China's outward investment potential in the sector.

Van der Wath says that he will attempt to forecast the role China is playing as a consumer of resources, but also highlight trends in China's domestic mining industry. He says that he would like to find out how global mining companies view China as a market, partner and competitor for resources.

He says China is making its corporate balance sheet more global and is investing in South America, Africa, Australia and Asia. He comments that the connection between Africa and China is important.

"Africa is clearly playing a key role in China and there are some interesting trends emerging. Africa is becoming a key supplier of energy for China, as well as a key market for Chinese products and services," he adds.

He explains that Africa is a key area for sourcing raw materials, such as timber and fish, as well as metals, minerals and other nonenergy resources.

Van der Wath will accompany a leading delegation of Chinese mining business people to three African countries, including South Africa, after the Indaba.

He says the trip is important for local industry to increase its understanding and partnerships with China. Such a delegation has never participated at the Indaba before. Van der Wath adds that a China networking session has been included in this year's Indaba, which is a new feature at the event.

Commodities Review and Output Forum
Van der Wath comments that the Mining Indaba commodities review and output forum will look at the bigger picture and make a broader assessment of the resources industry globally.

He says that all the speakers involved in the forum will review the outlook of the industry, given the current economic crisis. "In 2008, commodity prices started high, but the year ended with prices significantly lower," he says.

"The global economy context looks very different as well. The picture has become far bleaker and large players have become more conservative in their outlook of the industry. The outlook for commodity demand and consumption has been toned down, which is reflected in the price adjustments that have been made," says Van der Wath.

He adds that the first day of the Indaba will review where the global mining industry stands and what the implications are for regional and sector growth in the global context, as well as the implications for commodity demand and prices.

"The environment could not look more different when compared with the 2007 and 2008 events," says Van der Wath.

He believes that the speakers specifically may discuss the outlook for commodity demand in certain industries and regions, and how this will translate into investment and capacity decisions by the senior players. They also may discuss how this will affect exploration, expenditure and consolidation, which are undercurrents for merger and acquisition activity.

The accessibility of liquidity for companies to borrow or carry out placements for listed companies, or to raise funds in other ways, will also be discussed.

He explains that his presentation specifically will focus on the sustainability of China's growth, its demand for resources and what the implications are for the industry at large, but also the implications of the economic crisis for Chinese companies. He says that he will discuss how active and aggressive these companies need to be to enable them to play the game globally and use the current economic climate as an opportunity to make international acquisitions.

Financial Crisis in China
The financial crisis has begun to have an effect in China, but the extent of the effect is still being analysed. Van der Wath says the direct financial effect has not been as severe in China as in the US, Western Europe or Australia, but the effects concerning the real economy are emerging. These include the reduction of exports, companies finding it difficult to fulfil initial public offerings and raising capital.

Van der Wath comments that the gross domestic product (GDP) of China was growing at 11,9% in 2007 and decreased to 9% in the third quarter of 2008. "The question is, will China fall back to a GDP growth of below 6% to 8%, or will it maintain a level over 8%?" he says.

Van der Wath says China's GDP will grow at a slower rate in the first and second quarter of 2009, but he expects it will stabilise in the second half of 2009.

Mining in China
Mining is not a large contributor to China's overall GDP, but it is a large employer and does have an effect on the safety, social and environmental aspects of the country, says Van der Wath.

He adds that minerals such as gold and copper have been newcomers to the global economy over the past five years.

"I think in certain commodities, China will continue to lead. Clearly, with almost three-billion tons a year of coal produced, coal is a key market and commodity, but if one looks at platinum, diamonds and other rare earth minerals, the amount produced is negligible and China is not significant in these markets," says Van der Wath.

He comments that China is becoming a more mature mining market with increased exploration being carried out and certain production statistics reaching international levels. He adds, though, that in some respects, China is still behind in terms of mining, but it is an emerging mining and commodities player.

The Effect of the Crisis on Commodities
Van der Wath says that significant reductions in the demand for steel in the automotive industry have been seen. Building construction is using less copper and there has been a reduction in the demand for special earth metals.

He comments that, to a certain extent, there is some misalignment between the short-, medium- and long-term outlooks of the economy. In the short-term, production is cut back, but in the medium term, demand will continue and production will need to be increased again. He explains that sometimes production and demand become unbalanced, owing to uncertainty.

"In the emotionally and psychologically challenging environment of the economic crisis, many companies have not survived and many do not know if they will be next, as fund raising is difficult." says Van der Wath.

He says it is difficult to forecast the effects, with the result that it is difficult to budget, secure capital, plan expansions and secure long-term agreements.

The Mining Indaba
"The Mining Indaba has established itself as a key event on the yearly calendar. It is important in terms of who attends and has a very significant senior contingent, which is always important," says Van der Wath.

He adds that the Mining Indaba is well planned, well organised and value adding, which makes it a key event in South Africa. He comments that it could include more African and globally orientated representatives, such as Indian, Russian, Chinese, Canadian, South American and Australian representatives, as it tends to focus mainly on South African mining.

However, international attendance has increased significantly over the years, creating a global networking opportunity.

Van der Wath says the event draws together all the largest mines from around the world. Every mine discusses its businesses, risks, issues and opportunities.

He says that participants in the Indaba wish to meet with the decision makers, and that is exactly the profile of many delegates. The event is large and well presented. He concludes that he hopes that global crisis will not slow down participation, but says he is optimistic and is looking forward to it.

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