CEO Michelmore on dancing with the Dragon

Andrew Michelmore, CEO of Minmetals Resources Limited (MMR), treated those who attended Tuesday night’s AMPLA Twilight Seminar at Freehills to a thought-provoking presentation.

MMR is not your everyday company. Its management team is based in Melbourne, it is listed on the Hong Kong Stock Exchange and its major shareholder is the state-owned China Minmetals Corporation. MMR is a rare example of China investing in Australia’s human capital and it has strived to achieve a strong ‘east-west’ partnership that can stand the test of time.

Throughout his presentation, Michelmore spoke in detail about MMR’s explorations and operations, its journey since acquiring Minerals and Metals Group (MMG) at the end of 2010 and its ambitious strategies moving forward into 2012. However, it was Michelmore’s thoughts about Australia’s future relationship with China that really captivated his audience.

According to Michelmore, the centre of economic gravity is shifting from the West back to the East. Interestingly, he noted that apart from the 19th and 20th centuries, the Asian region has led the global economy since the beginning of the Common Era. Michelmore stated that he believes China is going to achieve huge economic growth in the coming years, but went on to emphasise that Australia has what China needs to help them grow. For that reason, a strong partnership with China is mutually beneficial and could be lucrative for Australia.

Michelmore’s message is simple. We can’t fight China. We need to work with Chinese companies, on equal terms, in what must be a win-win scenario for both parties. This is what MMR has tried to achieve and it appears to have reaped the benefits.

Significantly, Michelmore believes that it is important to fight the incorrect perception that Chinese companies collude with each other. He affirmed that, in reality, the exact opposite is true. Chinese companies fiercely compete with each other, in contrast to the collusion believed to be characteristic of Japanese companies back in the 1960s and 1970s.

Ultimately, Australia needs foreign investment and China is a crucial strategic partner moving forward. MMR is one of the leaders in fostering this relationship and tries to use it to create a competitive advantage over its competitors.

Michelmore’s presentation was not limited to China. He explained some of the obstacles that confront his company in Laos, where unexploded bombs from the Vietnam War need to be cleared. He also stressed the importance of building trust and keeping one’s promises in Africa, a region where many companies fall into the trap of painting all countries with the same brush.

Michelmore is an industry leader. His insights on how to avoid cultural clashes are alarmingly simple. All that is required, he suggests, is the ability to “step into the other person’s shoes,” to understand that others see the world through different eyes and to embrace diversity genuinely and wholeheartedly. One couldn’t help but leave Michelmore’s presentation feeling that this mantra could equally apply to many other areas of life outside the corporate world.

Freehills would like to thank Andrew Michelmore for his insightful presentation.

How important is Africa to Australian mining?

Australian mining companies now have more projects in Africa than in any other region outside of Australia. While our mining companies have been part of Africa’s mining industry for years, the last several years have seen a dramatic increase in the level of direct investment into the broader African resources sector.

The Chinese are no less ambitious in their interest in African projects, being engaged in almost all of Africa’s 54 countries – either as miner, trader, offtaker, engineer or lender. More recently, a trend has emerged of Chinese entities seeking control of ASX listed vehicles with African assets.

At this time of increased focus on mining investment into Africa, highlighted at the recent Commonwealth Business Leaders Forum held in Perth as part of the build-up to CHOGM – Freehills’ partners Justin Little, John Tivey and Gemey Visscher, as well as representatives from our alliance firm in Beijing (TransAsia), are gearing up to speak on the importance of fostering greater ties between Chinese and Australian companies looking at investments in African mining projects at the 3rd annual China Overseas Investment Fair in Beijing next month.  The Investment Fair will be attended by all of the major Chinese SOEs and government agencies, including those such as the China-Africa Development Fund, which have a mandate to support investments into Africa.

Australia’s bullish approach to investing in regions once considered to be on the wrong end of the sovereign risk spectrum is certainly supported by recent statistics, comments recently made by the Foreign Minister, Kevin Rudd, and by a recent Australian Trade Commission Survey:

• there are now approximately 230 Australian mining and oil & gas companies operating about 650 projects in approximately 43 countries within Africa.  In total, these projects account for around $24 billion worth of investment 
• 143 new projects were added in 2010 alone and approximately 100 new projects (sponsored by roughly 20 companies) have been added since the beginning of 2011
• of the 700 or so mining companies listed on the ASX, 127 (or 18%) have their primary asset in Africa, spread across 400 projects
• Recent examples of Chinese entities bidding for companies with African-focussed mining projects include:
• Minmetals $6 billion bid for dual Australian and Canadian listed copper miner Equinox
• Minmetals friendly $A1.3 billion takeover of Congo-focused copper miner Anvil Mining; and
• Hanlong Mining’s recent takeover bid for Sundance Resources which has an iron ore project in Africa

Freehills’ has acted in both of the recent Minmetals’ transactions referred to above and for other Chinese entities seeking cornerstone or strategic investments in ASX-listed mining companies with exposure to African projects.

The China Overseas Investment Fair is scheduled to run for two days from 8 – 9 November 2011.