MAC: Mines and Communities

China update

Published by MAC on 2008-03-01

China update

1st March 2008

A crack down on illegal miners...two dozen workers killed at an illegal mine: the pattern in China hardly seems to change.

Meanwhile, the country's relatively weak environmental protection agency, SEPA, seeks to staunch the flow of 39 "highly polluting and environmentally dangerous" products (including metals) - even though investment in these products increased more than 17% last year.

In our roundup of new Chinese ventures overseas, it's notable that one major steel investment planned for India promises to assist the country's own "development", rather than export production back to China.

200 people arrested in Chinese illegal mining crackdown


1st March 2008

TAIYUAN -- More than 200 illegal miners have been arrested in a work safety campaign in Linfen, a coal-rich city in north China's Shanxi Province, after a deadly blast that killed 105 in December.

The city government started a thorough inspection at the end of last year of 5,400 illegal mining pits that had been closed but resumed production since 2006.

Authorities destroyed nearly 900 illegal mining sites in the operation.

Twenty-six mine administrators were reprimanded for failing to fulfil their duties.

The tightening of mine administration followed a coal mine explosion on Dec. 5 at Xinyao Coal Mine, Hongtong County. The tunnel where the gas blast occurred was operated illegally and hadno ventilation facilities.

The company's legal representative, Wang Hongliang, investor Wang Donghai and production manager Kong Huiping were sentenced to life in prison on Feb. 24 for their roles in the accident.

In January, a vice-mayor of Linfen who was in charge of coal development was sacked for taking bribes to seek benefits for others, many of whom were miners.

Shanxi produces about a quarter of the country's coal each year. The coal production of Linfen accounts for more than half of Shanxi's total.

Explosion at illegal iron ore mine kills 24 workers in Hebei

Interfax China Metals and Mining

22nd February 2008

An explosion at an illegal iron ore mine in Wu'an City in northern China's Hebei Province last Sunday has left 24 miners dead and five injured, state media reported Monday.

The accident took place during blasting work at the illegal iron ore mine, which was using a pig breeding farm as cover, state-run Xinhua news agency reported.

The owner of the farm, who did not hold mining rights to the iron ore resources and organized the mining activities without license, fled after the accident.

Local public security authorities are currently searching for the farm owner and carrying out an investigation into the cause of the accident.


China Eyes Heftier Fines For Water Polluters

PlanetArk CHINA

27th February 2008

BEIJING - China stepped up pressure on polluters on Tuesday as it debated a draft law that would allow for fines against the heads of companies that foul the water and floated the idea of an end to tax breaks for polluting exporters.

Lawmakers began to review the draft of an amended water pollution law ahead of a full session of the National People's Congress (NPC) next week, the official Xinhua news agency said.

Under the draft law, executives could be fined up to half their annual salary for water pollution incidents caused by their companies, Xinhua said. Currently, individuals can only be disciplined for such incidents.

The law would also ease the upper limits on penalties against companies responsible for water pollution, holding them responsible for 30 percent of direct losses from "serious" incidents and for 20 percent of the cost of incidents with "medium consequences", Xinhua said without elaborating.

Under existing law, the State Environmental Protection Administration (SEPA) may fine water polluters a maximum of 1 million yuan ($140,000), seen as a major impediment to clamping down on them.

"The fine should be made heftier, especially on those who repeatedly violate the environment rules," Xinhua quoted Hou Yibin, a deputy to the NPC's Standing Committee, as saying.


The draft law coincides with a call by the environmental watchdog for an end to tax breaks enjoyed by exporters of 39 products that it said are a danger to the environment.

The items, including pesticides and batteries, currently benefit from value-added tax rebates ranging from 5 percent to 13 percent when they are exported. Blacklisting the products would protect public health and be a tangible step towards honouring China's international commitments to safeguard the environment, Pan Yue, deputy head of SEPA, said on the agency's Web site,

SEPA has listed 141 products as "highly polluting and environmentally dangerous", and Pan said more would be added to the list, which would serve as a reference for future trade and taxation policies.

SEPA, a relatively weak agency, is trying to broaden its influence by enlisting other arms of the government to give economic and financial policies a green hue.

Pan on Monday unveiled a "green securities" campaign requiring companies to meet environmental protection criteria if they want to sell shares to the public.

The latest initiative would require the cooperation of the finance and commerce ministries as well as the customs and taxation administrations.

The banking regulator said on Tuesday that long-term loans to highly polluting sectors, including petrochemicals, steel, non-ferrous metals and power, totalled 1.7 trillion yuan ($237.4 billion) at the end of 2007, an increase of 17.2 percent from a year earlier.

That was faster than the 16.1 percent increase in overall yuan-denominated loans in 2007. But the regulator said banks had made significant strides because loans to polluting industries had grown 30.8 percent in 2006.

(US$1=7.160 Yuan) (Reporting by Jason Subler and Zhou Xin; Editing by Edmund Klamann)


China Sees Risk In Lending To Developers, Polluters

PlanetArk CHINA

29th February 2008

BEIJING - China's banking regulator on Thursday warned big lenders of the risks of lending to real estate developers and highly polluting or energy-intensive firms, ordering them to step up controls to prevent a rebound in bad loans.

Despite a drop in their non-performing loan ratio in 2007, banks should not be complacent because they face stiff challenges ahead, Jiang Dingzhi, vice chairman of the the China Banking Regulatory Commission, told executives from the big lenders.

"Banks should carefully implement the government's macro control policies and effectively prevent various dangers," he said, according to the watchdog's Web site.

As well as singling out property developers and industries that consume a lot of energy and cause pollution, Jiang told banks to keep a close eye on manufacturers with obsolete plants and firms whose loans are guaranteed by local governments.

Highlighting the risks of real estate lending, figures from the Shanghai banking regulator show 2 billion yuan in property loans went sour in 2007, twice as much as in 2006, according to state media.

More than one quarter of the new loans extended by domestic banks in Shanghai last year went to real estate, and by the end of 2007 the sector accounted for about 32 percent of their outstanding loans, the 21st Century Herald reported on Thursday.

The National Audit Office issued a separate warning that banks were lending too much to finance road construction -- their exposure was 800 billion yuan at the end of 2005.

Owing to the bad management of some roads and insufficient toll collections, many banks were finding it hard to get paid back, state media said.

The bank regulator said the four banks among the Big Five that are listed on the stock market had an average NPL ratio of 2.87 percent in 2007, down from 3.60 percent a year earlier.

The four are Industrial and Commercial Bank of China, China Construction Bank, Bank of China and Bank of Communications. The quartet improved their return on assets to 1.11 percent in 2007 from 0.88 percent in 2006.

The other member of the Big Five, Agricultural Bank of China, is still burdened by a high NPL ratio because the state has yet to carve out its bad loans and recapitalise the bank.

Including AgBank, the five largest banks had a NPL ratio of 8.05 percent at the end of 2007, down 0.55 percentage point from a year earlier. (Reporting by Eadie Chen; Editing by Alan Wheatley)



India: Sinosteel and Xinxing Ductile Group set up joint ventures

Sinosteel Corp., one of the largest state-owned iron ore and steel product traders in China, will enter into an agreement with the Indian government in March over a proposed 5 million-ton steelworks project in Jharkhand State.

"The Indian government has already approved our proposal for a 5 million-ton steelworks project, and an agreement is expected to be inked next month. Sinosteel does not intend to invite any joint-venture partners into the project, into which it will invest a total of $2 billion," announced the managing director of Sinosteel India Pvt. Ltd., Sinosteel's Indian subsidiary.

Although Sinosteel has not yet picked a site for the plant, it is likely to be located 60-70 kilometers from Jharkhand State's capital, Ranchi.

According to the Sinosteel spokesperson: "The steelworks project is designed to have a first-phase capacity of 2 million tons…Products from the steelworks will not be exported to China, but will mainly supply the domestic Indian market as well as some South Asian countries."

Moreover, Xinxing Ductile Iron Pipes Group Co. Ltd., a major Chinese state-run steel mill, has joined forces with both Chinese and Indian companies to establish its first steelworks project in Karnataka. Xinxing Ductile Group is the largest shareholder in the joint venture – called Xindia Steel – with a holding of 35 percent. China Minmetals Corp. holds a 20 percent stake, while three Indian companies together hold the remaining 45 percent stake.

Australia: MCC to acquire Cape Lambert iron ore project

The Metallurgical Construction (Group) Corp. (MCC), China's leading state-owned mine construction company, has entered into a memorandum of understanding (MOU) with Cape Lambert Iron Ore Ltd. to purchase its iron ore project in the Pilbara region of Western Australia.

South Africa: Sinosteel to expand ferrochrome capacity

Sinosteel Corp. recently initiated a ZAR 3.3 billion ($429.13 million) expansion project to boost the chrome ore and ferrochrome capacity of its South African-based subsidiary ASA Metals (Pty) Ltd. in order to meet increasing Chinese demand.

According to Sinosteel: "Upon the completion of the expansion project in 2010, the annual capacity of ASA Metals will more than triple from the current 420,000 tons of chrome ore and 120,000 tons of ferrochrome..ASA Metals currently sells approximately half of its ferrochrome to China, with the other half exported to other Asian and European countries." .

Australia: Usmanov's Metalloinvest confident on sale of Mount Gibson stake

Metalloinvest, the company that manages billionaire Alisher Usmanov's assets, says it’s confident it will conclude a deal to sell its stake in Australia's Mount Gibson Iron Ltd. to China's Shougang Concord International Enterprises Co. Ltd.

Kyrgyzstan: Lingbao Gold to purchase gold deposit

Hong Kong-listed Lingbao Gold Co. Ltd. has entered into an agreement with China Road and Bridge Corp. (CRB) to purchase the Istanbul gold deposit in the Kyrgyz Republic through its Kyrgyz-based subsidiary Full Gold Mining Ltd. for a consideration of $25.3 million.

[source for all the above articles: Interfax China Metals and Mining, 29 February 2008]


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