On 30 June 2017, Barrick Gold Corporation (Barrick) announced the completion of the sale of a 50% interest in its Veladero mine in San Juan province, Argentina, to Shandong Gold Mining Co., Ltd, (Shandong Gold) for US$960 million. Shandong Gold was listed on the Shanghai Stock Exchange in 2003 and by 2016 had produced approximately 1.2 million ounces of gold. It is currently the only Chinese mining company categorized as a ‘National Environmentally Friendly Enterprise’ by the Chinese Government. Following the sale Barrick and Shandong Go will form a 50/50 joint venture, which will explore and jointly develop the Pascua-Lama deposit and the El Indio Gold Belt on the border of Argentina and Chile. Barrick has stated that the proceeds from the sale will be used primarily to reduce its debt. (Source: http://www.asiaminer.com/news/latest-news/8664-barrick-and-shandong-finalise-veladero-jv.html#.WWRqIRWGOUl, 6 July 2017)

Rosneft clears last hurdle in Essar Oil takeover

On 22 June 2017, Igor Sechin, CEO of Rosneft Oil Company PJSK (Rosneft) confirmed that Rosneft’s delayed US$13billion takeover of India’s Essar Oil Limited (Essar Oil) would proceed. Rosneft will acquire a 49% stake in Essar Oil from its holding company Essar Global Fund Limited (Essar Global). Russian investment group United Capital Partners and Swiss commodities trader Trafigura Pte Limited will take a 49% stake between them, with Essar Global’s founders taking the remainder. Essar Oil is Essar Global’s most profitable business; it controls India’s second-largest oil refinery and 2700 petrol stations throughout the country. It has been struggling under a heavy debt burden. Essar Steel India Limited (Essar Steel), Essar Oil’s sister company, one of 12 indebted Indian companies granted protection is by the Reserve Bank of India under the country’s new bankruptcy code. The takeover was reportedly delayed by several Indian banks with significant exposure to Essar Oil and Essar Steel, and who were seeking assurances that Essar Global would use part of the proceeds from the sale of Essar Oil to invest in Essar Steel. Essar Global has committed to making a capital injection in Essar Steel pursuant to the sale. The takeover will be the biggest ever foreign direct investment in India. (Sources: https://www.ft.com/content/28067852-573f-11e7-9fed-c19e2700005f?mhq5j=e3, 22 June 2017; http://www.reuters.com/article/us-rosneft-oil-essar-banks-idUSKBN19E0TP, 23 June 2017)

Mergers and acquisitions among Chinese State-owned Enterprise seen as preparation for Belt and Road Initiative

The Chinese Government has initiated a fresh round of State-owned Enterprise (SOEs) mergers in the coal, electricity, heavy machinery and steel sectors. Coal producer Shenhua Group Corporation Limited (Shenhua Group) is reported to be in merger talks with China Guodian Corp (China Guodian). It is estimated that Shenhua Group and China Guodian have combined assets of approximately US$262 billion. In March 2017, it was announced that China National Nuclear Corp. and China Nuclear Engineering & Construction Corp would merge to create a new group with an estimated value of approximately US$80 billion. In June 2017, China National Machinery Industry Corp. (China National Machinery) received Government approval to merge with the China Hi-Tech Group (China Hi-Tech) which produces textile machinery. The combined value of China National Machinery and China Hi-Tech is estimated to be approximately US$52 million. The China National Chemical Corporation (CNCC) and the Sinochem Corporation (Sinochem) are also understood to be involved in merger talks. Should Sinochem and CNCC merge, it would create the world’s largest industrial chemicals firm. The recent merger activity is part of a wider restructuring by Chinese SOE’s as part of China’s ‘Belt and Road’ initiative. (Source: https://www.ft.com/content/e3972f54-62e2-11e7-91a7-502f7ee26895, 10 July 2017)