China out to consolidate its mining industry

China's Land Ministry plans to merge the miners of 15 minerals into fewer, larger groups to improve their efficiency and safety, Bloomberg reported on Friday

The plan covers miners of minerals such as coal, iron ore, copper ore and gold, China's Ministry of Land and Resources said in a statement on its website. The government supported larger miners acquiring smaller ones in regional mergers, the statement said, and the mergers would cut mine numbers from an existing 120,000, mostly small-scale projects owned by individuals.

China aimed to complete the merger plans in three of the 15 minerals in five prospecting areas by the end of 2007, according to the statement, although the priority areas were not named. The whole project will be completed by the end of 2008.

"The next few years will be the climax of large-scale mergers and acquisitions in China," Zhang Fang, analyst at China Securities told Bloomberg. "China realised it had to do more to conserve valuable resources, especially after going through the commodity price rally in the past few years."

Rising commodity prices have left miners in China flush with cash, with companies such as China Shenhua Energy, the nation's biggest coal miner, and Aluminum Corp of China, its largest producer of the metal, stepping up domestic acquisitions to secure resources.

"The mergers will create a lot of buying opportunities," Zhang said.

The Chinese government also intends to cut the number of prospecting and mining permits issued by 20 per cent, moving to allow only a single permit for each mining zone. Moreover, it wants to reduce mining deaths and accidents by 10 per cent and reduce pollution by 15 per cent, the statement said. The mergers would also boost the use of new technology for cleaner mining and increase mineral ore recovery rates.