TORONTO - A bid by China's largest nickel producer for Toronto-based Crowflight Minerals Inc. could open the door to even more Chinese investment in Canadian resources, according to Crowflight's CEO.
"This is (Jinchuan Group's) first major nickel purchase inside of Canada, and who knows what opportunities it might bring for not only Crowflight but Canada, in terms of expanding other sites and exploring other properties," Mark Trevisiol said in an interview Wednesday.
The $150-million bid by Jinchuan - the largest producer of nickel, cobalt and platinum in China and the fourth-largest nickel producer in the world - is the latest by Chinese companies to get access to Canadian mining assets and gain future supplies of base metals such as copper, nickel and zinc.
Trevisiol said surging demand in the rapidly growing Chinese economy, combined with limited resources within China, means Chinese companies are becoming increasingly interested in Canada.
"The demand in China is going gangbusters in terms of steel production, and we fit right into the stainless steel production equation," he said, adding that 70 per cent of the world's nickel is used to produce stainless steel.
"Last I saw, China was producing almost 40 per cent of the world's stainless steel, which is pretty significant," he added.
Growing demand for nickel has caused the price to rise from around US$5 per pound a year ago to above $11 per pound today.
And the same is true of many other commodities, which are becoming more valuable in the face of economic growth around the world, particularly in Asia, said John Ing, a mining analyst and president of investment dealer Maison Placements.
"It's no secret that the Chinese companies are looking around for deposits," Ing said.
"They are flush with cash, unlike cash-strapped Western companies, so they're putting to use their deep pockets."
"The reality is that, looking ahead, strong growth means an insatiable appetite for our resources, ours and Australia's and America's," he added.
Last summer, a Chinese investor acquired about 20 per cent of Vancouver-based Teck Resources (TSX:TCK.B), Canada's largest publicly traded miner.
And Jinchuan struck a C$214-million deal earlier this year to acquire Tyler Resources Inc. (TSXV:TYS), a Calgary company with a project in Mexico. The company also owns 18.5 per cent of Toronto-based junior miner Tiomin Resources Inc. (TSX:TIO).
Meanwhile, PetroChina made its first significant foray into Alberta's oilsands last year through its nearly C$2-billion investment in two projects owned by Athabasca Oil Sands Corp.
The bid for Crowflight from Jinchuan Group tops a rival $102-million offer from Pala Investments Holdings Ltd. of Switzerland to buy the company's Bucko Lake nickel mine and surrounding exploration properties in central Manitoba. However, Trevisiol said there are hurdles that need to be overcome if the company's board is to recommend shareholders approve the Jinchuan bid.
Jinchuan wants to buy 100 per cent of the company and 100 per cent of the metal produced from Bucko Lake and any other producing resources Crowflight may have in the future. However, Crowflight (TSX:CML) currently has a contract with Xstrata Nickel to process its ore at Xstrata's operations in Sudbury, Ont.
"There's different mechanisms that are possible, but we have to start discussions with Xstrata and with Jinchuan on what could potentially fit, if anything," Trevisiol said.
Crowflight said Tuesday the bid by Jinchuan and a partner controlled by Crowflight chairman Stan Bharti is valued at 26 cents a share. That represents a 47 per cent premium to the company's closing share price last week.
Crowflight owns the Bucko Lake nickel mine near Wabowden, Man. The company also holds nickel, copper and platinum group projects in the Thompson nickel belt in Manitoba and the Sudbury basin of northern Ontario.
Shares in the company were unchanged at 22 cents in Wednesday trading on the Toronto Stock Exchange after gaining 29 per cent on Tuesday."
