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As mining headlines around the world are consumed with BHP's bid for Potash Corp, Chinese investment funds seem spurred into action
The recent headline-grabbing $39 billion bid by the world's largest mining company for the planet's top potash producer appears to be spurring potash-hungry Chinese investment funds into action.
On the heels of BHP Billiton's (NYSE: BHP) unsuccessful initial takeover offer for Potash Corp. of Saskatchewan (TSX: POT) (NYSE: POT) last month, China Mining United Fund has announced a move to more than double its treasury to $760 million. Launched just last year, it is one of China's first private mining-oriented investment funds.
China Mining United Fund's mandate is to secure long-term supplies of key minerals and commodities. Most of which are needed to stoke the furnace of China's thriving economy and to sustain a growing urban labour force that is increasingly demanding feed-intensive animal protein in their diets.
Hence, potash is obviously at or near the top of the fund's shopping list, especially since it already has small but strategic investments in place with privately-owned Brazil Potash Corp. and Toronto-based Allana Potash Corp. (TSX.V: AAA).
Investment industry analysts believe that China Mining United Fund will likely favor Allana's Ethiopian potash project in the near-term. That's partly because the Chinese government committed earlier this year to investing billions of dollars in Ethiopia's underdeveloped economy, which obviously also buys plenty of political influence.
Allana's deposit, which sits at the heart of Ethiopia's historic Danakhil potash basin, has an inferred resource of 105 million tonnes of potash, averaging a favorable grade of 20.8%. Drills continue to turn in the anticipation of building upon this initial resource estimate, as well as validating the company's view that one of the world's lowest cost potash mines is in the offing.
Company president Farhad Abasov says that as yet he hasn't received any solicitations from China Mining United Fund to take a bigger stake in his company.
"However, we're already in talks with several other prospective Chinese and Indian investors, as well as other international mining organizations," he says. "That said, there's no urgency on our part to strike any additional deals, especially since we believe that our ongoing drilling successes will allow us to double or triple our existing potash resources by the year's end."...MORE