MCC Chief Defends Overseas Resource Strategy

(Beijing) - Share performance for Metallurgical Corp. of China (MCC) has been less than encouraging in the year since the company completed a dual listing in Shanghai and Hong Kong in September 2009.

H-share prices have fallen to less than HK$ 3.50 and A-share levels slipped below 4 yuan in recent weeks, down from the respective debut IPO prices in Hong Kong and Shanghai.

Investors are well aware that MCC's operating revenues grew a respectable 38 percent year-on-year, but they're concerned because the company's operating margin fell.

Seeking an explanation for this mixed record, Caixin interviewed Shen Heting, who serves as company president as well as party secretary and vice chairman of MCC's parent China Metallurgical Group Corp. He painted a confident picture of a company that's pursuing long-range mining projects around the world with huge profit potential.

"There is no pressure because I know the situation in the company," Shen said. "And I know we can fulfill our promise to shareholders as outlined in our prospectus."

The construction, real estate and mining group has been working especially hard to position itself overseas since the 1990s by developing projects for mining copper, iron, lead, zinc, nickel and cobalt – resources Shen favors. To date, seven overseas projects have been established, mainly through direct capital infusions.

But so far, no bright profit spots have appeared on the pages of the group's financial reports dedicated to the minerals business.

For this reason, Shen said he thinks the Chinese government should provide additional financial support. MCC is acquiring resources for the country overseas, he said, and should be given a corresponding level of policy support, with cash at the core.

Central government enterprises that secure mines overseas are in reality securing resources for China, Shen said. MCC has received some government capital, he said, the amount has been "insignificant" compared to the MCC's investments.

Each mine requires huge financial inputs, and so far the company has poured in some US$ 10 billion – an amount Shen said equals the company's current net assets. Its Papua New Guinea project, for example, cost US$ 1.4 billion, while a mine being developed in Afghanistan is priced at US$ 4.4 billion.

"This business is not only something we want to pursue but something we need to do for the country," Shen said. "But our capital capacity is limited. Clearly, it is beyond our means."