China Yunnan Copper, China's third-largest copper producer, said on Tuesday a takeover of Rio Tinto Ltd by BHP Billiton Ltd would not be a cause for alarm for Chinese customers of raw materials.
This new company's future depends on China's economic development, and it cannot develop without the help of the others in China, so I am not concerned, Weiping Yu, executive vice general manager of Yunnan Copper Industry (Group) Co Ltd, said through an interpreter in Sydney.
Yu's comments run counter to those expressed by other Chinese industrial leaders, who said they are worried over a marriage of BHP and Rio, already the world's first and third largest mining houses, respectively.
BHP Billiton is trying to persuade rival Rio Tinto to accept a $140 billion takeover plan it says will assemble a mega mining house controlling the global flow of material from the world's largest copper mine, vast iron ore deposits, and dozens of other mineral deposits.
BHP Chief Executive Marius Kloppers said late Monday that global urbanisation, particularly in China, had left a massive deficit between supply and demand for raw materials that only an industry giant could address.
A merged BHP/Rio would create a global force in iron ore and coal, but the two companies also supply ores used to refine industrial metals such as copper and would set benchmark prices for many commodities.
Little excess ore and idle smelter capacity in China have already driven down the fees paid by miners to refine copper. BHP alone accounts for roughly 15 percent of China's supply of copper concentrate, or crushed ore.
Any negotiations between the miner and the smelter should be a win-win strategy, or else nobody can survive in the long term, Yu said.
He also said Yunnan Copper's purchase of 21 percent of the stock in recently floated Australian exploration firm Yunnan Copper Australia Ltd could lead to more investments in Australia in a bid to become more self-reliant in raw materials.