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When Fortune Minerals Ltd. began courting capital markets to fund a giant coal project in British Columbia two years ago, chief executive officer Robin Goad knew he wouldn’t be sourcing the funds locally.
Canadian banks were saying Fortune should get long-term supply agreements with Asian customers before they were comfortable financing the $800-million project.
“Well, we thought, if we are going to have to get [agreements], why don’t we just partner with the guys who want the stuff,” said Mr. Goad, who sold a 20-per-cent stake in the Arctos coal project to South Korea’s Posco a year later, marrying Fortune’s need for capital to the giant steel maker’s need for the metallurgical coal to produce steel.
“We didn’t need a bank,” he said in a recent interview. The Posco deal marked a growing trend of Asian customers turning to Canada – where publicly listed companies control some 10,000 projects worldwide – to guarantee supplies of the commodities needed for their booming economies.
“When we started to sell our material, obviously Asia was the first place we looked,” said Peter Secker, CEO of Canada Lithium Corp., which signed supply agreements with Tewoo-ERDC and Marubeni Corp., top commodity trading houses in China and Japan, respectively.
Canadian miners had more reason to turn to Asia in the past year, as debt and equity markets dried up and big producers who typically buy smaller companies to replace reserves also pulled back from the market, stung by writedowns on acquisitions that went sour as commodity prices retreated.
“There’s no money in North America or coming out of Europe any more,” said Robin Phinney, CEO of potash developer Karnalyte Resources Inc., which sold a 19.98-per-cent stake to India’s Gujarat State Fertilizers & Chemicals Ltd. in January in exchange for cash and a 20-year supply deal.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/big-deals/miners-look-to-asia-for-partners-and-financing/article9122818/