China’s Hongqiao Group (CHQ) has announced they have signed an MOU for the acquisition of Target Company, an African company, along with Winning Logistics, also of Africa. According to the MOU, they proposed spending $120M to obtain the rights to develop and produce bauxite over a term of 25 years. Hongqiao will hold 90% shares and Winning Logistics will own another 10% share after the acquisition. The formal agreement of acquisition is expected to be completed within four months after executing MOU.
Guinea has the largest bauxite reserves worldwide according to USGS data. Target Company owns the bauxite project in Guinea which has a total resource base of 2.2 billion tonnes, 624 million tonnes of which are classified as measured and indicated. As per Hongqiao’s existing aluminium capacity of 3Mt, the classified and measured bauxite can satisfy more than 40 years’ consumption.
The MOU has not indicated the detailed schedule of mining, though I think that will be laid out in the formal agreement after four months.
Of course, signing an agreement and buying a local company are only the first steps. CHQ still has to get the mine developed, and get the ore to the shipping point. But at least they have taken a first step towards securing their raw materials supply.
We will keep watching on the follow-up information about this project.