M&A

29 October, 2009

UPDATE 1-CIC invests $700mln in Hopu-backed mining firm

* CIC invests in second Mongolian mine this week

* Iron Mining deal comes before company's planned IPO

* Iron Mining backed by Hopu, Temasek, Credit Suisse (Adds details, background)

By Michael Flaherty and Farah Master

HONG KONG, Oct 29, (Reuters) - China Investment Corp (CIC), a near-$300 billion sovereign wealth fund, plans to invest $700 million in Hopu-backed Iron Mining International Ltd, a source told Reuters on Thursday.

The investment would be the Chinese fund's second involvement this week in a Mongolian mining deal as it shifts its investment strategy to natural resources from financial institutions.

CIC's [CIC.UL] investment in Iron Mining follows a $500 million deal with SouthGobi Energy Resources (SGQ.V) earlier this week. [ID:nN26192897]

The fund's investments in Mongolian mining companies come after a recent change in Mongolian mining laws that have paved the way for foreign investment. Iron Mining International, part-owned by private equity firm Hopu and Singapore state investor Temasek [TEM.UL], plans to list shares in Hong Kong late this year or early next year, hoping to raise up to $1 billion. [ID:nHKG44842]

CIC's deal with Iron Mining International involves a $500 million convertible loan, with an option to increase the loan to $700 million, according to the Wall Street Journal.

CIC has asked Iron Mining, which owns and operates a Mongolian iron ore mine, to add partly-owned China International Capital Corp as an underwriter for the IPO, along with Credit Suisse, which was an early investor, the Journal reported.

Hopu, a China-focused private equity firm run by Fang Fenglei, chairman of Goldman Sachs' (GS.N) securities joint venture in China, jointly invested $300 million with Temasek in International Mining, previously known as Lung Ming Investment Holdings Ltd.

Credit Suisse (CSGN.VX) invested $120 million in the company at the time and private equity firm Clarity invested $20 million, according to the source, who was not authorised to speak publicly about the deal.

China's robust economic growth and commercial property boom has made it the world's largest iron ore buyer, consuming more than half its traded ore.

CIC, with more than $290 billion under management, has put more money into commodities, real estate and infrastructure to hedge against the risks of medium- and long-term inflation and a fall in major currencies.

Chairman Lou Jiwei said on Wednesday that CIC has invested about half its $110 billion in available funds, mainly in publicly traded assets, and has enjoyed "not bad" returns so far this year. [ID:nPEK322226] (Editing by Ian Geoghegan)

Source: http://www.reuters.com