China Said to Form State-Owned Fund to Deal With Mining Debt

China Said to Set Up State Fund to Absorb Mining Debt

China’s government is said to be setting up a state-owned fund to absorb bad debt in the mining sector, including loans owed by China Minmetals Corp., as the fallout from a price collapse batters the global commodities industry.

The investment company would be established by the State-Owned Assets Supervision and Administration Commission to coordinate the country’s investment in mineral resources, according to people with knowledge of the matter. The unit would take on some existing debt from the mining industry, said the people said, asking not to be identified because they’re not authorized to speak publicly.

The world’s biggest mining and commodities firms are reeling as prices of everything from oil to steel and copper collapse to multi-year lows. In the latest sign of pain for the industry, miner Anglo American Plc on Tuesday announced a sweeping response to the rout including asset sales, mine closures, and job cuts. A slowdown in China’s economic growth is slowing demand for raw materials.

Minmetals, the country’s biggest metals trader, has more than 60 billion yuan ($9.3 billion) of outstanding debt, according to three of the people. At least some of this debt would be absorbed by the new government-backed investment company, they said. Minmetals runs mines including deposits in Peru and Australia via its 74 percent stake in the Hong Kong-listed MMG Ltd.

The plans for a restructuring of mining debt in the sector come after an announcement by SASAC on Tuesday that Minmetals would take over one of China’s biggest state engineering groups, China Metallurgical Corp. Calls to a Beijing-based spokesman for SASAC were unanswered. A spokesman for Minmetals in Beijing said he couldn’t immediately comment.

— With assistance by Jacqueline Poh, Heng Xie, and Martin Ritchie

Before it's here, it's on the Bloomberg Terminal.