China Mining Finance Model

After the rapid Economic development of China in about 20 years, the inconsistency between mineral resources supply and demand is serious, with proved up reserves insufficient. It is estimated that in 2020 the domestic supply of only 6 out of the 45 major mineral resources will meet the demand, and that more than 40 mineral-resources-based cities will face the exhaustion of mineral resources and more than 400 big mineral bases or mines will be in danger of closedown. But our country's 92% primary energy, 80% industrial raw materials and more than 70% agricultural production means are supported by mineral resources, and the figure won't change dramatically in the future.Therefore, mineral resources are the base of the national economy, the inconsistency of the supply and demand will restrict our economic development directly. However, the leading restriction to the mineral industry development is the difficulty of financing, behind which lays the capital structure and corporate governance problems of mineral firms. Now, most Chinese mineral companies rely very much on cash, and the capital chain is vulnerable to breakdown, which is the key factor for mineral corporations'financing. To solve it, the writer of this paper makes some research and consults foreign practices.This paper focuses on the research of the financing pattern for mineral companies and consists of four parts.Chapter One : Corporate Financing Pattern (domestic and abroad)This part researches the security-dominated pattern (USA), Sole bank financing pattern (Japan) and all bank financing pattern (Germany). Through comprising and analyzing the three patterns, the author points out the problems of Chinese financing pattern. Chapter Two:Mineral company financing pattern (domestic and abroad)This chapter analyses the characteristics and pattern of international mineral companies financing, risk in different stages, capital demand and the comparison for the best pattern at different stages. Domestic patterns are also covered. The major difference of domestic and international pattern the difference between the capital pattern and the cash pattern are pointed out.Chapter Three:Pattern selection of Domestic mineral enterprisesBased on the previous chapters, this chapter deals with:(1). How can mineral enterprises evaluate the advantages and disadvantages of different financing patterns? And quantity-based evaluation model is introduced to analyze the effect of different financing patterns on a company's financial condition and calculate the cost of each pattern.(2). The paper analyzes how capital meets the demand of mineral enterprises. It is recommended that investors exam the mineral industry macro environment, the mineral project and the financial capability of the mineral firm.Chapter Four: Some Consideration of mineral firms financing From a strategic point of view, this chapter tries to make clear that not only a proper financing pattern is needed, but also the improving of the pattern, good relationship with banks, capital structure and corporate governance should also be emphasized, in order to get more efficient capital in a more efficiently way in the future.Through these four chapters, the essay tries to(1). Reveal problems existing in Chinese mineral companies'financing and the causes.(2). Point out what should be emphasized when Chinese mineral companies are choosing financing patterns.(3). Establish a quantity-based model to help companies'financing pattern selection.