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PrintThe Vietnamese authorities are moving mountains to open up the country to foreign invesment. But their enthusiasm does not seem to extend to the mining industry. There, if a significant recent deal is any guide, domestic companies will get priority.
First time into resources investment for a food and finance group
The country’s Masan group, which counts TPG and Denmark’s BankInvest among its investors, has bought the troubled mining assets of funds run by Vietnam’s oldest investment managers, Dragon Capital.
Masan bought the mining project at about book value of US$130 million, according to a person familiar with the situation. It is, interestingly, a first acquisition in natural resources for a company which has until now focused on food and banking.
Nui Phao Mining Joint Venture Co., or Nuiphaovica, holds one of the world’s largest undeveloped tungsten deposits. Tungsten is a metal used in light bulb filaments as well as in precision tools and airplanes.
It is good news for Dragon, a Vietnam-only investment group with US$1.4bn under management at the end of December. Although it will take a big loss – it bought Nui Phao in February 2007 for C$275.6m – it has been struggling to find funding as the global crisis hit credit lines and depressed metals prices. Moreover, Dragon almost lost its development licence in the middle of last year after the Vietnamese Prime Minister visited the site and suggested that it should be cancelled.
Dragon has also recently come under pressure from Richard Deitz, the owner of VR Capital, which specialises in distressed assets in emerging markets, who has complained about the discounts to net asset values of Dragon’s leading funds. Deitz has urged Dragon to ring fence its Nui Phao holdings and convert two of its main AIM-listed funds (Vietnam Enterprise and Investments Ltd and Vietnam Growth Fund Ltd) to open ended funds.
But foreign funds still raising money
The deal is unlikely to reassure foreign investors in the resources sector. Vietnam has done a great job of opening up to investment generally, but mining still touches a raw nationalistic nerve. Today’s deal smacks of government manoeuvring to make sure that the deposit – which Masan says will eventually account 5 per cent of the world’s tungsten output as well as having significant deposits of bismuth and fluorspar – is developed by a local player.
However, Dragon and other foreign investors are not being put off from other sectors. As Vietnamnet reports, Dragon is raising up to $100m for a new Vietnam fund.
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