The Avanti Group the equities research house based in Tokyo, providing professional trading and investment research solutions to institutional and private investors across the globe have recently drawn their investor’s attention to recent developments in the mining sector.

The offer from the Chinese government controlled Baosteel is seen by many to be the resumption by Chinese companies endeavoring to secure access to global resources while taking advantage of recent price slumps in key commodities such as iron ore. The bid for control of Aquila sees Baosteel partnering with Australia’s largest haulage firm, Aurizon Holdings Ltd.

For Baosteel, which has been invested in the Perth based Aquila since 2009 the bid if successful would see it and Aurizon both hold 50% of the AUD$7.4 billion iron ore project in the West Pilbara region of Western Australia consisting of mines, railways and port facilities. Baosteel and Aurizon are offering a 39% premium for Aquila with their bid of AUD$3.40 in the cash offer causing shares in the mining concern to gain up to 39% in Sydney trading.

“With the current slump in many of the mineral commodities that China imports affecting valuations of their producers it makes perfect sense for the large state run enterprises in China to seek control over production in its entirety from mining through refining and manufacturing, with the only real surprise here being the involvement of Aurizon in such a large capacity as equal partners,” said Murakami Hiroto, Senior Vice President of the Global Investment Division at The Avanti Group.

With March bearing witness to the retreat of Iron ore into a bear market as inventories of the material in China reached their highest ever levels, major producers of the mineral ore including the industry giants, BHP Billiton Ltd and Rio Tinto Group have increased production capacity to meet rising demand for steel. In 2013,China’s imports of iron ore accounted for nearly 72% of the global demand with the state run Baosteel’s Baoshan Iron & Steel Co taking in almost 20 million metric tons of Australian sourced iron ore in that period.

“With mineral prices down, we have already seen Chinese companies seek to capitalize on their ability to secure supply to resources as far afield as Chile to Kazakhstan and as a major supplier of raw materials to China, Australian mining companies will increasingly become more and more attractive under these current conditions, both as subjects of buyouts and partnerships,” concluded the Senior Vice President at The Avanti Group.

The Avanti Group is an equity research house providing research and analysis outsourcing solutions for institutional financial traders worldwide, founded in early 2003.