Finland is considering increasing its holdings in mining companies including Outotec Oyj (OTE1V) as the government’s investment unit bets demand out of China will drive profits.
“What happens in China and in the emerging markets overall certainly has a large effect on the mining industry’s outlook,” Kari Jaervinen, managing director of Solidium Oy, which handles the Finnish government’s equity investments, said in an interview in Helsinki yesterday. “We’ve added ownership in Outotec throughout last year. It’s very possible that we’ll continue to grow the position as the market situation allows.”
China’s gross domestic product expanded 7.9 percent in the fourth quarter from a year earlier, accelerating from 7.4 percent in the prior period. That was more than the 7.8 percent estimated by economists in a Bloomberg survey. Industrial production rose an annual 10.3 percent and retail sales in the world’s second-largest economy grew 15.2 percent in December from a year ago.
“Looking at the inevitable development of urbanization, whether in China, India, Indonesia, Malaysia or Vietnam, it will lead to the continuation of the super-cycle in the coming years,” Jaervinen said. The impact on mining will be “positive.”
Shares in Outotec rose 1.1 percent to 47.33 euros as of 11:24 a.m. in Helsinki. The gain brought the stock to its highest level since November 2007, based on closing price data and excluding intra-day moves.
Orders from China will help offset the economic decline in Finland. The Nordic nation fell into a recession in the second quarter, as the debt crisis in Europe battered exporters.
Solidium has spent 26 million euros ($35 million) over the past six months to raise its stake in Outotec to 8.3 percent from the 5.5 percent reported on May 4. The investor, which has a portfolio of 7.3 billion euros, also holds an 11.1 percent stake in Metso Oyj (MEO1V), a Finnish maker of rock crushers.
Outotec makes equipment and provides services for metal processing, water treatment and energy solutions.
Solidium could also buy shares in Talvivaara Mining Co. should the Finnish nickel miner issue new stock, Jaervinen said yesterday. Talvivaara is looking at a range of funding options, including debt and equity, to refinance debt maturing in May. It’s struggling with the aftermath of a waste-water leak and last year’s nickel production missed its targets by as much as 56 percent.
“We haven’t given up hope on Talvivaara,” Jaervinen said. “Should there be a rights issue, we’d certainly consider an investment.”
The investor now holds 8.9 percent of Talvivaara shares and seeks to keep the stake at that level even after a possible right issue.
“Our view on the industry is still positive in the long term,” Jaervinen said. “We believe that the industry has very significant, interesting Finnish companies which could grow to be global leaders.”
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