Chapter 374: This is the Charm of Mergers and Acquisitions
Jiangda Securities.
Inside the closed-door meeting room, confidential business discussions were underway.
Hualu Group's headquarters were located in Yanjing, and Lu Caiqing had traveled from there to Hong Kong to join Li Tang. In addition to him, several prominent figures attended today's meeting: Sun Xiushun, founder and chairman of Villy Hong Kong Shipping Company; Rong Yijian, chairman of Huaxin Taifu; Chen Jinghe, chairman of Zise Mining; and Li Feiqun, director of the investment banking division at Jiangda Securities.
Most of them already knew each other well.
"Chairman Rong, how is the Sino Iron Ore project progressing?" Li Tang initiated a conversation with Rong Yijian, trying to ease previous tensions that arose during their last encounter at Haigang.
"It's progressing smoothly. The feasibility study has been approved by the relevant Western Australian authorities. The next step is the formal development phase. Within three to five years, Sino Iron will be operational, producing at least 30 million tons of iron ore annually," Rong Yijian replied enthusiastically, suddenly energized at the mention of his project.
"What's the total investment?" Li Tang inquired further.
"About four billion US dollars," Rong replied confidently.
"Thirty billion yuan…" Li Tang internally sighed, reflecting that history was indeed hard to alter.
Even after bluntly warning Rong in person, he still couldn't dissuade Rong from proceeding. If the Sino Iron project continued, it would indeed commence production after investing four billion US dollars. In the first year, it would export ten million tons of iron ore concentrate—proof of initial investment success, like receiving an achievement certificate.
However, ten million tons would be far below the originally expected production level. To achieve the planned full-scale production would require an additional eight billion US dollars beyond the initial four billion.
Costs such as labor, machinery, and raw materials would escalate yearly. Yet even these increasing costs weren't the biggest problem.
The real trouble, causing Sino Iron to halt after more than 30 billion yuan investment, originated from Palmer.
When selling the mineral rights to two billion-ton magnetite deposits (totaling four billion tons), Palmer had cunningly embedded a hidden clause. After seeing Huaxin Taifu pouring enormous investments into developing the mine—though production was repeatedly delayed—it eventually began exporting iron concentrate. That's when Palmer sprang his trap.
Palmer took Huaxin Taifu and the Sino Iron project to court, claiming that the initial sale only transferred extraction rights for raw iron ore. However, the refined concentrate was a separate business right, for which no authorization fee had been paid.
Palmer demanded a shocking compensation of 30 billion Australian dollars!
The court naturally didn't award Palmer the full amount he sought, yet still ruled in his favor—unsurprising, as Palmer was Australian, and the judges deciding the case were also Australian, possibly even personally acquainted with him.
The ruling stipulated that for every year Sino Iron operated, it must pay Palmer an additional 200 million AUD in royalties for iron concentrate sales, for up to thirty years. This meant that, if the mine continued operating long-term, Huaxin Taifu would have to pay Palmer an unbelievable total of 6 billion AUD in royalties alone.
It essentially became a tribute payment, placing Palmer on a pedestal. This situation even catapulted Palmer to the position of Australia's richest man!
Already financially strained and with production far below expectations, paying an extra 200 million AUD annually made Sino Iron's position utterly untenable. With massive debts accumulated, Huaxin Taifu faced a desperate dilemma: moving forward would lead to more losses, yet retreat meant total disaster.
Ultimately, they had no choice but to temporarily halt the project indefinitely—unless iron ore prices skyrocketed to something absurd like 1,000 USD per ton, only then might Sino Iron see daylight again.
"It's indeed a considerable investment, but inspired by the success of your Lianying Mining, I'm confident our Sino Iron project will also achieve production success!" Rong said optimistically, lost in his dreams.
Li Tang listened helplessly, gently shaking his head, yet kindly warned again, "I know you dislike hearing this, but honest advice is always bitter. Thoroughly re-examine your contracts and remain cautious about Palmer. Additionally, if you've already initiated your investment plan and insist on proceeding, at least follow Lianying Mining's example—hire local Australian companies for key infrastructure like railways, power plants, and ports."
"We're different," Rong replied firmly, clearly disagreeing. "We've already transferred 20% of the Sino Iron project's rights to a domestic state-owned metallurgy enterprise, assigning them as general contractors. They'll manage infrastructure projects, partnering primarily with Chinese construction companies."
His attitude was both righteous and uncompromising, his gaze slightly judgmental toward a private entrepreneur like Li Tang. Perhaps, deep down, he felt their paths diverged fundamentally.
What else could Li Tang say?
He couldn't force Rong to abandon the Sino Iron project.
"Just proceed cautiously," Li Tang sighed softly, then turned to address the others. "Chairman Sun, it's been a while."
"I rarely see you, but I often meet with Frette," Sun Xiushun replied carefully, sensing the tension between Li Tang and Rong earlier. Unwilling to involve himself, he remained diplomatically neutral.
"This year, our iron ore shipments successfully reached domestic ports from Tehran Port, largely thanks to your strong support," Li Tang expressed sincerely.
"You're too kind, Mr. Li. It's our duty," Sun chuckled modestly, leaning closer to whisper, "Frette mentioned next year's ore output will increase significantly, boosting our shipping volumes. Several large cargo vessels are about to enter service, greatly enhancing our capacity. Please continue entrusting next year's shipments to Villy Shipping!"
"Absolutely," Li Tang reassured him confidently, then politely greeted Chen Jinghe and Li Feiqun.
He knew Chen and Li Feiqun had successfully collaborated before; Zise Mining's smooth IPO in Hong Kong had been expertly facilitated by Li Feiqun's investment banking team.
"The eight hundred million yuan from the Gongcun Copper-Gold Mine project will arrive in your account soon," Chen Jinghe said, clarifying that he wasn't participating in Li Tang's current investment project.
Zise Mining had no aluminum operations and wasn't interested in non-controlling investments like Galuminium Group. Nevertheless, Chen attended out of respect and curiosity, aware of Li Tang's upcoming collaboration with Jiangda Securities.
"I've heard your name many times from Chairman Chen and seen it frequently in newspapers and on TV," said Li Feiqun, a poised professional dressed impeccably. "Today is the first time meeting you personally. You're much younger than I imagined!"
"You're very kind, Director Li," Li Tang nodded politely.
"Jiangda Securities has made every effort to secure the one-billion-USD loan you requested," Li Feiqun stated directly, demonstrating her efficiency.
Internally, Jiangda Securities had no hesitation about lending Li Tang this sum. Everyone knew Li Tang was China's most successful entrepreneur. Just his holdings in Lianying Mining alone were worth over ten billion USD. There was zero concern about his repayment capability.
This one-year loan came with high interest, explicitly designated for acquiring Galuminium Group's shares, which would also become collateral upon purchase. Even in case of default, Jiangda Securities could easily liquidate these shares to recover their loan. Additionally, with Huaxin Taifu and Hualu Group involved, repayment capacity was effectively doubled.
In fact, after approving this one-billion-USD loan, Jiangda Securities had proactively asked if Li Tang needed even more, readily offering tens of billions if necessary.
Li Tang hadn't refused outright, simply stating he'd initially borrow only one billion USD. He hinted, however, that further funding might soon be needed, requesting Jiangda Securities remain prepared.
With funding from Jiangda Securities approved, his Hong Kong mission was already halfway accomplished.
He turned to Lu Caiqing and Rong Yijian. "As Director Li confirmed, the loan is secured and will be disbursed rapidly to meet our needs. If you both agree, let's officially sign the agreement."
"No problem. Let's finalize it quickly," Lu Caiqing eagerly agreed, clearly energized by such a substantial international investment. This was precisely his goal in leading Hualu Group—to position the company prominently on the global stage.
Why risk everything following Li Tang?
Lu could have patiently waited for Lai Xiangrong's retirement to slowly achieve his aspirations. Instead, following Li Tang now posed great personal and professional risks. A failure could jeopardize his path to the General Manager position at Hualu.
Yet privately, Li Tang had reassured him that Galuminium wouldn't be acquired by Alcoa, but another mining giant would certainly step in with a substantial offer. Believing Li Tang's inside information was reliable, Lu was determined to seize this rare opportunity, hoping to secure a great victory and strengthen his future position.
"I previously promised you Hualu Group would contribute 300 million USD," Lu stated confidently.
"We'll invest 100 million USD," Rong added lightly. "Everyone says you're the master of mining investments. Huaxin Taifu will make this small contribution to learn from your expertise."
"That's 2 billion USD—we have enough funds," Li Tang concluded decisively.
Li Tang rubbed his hands together subconsciously, feeling a subtle sense of nervousness and anxiety. After all, this was the first time he had taken on such a large-scale investment in a field he wasn't entirely familiar with.
Fortunately, he had trustworthy partners by his side, and his company's investment department had cultivated considerable talent over the years, proving essential at this critical moment.
"You said this investment in Galuminium Group shares would last up to a year. Our loan from Jiangda Securities is also set for one year, fully managed by them. Not even considering the potential stock gains or losses, the related handling fees alone will exceed one hundred million USD!"
Lu Caiqing had strong confidence in Li Tang's judgment, decisively agreeing to follow Li Tang into this major undertaking. However, he felt the current situation still warranted caution.
As the saying went, without foresight, immediate troubles would arise. Investing in Galuminium required meticulous planning, with clearly defined goals and strategies.
"Currently, international opinions on Galuminium Group's financial situation and stock price trends are divided. Every analyst has their own perspective."
He looked earnestly at Li Tang, emphasizing: "We should set a clear red line. If Galuminium's stock price falls to a certain point during our holding period, we need a stop-loss threshold."
A stop-loss threshold?
Li Tang hadn't really considered such a scenario. According to his memory of future events, Galuminium's stock price would steadily rise amidst fierce competition among several major mining giants seeking acquisitions.
"What price do you think is appropriate?" Li Tang asked.
"We acquired shares from Sanjing Trading at $57.8 per share. I think setting our stop-loss around $45 or even $40 per share is reasonable," Lu Caiqing proposed, glancing toward Rong Yijian. "Chairman Rong, what do you think?"
"That's a reasonable stop-loss point. A loss of about 30% is painful, but cutting losses at that stage is far better than risking losing everything," Rong Yijian concurred.
"Alright, I'll inform Jiangda Securities to establish a stop-loss level," Li Tang readily agreed without further debate.
After all, they lacked his foresight. The stock market was volatile, and no one could guarantee future movements.
Lu Caiqing had always been curious about Li Tang's unwavering confidence in Galuminium. Now that their partnership was finalized, he asked more specifically, "You previously mentioned obtaining reliable information that another company, besides Alcoa, is interested in acquiring Galuminium. Which one is it?"
Without hesitation, Li Tang replied, "Litop!"
...
Perth.
Litop headquarters building.
Alba called Eric over. "How is the Pebble project progressing?"
Eric, who had just returned from the United States, didn't look pleased. "Aside from the $330 million USD spent purchasing Northern Dynasty Mining from Li Tang, we've already invested another $350 million USD in exploration and feasibility studies. The feasibility report received approvals from multiple U.S. departments, and the mining rights were smoothly obtained earlier. But now we're facing another serious problem."
"What problem?" Alba asked.
"Bristol Bay in southwestern Alaska is one of the U.S.'s major salmon fisheries, bringing in nearly $300 million USD annually from salmon fishing. Several rivers flowing into Bristol Bay originate from protected nature reserves, very close to our Pebble project area."
Eric frowned deeply. "Since word got out about our Pebble development, environmental groups and media have started claiming our mining operations would cause severe pollution, drastically affecting salmon habitats! Recently, protesters even demonstrated outside environmental agencies, demanding to halt our project. Now the environmental agency is re-examining our development plans, which could severely delay progress."
"A delay would be manageable. My concern is if they directly block the Pebble project altogether!" Alba had already seen reports in the news but hadn't fully grasped their seriousness. After hearing Eric's account, his expression turned grim.
"The environmental officials called me in, stressing the severe environmental situation," Eric said, gradually realizing the desperate situation. "Environmental audits are becoming increasingly strict. Without an exceptional environmental protection plan, even if the mine is built, it won't receive final approval, and we won't be able to operate."
"What exactly constitutes an 'exceptional' environmental plan?" Alba's voice held barely suppressed anger.
"It's less about the actual environmental plan and more about how determined the Alaskan locals and environmentalists are. If they're just temporarily stirring trouble, things might calm down eventually, allowing our plans to proceed," Eric outlined the worst-case scenario. "But if they persist in opposition, the environmental agencies wouldn't dare risk approving our mining operation."
"These environmentalists have nothing better to do than create chaos!" Alba finally burst out angrily. "Those environmentalists have the energy to protest and shout slogans precisely because corporations like ours pay substantial taxes and create countless jobs, keeping them fed! Societal progress, job creation, significant tax contributions—all come from businesses like us!"
Eric understood Alba's anger.
They'd made significant efforts and concessions to local residents in Alaska, offering generous compensation and employment opportunities. But instead of being satisfied, the locals turned aggressively against them, demanding that the Pebble project be completely abandoned.
Had environmental pollution genuinely threatened salmon habitats and fisheries, the locals' opposition would have been understandable.
However, the loudest opposition came from environmentalists armed with sophisticated data analyses claiming the Pebble project would inevitably cause catastrophic pollution. They argued passionately that salmon fishing represented sustainable economic value, benefiting generations indefinitely. In contrast, the Pebble mine would provide only temporary tax revenues while permanently destroying the ecosystem, depriving future generations.
Their persuasive rhetoric intimidated environmental authorities and U.S. congress members.
Eric personally believed these activists simply had too much time on their hands.
Worst of all, these environmentalists possessed a kind of unshakeable moral superiority. Attempts to bribe or influence them financially never worked—they weren't interested.
"Those activists truly have nothing better to do," Eric echoed Alba's sentiment bitterly.
"Continue funding the Pebble project! No matter what it takes, we must push this through!" Alba clenched his teeth, his determination hardening.
"How much?" Eric asked.
"Add another $150 million USD to the budget. Make sure the environmental officials and politicians in the U.S. are fully satisfied, and silence all opposing voices!"
Alba fully understood the incentives for American politicians.
"A few Alaskan indigenous corporations are also fiercely opposing us, even filing lawsuits," Eric reminded him.
"Feed them too!" Alba knew these situations could only be resolved with money. Once the Pebble mine was operational, these hundreds of millions in extra expenditures would become insignificant.
Eric accepted his orders but lingered, indicating another matter. "I've been closely monitoring Galuminium Group. Alcoa has repeatedly attempted to acquire Galuminium, but their offers were consistently rejected by Galuminium's board because their bids were significantly below market price. Although Alcoa has temporarily retreated, they're already planning their next move. They won't easily abandon acquiring Galuminium, especially since Rusal recently acquired Russia's second-largest aluminum company, becoming the world's largest aluminum corporation. Alcoa desperately wants to surpass Rusal and dominate the North American aluminum market, making Galuminium an ideal acquisition."
Turning away from Pebble, Alba's expression became even graver.
Litop had firmly established iron ore, copper, and aluminum as their three core businesses, pursuing rapid development. While iron ore was their established strength, the promising Pebble copper project—despite successful preliminary stages—was now threatened by environmentalists.
Short-term copper expansion was difficult. Their aluminum business accounted for only 15% of the group—far from sufficient. Alba aimed to raise aluminum's share to one-third of Litop's business, equaling iron ore's profitability.
Galuminium Group represented a rare, strategic opportunity. Currently ranked seventh globally, Litop's aluminum division could leap directly into the top three, potentially surpassing Rusal and Alcoa to become the world's largest aluminum producer after acquiring Galuminium.
"I've briefed the board, and they're highly supportive of competing for Galuminium," Alba said eagerly. Personally overseeing an acquisition that propelled Litop Aluminum to global leadership would be the crowning achievement of his career.
"If Alcoa renews its bid for Galuminium, it's our chance to step in!" Alba emphasized.
Compared to the Pebble project, Alba felt acquiring Galuminium deserved higher priority.
"I'll keep monitoring Galuminium's finances closely," Eric assured him, prepared for the acquisition.
"Not only must we track Galuminium, but Litop must also be internally prepared—especially regarding capital," Alba said passionately. "This acquisition could cost up to $30 billion USD, becoming the largest mining acquisition in history! Eric, we must make this happen!"
Eric felt his adrenaline surge at the thought of managing a massive $30 billion deal. However, he quickly realized Litop alone couldn't finance such a deal—such mega-acquisitions always relied on investment bank loans.
Successful acquisitions depended on consistent future profits, enabling gradual repayment of debt and interest. That was precisely the charm of mergers and acquisitions.
However, failed large-scale acquisitions that brought down entire corporations were also common. The causes varied, impossible to foresee completely.
"CEO, I've heard something very interesting recently," Eric suddenly remembered, regaining composure.
"What is it?" Alba asked.
"I heard Li Tang is buying Galuminium shares from Sanjing Trading—about 5%."
"What?" Alba's eyes widened slightly. "Li Tang from China?"
"Yes."
"Li Tang has no bauxite mining interests. None of his companies operate in aluminum. Why would he buy Galuminium shares?"
"Unclear. The purchase hasn't been officially announced and is rather discreet. But a Hong Kong investment firm has been aggressively buying Galuminium shares, now holding over 3%," Eric reported solemnly. "Our investigations confirm Li Tang controls that Hong Kong firm."
"He also wants Galuminium?" Alba stood up abruptly, startled.
"There's no direct evidence he's attempting an acquisition. But his activities strongly suggest a special motive," Eric explained slowly.
Alba sat down again, deep in thought before asking cautiously, "Is Li Tang deliberately targeting us?"
Eric shook his head thoughtfully. "Litop never publicly declared interest in Galuminium. Li Tang likely has no idea we plan to acquire it."
"Then what exactly is this technician doing in capital markets?" Alba wondered uneasily. "Investing in Galuminium right now doesn't seem wise."
"I heard Li Tang is close to Richard. Maybe Richard convinced him to support Galuminium's push into China," Eric speculated.
"That explanation makes sense," Alba nodded reluctantly. "Regardless, we continue as planned!"
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