Source: Wall Street Journal               Date: 12 October, 2011

State-owned mining firms may be crucial to the market in the defense of economic downturns for the Asia-Pacific region. M&A activity and its demand for natural resources have been crucial to the market in the past decade.
China's Sinopec Group said it plans to buy Canadian oil and gas producer Daylight energy for CAD 2.2 billion. That same day the Australian uranium miner Extract Resources rose 10 percent in reaction to reports that China Guangdong Nuclear Power would revive a takeover attempt for London-listed Kalahari Minerals. The Chinese firm currently holds 43 percent of Extract stocks. Additionally, a senior official of Korea National Oil Corp. said his firm is searching for acquisition targets overseas. Excluding the Sinopec deal, Asia-Pacific oil and gas companies have accounted for a record of 26 percent of global M&A by value in the mining sector this year.
Asian buyers are becoming bolder as the average transaction size of Asian buyers has steadily increased. Sinopec is paying a 120 percent premium to Daylight's closing price to help the latter's shareholders earn back the 56 percent drop in the company's valuation this year. This and  CGNC's renewed interest in Kalahari following the Fukushima nuclear disaster and KNOC's lowered valuations after a recent sell-off in energy stocks after oil prices may be part of a grand strategy. It is no coincidence that Sinopec, CGNC and KNOC are all state-controlled. This provides an ideal combination to sellers with vast funds and sometimes hazy notions of strategic value.
This strategy may all resource firms to act as a “Warren Buffet” figure, bailing out firms when the market falls into peril. Whether their returns will prove as sustainable as Warren Buffet's is another matter.