Alastair Clayton: Around China with the mining chief who eats, drinks and smokes the job

A day in the life of the Executive chairman of South China Resources
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The Independent Online

6am

Alastair Clayton boards the coach that will take him and a group of South China Resources colleagues, City analysts and journalists to visit a state-owned molybdenum ("moly") mine. The party are staying at the luxurious Sofitel in the central Chinese city of Xian, home of the Terracotta Warriors.

They head off for the giant Jin Dui Cheng (JDC) mine. Aim-listed South China is in the early stages of developing its own copper and moly mine in the region, known as the Danfeng Project, so seeing this long-established operation is going to be fascinating for them (in a Stock Exchange announcement yesterday, South China reported that it had discovered further areas of metal deposits at Danfeng).

Despite the punishing start and a long night of banqueting the previous evening with Chinese officials, Mr Clayton, is, as ever, talkative and fizzing with energy. The group will be one of the few Westerners ever allowed to see this mine.

During the journey, Mr Clayton, a 34-year-old Australian, enthuses about the quality of the highway and the amount of construction activity visible all along the side of the road. It all means demand for steel and therefore moly, which is a raw material used in steel-making. JDC is the third biggest producer of moly in the world.

"As someone said, China never puts its foot on the brake. It's just that sometimes it take its foot off the accelerator," Mr Clayton says.

South China has offices in Xian, where most of the staff - a mixture of foreigners and Chinese - are based. Mr Clayton is one of the few company people located abroad - in London, where he handles relations with the investment community.

South China, despite being a tiny company, has used its permanent office in China to establish contacts with local officials that would be the envy of the mining giants. Personal relationships are crucial to doing business in the country, Mr Clayton says.

"We are dismayed when we see companies with a 'fly-in fly-out' mentality. You need to have a presence here. You need to be 150 per cent committed to China ... We can show commitment to the province. That's what they like to see, and quite rightly so."

During the trip, Mr Clayton, the executive chairman, has already had a number of very promising meetings, where the Chinese have shown themselves to be keen on South China.

Mr Clayton says: "We can bring Western standards, and that's hugely attractive to them. They can have a dangerous, polluting industry or Western standards."

10.30am

The party arrive at the JDC mine, which is in the hills, surrounded by its own town. The town is surprising neat, with decent-looking buildings and communal facilities.

This is an open-cast mine and the South China group are shown a vast hole in the ground, where a hill once stood. Trucks and diggers are in operation in the pit, extracting the rock and moving it to be processed. Mr Clayton immediately sees that the trucks are too small and there are not enough diggers to service them. "There's hell of a lot of efficiency to squeeze out of there. You could make it 30 or 40 per cent more efficient," he says, almost licking his lips. He would love to be involved in running this mine.

They are then taken around the vast mill and processing plant, with a guide talking them through the process.

11.30am

Mr Clayton and his group meet the JDC officials in a smart office building on the site, which also houses a surprisingly smart hotel for the mine. They gather in a plush boardroom, around a very large table. Each person present stands up to introduce him or herself to the gathering, to a round of applause, as seems to be the Chinese custom. For South China, these are important people to impress.

Mr Clayton tells them (through an interpreter) that he can help to provide Western capital.

"We understand how to list companies with Chinese assets on the London Stock Exchange. Thus far, we have not even scratched the surface of the capital we can access, were the right project to come along. People want to invest in China. They just don't know how. We are one of the only companies doing it," he says, as part of an impromptu speech.

What was supposed to be a get-to-know-you session quickly turns into a proper business meeting. The JDC people discuss the areas in which the two companies can work together.

Mr Clayton seizes the opportunity. He suggests a joint venture that would use South China's technology to extract moly from a low-grade stockpile of rock at the JDC mine. The Chinese like it, though they clearly don't realise how small a company South China is.

12.45pm

Lunch with JDC officials. Despite being in the middle of a working mine, a lavish lunch is laid on, with both sides sitting around a large circular dining table. A seemingly endless series of dishes are brought in and placed on a glass wheel on the table, which is spun around to make sure everyone gets a chance to sample each dish. Some of the food is rather exotic. Most of it is delicious. There is a black chicken foot and chicken entrails in the soup. Jelly fish is on the menu. Other dishes are hard to identify, "funky stuff" as Mr Clayton calls it.

In the Chinese style, everyone smokes throughout the meal. Luckily, Mr Clayton and his most senior colleagues can match the Chinese cigarette for cigarette.

More importantly, they have the stomach to match their hosts in drinking, which seems to be a pre-requisite of doing and winning business in China. This means drinking baijiu, a potent Chinese liquor served in shot glasses.

It is the custom for each side to make toasts, every few minutes. Either it is done between two individuals - you have to toast individually with all important people around the table - or there is a toast for the whole gathering. The foul-tasting baijiu must be knocked back in one go.

Suitably refreshed, the South China crew get in their bus to head back. On the journey, Mr Clayton is happy. "I'm extremely excited about production JVs there, a mine of that size is a thrilling opportunity .... That meeting was a dream, in terms of actually getting something done."

7pm

Dinner that night is with the mayor of Shang Huo City, the town closest to the South China mine, a Mr Wei. The mayor of a Chinese town is an important official. The two sides meet in a huge hotel on the outskirts of Shang Huo City, in a private dining room. The smoking and toasting begins, though in a slight variant at this meal, there is also toasting with Western dessert wine (which must also be downed in one). Dozens of dishes are brought and placed on the spinning wheel.

The mayor, speaking through an interpreter, is clearly keen on Western investment and is particularly taken by Western management skills, which he insists must be learnt by Chinese companies.

Asked whether China is a market economy, Mr Wei answers with an unambiguous "yes", adding "Government does not interfere in a company's operations any longer. Only through legal mechanisms."

Mr Wei tells the South China team that state enterprises which cannot make a profit are now allowed to go into bankruptcy - unless they are in a strategic sector.

Crucially for Mr Clayton, the mayor tells him that South China's mining licence will be approved (this occurred when Mr Clayton returned to London).

Some of the Chinese at the gathering are getting rowdy, having taken rather too enthusiastically to the baijiu toasting. The mayor, apparently sensing this, gets up and abruptly winds up proceedings.

On the bus back to the hotel in Xian, Mr Clayton explains the importance of the meeting. "The key for all approvals lies at the provincial level. That's the great thing about being a small, nimble company. Someone like BHP [Billiton] is a five-hundred-pound gorilla trying to move through, pardon the pun, a china shop. We move under the radar. BHP has to operate at the Beijing level. We don't. That's where we have the edge."

11pm

The bar at the Sofitel is loud, with a live band belting out Western songs, and some people are dancing (badly). Mr Clayton has a beer. There is to be a 5.30am start the next day, to visit South China's Danfeng Project.

He reflects on the meetings that he has had so far. "The talk of specific JVs blew our minds. We were expecting a more general discussion."

He says he will have to return to China soon, to follow up. "I'm delighted with the progress we have made. We have only been listed a year. The team have worked their butts off."

Bed at midnight.

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