Chapter 508 - Mutually Satisfactory Agreement
Chapter 508: Mutually Satisfactory Agreement
Translator: _Min_ Editor: Caron_
“Because of the breakthrough you made in the deepwater mining field, the futures of iron, copper, gold, and molybdenum have accelerated their demise. To maintain the stability of the market, the mining giants have spent quite some effort. Of course, the key to solving the problem is on you.”
How many deposits were there in the ocean? If Future Mining made a significant breakthrough in the area, investors’ expectations for deep water mining would, without a doubt, heat up. How many resources were there available in the sea? Aside from Jiang Chen who already acquired a global mining reserve map, no one knew.
And investors themselves were creatures who loved to imagine.
Luke smiled at Jiang Chen.
“If I guessed correctly, Future Mining’s costs for deepwater mining projects aren’t high, and the production is sizable.”
Luke’s expression clearly showed he wasn’t clueless. There was no purpose in covering things up, so Jiang Chen didn’t try to hide the truth.
“You guessed correctly.”
Labor costs only included the salary of the employees on the sea platform; the underwater equipment was powered by the tidal generator, making the cost of maintenance almost negligible. The only equipment costs were paid in crystals. Without knowing the ratio between crystals and modern world currency, he couldn’t calculate the cost of equipment.
But he was certain about one thing – the costs of deep water mining were extremely low before space mining appeared.
“The world’s iron, aluminum, and copper markets are already on the brink of collapse. Without any exaggeration, if the price of iron continues its downward trend, by end of the year, 47 mining companies will face the risk of bankruptcy. In the short term, it may be beneficial to us, but it’s also dangerous for us in the long term. So I want to solve the problem by taking a step back.”
“So what do you propose?” Jiang Chen was quite intrigued as he looked at the smiling Luke.
“If I remember correctly, you can influence the political decisions of the Xin government. We want you to influence the presidential office’s decision and increase the mining export tax by 50% to limit domestic exports of mining resources,” Luke said in a quiet voice.
To Jiang Chen’s surprise, he previously thought Luke wanted to purchase Future Mining’s technology, but he didn’t even mention this and only offered a proposal that didn’t really affect Future Mining.
“Limit Future Mining’s access to the international market to cooldown the investors? But what do I gain from this?”
“We obviously won’t make you do this for free. I’m willing to provide you contracts for iron, aluminum, copper and other metals effective within five years at 80% of the current market price.”
For BHP, it was indeed a big step backward. A discount of 20% meant they were essentially providing the metals at cost and working for free for Future Group for the next five years in exchange for slowing down Future Group’s low-cost ores from entering international markets.
“Use the power of capital to slow down the introduction of new technologies?” Jiang Chen’s words seemed to carry more meaning than the surface suggested.
“You could interpret that as paying enough compensation in the hope of delaying the introduction of technology to the world. In a market where supply exceeds demand, introducing technology isn’t beneficial to the market,” Luke said with sternness.
Luke was clear with BHP’s stance on this.
For an international mining tycoon, Jiang Chen wasn’t naïve enough to think they would use market competition to solve the problem. To be able to own so many mining resources in multiple nations around the world, their political investments certainly couldn’t be underestimated.
The reason why Luke brought it up was because they wanted to avoid a direct conflict with Future Group. Since Future Group was no longer a small fish in the sea, its core focus was in space tech and not in resource extraction, so both sides could avoid unnecessary conflict.
On the other hand, BHP wasn’t the only company affected – Rothschild-controlled Vale was the largest mining company in the world. It would be hard to say this encounter had nothing to do with Carmen.
Jiang Chen’s head spun rapidly as he weighed the pros and cons of the proposal.
If possible, Jiang Chen wanted to avoid a direct conflict with the mining giants. Future Technology’s business expansion required a stable environment. It was unwise to create enemies for himself.
Especially since excessive resources were only relative to the current situation. Although the theme of the proposal required both parties to take a step back, it would be hard to determine who actually gained and who actually lost…
Luke patiently waited for Jiang Chen’s response.
Without making him wait for long, Jiang Chen spoke after a momentary pause.
“Five years? Can I ask the supply amount?”
“Determined by you.” Luke made a generous offer as he elegantly sipped his champagne.
When Jiang Chen heard this, an undetectable smile appeared on his face.
“80 million tons.”
When Luke heard Jiang Chen’s number, he almost spat out the champagne in his mouth.
“80 million tons? Does Mr. Jiang have an idea of the number you just provided? I’m not joking – even if all of Xin’s steel plants operated continuously for 50 years, there would still be an excess of ores left.”
Hua’s iron ore imports for 2015 was 950 billion tons and Xin’s total area was less than half of any of Hua’s provinces. It was a question if they could process the ores in 15 years, let alone five years!
But this was an outsider’s perspective.
“You don’t have to worry about this – Future Group naturally has the resources to process the resources. Also, something worth mentioning is that the 80 million is the sum total of iron, aluminum, copper, nickel – not just iron alone. Of course, iron would make up the majority of the number, at least 75%.” Jiang Chen smiled.
With his eyebrows tightly locked together, Luke hesitated for a moment before nodding.
“At most 50 million tons, and you must assure me that the ores provided at cost must not enter international markets. This will be written in the contract.”
“No problem. But I have to mention now that the mines may be processed at neighboring Papua New Guinea before being transported to Xin,” Jiang Chen reminded him.
With the shortage of labor, Jiang Chen planned to move the industries with high population and labor demands to neighboring countries. As a developing country, Papua New Guinea was a great choice in addition to Moro still in its beginning stages.
Luke deliberated for a bit longer before finally giving him a nod.
“No problem.”
“Also, molybdenum, uranium, and other precious metals are not included in the contract restrictions,” Jiang Chen proposed.
“No problem. Molybdenum and the precious metals market have been under the control of Hua and nothing to do with us… Also, if I may ask, is it feasible to extract uranium from deep water?” Luke was curious.
“Not now, but it doesn’t mean it’s not feasible in the future. We may have a breakthrough in the next five years; it’s hard to say,” Jiang Chen replied with ambiguity.
“Is that so? That’s surprising. If you don’t have any other opinions, then I’m happy we’ve reached an agreement.” Luke raised his glass with a smile.
“I wish only success for our partnership.” Jiang Chen also raised his cup with a mysterious smile flashing and fading on his face.
Following the crisp sound of their toast, the agreement worth billions had been settled. The two sides both had satisfied smiles as they received what they needed.
Luke received the promise that Future Mining wouldn’t introduce deep water mining technology to the global market. Although they wouldn’t make money on 50 million tons of ores, BHP would not take losses on these. With the current market, it was incredible to maintain an income statement without losses without decreasing production. Although on the surface, it might look like BHP was working for Future Group for free, from another angle, Future Group solved the excessive production capacity issue faced by BHP.
The gains for Jiang Chen were obvious – he obtained 50 tons of ores at the floor price. It was a critical deal for Future Group’s planned construction of floating ocean cities, space elevator terminals, and habitable mega space stations.
It wouldn’t be five years before Luke would regret the agreement he made tonight.
Excessive production was always relative to the present.
The only thing that made Jiang Chen puzzled was how Luke was so confident about Future Mining’s costs and production as well as his calmness about deep water mining technology without any intention of acquiring the technology.
Jiang Chen stared at the glass in his hand and entered deep thought.